February, 2001

Dear Friend of Radio Liberty:

"It's not what you think. Are you going to believe what I tell you, or are you going to believe your lying eyes?"
Attributed to Groucho Marx [1]

"I think it's a fake. . . . It's too convenient that this happens when we need the fuel the most. They say they're going to deregulate everything and they're supposed to save us money, but instead they raise the prices."
A retired engineer: quoted in The New York Times, January 13, 2001 [2]

"More than half of those polled, or 54 percent, said that they did not believe there really was an electricity shortage. . . ."
The New York Times, January 13, 2001 [3]

"Every single human being on the planet Earth wants me to raise rates, except me, and the people standing behind me."
Governor Gray Davis, The New York Times, January 20, 2001 [4]

". . . Gov. Gray Davis may have to take two urgent steps that he has insisted he would resist: a large increase in power rates, and a state plan to help the utilities pay off roughly $12 billion in recent losses by selling state-backed bonds and having utility customers pay them off over a period of years through special charges, a step known as securitization."
The New York Times: January 20, 2001. [5]

Last month I promised to reveal the agenda behind the energy crisis, and tell you about Steve Peace, the State Senator who created the problem.

One of Groucho Marx's most famous comedy routines depicted him in bed with a woman when his wife comes home unexpectedly. Groucho immediately leaps from the bed and screams:

"It's not what you think. Are you going to believe what I tell you, or are you going to believe your lying eyes?" [6]

We are witnessing a similar situation today. Despite a well-financed campaign to convince the public the energy shortage is real, most people believe it was created to increase their utility bills. They are correct.

The cost of electricity is about to rise to historic levels, but there is an agenda behind what is happening. I will expose that plan in this letter and next month's letter.

When a reporter asked a 64-year-old, retired engineer for his opinion of the energy shortage, he replied:

"I think it's a fake. . . . It's too convenient that this happens when we need the fuel the most. They say they're going to deregulate everything and they're supposed to save us money, but instead they raise the prices." [7]

When the reporter asked a computer programmer for his thoughts on the subject, he responded:

"Deregulation is what caused it all. . . . I don't see how you can look at this as an economic model that is going to provide better service. What advantage you get from deregulating a monopoly escapes me." [8]

A poll was taken to determine what the public thinks about the energy crisis. The survey revealed:

"More than half of those polled, or 54 percent, said that they did not believe there really was an electricity shortage. . . . Perhaps unsurprisingly, 66 percent said they disapproved of the 1996 state deregulation plan." [9]

Governor Gray Davis agreed with that assessment. In his State of the State Address, he proclaimed:

"You are all aware of the basic facts. In 1996 the Legislature and the Governor launched an untested restructuring of California's electricity market.

Under their plan, our three investor-owned utilities - Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric - were forced to sell off their generating capacity to unregulated private companies.

And the price of electricity - long regulated by the California Public Utilities Commission - was to be set instead in a freewheeling commodities market. . . ."

The out-of-state generators who bought most of our utilities' power plants, are now charging California several hundred percent more for wholesale electricity than we paid just one year ago.

Senator Dianne Feinstein and I have repeatedly urged the Federal Energy Regulatory Commission to use its exclusive powers to lower these record prices. But despiteour repeated demands, it has shirked its responsibility to protect ratepayers from this legalized highway robbery.

In fact, this Commission made matters worse when, in December, they lifted the hard price cap, causing the average price per megawatt hour to increase by nearly 900% compared to the same month the year before. That's like paying 25 dollars for a three- dollar gallon of milk. . . .

On many days 10-12% of the electricity generated in California leaves our state in search of even more exorbitant prices. On some occasions, the merchant generators have brought the State to the very brink of blackouts by refusing to sell us back our own power because they could find higher prices elsewhere.

Think about it: they're refusing to sell us our own power.

Worst of all, there's evidence that some generators may be purposely withholding electricity from the California grid to create artificial scarcity which in turn drives up the price astronomically. . . .

