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Local Globalism Means Extortion
© 2000 The Gobbler
by Roy Harvey and Karen Engstrom
A year ago a company called NRG
Energy Inc. bought two local power plants, Huntley Station just
three miles north of Buffalo, and Dunkirk Station, about 50
miles south of Buffalo. It was a globalist thing.
Globalism is local. Don't imagine
for a moment that it's only somewhere else. In Buffalo, in Jamestown,
in all the little cities and towns throughout Erie, Chautauqua,
and Cattaraugus Counties, globalism is at work - but not for
you (unless you're a significant stockholder in an NRG-like
business).
NRG is a globalist operation.
While it claims to be the 7th largest producer of energy in
the world (and touts itself as moving into the number three
spot) it is itself a subsidiary of another giant, Xcel, holed
up in Minneapolis. Itself a product of a giant merger, Xcel
is a major buyer of what used to be called "public energy utilities."
(1)
Except for municipally owned energy
producers like Jamestown's BPU, public utilities were never
public. They were local monopolies that were regulated (capacity
rates, to ensure a minimal shortage of energy at peak times,
and review of price increases, etc.). Only in that tangential
sense were the utilities "public." And that's gone. With deregulation,
what's in its place is a thing called the private-owned manufacturing
facility. What does that mean? It means that it's virtually
unregulated. They were always privately owned monopolistic manufacturing
facilities. Now they don't have to worry about public scrutiny.
And they can become virtually monopolistic when they buy up
all the local power plants that are for sale (a consequence
of deregulation). Or they can work in collusion with other similar
groups (e.g. KeySpan Energy, Orion Power Holdings and NRG Energy,
three wholesale energy suppliers that control more than two-thirds
of the generating capacity in downstate New York). (2)
It didn't take groups like NRG
long to see the money-making potential of deregulation, especially
since they and their lobbyists wrote and pushed it through,
in New York and across the nation. (3)
Selling electricity is especially
lucrative for globalists like NRG, which is essentially a mergers
and assets acquisition thing, not an energy company as such.
NRG, like players in the game of Monopoly, simply buys up power
plants, diversifying the kinds of energy plants they buy as
any good portfolio manager would, with the sure-fire knowledge
that they're going to be able to massively jack up energy prices
immediately or soon after, while finding ways in the short run
to dramatically increase profits. Quite often, as in New York
City recently, price increases are simply tacked on to increases
due to legitimate fuel cost increases. (4)
In addition to the normal ways
of increasing profits (firing, speeding up, etc.), they have
another powerful trick, that of extorting the communities dependent
on the public utility for taxes. (5)
Dunkirk and Tonawanda
Case in point: Niagara Mohawk
Dunkirk plant paid $8.6 million annually in taxes to Chautauqua
County, the City of Dunkirk, and the Dunkirk school district.
It was the largest single taxpayer in the County, and seemed
to be getting off cheap. The city and the school district in
Dunkirk got more of the tax monies, in some measure because
the plant pollutes their city more than it does the rest of
the county. It's in the heart of their city, after all. And
over the last decade, Niagara Mohawk Dunkirk Plant was granted
two dramatic tax breaks. (6)
Along comes NRG, buys up Dunkirk
Station and the Town of Tonawanda-based Huntley Station on the
cheap (under $200 million each), and demands that their taxes
be reduced or they'll pull out.
How do we know they'll pull out?
We don't. But this is what we hear from Mr. James Mintun of
the Chautauqua County Business Council: "If the plant is not
competitive, it will close. Everyone will lose. This will also
hurt the image of Dunkirk." (7)
Let's return to Mr. Mintun's observations
in a moment. But first, NRG is not saying they want to stop
paying altogether. They want to substitute paying taxes in favor
of a thing called "payment-in-lieu of taxes" (PILOT).
What this seems to mean is that
they're willing to pay something, but they want to be free of
paying the government. This is a neat trick in at least two
ways: first, they undermine government by bypassing it. If the
last shred of government is gone, who's going to give them any
grief at all? Especially in rural areas where there are virtually
no consumer watchdog groups. Secondly, if they volunteer to
make these "payments-in-lieu-of-taxes," they won't be legally
obligated to pay them when they're ready to phase out paying
altogether.
