The Energy Crisis Deja Vu All Over Again(Archive)
Electricity was a modern miracle. It turned night into day and made the load of humankind lighter. For all its import to society over the past century, however, the production of electricity has barely changed. Today fossil fuels still produce half of all the electricity in this country.
The Bush Administration could have changed that. It didn’t. Its energy policy painted a picture of the future as ancient and dirty as the coal and oil on which it relies.
Like the Bush plan, crisis-stricken California is mired in the past as well. In fact, its energy woes bear an eerie resemblance to the last major crisis in electricity, which occurred in the late 1920’s.
For the most part, electricity in the 1920’s was controlled by a handful of utility holding companies, which in turn were controlled by a few individuals. The most infamous of these was the Midwest Utilities Holding Company founded by Chicago transportation magnate Samuel Insull.
As a young businessman, Insull was a protégé of no less than Thomas Edison and John D. Rockefeller, two of the scions of American history. Insull learned the politics of business so well, in fact, that he ended up owning all of the urban rail lines in Chicago and the power plants that electrified them.
Propped up by the revenues generated by the production of electricity, holding companies like Insull’s issued securities for dummy companies in multiple states. When the stock market crashed in October of 1929, so did the holding companies and the investments of tens of thousands of individuals. And so did the stability of much of the electrical distribution network in the country.
This scenario should be familiar to Californians. Like the 1920’s, the market for electricity in California is poorly regulated, the demand for electricity is outpacing supply and the distribution system of electricity is narrowly controlled. And like the utility holding companies of yore, a handful of companies are using the price of electricity to amass great riches.
From the end of 1999, when the crisis began, through the end of the first quarter 2001, the stocks of energy suppliers in the state have soared. Duke Energy’s stock is up 76% during that time. Calpine’s stock is up 244%. El Paso’s stock is up 78%.
The fallout from the crisis is similar as well. Since the California crisis began, the state’s two largest utilities, PG&E and Southern Edison have indeed gone bankrupt, while blackouts roll through like the state like the waves on the Pacific.
Today, accusations of profiteering are being levied against energy suppliers by state and federal agencies. In the aftermath of the 1929 crisis, The Public Utilities Holding Company Act of 1935 was passed to regulate electric utilities because of their many nefarious deeds leading up to the crash. The country had learned that electricity was no ordinary commodity. It couldn’t (and still can’t) be easily stored like oil or coal.
Even the prevailing solution to crisis – increased production – is the same. In the 1930’s, however, the country needed jobs and power. Hydroelectric dams projects and coal-burning plants provided both. Today, the country needs economic and environmentally sustainable solutions. Solutions coming forth from California and Washington virtually ignore the sources that stand the best chance to achieve both: alternative energy.
Investors, at least, haven’t ignored alternatives. From January 1, 2000 through March 31, 2001, for example, Fuel Cell Energy, the producer of energy efficient technologies, is up 303%. AstroPower and Spire, two makers of solar products, are up 114% and 48% respectively.
As secure as the status quo looks at the moment, the promise of alternative energy is growing too bright to ignore. If there is a ray of hope is this current morass, it’s that a solution exists, but it must be found in future not the past.