These generators may be acting within the law. But if they're illegally gaming or manipulating the market, the Attorney General will track them down. . . ." [10]

Elsewhere Governor Davis stated:

". . . some power plants are deliberately withholding power or performing unnecessary maintenance to drive up prices. . . ." [11]

Conservative leaders criticized Governor Davis for his remarks. They blamed the problem on environmental activism. Liberals claim there wouldn't be a shortage of electricity if the public would conserve energy, while conservatives want to build more power plants. Liberals say the state should purchase the power grid and control energy production, while conservatives say we should stop regulating the energy industry. Liberals claim the free market system created the problem, while conservatives insist only a free market can solve the problem. Liberals claim energy producers are making obscene profits, while conservatives say energy producers have a right to make a profit. Liberals say energy deregulation created the problem, while conservatives say we should deregulate energy production further. Who is right? Is the environmental movement responsible for the problem? Is the energy industry responsible? Are politicians and bureaucrats responsible? Is the Federal Energy Regulating Commission responsible? Are the public utilities responsible? Should we deregulate the energy industry further? The problem didn't result from a shortage of electricity as media pundits would have us believe, or because we can't build enough power plants. The energy crisis was created to undermine our economy, impoverish our people, and change our way of life. It is the final stages of The Unfinished Agenda described in a report sponsored by the Rockefeller Brothers Fund. You will learn more about that agenda next month. [12]

Some people say the Green Party is responsible because it advocates:

". . . decentralized public ownership and democratic control of our energy system. . . ." [13]

Public ownership is socialism, and many of our legislators are dedicated socialists, but when they voted to deregulate electricity they voted to undermine the regulatory system they support. Energy deregulation transfers energy production from government-regulated monopolies (public utilities) to privately owned corporations that can exploit the system. California's public utilities provided cheap, dependable electricity for almost a century, and they worked well until the 1960s when they were viciously attacked by environmental activists. The activists harassed the companies and did everything possible to run up their expenses. If a public utility wanted to build a power plant, the activists demanded additional studies and new safety regulations. If the utility acceded to their demands, the activists made new demands. They delayed the approval, construction, and opening of the Diablo Canyon nuclear plant for 17 years, and increased its cost from $350 million to $5.8 billion. That facility ended up costing 18 times more than it should have because of the environmentalists. [14] Since the activists had the support of the media, tax-exempt foundations, many corporations, and some highly placed government officials, they were successful in most of their endeavors. Eventually they were able to stop the construction of most new power plants in California, and that is one reason for our current problems. The public utility companies had to recoup their losses, so they asked the PUC for higher utility rates. That's why electricity costs 50% more in California than it does in neighboring states. Despite that fact, most people were happy with our system, so why did we abandon it and embrace a system that has resulted in higher prices wherever it has been introduced? When you know the answer to that question you will understand why there is an energy crisis in California today. [15]

When Governor Davis delivered his State of the State Address on January 8, 2001, he avoided the question by stating:

"Now, our job today is not to engage in an ideological debate over the pros and cons of deregulation. I'm not here to point fingers or assign blame and I assume the proponents of deregulation really did envision lower energy costs and smaller electricity bills. They certainly didn't plan for this mess." [16]

Some proponents of energy deregulation may have believed it would work, but those who knew what happened in other countries realized it would fail. The new system replaced state-regulated monopolies with unregulated monopolies, and without competition, prices always rise.

Governor Davis is an intelligent man, but he is afraid to tell the public the truth. There is an "Energy Establishment" that operates behind the scenes. It consists of major corporations, it functions as a cartel, and it wants to control energy production throughout the world. Until recently it had difficulty accessing markets because most countries have state-regulated monopolies. The only way to penetrate those markets was to destroy the monopolies. Energy deregulation was designed to accomplish that goal.

Gregory Palast has worked as an energy consultant for over thirty years. His job was to analyze public utilities and tell state regulators how to improve them. When the Labor Party came to power in Great Britain he was asked to go to England to help the new government deal with the energy system they inherited. Margaret Thatcher deregulated energy in England in 1990 by promising to introduce competition and lower the price of electricity. Instead, she converted a relatively efficient, inexpensive, state-regulated delivery system into an inefficient, expensive delivery system. [17] In a recent article in The Washington Post, Gregory Palast described how the new system worked in England, and why it increased the cost of electricity.

"First, electricity businesses are split into "generators" and "distributors". . . .