It's of interest to look at the
question of tax relief, for a moment. Clearly this globalist
operation needs some tax relief. After all, in the 3rd quarter
of 2000 their revenues only went up to $1.47 billion, from $283.6
million. (8) Their profits were only a measly 25%. (9)
They've been buying energy producing
utilities all over the world at a mind-spinning rate. Clearly
they need the help of Dunkirk's School District.
Okay, granted. It's a dog eat
dog world. Dunkirk should cut its throat for the cause. When
NRG's taxes go down, the home owner's (and renter's) will go
up. But geez, if NRG executives and assets acquisitions and
mergers staff can't show an immediate profit, their stock won't
rise rapidly enough, causing a slowdown in acquisitions. At
the current rate, they're buying new plants across the globe
at about one every two weeks since they were founded in 1999.
They own 181 at last count, and they tend to pay cash. (10)
Before we return to Mr. Mintun's
comments, it's important to note that NRG in Dunkirk says they
need tax relief because they've got to sink $50 million into
repairs to the facility. (11)
First off, note: Niagara Mohawk
(which is an energy producing company), for whatever reason,
let the Dunkirk plant fall into a state of disrepair. Then they
sold the plant to NRG which has a habit of buying rural or troubled
plants where there's no potential opposition (not having an
independent, critical press is a key part of this). Weren't
those tax adjustments granted to Niagara Mohawk because they
pleaded help in making infrastructure repairs? And what guarantee
is there that globalist NRG will make any sort of repairs? According
to county officials we've spoken to, none. In five or ten years,
NRG could be in the business of dumping these plants, just writing
them off, or selling them to yet other globalists who will finish
gutting them. It's much like slumlords: buy up old buildings,
don't make repairs, stop paying taxes, squeeze every last nickel
out of the poor tenants, then let them go to the tax sale, leaving
governments with the cost of demolition and clean up. Only these
NRG guys seem to be much slicker than slumlords.
Now, Mr. Mintun
Okay, now Mr. Mintun. He agrees
with NRG that the Dunkirk plant is "overassessed." The State
of New York set the value of the plant, for 2001, at $275 million,
up from $231 million, though it's taxed on $186 million - nearly
$90 million under its assessed evaluation. NRG Energy paid just
under $200 million for the plant, a sweet deal because it bought
two at the same time. While the State saw an increase in value
of $44 million (1999 - 2001), NRG argues that the plant is drastically
going down in value because of deregulation (which enabled them
to buy it in the first place). (12)
The NRG argument is specious.
The trade off for utilities being allowed to have monopolies
was that they were regulated by the State. Deregulation means
no guaranteed monopoly, and no regulatory oversight. But just
because the State doesn't guarantee NRG (etc.) a monopoly doesn't
mean the new "private-owned manufacturing company" can't, in
effect, create one.
"It's noncompetitive," says Mr.
Mintun. What does that mean? NRG has virtually no competition.
Does the Chautauqua County Business Council executive director
mean to imply that poor NRG can't compete? With whom? Severe
transmission constraints limit the power that can be imported
into various regions, ergo NRG has virtual monopoly (and we'll
get eventual brownouts).
As part of his effort to please
NRG, Mr. Mintun says that significant property tax reductions
were granted for electric generating plants in Oswego and Huntley
Station in the Town of Tonowanda -- to NRG, which demanded and
got them. (13)
And finally, Mr. Mintun says that
the plant "will close" if it is not "competitive". "Everyone
will lose. This will also hurt the image of Dunkirk." This is
the classic globalist threat. It's quite often carried out.
Apparently Dunkirk, its school
district, and Chautauqua County are not buckling under fast
enough for the globalist agenda. They're acting as "obstructionists."
If the public and their resisting government officials don't
capitulate, they will hurt the image of Dunkirk. This is not
much different than the Third Reich saying to the Czechs, Poles
or the French (1939), "if you resist us it will hurt your image."
Those who counseled capitulation were called Quislings, collaborators.
To make the thing palatable, NRG
is telling the Dunkirk school district and the city to hit the
state up for more relief, essentially beggaring themselves as
failed communities. Such monies, if available, are temporary,
and are simply corporate divesting of social responsibility,
and the money will dry up soon after the deals are done.
