Megan Lectures

Shorter Megan McArdle: Accept your victimization and do nothing.

Long Version:

We are all guilty of formulating some ideal policy, and then acting as if whatever crippled version of that ideal policy survives the political process will necessarily be better than the status quo. But the pressures of the political process often require vast and counterproductive alterations. To take but one example, energy market deregulation can work very well. But energy market deregulation as screwed up by California's various interest groups (including the moronic consumer groups that proposed forcing all the utilities to always buy their power on the spot market!!) was much worse than sticking with the boring, inefficient old system.

There seems to be something missing from this paragraph. What could it be? Energy deregulation, why is that so familiar? Energy, deregulation, grandmas freezing--oh yeah. I remember now.

ENRON.

In October 2000, Daniel Scotto, the top ranked utility analyst on Wall Street, suspended his ratings on all energy companies conducting business in California due to the possibility that the companies would not receive full and adequate compensation for the deferred energy accounts used as the cornerstone for the California Deregulation Plan enacted in the late 1990s. Five months later, Pacific Gas & Electric (PG&E) was forced into bankruptcy. Senator Phil Gramm, the second largest recipient of campaign contributions from Enron, succeeded in legislating California's energy commodity trading deregulation. Despite warnings from prominent consumer groups which stated that this law would give energy traders too much influence over energy commodity prices, the legislation was passed in December 2000.

As Public Citizen reported, "Because of Enron’s new, unregulated power auction, the company’s 'Wholesale Services' revenues quadrupled—from $12 billion in the first quarter of 2000 to $48.4 billion in the first quarter of 2001."[7]

Before passage of the deregulation law, there had been only one Stage 3 rolling blackout declared. Following passage, California had a total of 38 blackouts defined as Stage 3 rolling blackouts, until federal regulators intervened in June 2001. These blackouts occurred mainly as a result of a poorly designed market system that was manipulated by traders and marketers. Enron traders were revealed as intentionally encouraging the removal of power from the market during California's energy crisis by encouraging suppliers to shut down plants to perform unnecessary maintenance, as documented in recordings made at the time.[8] These acts contributed to the need for rolling blackouts, which adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced a large number of retail consumers.

The naked dishonesty here is mind-boggling. McArdle blames (liberal) special interest groups, not energy traders, for California's energy problems. She ignores Enron altogether, the better to argue against doing something to help the country's dire economic problems. Why would anyone do such a thing? What do they get out of it?

Nothing, really. They think they do, however. They are being loyal to their tribe and think their loyalty will be reciprocated. They don't acknowledge that while some people fancy themselves as authorities and leaders, the real leaders are using them and laughing at their gullible complicity.

Four years after California's disastrous experiment with energy deregulation, Enron energy traders can be heard – on audiotapes obtained by CBS News – gloating and praising each other as they helped bring on, and cash-in on, the Western power crisis.

"He just f---s California," says one Enron employee. "He steals money from California to the tune of about a million."

"Will you rephrase that?" asks a second employee.

"OK, he, um, he arbitrages the California market to the tune of a million bucks or two a day," replies the first.

The tapes, from Enron's West Coast trading desk, also confirm what CBS reported years ago: that in secret deals with power producers, traders deliberately drove up prices by ordering power plants shut down.

"If you took down the steamer, how long would it take to get it back up?" an Enron worker is heard saying.

"Oh, it's not something you want to just be turning on and off every hour. Let's put it that way," another says.

"Well, why don't you just go ahead and shut her down."

Officials with the Snohomish Public Utility District near Seattle received the tapes from the Justice Department.

"This is the evidence we've all been waiting for. This proves they manipulated the market," said Eric Christensen, a spokesman for the utility.

That utility, like many others, is trying to get its money back from Enron.

"They're f------g taking all the money back from you guys?" complains an Enron employee on the tapes. "All the money you guys stole from those poor grandmothers in California?"

"Yeah, grandma Millie, man"

"Yeah, now she wants her f------g money back for all the power you've charged right up, jammed right up her a------ for f------g $250 a megawatt hour."

The funny part of this is that McArdle is suffering and will suffer as much as the other victims of our leaders' greed. She can't admit this because she sees herself as a leader, not a follower. Leaders are winners and followers are sheep waiting to be shorn by better men. So when Megan's stock portfolio evaporates and friends lose jobs and wages begin their inevitable move downward, as they are bound to do in a time of deflated prices and high unemployment, Megan will blame labor unions and minorities and oh, anyone else but the real culprits.

Even Megan McArdle forgets that rich people hate you.