There was a news item last month about Russians struggling through the worst winter in a half century and how 17 people in one town west of Vladivostok had frozen to death in their flats. Everyone in the town was complaining that the electric utility, recently privatized, no longer served them because they had no money to pay for electricity. The privatized utility was selling its much needed electricity only to a local industry which had the cash to pay for it. Ah, how the residents longed for the old days when the state-run utility kept everyone alive in their frigid Siberian flats.
The fact that the local power industry, like many other industries in modern mother Russia, had been deregulated, privatized, and hence become an opportunity for savvy investors ,was little comfort to the 17 poor people who froze to death in their beds.
When I saw this report, I did not think especially about the failings of Russians to adjust to a new economic reality as much as I thought about what happens when a government sidesteps it responsibility to care for its people and place that well being into the hands of others whose chief concern is self interest and most especially, money.
Truly, the mask of "deregulation" had been lifted in this case to see the tyranny of capitalism.
Is this particular to Russia? I think not.
It is a cold winter and an even colder reality about the kind of capitalism that has been witnessed in the California deregulated Òelectricity rushÓ of 2001.
The California crisis occurred because successive governments in that state, pressured by environmentalists and others, would not permit the construction of new generation facilities. It was determined that it was better to build it elsewhere but not where the electricity was needed. It also occurred because government insisted on capping the retail rate of electricity because ratepayers did not want their bills to increase. As the consumption grew and state utilities could not supply all of the demand, they were forced to look elsewhere and neighbouring utilities, with no cap on the price they could sell their power for, charged as much as they could.
Utilities outside California refused to supply electricity to that state because the utilities purchasing that power were so financially strapped that there was no guarantee of payment. The Californian utilities could not supply enough electricity and millions of people and hundreds of thousands of businesses, great and small, were thrust into darkness. The electricity was turned off. Just like that. Better to leave someone trapped in an elevator or be injured in a traffic accident and die or fall in the dark and be injured or just plain scared and uncertain, than not to be paid a spot market price for electricity.
Even B.C. Hydro profited a billion dollars from the misfortune of Californians. The province was so proud of its opportunistic windfall that it has generated a cash energy rebate to B.C. ratepayers on the eve of a political election.
Well, luckily enough, California is a very rich place and the government there has stepped in now with half a billion dollars to purchase short term contracts to keep the power flowing into the state and it is taking regulatory measures to speed up the construction of new utility generation and offering bonuses to those companies who can being their plants on line sooner to meet the summer peak load. In other words, government has intervened to protect the interest of its people and to act responsibly like it should have done in the first place.
Funny, I always considered myself a capitalist until I start to think that I have no personal or financial interest so great that it should cost the life of a customer. I canÕt even think I would be very proud to work for a company that placed the interest of its profit, its dividend, before the misery of a customer. I suppose I would not be a very good tobacco company executive or investor who profits from the misery and death of millions. Nor would I want to be a tire company executive that made a knowingly faulty tire and buried the problem in order to avoid the cost of solving it while people rolled their cars and died. Nor would I want to own the Russian utility that refused service to someone who couldnÕt pay and left them to struggle in the cold and dark until death.
I thought deregulation was supposed to be about competition to see who could build the least expensive generation in order to compete for demand. I thought that deregulation was supposed to bring lower prices and more choices for customers.
Did anyone forecast that this scenario only exists when their is more than enough supply? When the supply is tight, then the price goes up as high as it can and if you canÕt pay, or wonÕt pay, then you live and work and heat yourself with a candle. How romantic. And if you fall down a flight of stairs or get killed in an intersection with no working traffic signal, then you are a casualty of deregulation and a consequence of someone making a buck.
Welcome to deregulation, everyone. Electricity to the highest bidder and one jurisdiction screwing over another for a dollar, or a billion of them. A profit at someone elseÕs misfortune, and no conscience about it. If you are lucky enough to live in California or Alberta or British Columbia where there are governments flush with cash and political agendas, then you can expect a rebate to soften the economic blow. Prosperity has its perks.
If you live in an impoverished town west of Vladivostok and you have no cash and no clout, then you suffer in the bitter cold and disrespect your government for abandoning your interest.
Randy Hurst
Publisher and Executive Editor
rwh@istar.ca