Breaking the Birch Rod
RUSKAY, JOSEPH A.
POWER PLAY IN THE ELECTRIC INDUSTRY Breaking the 'Birch Rod' By Joseph A. Rusk ay Since 1881, when a Pennsylvania municipality got tired of paying the local utility's high electricity rates and...
...Last January, the trustees submitted a confidential report to the governor, once again explaining why the Authority should be permitted to construct a nuclear plant "to provide greater benefits to the people of the state...
...New York's Power Authority has tried without success to obtain permission from the governor and the Legislature to construct nuclear facilities...
...Thus the prospect is that the public systems will be reduced to mere wholesale customers of the investor-owned utilities...
...At the same time, the private companies have been opposing proposals to increase production of low-cost power by Federal and state authorities, and have tried to restrict access to such sources by the publicly-owned systems...
...The determination of the New England private utilities to take over the publicly-owned companies, or to put them out of business altogether, was vividly demonstrated at a hearing before the Vermont Public Service Board last October...
...The New York Power Authority, the biggest generator of electricity in the East, was to be barred from producing nuclear power altogether...
...The chairman of the Florida commission remarked that "it has been proven throughout the history of our country that the best regulation is little or no regulation" ??a curious stand for one who is charged with protecting the public interest...
...The temporary reprieve was accompanied by demands from Senator Robert F. Kennedy, members of the Legislature and others for the appointment of a bipartisan legislative committee to study and prepare a comprehensive power development program for New York State...
...According to calculations of the Edison Electric Institute, an industry association, their investment should grow to about $85 billion by 1970 and reach $162 billion by 1980...
...And now the private companies have not only mounted a massive campaign to establish a total monopoly in the industry, but they appear to be winning the battle...
...And if they are dissatisfied they can still petition the various state Public Service Commissions or the fpc to fix reasonable rates...
...As a result of mergers and acquisitions, they are now joined in a few huge interconnected systems that span the country...
...The private interests have by no means retreated, however, and reports of frantic wire-pulling and arm-twisting are rampant...
...Though dwarfed by the size and resources of the private utilities, the public systems??which today number over 3.000 and serve some 20 per cent of American electricity consumers??have traditionally offered cheaper rates and provided a "yardstick" for measuring the efficiency and charges of the private power companies...
...the upshot would likely be a significant increase in electric bills, perhaps by billions of dollars...
...No sooner did the private utilities get wind of the document than they sought a hearing with Rockefeller...
...But fpc regulations for setting interstate electric rates are not subject to any fixed criteria of efficiency...
...That is correct," the President answered...
...Owning over 75 per cent of the nation's installed generating capacity, they take in 80 per cent of the industry's revenue...
...Not surprisingly, therefore, the private utilities are eager to have Congress adopt a bill introduced some time ago by Senator Warren Magnuson (D.-Wash...
...The background to this attempted power coup throws additional light on the determination of the private interests to monopolize nuclear power...
...And of the 62 atomic generating units having a capacity of 10,000 kilowatts or more already in operation or scheduled for completion during the next six years, 52 are associated with private power companies and only eight with publicly-owned systems...
...As far as I know...
...The group charges that the New England utility combine has consistently excluded it from regional plans for power generation and transmission...
...This would immunize them from anti-trust violations if the Federal Power Commission (fpc) had approved their power pooling and other joint arrangements in advance...
...The Northwest Public Power Association recently forecast that a publicly-built system would afford customers in that region savings of about $630 million over the life of the atomic plant...
...The big chip in the pot is atomic power in the State of New York and who will run the show: the people through the Power Authority...
...or the private power companies...
...No, sir...
...You are not selling, then, to any Massachusetts utilities anywhere that were not participants in Yankee Rowe...
...Advocates of public power—-notably Senators Lee Metcalf (D.Mont...
...The Authority's trustees have made it clear that they do not seek to restrict the building of private atomic plants, but they have stressed that they will be able to provide cheaper power than the private companies could offer...