Several corporations from the "Energy Establishment" bought the generating plants; other companies bought the power lines.

"Then something called a "power pool" is established. Every day, generators bid the price at which they will supply electricity to the pool at a certain hour of the next day. . . . In Britain, it didn't take long for the handful of power sellers and traders to learn how to "game" the pool, essentially turning the daily auction into a fixed casino. Last year, Britain's Office of Electricity and Gas Markets concluded that collusion and manipulation of the pool had become standard business practice. . . ."

". . . the public has suffered higher prices, decayed service and blackouts. In the 1990s, as America's electricity prices fell with the price of oil, Britain's stayed stratospheric, on average 70 percent higher than in the States. . . . Notably, three of the four biggest power generators controlling the California market - AES, Southern and Dynergy - and the biggest U.S. power trader, Enron, are also big players in Britain. [18]

Paul Krugman served on the advisory board of Enron until he resigned because of a conflict of interest. In a recent article in The New York Times he noted:

"Kenneth Lay, chairman of Enron, was a prime mover in George W. Bush's presidential campaign; he has also been an influential voice in favor of electricity deregulation, and Enron is profiting handsomely from the electricity it sells in California. But what he actually said was that California's power consumers 'need to see the price signals [that is, pay much more] and start modifying behavior to reduce demand until we get new supplies.' He also rejected the plea of California officials for a federally imposed cap on wholesale electricity prices, arguing that this would merely 'start spreading the shortage around'. . . ."

". . . the wild wholesale market also, arguably leads to another source of reduced supply: power-generating companies have a clear incentive to produce less than they can, because doing so drives up the prices they get on what they do produce." [19]

Deregulation rewards companies that withhold power from the grid. In a recent article entitled Profiting From an Energy Crisis, Timothy Egan and Sam Howe Verhovek wrote:

"The attorneys general in California, Oregon and Washington are investigating whether the handful of power companies that sell electricity to the state manipulated the market, cutting back supplies to set off the threat of blackouts - which then led to higher prices and windfall profits. The companies deny that they did so. . . ."

"'The simple fact is that a handful of people who were really smart figured out how to make a ton of money selling the same product in essentially the same market conditions as before at 10 times the price', said Michael Kahn, chairman of the California Electricity Oversight Board, and co-author of a state study on how the market here collapsed." [20]

Power plants can generate electricity 95% of the time, and close for maintenance 5% of the time. Last November 30% of California's power plants closed for maintenance at the same time, while in December 25% of the power plants closed at the same time. [21] [22] That's why we've had an energy shortage in California, and why Governor Davis believed:

". . . some power plants are deliberately withholding power or performing unnecessary maintenance to drive up prices. . . ." [23]

Our utility companies lost over $12 billion buying electricity at the rigged auctions, and eventually ran out of money. Then the state stepped in, issued $10 billion in bonds, and continues buying electricity at the rigged auction. The state is currently paying about 30 cents a kilowatt for power, and charging rate- payers 6.5 cents for the product. Sooner or later the citizens of California are going to have to pay the billions of dollars that have been stolen by the Energy Establishment, and their friends in government. Governor Davis fears there will be a backlash if he raises utility rates, so he is borrowing money from future generations so he won't be blamed for the energy crisis. Recently he remarked:

"Every single human being on the planet Earth wants me to raise rates, except me, and the people standing behind me." [24]

Sooner or later we must hold our legislators responsible for their folly, and sooner or later we must demand that those who are responsible for the energy crisis pay for their deceptive practices. You must help disseminate the truth about what is happening. A recent article in The New York Times reported:

"Gov. Gray Davis may have to take two urgent steps that he has insisted he would resist: a large increase in power rates, and a state plan to help the utilities pay off roughly $12 billion in recent losses by selling state-backed bonds and having utility customers pay them off over a period of years through special charges, a step known as securitization." [25]

Next month I will get to the story about Senator Steve Peace, explain The Unfinished Agenda, and conclude this series of letters.

My book, Brotherhood of Darkness, is moving well. Please help me distribute it either by itself, or as part of a special offer which includes the book, a video, and an audiotape. Discounts are available on bulk orders.

