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Aug 14, 2003

CONTACT: Doug Heller - 310-392-0522 x309

Electricity Deregulation Strikes Again?

Massive Blackouts Hit Deregulated Systems in New York, New Jersey, Ohio, Pennsylvania, Connecticut, Michigan
Santa Monica, CA --Most of the states impacted by Thursday's massive blackout are states that have enacted electricity deregulation schemes in recent years, according to the California-based Foundation for Taxpayer and Consumer Rights (FTCR). While the reasons for the blackout remain unclear, FTCR believes that the lack of government oversight of public utilities contributed to the extended reach of the power outages. Historically, electric utilities had been fully regulated and subject to stringent supply standards and price controls.

"We do not know why the power failed in New York, but we know that over the last few years most of the affected states have been deregulating their power systems," said FTCR's senior consumer advocate Douglas Heller. "Regulated and publicly-owned power systems are better suited to ensure energy reliability, while deregulated systems are more susceptible to dangerous supply shortages like the one that blacked out much of the Northeast. Electricity is too vital to the public safety and economy to leave in the hands of unregulated power firms."

Noting that virtually the entire Northeast, from Michigan to Maine, has reduced regulatory controls over energy, FTCR warned that today's blackouts may lead to a push for higher prices by the energy producers that sell into the various power grids hit by the blackouts. During the California energy crisis, deregulated power firms manufactured shortages and put the state through six days of statewide rolling blackouts in order to justify massive price increases.

"If regulators cannot control prices or supplies, the public faces the dangerous proposition of paying too much for power, not getting enough power or both," said Heller.

The group also suggested that federal lawmakers should take a lesson from this disaster as they consider the national energy legislation that will be debated this fall. Under the current proposal, 70 year old rules geared to protect the public from private utility holding companies would be removed and the nation's energy system would be further opened to deregulation.

"Where we have tried deregulation, we have seen price spikes and blackouts. This Northeast energy disaster should serve as a reminder that Americans need more energy protection and regulation, not less," said Heller.


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