...While the private utilities would have had to sell additional kilowatt-age to the State Authority under the plan, this was, in the words of former Authority member Edward H. Case, "just the pleasing bait for the gullible and the unwary...
...Even by pooling their resources, they could not build systems large enough to yield comparable gains...
...Should they succeed, the competitive yardstick would disappear...
...For nearly a decade...
...Lawrence River cannot meet the growing demands of its customers in New York and adjoining states...
...and George Aiken (R.-Vt...
...Asked by the attorney for the municipal companies whether his clients would be allowed to buy stock, the President of the Vermont Yankee Nuclear Power Corporation replied succinctly: "No...
...Finally, faced with the private utilities' refusal to cooperate with public systems, the fpc seems to adopt a sort of Pollyanna attitude, hoping all concerned will come to see the wisdom of mutual cooperation...
...It may be argued that even if the public power systems are excluded from nuclear projects, they will still be free to buy their electricity from the private companies at wholesale...
...As for the state regulatory bodies, there is general agreement they have been woefully inadequate in the past, often betraying indifference and even hostility to consumer interests...
...Subsequently a series of conferences took place in Albany behind closed doors, attended by the governor, certain of his legislative advisers, and representatives of the private utilities...
...Every attempt by the municipals to participate as stockholders in these projects, or at least to share on an equal basis in the future power output, has been brusquely turned down...
...POWER PLAY IN THE ELECTRIC INDUSTRY Breaking the 'Birch Rod' By Joseph A. Rusk ay Since 1881, when a Pennsylvania municipality got tired of paying the local utility's high electricity rates and built its own power plant, public and privately-owned power companies have operated side by side across the United States...
...Without more low-cost electricity, the Authority has warned, industry in New York cannot expand and industrial plants will emigrate to areas where power costs less...
...Studies by the Atomic Energy Commission (aec) and the fpc emphasize that interconnected public/private systems capable of large-scale generation and transmission are the key to abundant future supplies of low-cost electricity...
...No spokesman for the public systems' 100,000-odd customers were consulted or invited to be present at the meeting...
...And at a hearing before the sec in January of this year, a spokesman for one of the private utilities sponsoring the nuclear projects was asked whether a municipal system could purchase unit power directly from Yankee Atomic Corporation if it was not allowed to purchase stock...
...the benefits the buyer should realize from new, large-scale plants are frequently diluted by antiquated and inefficient equipment incorporated in the rate base...
...Clearly, if nuclear power is controlled by the private electrical companies, it is the American householder and industrial consumer who will suffer...
...Members of the building trades and certain other unions, for example, have reportedly been given to understand that approval in the next session will mean thousands of extra construction jobs for their members...
...Half the generating facilities now under construction or planned for operation in the near future will be nuclear installations...
...In New York, the public sector also risks losing out on nuclear power...
...the attorney continued...
...Again the answer was "No...
...Moreover, most of the publicly-owned municipal companies and rural cooperatives, having generally inferior resources, purchase all or part of their electricity at wholesale from the private companies...
...Perhaps even more significantly, when the governor announced his nuclear program in the spring, the State Power Authority suddenly came around full face and added its endorsement...
...warn that the private utilities have maneuvered to exclude the rural electric and municipal systems from their nationwide networks and to deny them access to low-cost power, including the tremendous potential of nuclear power...
...The Authority's report was never released, and there are rumors that an attempt was made to recover all outstanding copies...
...We are only 12 per cent of the corporation, but I would think you would be...
...With a capital investment of over $64 billion, the private electric utilities comprise the nation's biggest industry...
...In other words, this "birch rod in the closet," as Franklin D. Roosevelt called it, has been a major factor in keeping down the rates for the remaining 80 per cent of American consumers...
...In the hectic closing days of the Legislature, Governor Rockefeller and the Republican leaders attempted to put through an $8-billion nuclear power program...
...Translated, that means the fpc still hopes the lion will eventually lie down with the lamb...