Blackouts, Brownouts and Price
Gouging
A reminder: if you want a look
at our future in western New York under NRG, look at California
which deregulated its energy utilities four years ago. It meant
instant skyrocketing increases for consumers, rolling blackouts,
and bankruptcy warnings from utilities. NRG's California profits
were a 221% increase in third quarter of 2000. (14)
Where did we screw up?
Pro-deregulation Public Utilities
Commissioner in California, Richard Bilas, after things went
out of control, said, "I hate to admit this, but I don't know
what's gone wrong. Where did we screw up?" (15)
One answer seems to be in the
area of "excess energy" capacity. If excess exists, prices drop.
If there's no excess, companies can more easily gouge customers.
And it's not going to happen in a deregulated industry that
there will be excess (a demand of the regulatory agencies or,
in places like Australia, where government-owned plants dump
energy on the grid to keep private owners like NRG from jacking
up profits). Lacking excess, energy consumers experience brownouts
and blackouts. If plants like those in Tonawanda Town and Dunkirk
fold, that just means greater prices for those on the grid -
and brownouts and blackouts. (16)
What's the answer? One option
that should be considered is the public purchase of the plant.
After all, will NRG destroy it if they decide to close it? Of
course, in five or ten years time, there may be little left
of the plant. .
Jamestown's BPU faces all the
problems of an energy producer, but, being publicly owned, still
has the concept of public service rather than a maximization
of profits as its objective. And don't fall for the "socialist"
nonsense. Public ownership of crucial industries like electricity
generation is about as "socialist" as your public library.
What can you do?
1) Contact whatever citizen group
you can - especially if it's not a party to the extortionists.
Possibly the Republican Party, probably the Democratic Party,
most likely the League of Women Voters, and definitely the Green
Party.
2) If you are a news reporter,
this story, though complicated, is worth looking into. It has
a Pulitzer Prize written all over it. The authors of this article
are not reporters, don't have access to newsroom files, large
readership (or viewers), or corporate officials (who, admittedly,
don't have to talk to reporters, unlike government officials).
It begs for serious investigation.
Email Roy
Harvey & Karen Engstrom
Sources
1) www.xcelenergy.com/subsidiaries/subsidiaries.asp
and www.NRGenergy.com
click
"news" for press releases; using left menu on page 2: click
"financial report" for 2000 Annual Report
2) FOSTER ELECTRIC REPORT Sept. 6, 2000. section:
Report No. 1999; p10 headline: N.Y. Continues Efforts to Iron
Out Competitive Electricity Market Problems. Body: Demands for
investigation into business practices of NRG energy, KeySpan,
and Orion Power Holdings by NYC Public Advocate Mark Green.
3) www.latimes.com/news/comment/20001221/t000121540.html
"Electricity Deregulation Doomed From Start" by Paul Richins
Jr. many other stories on Cal. rate hikes in WWW.latimes.com
search NRG
4) FOSTER ELECTRIC REPORT, Sept. 6, 2000. see
above.
5) San Diego Union Tribune, July 31, 1999; Dallas
Morning News, Dec. 15, 2000; Northeast Power Report, May 7,
1999.
6) www.Buffnews.com , Norma Braune article, Dec.
12, 2000
7) all Mintun quotes are from WWW.Buffnews.com
Norma Braune article, Dec. 12, 2000
8) WWW.biz.yahoo.com/p/n/nrg.html second paragraph
as of Dec. 28, 2000.
9)www.standardandpoors.com/ratings/infrastructurefinance/NRGNews.htm
on Dec. 23, 2000.
10) www.NRG.com annual report 2000
11) Buffalo News, Norma Braune article Dec. 12,
2000 search Braune).
12) Chautauqua County Public Records
13) www.NRG.Energy.com press releases
14) www.Google.com search NRG - AP story by Greg
Risling 12/17/2000 "Profits Soar for Power Companies in California's
Deregulated Market".
15) & 16) WWW.LATimes.com 12/21/2000 "Deregulation
doomed From the Start" by Paul Richins Jr.
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