What's Wrong With the Montana Power De-Regulation? (1998)

How we "lost" Montana Power and cheap electricity

There  are still numerous confusions and misrepresentations about how we "lost" Montana power and our unique and irreplaceable hydropower, which gave us some of the cheapest electricity in the nation.  In going through some old papers, I found this essay from 1998, before anything had really happened, but it was underway.  I've added a new preface with some additional information I didn't have, then.  I also refer to the Clinton "deregulation" plans (which go back decades including the airlines, AT&T, IBM, etc), as well as the "Reinventing Government" which I supported, then, under Al Gore.  I was actually a Gore fan in those days, and I still put him ahead of most Democrats for finally  being honest and public-spirited, or at least using that rhetoric.  

As for the state of the environmental movement and energy policy, today, here is an excellent summary:


http://www.counterpunch.org/2013/03/07/the-environmental-movement-at-the-crossroads/

The solutions, then and now, are the same - renewables only, and vast reconstruction of the infrastructure and lifestyle patterns to replace nearly all carbon-based energy within a decade or two.  Unfortunately, the first decade has already been completely wasted.  Fewer people believe in the necessity of this course, now, than they did in 1998.

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The following essay was my attempt, in 1998,  to address the policy implications of the "de-regulation" legislation then being promulgated by Montana Power.  What I did not know at the time is that  Goldman, Sachs had already bought up a lot of MPC stock (under a plan commissioned by PPL)  and appointed a new CEO, Bob Gannon, whose mission was to sell off MPC assets so that PPL could acquire sufficient non-nuclear assets to replace the power produced by its 17 or so nuclear  power plants nearing the end of their life-spans.  This proceeded by a number of apparently unrelated steps, like starting Touch America and laying $1 billion or more worth of fiber-optic cable which at that time was grossly overbuilt, and had to be sold at a huge loss.  

At that point, the power industry was reconciled to not being able to rely on nuclear energy in the future.  After  Chernobyl and Three Mile Island, no new nuclear power plants were being built in the United States.  Yet, there has always been a strong nuclear lobby waiting for an opportunity to harvest vast public subsidies and "protections" from liability to build its horribly dangerous and proliferation-prone power plant (each of which is a potential bomb factory, which everyone recognizes in North Korea or Iran, but denies for other "allies" and NATO bloc countries).   

For the very same reasons which the world fears Iran's development of a  nuclear power industry, we should fear even more those countries which do not adhere to the  Nuclear Non-proliferation Treaty, and which have already developed substantial nuclear weapons arsenals - like Israel, India, and Pakistan.  Other countries, like Japan, Brazil, and any other country with a domestic nuclear power industry (or even a foreign-built plant which they control),  is only a few months from actually building a fission bomb (like Hiroshima) out of enriched uranium or re-cycled plutonium from the reactor's fuel rods.  So, nuclear power as such needs to  be phased out quickly and completely - a major part of the reason why so many peace and environmental people supported Barack Obama.  That was a cornerstone of his platform, and one which he repudiated immediately after being elected.  

But back to the liquidation of MPC (which, in 1998, wasn't even hinted at by those responsible).   All of the analysis here is spot-on, if I may say so.  I understood fully that this had nothing to do with the federal "de-regulation" which had very different purposes and mechanisms - namely, to  induce more competition and real market pricing in the electricity market, instead of allowing  entrenched local or regional monopolies to continue their promotion of more carbon-based energy and the resulting pollution (especially CO2 causing global warming.  I was well-informed on this issue back to the 1970's).


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What's Wrong With the Montana Power De-Regulation?  (1998)

