President vs. governor over California's power

By Paul Van Slambrouck (paulvan@ix.netcom.com) Staff writer of The Christian Science Monitor

SAN FRANCISCO

Each gravitates to the political center, and each knows what it's like to run a big state.

But when it comes to energy policy and the politics that drive it, President George W. Bush, a former governor of Texas, and Gray Davis, current governor of California, dance to radically different tunes.

Their divergent views have created a chasm between the federal government and California, in terms of how to fix an electricity crisis that is affecting other parts of the nation.

The Bush administration has extended an emergency order to help California utilities buy power and natural gas through Feb. 6. And this week, Bush put Vice President Dick Cheney in charge of a cabinet task force to address the state's energy crisis, noting that the issue was a matter of "high concern for the nation."

But the help has come with a scolding that the state needs to fix its own mess. Some suggest it's partisan politics, with Republican Bush not eager to help a potential 2004 rival in Democrat Davis.

But most political analysts downplay that as a factor, partly because a Davis candidacy is a long shot and because there are political dangers for Bush in antagonizing California.

Rather, analysts say the divergent views held by Bush and Davis are consistent with the philosophies of their respective political parties and are born of the contrasting ways energy cuts as a political issue in their home states.

"Here in Texas, energy is like a religion, and you believe in it and support it," says Robert Stein, a political scientist at Rice University in Houston. Texas relies on the energy sector, both oil and power plants, for its economy, jobs, and general well-being, says Mr. Stein. So energy producers hold huge political sway.

In California, by contrast, the energy sector is viewed with "a lot of suspicion," says Bruce Cain, a political scientist at the University ofCalifornia at Berkeley. Consumers of energy, whether it's oil or electricity, hold greater political clout.

The net result: "There is a polarization on this issue, as there often is between Republicans and Democrats on energy issues," says Pietro Nivola, author of "The Politics of Energy Conservation."

Further, the kind of federal and state cooperation needed to make electricity deregulation work has broken down in the California case, says Paul Joskow of the Center for Energy and Environmental Policy Research at the Massachusetts Institute of Technology.

What is needed, he says, is a return of "cooperative federalism," a phrase used, oddly enough, to describe how the federal government and the California government worked together in formulating this state's deregulation" policy in 1996.

The polarization is clearly seen in the issue of price controls. When California restructured its electricity market, it imposed a freeze on retail rates, on the assumption that so-called "deregulation" would likely decrease consumer rates.

Instead, wholesale power prices soared last year, leaving the state's utilities with what they say is a bill for buying power that exceeds by $12 billion the price they are allowed to charge. They say bankruptcy is a real prospect.

The Bush administration has made it clear that the cap on retail prices must be lifted, as politically painful as that might be, in order to stabilize the utilities and encourage conservation.

Mr. Davis, on the other hand, says the federal government is shirking its regulatory responsibility. The Federal Energy Regulatory Commission, which is charged with making sure wholesale rates are "just and reasonable," should take steps to bring wholesale prices down, says Davis.

So far neither side has gotten what it wants, though there have been some signs of give. Recent comments by Davis have been interpreted by some as an indication his opposition to higher retail rates is softening. And FERC this week took steps to alleviate wholesale prices with a "soft cap," which requires suppliers to justify high prices.

Regardless, Davis's orientation in a state like California, where consumer and environmental activism is strong, is apt to remain tilted against power providers, in favor of consumers.

That's not to say Davis has ignored the utilities and other large power providers. Some, in fact, have been major campaign contributors. But Davis is now facing reelection in two years. With an already-fat war chest, his focus is clear: Votes, not money, according to political scientist Sherry Bebitch Jeffe of the University of Southern California.

Further, Davis is threatened with a ballot initiative on electricity deregulation, should he alienate consumer activists. Such an initiative could prove humiliating to Davis.

While Bush is no longer strictly beholden to the politics of oil, his political leanings were forged there and his administration is full of people with energy-industry backgrounds.

Federal steps to help regulate California out of its bind are unlikely.

There are anomalies in the general equation that Republicans favor unregulated prices while Democrats prefer rate protections. For instance, it was Democrat President Jimmy Carter who presided over the gradual deregulation of oil and natural-gas prices in the US in the 1970s.

And it was producer states that prevailed on Republican President Dwight Eisenhower to impose oil-import quotas in the 1950s when domestic prices dropped. This time around, Davis first sought wholesale price caps from the Clinton administration, and failed.

Politics always are part of the mix, says Mr. Nivola, and the parties' views of price caps "are not always pure." But by and large, their contrasting philosophies are holding true in the California case, he says.

Ideologies aside, plenty of room remains for compromise, say some analysts.

"They're both right and they're both wrong," says Mr. Joskow. "President Bush's team is right in criticizing California's unwillingness to deal with the rising cost of electricity by lifting price caps," he says. "But the Bush team is wrong that this is just a California problem....The federal government has played a major role in the Western electricity market since the 1960s."

One other factor that may have Texans and Californians talking past one another is the fact that California's electricity market is strongly interconnected with other states in the West. Texas, on the other hand, is self-sufficient in electricity and for a time was even immune from FERC regulation.

As a result, Joskow says, the Bush administration's expectation that California fix its problem alone is out of step with the way the electricity market works in the West.

-- Swissrose (cellier@azstarnet.com), February 01, 2001

Answers

Talk is cheap and usually worth it. As I understand the power problem in California, there is not enough supply for the demand. Either demand has increased beyond expectations or the supply has been reduced, for whatever reasons. While both may be causes, my suspicion is the latter is the primary reason. This is based on info from last Dec indicating more than normal unscheduled generation downtime. The solution, then, is either reduce demand or increase generation. Can Bush or Davis do either?

-- Warren Ketler (wrkttl@eartlink.net), February 01, 2001.