Friday, September 27, 2002

Krugman on Mussolini-style fascism.

Federal regulators certainly seemed determined to see and hear no evil, and above all not to reveal evidence of evil to state officials. A previous FERC ruling on El Paso was, in the view of many observers, a whitewash. In another case, AES/Williams was accused of shutting down generating units, forcing the power system to buy power at vastly higher prices from other units of the same company. In April 2001, FERC and Williams reached a settlement in which the company repaid the extra profits, but paid no penalty — and FERC sealed the evidence. Last week CBS News reported that "federal regulators have power control room audiotapes that prove traders from Williams Energy called plant operators and told them to turn off the juice. The government sealed the tapes in a secret settlement" — the same settlement? — "and still refuses to release them."

If that's true, FERC caught at least one power company red-handed, in the middle of the crisis, at a time when state officials were begging the agency to take action — and then suppressed the evidence. Yet this story has received little national play.

For some reason it has never been cool to talk about what was really happening in California. When the crisis was in full swing, most commentators clung to a story line that blamed meddlesome bureaucrats, not profiteering corporations. When the crisis came to an end, it suddenly became old news.

Maybe our national faith in free markets is so strong that people just don't want to talk about a case in which markets went spectacularly bad. But I'm still puzzled by the lack of attention, not just to the disaster, but to hints of a cover-up. After all, this was the most spectacular abuse of market power since the days of the robber barons — and the feds did nothing to stop it.

And if FERC was strangely ineffective during the California crisis, what can we expect from other agencies? Across the government, from the Interior Department and the Forest Service to the Environmental Protection Agency, former lobbyists for the regulated industries now hold key positions — and they show little inclination to make trouble for their once and future employers.

So we ignore California's experience at our peril. It's all too likely to be the shape of things to come.