The emerging debate between Montana Power and public policy analysts and activists  is proving to be very damaging to Montana Power and its perceived self-interest. All sorts of  fundamental issues and questions have been elided or ignored in the discussion. I'd like to take  this opportunity to outline a few of these issues so that we can more accurately bring to bear the  relevant information and arguments necessary to arrive at the correct policy decisions. 
Obviously, what has happened so far is that Montana Power has tried to "cash in" its  previous winnings under the regulated regime, claiming it is now prepared (having divested itself  of the weaker sectors soon to be subject to competition) to face the "Brave New World" of de- regulation. 
In order to properly understand this process, and to determine what the correct public  policy should be, we need to examine the concepts of "infrastructure", "public utility",  "regulation", "environmental concerns," "historical concerns", "social justice concerns," and  "public policy," to name but a few. If we are not on the same page with respect to language and  analytical tools, we can hardly arrive at a decision agreeable to all. 
What, if any, are the philosophical assumptions held by each side in this controversy?   If we can first define our philosophical differences, and go over them, we should be able to  determine whether we might ultimately achieve a consensus on policy in this area.  
Montana Power and its supporters claim to have already done this. The problem is, the discussion was grossly skewed to include only those who had direct financial interests in the "de-regulation" process. This is happening with increasing frequency. Environmental law, for instance,  is being altered so that only those with recognized, official financial or political interests, are  invited to the discussion, or allowed to bring suit to prevent a timber sale, oil lease, or whatever.  Montana Power can hire 18 lobbyists to the state legislature and utilize the best law firms in the  state (essentially with your money because all of theirs comes from the rate-payers) and not only participate in the disucssion, but dominate it and largely write the ensuing legislation. 
A former regulated monopoly providing a recognized vital public service, Montana  Power wants to have de-regulation, and is even willing to compete openly with rural electic co- operatives, who were once restricted to low-profit rural areas, and not allowed to compete in the  more lucrative urban, industrial areas. Now, by a kind of Devil's Bargain, rural co-ops will lose  their "cooperative" character, and have owner-members in addition to commercial customers who are not owners. This is what is happening in China, as well. Former state companies and co-ops  have begun to compete aggressively in the global marketplace, and some have become very  wealthy and powerful - not exactly the kind of "socialism" which Mao envisioned. 
Montana Power's interests have gradually shifted to the coal and petroleum business  and other aspects of energy generation and supply, with subsidiaries in other states and Canada. It  is now more like a resource conglomerate (like its parent company, Anaconda) than a public  utility. We should remember that much of our public utility infrastructure was actually built (and  until recently often controlled) by Anaconda or its successor companies. This is the history that  must be taken into account in any policy changes initiated by Montana Power. 
Like the Anaconda Company before it, Montana Power is a symbol of hegemony and  domination over the people of Montana. Even its employees don't care much for it, although it has the reputation of paying better than almost any comparable job. Yet, the temptation to cut  payrolls is overwhelming in today's cutthroat economy, and this is probably the main reason  Montana Power has opted for the de-regulated marketplace. As the unions lose political power,  the state will no longer be able to protect their interests. 
Since the 1970's and earlier, Montana Power has been promoting, lobbying for, and  hiring consulting firms to justify policies such as these: export coal and electricity; make Montana  a "right to work" state; get rid of the Coal Severence Tax and environmental regulations, and so forth.  Then our economy will boom (like North Dakota's?). 
By now, we've done virtually all of it, and no boom is in sight, except in stock market  prices - a boom which will obviously not be sustained over the long run, since price-earnings ratios are now nearly 3 times normal. I visited the State Employment Office the other day, and aside from skilled trades, only about 3% of the jobs paid more than $7/hour. Most were $5.50 or less.  We're rapidly reaching the point of working for bare survival needs - the "iron law of wages" which Ricardo identified and Marx later believed was true. 
If we gave up our private automobiles in favor of bicycles and public transportation,  and began to live communally and share our material goods more equitably, we could all work less, use less energy, and thus need less money. We could also live healthier lifestyles, and thus spend less on medicine and health care. We could maximize economic efficiency in the provision of basic needs. Perhaps this solution, reminiscent of the Chinese, will eventually happen. But I don't think it's quite what Montana Power and the co-ops have in mind. 
Montana Power has not yet begun to prove that what they are doing is in the best interests of the people of Montana. Let's not assume that "de-regulation" as a federal mandate is  necessarily the same thing as what is happening under Montana Power's direction. Indeed, regulation and de-regulation were both accomplished to suit Montana Power's needs and  interests. It thrived under the regulated regime, and intends to thrive even more under alleged  "deregulation." But its means of doing so is disingenuous. The business it retains will still be regulated by friendly, Montana regulatory agencies, which have demonstrated that they are almost immune to public interest concerns. It makes little difference which party is in power.
Few business concerns actually favor de-regulation. Instead, they would prefer  monopoly, regulated status in which they can largely control or have a close working relationship  with the regulators, who often leave through a revolving door to become top salaried executives of  the regulated companies. 
The Federal Government could do a much better job of de-regulating local industry and  protecting the environment, and do so according to uniform standards nationwide, so that no  region can unduly benefit at the expense of others, and large corporations cannot impoverish,  pollute, and deplete one state's resources for the benefit of its stockholders, workers, and  customers. 
Montana Power has taken a big chance by attempting to forestall a process which is inevitable. Neither the people of Montana nor the nation as a whole will stand for Montana Power ripping us off even more, while using our money, our rivers, our coal, and our jobs to make itself and its stockholders even richer. It's a public utility. Its business interests belong to its stockholders, but its material assets have a set, book value, and anything above that value belongs to the people of Montana. 
If the "book value" of its dams is $600 million, then they must return them to the State  (the people) for that price. It's that simple. We can use the sale of electricity from the dams to pay back the $600 million. After that, we can decide which dams to retain, and for what purposes. 
Most of all, this episode in Montana Power's sorry history demonstrates the need for  more creative thinking in public policy. This is what "reinventing government" is all about.