The Guardian February 14, 2001


Deregulation causes energy crisis

by Fred Gaboury

CHICAGO  Lucinda Ware, an 84-year-old woman living on Chicago's 
SouthSide, has an income of just over $700 a month. Early last month she 
got a $440 bill from People's Gas for the month of December.

Ware, one of the 85 percent of Illinois homeowners who depend on natural 
gas for heat, hot water and cooking, says she'll be able to scrape up 
enough money to pay that bill. But she wonders what she'll do next month, 
which she fears, will be 40 percent higher.

There have been other increases as well: Heating costs for Chicago public 
schools are up US$7 million, 50 percent more than called for in the budget. 
More than 100,000 more families are receiving emergency assistance from the 
Low Income Home Energy Assistance Program compared with a year ago.

For People's Gas: a 55 percent increase in quarterly net income as cold 
weather, low inventories and deregulation combined to drive up heating 
costs in Illinois and throughout the Midwest.

Nor is People's alone in its good fortune. With what the Wall Street 
Journal called (unusually) high oil and natural gas prices and strong 
profits from their refinery operations, the nation's largest oil and 
natural gas companies racked up obscene fourth-quarter profits last year.

"The industry is putting on a show the likes of which has never been seen 
before", the Journal article said.

Exxon Mobil set a record with a fourth-quarter profit of $5.2 billion; 
Texaco Inc said its quarterly profits were a record, while Chevron Corp 
said 2000 was the most profitable year in its history. BP Amoco, the 
British/US energy conglomerate, made a fourth-quarter profit of more than a 
billion dollars from natural gas sales in the United States.

In a telephone interview, Patricia Clark, associate director of the 
Citizens Utility Board, said, "They are going to have to hide those profits 
somewhere. People paying high energy bills are going to be screaming bloody 
murder."

Bob Vondrasek, executive director of the South Austin Coalition, was blunt 
when asked his views on the heating crisis. "Deregulation has turned 
heating our homes over to Wall Street and most States, including Illinois, 
have surrendered any control over outfits like People's Gas."

Vondrasek said he doesn't "expect much help" from the Bush administration. 
"After all", he said, "both he and Dick Cheney are from the oil industry. 
That means the first step we have to take if we are going to change things 
is to get organised."

He said the Coalition is working with Democrat Rep Danny Davis to organise 
a meeting on February 20.

William Abolt, Chicago's Environmental Commissioner, says consumers are 
faced with a deregulated market in terms of gas production but a non-
competitive market place. "Because of this, gas companies are indifferent 
about prices while producers have no check on what they can charge. You 
have the worst of all possible worlds and it's ripe for price gouging", he 
said recently.

When growing anger forced Mayor Richard Daley and the city council to 
demand an explanation, People's Gas stonewalled, with CEO Richard Terry 
even going so far as refusing to attend a special meeting called by the 
council to investigate gas prices.

While a city ordinance protects customers from cut-offs until April 1, 
People's has refused to extend its budget payment plan to 18 months or to 
allow non-budget customers to take longer to pay off this winter's bills.

Wall Street is well aware of the resentment percolating in the nation over 
high energy costs accompanied by outrageous profits.

In an analysis of trends in the utility industry directed at investors, 
Goldman Sachs warns that record high prices "raise the spectre of increased 
regulatory risk as Congress and many state commissions and legislatures 
have announced investigations".

Carl Rosen, President of United Electrical Workers (UE) District 11, told 
the People's Weekly World that deregulation of the price of natural 
gas and lax enforcement of the regulations that are still on the books by 
the Federal Trade Commission (FTC) and the Illinois Commerce Commission are 
responsible for the high price of natural gas. "In general, the members of 
these commissions are the same `free market' types who told us deregulation 
would create competition.

It hasn't and it won't."

Enforcement has become weaker over the years with the Securities and 
Exchange Commission approving more than 120 mergers of electric and gas 
utilities since 1978. Most analysts believe that within a few years a 
handful of huge conglomerates will control production of the nation's 
electrical and natural gas needs.

* * *
People's Weekly World (Abridged)

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