Executive Intelligence Review

EIR Energy Crisis Update Agenda for
National Energy Emergency Action

April 25, 2001

I. Energy Hyperinflation Explodes Into Protests—
'Out of Gas ... My Ass!'

Gasoline jumped in price almost 20 cents a gallon in most states in April, hitting $2.00 in San Francisco. The national average gasoline price was $1.67 a gallon on April 16, up 8.4% from April 6--the largest two-week jump in terms of cents per gallon since such surveys started in the 1950s, and equal in percentage increase to all of last year. While specific regional "explanations" are cited (refinery constraints, reformulation constraints, etc.) the gas prices are clearly part of the overall energy hyperinflation associated with speculation, cartel ownership, and chaotic infrastructure, worsening each day that deregulation continues. There is no shortage; stored gasoline supplies are actually above last year's, and rising.

The gasoline price crisis hit at the same time that nationwide, some 3.3 million households faced utility cut-off notices in April/May, after the pile-up of six months of high-priced winter heating bills that are unpayable (natural gas, propane, electricity, etc.)

Petitions, marches, rallies, and other protest actions are occurring. "Out Of Gas ... My Ass"--is the theme of an EIR News Service information radio blitz, to expose the full nature of the crisis, and the necessity of mobilizing for re-regulation.

II. Bush Administration/Media Hype Conditions for
'Emergency' Rule

In opposition to growing demands by state legislatures, and citizen protests, for re-regulating energy prices, the focus of the major media and energy cartel spokesmen, is that summertime prospects for $3/gallon gas, along with electricity black-outs looming, are grounds for Federal emergency-rule. Typical is an April 23 Reuters wire quoting Energy Department Assistant Secreatry Robert Kripowicz, "If anything unforeseen should happen--a refinery go down unexpectedly, a pipeline taken out of service--we would see gasoline prices skyrocket."

This hype coheres with the a draft text for an "Electricity Emergency Act," being readied for filing by Rep. Joe Barton (R-Tex.), at the request of the White House. It calls for emergency rule. A report is below.

III. New Bi-Partisan Senate Bill to
Control Electricity Prices

On April 24, Senators Dianne Feinstein (D-Calif.) and Gordon Smith (R-Ore.) held a press conference announcing their new legislation to control wholesale energy prices by forcing the Federal Energy Regulatory Commission (FERC) to use its legal power to mandate regional caps or cost-based pricing. The bill requires that within 60 days of passage, FERC must either institute wholesale price caps in 11 western states until March 2003, or implement cost-based pricing over that period of time. Senator Feinstein said that these measures are necessary to ensure the stability and reliability of the electricity delivery in California, and that the "legislation is designed to force FERC to do its job so that the financial crisis does not get any worse than it already is." Republican Smith stated that he was initially reluctant to support controls, but "it's a mistake to defend a system that some can game to make incredible profits." He denounced the "exploitative pricing" now taking place.

Energy Cartel Making Hyper-Profits

Corporate reports for Q1 2001, show energy companies racking up mega-profits, contrasting with mass losses and lay-offs in other sectors. Examples:

  • Enron Oil and Gas saw its first-quarter earnings increase more than fivefold. While its production of natural gas rose by 2.7%, the average price it received per thousand cubic feet rose from $2.29 to $6.19, compared to one year ago.

  • ExxonMobil reported that its profits were up 51%, due to "strong" crude oil and natural gas prices, and "better profits" from refined fuels, such as gasoline. Fortune 500 this year ranked ExxonMobil the world's biggest company.

  • Houston-based Conoco's first quarter profits rose 64%.

IV. Senate Banking Committee Votes for
Repeal of 1935 Public Utilities Holding Co. Act

On April 24, the Senate Banking Committee, chaired by Sen. Phil Gramm (R-Tex.) voted 19-1 to repeal the 1935 Act. To go into effect, the entire Senate would have to approve it, but the move shows the flight-forward for more deregulation, hyper-profits, and economic destruction. The Act was enacted under President Franklin Delano Roosevelt to stop the kinds of practices that have again arisen today, where holding companies are setting up unregulated subsidiaries, playing shell games, and subverting the energy system.

Typical of today's patterns is Warren Buffett, whose firm, Berkshire Hathaway, already owns most of MidAmerican Energy Co. of Des Moines (2.2 million electricity customers, and 1.2 million gas customers) and stakes in other energy firms. He said he is ready and waiting with $10 billion more to position in utilities, if and when the 1935 Act is wiped off the books.

V. Analysis: 'Electricity Emergency (Rule) Act'

The draft text of the "Electricity Emergency Act," backed by Rep. Joe Barton (R-Tex.), chairman of the Energy Subcommittee of the House Interior Committee, is now in the mark-up stage, for introduction in early May. This has the backing of the White House, and is officially intended "to provide for electricity emergencies."

First, what is absent from the bill is any intervention to stabilize out-of-control prices of electricity, or any other kind of energy. Second, there is no provision for making scarce electricity supplies reliable for priority sectors of the economy--food processing, farming, hospitals, water treatment, etc.

The premise of the proposed law is that the current, deregulated "markets"-based system must prevail at all costs. Moreover, there are blatant provisions for furthering the special interests of various of the energy cartel companies. There are reports of efforts by Democrats to add to the bill some form of energy price controls on the cartels.

There are two overall sections to the bill.

Title One—General Measures for Electric Energy Emergencies

This has ten proposed sub-sections. The very first directs the Federal Emergency Management Agency to undertake emergency plans for states where electricity crises will hit. FEMA is to set priorities for who gets what energy. Another key sub-section directs the Federal Emergency Management Agency (FERC) to coordinate plans and requirements for some electricity users to forgo electricity, for use by others.

Another sections spells out a grab-bag of proposals for reducing energy consumption--"demand control" includes such ideas as making Western states adjust their Standard time for savings on daylight.

Several sub-sections specify give-aways to private energy cartel interests, in the name of "emergency."

  • FERC is to be able to command any local electricity distribution system (e.g., in Nevada, which has been re-regulated) to open itself up for interconnection with whatever energy entity FERC commands.

  • Any generation facility that isn't paid for its power within 60 days by some wholesale purchaser (such as California), can break its contract with the purchaser, and sell elsewhere. Thus, unreliability is guaranteed.

  • FERC and the Secretary of Energy are to study and command where new electric transmission routes can go, and how they will operate. This is a top priority demand of the new cartel energy holding companies. The new bill may specify the use of eminent domain, to serve these private corporate plans.
Title Two—Assistance Available Upon a Governor's Request

There are ten proposed sub-sections. The first authorizes more government donations, in the name of helping poor people pay bills, to go to the energy cartel companies. A new fund is to be set up, under the Health and Human Services Department, to be available through the Low Income Home Energy Assistance (LIHEAP) plan, on request of state governors, on condition they declare they have an electricity emergency. There is no mention of staying cut-offs on households, or any other category of users faced with unpayable bills.

More grab-bag "conservation" ideas are proposed, including giving governors, in states with declared electricity emergencies, authority to order Federal facilities to cut use by 10%.

There are sub-sections setting aside environmental constraints on Federal hydro-power dams, and proposals to lift emission restrictions on natural gas plants and on-site generators.

There are orders to remove constraints and expand the Western Area Power Administration. In specific there are orders to compel the creation of an RTO--Regional Transmission Organization--in the 13 western states. This is a major demand of the unregulated "power marketers."

Subscribe to EIR