We have a new four-tape set, The Secret Agenda Behind The Energy Crisis. We also offer a syllabus and a video on that subject. An understanding of the energy crisis will help us reach others because higher costs will ultimately affect everyone. The items noted above are available by calling 800-544-8927.

Please copy and distribute this letter.

When Winston Churchill was appointed Prime Minister of Great Britain, he proclaimed:

"Victory at all costs, victory in spite of all terror, victory however long and hard the road may be; for without victory there is no survival." [26]

During the evacuation of Dunkirk, he announced:

"We shall not flag or fail. We shall go on to the end. We shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender." [27]

Winston Churchill was a gifted orator, but he extolled man's ability rather than God's concern. Let me conclude by quoting from a speech given by Abraham Lincoln:

"What constitutes the bulwark of our . . . liberty and independence? It is not our frowning battlements, our bristling sea coasts. . . . These are not our reliance against . . . tyranny. . . . Our reliance is in the love of liberty which God has planted in our bosoms. Our defense is in the preservation of the spirit which prizes liberty as the heritage of all men, in all lands, everywhere. Destroy this spirit, and you have planted the seeds of despotism around your own doors." [28]

Note the difference in the thrust of the speeches. Although both men were eloquent orators, Winston Churchill promoted man's genius while Abraham Lincoln promoted God's concern for man. If we focus our attention on men we will surely fail, but if we focus our attention on God we can surely prevail.

Thank you for your loyal support, and for standing with us during these difficult times.

Yours in Christ,

Stanley Monteith, M.D.




REFERENCES

1. Quoted from my memory of Groucho Marx's skit.
2. Rick Lyman, "Cynicism Abounds as Californians Lurch Through Energy Shortage," The New York Times, January 13, 2001, p. A11.
3. Ibid.
4. James Sterngold, "California Averts Blackouts, For A Day, As Utilities Thrash to Stay Afloat," The New York Times, January 20, 2001, p. A17.
5. Ibid.
6. See reference [1] above.
7. James Sterngold, op cit.
8. Ibid.
9. Ibid.
10. Governor Gray Davis, State of the State Address, January 8, 2001: Available on his web site, from his office in Sacramento, 916-445-2841, or from Radio Liberty.
11. Correction Please!, "From Regulation to Rationing," The New American, January 15, 2001, p. 42.
12. Gerald O. Barney, The Unfinished Agenda: A Task Force Report Sponsored by the Rockefeller Brothers Fund, Thomas Y. Crowell Company, 1977.
13. Green Party of California: Policy Directions, 1996, Energy Section, P. 13. (My thanks to Holly Swanson)
14. Rebecca Smith, "California Law Shows How Not To Structure Utility Deregulation," The Wall Street Journal, December 27, 20001. p. A1. See Also: John Elvin, "Electric Crisis Shocks California," Insight magazine, February 26, 2001, p. 18.
15. Gregory Palast, "Utilities Need Regulation," The Washington Post National Weekly Edition, February 5-11, 2001, p. 22.
16. Gray Davis's speech, op cit., p. 2 of the text obtained from the Governor's office.
17. Gregory Palast, op cit.
18. Ibid.
19. Paul Krugman, "Power and Profits," The New York Times, op-ed Editorial Section, January 24, 2001, p. A23.
20. Timothy Egan and Sam Howe Verhovek, "Profiting From An Energy Crisis," The New York Times article, reprinted in the Santa Cruz Sentinel, February 11, 2001, pp. A1, and A10.
21. Rebecca Smith, "Natural Gas Cuts Hurt California Power Plants," The Wall Street Journal, November 16, 2000, p. A4.
22. John Howard, "Off-line Power Plants Under Scrutiny Amid Unusual Alert," AP article, Santa Cruz Sentinel, December 7, 2000, p. A5.
23. "From Regulation to Rationing," op cit.
24. James Sterngold, op cit.
25. James Sterngold, ibid.
26. John Bartlett, Bartlett's Familiar Quotations, 1980, p. 744. Quoted from Churchill's first address to the English Parliament as Prime Minister, 1939.
27. Ibid., address referring to Dunkirk, House of Commons, June 4, 1940.
28. Abraham Lincoln, Edwardsville, Ill, September 11, 1858.


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