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California's Choices All Look Painful

By LAURA M. HOLSON

Agence France-Presse John Warda, an elementary school crossing guard, helps drivers navigate a busy intersection after a rolling blackout darkened traffic signals in San Francisco this week.

John Decker for The New York Times Hal Dittmer, owner of a small power generation company, shut his three power plants because he had not been paid by a big utility.

The Associated Press Gray Davis, left, helps introduce a new McDonald's place mat with energy-saving tips.

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OS ANGELES, March 23 — California's energy crisis seems to get worse with each passing day.

This week, Californians were once again plunged into darkness as warm weather and a large number of shuttered power plants caused blackouts from Santa Monica to San Francisco. In offices in and around Sacramento, frenzied negotiators continue their months-long talks to design a settlement to keep the nearly bankrupt utilities afloat and creditors at bay.

And despite a dizzying 190 bills introduced in the Legislature to address the crisis, the bickering among politicians persists. Republican leaders have called for the ouster of state utility officials, and California's controller warned that the state's general fund was in danger of being frittered away unless decisive action was taken.

Two months ago, Gov. Gray Davis promised a speedy end to the crisis. But all the solutions proposed so far seem as fragile and tenuous as the grid itself.

Now a growing chorus of economists, business leaders and policy experts are saying what most agree that Mr. Davis will not utter: the state cannot spend its way out of this crisis, and politicians are delaying an inevitable, albeit unpopular, end — raising retail electricity rates significantly. The desire to satisfy all parties is costly and has caused confusion and indecision.

"The solution to the policy problem is moving agonizingly slowly because there are several powerful political groups that can block any piece of legislation," said Laura D'Andrea Tyson, a former chief economic adviser in the Clinton White House who is now the dean of the Haas School of Business at the University of California at Berkeley. "California's politicians don't seem to have enough power or conviction — I think it's power — to get these groups to agree."

Further, said Steve Fleishman, a Merrill Lynch utility analyst in New York: "The government officials keep trying to plug the holes in the dam when they spout up. But there are too many things that need to be paid within the current utility rate structure."

In an interview today, Governor Davis reiterated what he has said for months: California's biggest problem is short supply — no major power plants have been built in 10 years — and he has invoked his emergency power to put more generation online quickly. He warned, too, that state negotiators were proceeding with caution to avoid the kind of mistakes the architects of deregulation made in the first place. "One of the reasons we are in trouble today was because there was a rush to judgment," he said. "We are not going to make that mistake again."

But for a brief moment recently, it looked as if the state had finally marshaled its forces and was well on its way to presenting Californians with a cohesive plan. The state treasurer's office hired bankers to help sell a $10 billion bond issue, the largest of its kind, that would help pay for power now and stabilize prices over time.

State negotiators hoping to avoid a taxpayer bailout announced a preliminary agreement with Southern California Edison to buy its transmission lines for about $2.76 billion. And Governor Davis proudly told reporters that his team had negotiated a successful round of long-term power contracts that would help keep California's lights on.

But almost every promising announcement has had a less-enticing twist. Intense negotiations with the privately-owned utilities drag on week after week. Southern California Edison has not finished a deal to sell its transmission lines, a necessity if it is to begin paying bills owed since November. "Progress has been made," said Bob Foster, Edison's chief negotiator. But he warned, "I don't want to sound overly optimistic."

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-- Martin Thompson (mthom1927@aol.com), March 24, 2001