California meltdown

ROLLING blackouts could soon be the least of our problems. The incompetence, neglect and shameless politicking that have characterized Sacramento's treatment of the California power crisis now threaten real, lasting harm to the state government and economy.

On Monday, Democrats and Republicans in the Legislature were unable to agree on the cornerstone of Gov. Gray Davis' energy plan. The plan called for issuing $13.4 billion in emergency bonds -- half the money would repay the state treasury for taxpayer dollars already spent buying electricity and the rest would pay to keep the power on during the summer.

Republicans denied Democrats the two-thirds supermajority needed to pass an emergency measure. As a result, Democrats had to pass a nonemergency version of the same bill, which won't take effect for at least 90 days.

At the earliest, the state won't be able to start collecting revenues until August.

But the long-term contracts Davis has cut with energy suppliers require the state to secure financing by July 1. Otherwise, the contracts lapse, and Sacramento will have to purchase juice on the pricey spot market indefinitely.

And by then, the state could be running low on cash.

There's no guarantee that once the bonds are issued, anyone will want to buy them. That means that state legislators will need to craft a state budget over the course of the next two months without knowing how much money they'll have to spend.

By then, energy purchases could easily eat up an additional $3 billion of taxpayer funds -- and that's on top of the $6 billion already spent. Without bond revenues to offset these massive expenses, Sacramento won't have the cash on hand to fully fund state services.

That's when things start to get really ugly. Does the Legislature start pulling the plug on education, health care, public safety and other vital services?

There's a lot of blame to pass around for this debacle.

Democrats, because they refused to come up with a long-term, workable solution; and Republicans didn't do much to help by offering an unfair and impractical scheme that would dun taxpayers from Los Angeles, Burbank and Glendale to pay the electricity bills of private utilities customers.

Why did it take until May to bring the bond legislation to the floor?

Where were all the politicians a year ago, when the handwriting was already on the walls?

What's most frustrating about the energy crisis is not the current situation, but the prospects for the future.

Davis has made it clear that he cares only about his re-election. Legislative Democrats are stumbling in the dark looking to blame or victimize utilities, power generators, Republicans, anybody but themselves.

And Republicans seem just as indifferent to the good of the state as long as there's a chance of gaining political advantage after a series of electoral defeats.

It's a formula for disaster.

At this rate, a hot summer of blackouts and a tough fall of budget shortfalls will be the inevitable result.

It's time for elected officials in Sacramento to wake up and start solving the people's problems instead of looking after their own self-interest.

http://www.dailynews.com/opinions/articles/0501/09/edi01.asp

-- Martin Thompson (mthom1927@aol.com), May 09, 2001

Answers

Capitol chaos: Lawmakers bicker while the lights go off

(Published May 9, 2001)

To anybody watching the state Capitol's electricity maneuvering this week, it must have looked like California had gone more than a little mad. Even while blackouts spread Monday across the state, Assembly Republicans were holding up the state's ability to borrow funds needed to cover the cost of the electricity California is buying this year in the stead of the insolvent utilities. In the Senate, Democrats were passing a 100-percent tax on the profits of power generators, not exactly an invitation for them to build more plants in California to ease the power shortage.

By delaying until late summer the issue of electricity revenue bonds to pay back the general fund, GOP lawmakers -- Assemblyman Anthony Pescetti of Elk Grove was the lone exception -- added another level of uncertainty and cost to the electricity crisis.

It's the last thing the state needs. Monday's blackouts occurred, in part, because BC Hydro, a Canadian producer, wouldn't deliver power to the state without cash payment. Generators are charging the state more for power at least in part because they are unsure they will be paid. Some of the state's long-term power contracts, which carry cheaper prices than the spot market, will be voided if the state doesn't have secure financing in place by July 1. The state's credit rating has been knocked down, raising interest costs to taxpayers because the state hasn't put the financial side of the electricity crisis behind it. Monday's action only made matters worse.

While Republicans in the Assembly were creating uncertainty about whether power producers would get paid, Democrats in the Senate were telling them that California doesn't want them to generate here. On a party-line vote, the Senate passed a bill confiscating the profits on electricity sales at prices well below current market levels.

Confiscating revenues above that base price, pegged at $80 per megawatt hour, or the average cost of production for the industry, would guarantee that no owner of an older or less-efficient power plant sells electricity in California this summer, assuring even more blackouts. And it would certainly cool any company's ardor about investing in the new power plants that are the key long-term solution to the state's electricity shortage.

