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Thursday, June 14, 2001

Light Around the Bend?

"We are turning the corner," Gov. Gray Davis boasted Wednesday during a discussion of the state's electrical energy crisis. The problem is, no one knows what lurks around that corner.

That's not to say we should expect only horrors. Indeed, there has been some good energy news. The weather's been cooler. Natural gas and electric power prices have dropped. And on Monday federal regulators will consider stronger controls on wholesale prices--not the price cap that California needs, but an improvement over the status quo.

Still, if we've learned anything from this crisis, it's that even good news often turns out to be harboring some monstrous revelation. Davis is proud of all the new power plants he has licensed. But if they do cause prices to plummet, recently signed long-term contracts will have locked us into far higher rates. Davis insisted Wednesday that the contracts have stabilized the market and will continue to do so--that everything will average out to our benefit in the long run. We'll see.

Meanwhile, with Pacific Gas & Electric Co. in Bankruptcy Court and Southern California Edison teetering on the brink, Davis and the Legislature remain stubbornly deadlocked over plans to restore the latter's credit-worthiness. Note to lawmakers: Please resolve this before recessing for a month on July 20.

Of course, the good news-bad news balance is, as always, relative. The greed--or, ahem, entrepreneurial spirit--of the private power generating companies seems even more boundless with the disclosure of the huge bonuses that company executives have granted themselves through the exercise of stock options. The Times reported Wednesday that the chairman of Enron netted $123 million in stock options last year, reaping the benefit of stock prices that soared largely at the expense of California.

Californians will be paying the bill for the next 20 years in the form of higher rates, the payback of the $7 billion spent on power that the state was forced to buy after utilities went broke paying massive power bills. All this resulted from the disastrous deregulation plan adopted in 1996. At least now the generators may finally feel some shame and thus be willing to discount some of the debt the utilities owe them--this in addition to any refunds they should be forced to pay if it turns out they did indeed gouge us.

A major problem with Davis' Edison bailout scheme is that the power companies would be fully reimbursed for the utility debt. If, instead, the state offered to pay them 70 cents on the dollar, that probably would be a better deal than they'd get from Bankruptcy Court. Such a provision would also make Davis' plan more palatable to lawmakers. Davis sometimes assumes an imperial attitude toward the generators, whom he castigates as cowboys who would steal you blind. But this does not match the disdain the Bush administration has visited on California. The administration stiffed the state again this week on the forced use of ethanol in gasoline. And Vice President Dick Cheney continued to insist that wholesale electricity price caps would not produce any additional power.

No one ever argued they would. But caps would keep generators' profits within reason and fulfill the Federal Energy Regulatory Commission's mandate to make prices "just and reasonable." If only someone could assure us that just and reasonable prices are really what we will find around the corner we supposedly are turning.

Copyright 2001 Los Angeles Times

-- Swissrose (cellier3@mindspring.com), June 14, 2001

Answers

I have no doubt that they have turned the corner. Due to a tiered pricing program you better conserve or have deep pockets so naturally a lot of people got conservation "religion". Its too bad they didn't get religion until prices forced them to but I guess that's market forces at work.

Here in Arizona we should have gotten solar religion a long time ago but it was dusted under the carpet shortly after the last energy crisis was past. I guess we'll just have to wait until we're totally out of gas and oil.

-- Guy Daley (guydaley1@netzero.net), June 14, 2001.