Commentary

The Lessons of the Blackout

The electricity blackout that crippled the Northeastern United States and Ontario last week underlines the folly of the privatization and deregulation of the electricity system. Although the exact causes of the collapse of the electricity delivery system serving over 50 million people have not yet been determined, there is an emerging consensus that the underlying problem, just as was the case in California, is the total absence of government regulations and controls of the companies generating and distributing electrical power in the Northeastern United States.

All of the regions hit by the blackout are served by private electrical companies in a deregulated environment. In addition, various experts have stated that there are numerous safeguards in place designed to prevent a cascading failure such as the one that occurred, although no one has yet explained why those safeguards failed to work. In addition, the high degree of integration of the Canadian distribution grid with the American system, a situation which supposedly ensures a reliable source of energy to consumers, has now been proven to increase the vulnerability of Canadians to the structural problems of the American system.

One of the factors cited in the case of the U.S. power distribution system is that it is an antiquated system which was designed to handle a fraction of the power it is currently carrying, and the same problem exists to a certain extent in Ontario. The construction of a modern, high-capacity distribution system will cost billions of dollars and no private company is interested in foregoing some of its profits to finance such an investment. The blackout, which is a result of power companies refusing to reinvest some of their profits in infrastructure and maintenance, will now be used as an excuse to extort billions of dollars from the state treasuries to build that infrastructure for them at no cost to their shareholders. Already, various American electricity companies are mounting a campaign for higher rates to pay for the needed upgrades to the distribution infrastructure. In California where consumers were promised a 20 percent drop in rates due to deregulation, rates actually soared by over 300 percent and the energy companies used rolling blackouts to blackmail people into accepting the rate increases.

The mantra of the neo-liberals is that the market knows best and that governments should let the market govern the economy. However, when the market fails, as it does on a regular basis, these same neo-liberals are the first to demand that the governments solve their problem of falling profits through massive cash handouts. The logic of this situation is inescapable: if monopoly capitalism is incapable even of providing people with a reliable electric power distribution system, something which is of crucial importance to any modern society, then of what value is it to society? Its time has passed and it must be replaced by an economic and political system which is capable of providing such security.