Five months into the power crisis, the general fund is still on the hook for power purchases, the utilities are still insolvent, many alternative energy generators aren't producing and the state hasn't yet acted to assure that it will speedily get the investment in new power that it so badly needs. The Legislature seems more consumed with political positioning and fighting over the distribution of pain from the crisis than with ending it. When will lawmakers finally get serious?

http://www.sacbee.com/voices/news/voices01_20010509.html

-- Martin Thompson (mthom1927@aol.com), May 09, 2001.

What I can't understand is why Gov. Davis decided last winter to day trade in the spot market for California energy. How could he possibly be so stupid?

In January it was clear that the only recourse was to let all three of the major utilities slip into bankruptcy. That way the bankruptcy judge would have the generators right where he wanted them - to the benefit of all California taxpayers. With the utilities owing $14 billion, the judge could simply negotiate a favorable price by saying, hey, you guys better play ball. Remember I can let you have 60 cents on the dollar or 2 cents. I've got the stick, and I'm holding it over your heads.

Instead, this idiot Davis tries to compete in the open market, runs up $6 billion in energy costs out of the state's $8 billion surplus, and is threatening the very solvency of the state.

If somebody can explain any logic to this farce, I'd sure like to hear it.

-- Wellesley (wellesley@freeport.net), May 09, 2001.

This is a bit of information a friend sent me the other day.

Can you imagine working for a company that has a little more than 500 employees and has the following statistics:

29 have been accused of spousal abuse,

7 have been arrested for fraud,

19 have been accused of writing bad checks,

117 have directly bankrupted at least 2 businesses,

3 have done time for assault,

71 can not get a credit card due to bad credit,

14 have been arrested on drug related charges,

8 have been arrested for shoplifting,

21 are currently defendents in lawsuits,

84 have been arrested for drunk driving in the last year,

Can you guess which organization this is?

Give up yet.

It's the 535 members of the United States Congress. The same group that cranks out hundreds of new laws each year designed to keep the rest in line.

These are the same nincoompoops who are trying to solve the energy debacle. Are you surprised about the sorry state of affairs?

-- David Williams (DAVIDWILL@prodigy.net), May 09, 2001.

I've lived in California the past 25 years and have seen several govenors and many state legislators come and go. Sacramento has to be just about the most screwed up political entity in the country (as bad as many of them are, none are worse).

But, I must agree, on this one, it boils down to one man who has done a cataclysmic amount of damage--Gov. Gray Davis--probably more damage to his state than any other govenor in history, to ANY state.

Figure it. Projections are that by year-end his "day trading" for electricity will run to $60 billion--more than SIX TIMES the budget surplus on hand. Where is the money coming from? His $13 billion bond issue proposal is a joke. Who will buy the bonds? Only a few wild, reckless speculators. And, the bonds would have to be unmercifully deeply discounted to attract even them. Also, what good would $13 billion do out of a total $60 billion obligation.

The way this clown is running this state is sheer madness.

-- JackW (jpayne@webtv.net), May 10, 2001.

I don't believe Gov. Davis has ever been accused of child molesting, abusing his wife, drunken driving, or kicking dogs. . .but, I must admit, an energy market trader he is not.

-- R2D2 (r2d2@earthend.net), May 10, 2001.

David, sorry to throw a wet blanket, but I've got to take issue with the statistics you've posted, primarily because someone emailed the same set of numbers to me the other day, and their validity has to be questioned for a couple of reasons.

First, the sender of my email applied the numbers to members of the Canadian House of Commons, of which there are 301. The total number of offences in the email is 373, so obviously some duplication has occurred. However, the idea that the exact same set of numbers applies to both governing bodies in Canada and in the US is dubious.

Second, I don't know about US legislators, but in the Canadian House of Commons the vast majority of parliamentarians are lawyers. Any one of the above offences would be serious enough to get a lawyer disbarred, MP or not.

-- Rachel Gibson (rgibson@hotmail.com), May 10, 2001.

Rachel, that list has been wandering around the urban myth circuit since at least the early 1980s. I first got it as a chain letter in about 1983, then as a fax in the early 90s, now it's making the e-mail and internet group rounds. Some things never die, perhaps in this case because it fits what we already believe about politicians.

-- Cash (cash@andcarry.com), May 10, 2001.

Maybe we just do not trust politicians, and "want" to belive that they are this corrupt.....

-- Helium (heliumAvid@yahoo.com), May 10, 2001.