...In its 1964 National Power Survey, it referred wistfully to "long-range planning of all generation and transmission facilities whether owned privately, cooperatively or by the Federal or other public agency, as part of the large coordinated power network to achieve the lowest cost of bulk power supply...
...A few years ago, when a bill was introduced in Congress that would have relieved the fpc of authority to regulate the interstate sale of electricity by private utilities to municipal systems and cooperatives, a number of state Public Service Commission representatives testified in favor of it...
...As one critic caustically observed, the Authority put a "stamp of enthusiastic approval on its own elector-cution...
...The Rockefeller program was quickly approved by the Republican-dominated State Senate, but defeated at the eleventh hour in the predominately Democratic Assembly...
...In New England, the ruthlessness displayed by the private utility combine trying to freeze out the municipal electric companies from access to low-cost, bulk nuclear energy is almost beyond belief...
...It has emphasized that its hydroelectric facilities at Niagara Falls and on the St...
...These municipals currently serve almost a half-million customers in Massachusetts and have been in business over 50 years (one of them since 1889...
...and has put road blocks in the way of an alternative program for importing low-cost hydroelectric power from Canada...
...The growing importance of nuclear energy as a source of abundant cheap power has made the situation especially acute...
...In any event, rate regulation is no substitute for the vital role of the public yardstick as a measure of the private electric companies' performance...
...It has been an uneasy coexistence, for publicly-owned utilities have always been anathema to their private competitors...
...The aec report on the Status of Civilian Nuclear Power has estimated that electricity from major nuclear plants constructed by public agencies would cost about 27 per cent less than that produced by private plants...
...has opposed efforts to secure sufficient money from Congress for the Dickey-Lincoln Federal power project in Maine, which promised new low-cost resources for the whole area...
...As friends of the public power systems see it, however, the lion not only refuses to lie down with the lamb, but it has already begun to devour it...
...And this would apply to both the Vermont Yankee and Maine Yankee Corporations...
...But the private utilities have already set up their own power pools and regional arrangements for joint construction of huge new generating systems that include nuclear power plants, to be linked by extra-high-voltage longdistance transmission lines...
...All this, of course, has put the isolated municipal and cooperative systems at a great disadvantage...
...And is it your understanding that if we requested it, we would be refused...
...Would you sell it to us if we were willing to pay a higher price for this power...
...With few exceptions, they have rigidly excluded the public companies from these arrangements, or at best have extended membership on a limited basis that limits economic benefits as well...
...In effect, it would have given the state's private utilities a monopoly in the construction and exploitation of atomic plants, along with generous financial assistance from the state...
...In 1965 they had to pay $10 million more than the national average paid by municipal systems for the power they purchased from the private companies...
...Senator Aiken has gone so far as to suggest that if the unmistakable trend toward monopoly continues, the industry might have to be nationalized...
...Senator Metcalf has called for an investigation of the industry by the Anti-trust Division of the Department of Justice...
...Most telling of all, the private combine barred the municipal systems from four vast nuclear projects...
...One of these is the proposed $129-million Vermont Yankee Nuclear Power Plant, where participation would have enabled the municipal companies to obtain power at about one-fourth to one-third of what they are now paying...
...Their generating capacity has doubled in the past 10 years and is expected to double again by 1980, when the average American will be using more than twice the amount of electricity he uses today...
...has successfully obstructed all state legislation designed to permit the municipal companies to finance and build their own large-scale nuclear plants...
...As a result, a fresh effort to push the program when the Legislature reconvenes might very well meet with success...
...A group of 40 municipal systems has been seeking help from the aec, the Securities Exchange Commission (sec) and other governmental authorities, but to date their complaints have fallen on deaf ears...
...It added that if nuclear plants were constructed by public authorities throughout the country, the savings to electricity consumers would be in the order of $3 billion every year...
...Joseph A. Ruskay, a new contributor, is an attorney in New York...
Vol. 50 • October 1967 • No. 20
