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California and the West | ON CALIFORNIA

The Shape of Things to Come

March 11, 2001|PETER H. KING

In the San Joaquin Valley, the fruit trees have sprouted blossoms of pink and white. The coastal hills have turned, as they do this time of year, a peculiar, almost too vivid shade of green. Late storms have come along, right on cue, to wash away the premature fretting about drought. And the sports pages bring word that the Dodgers, once again, need to find somebody who can play third base.

Yes, all the signs are here. Spring is upon us in California. The long winter of Stage 3 alerts and looming blackouts has all but passed. And as the seasons change, the energy situation, too, seems to be in transition. Yes, plenty of hard and furious bargaining still must be completed. The players keep on with their ceaseless, unfathomable maneuvers. The potential for unexpected turns remains high. Summer could be awful.

Still, there is a sense that the situation, if not under control, at least has reached a sort of calm. Softer weather alone will strip away much of the edginess. Moreover, long-term contracts and taxpayer-financed purchases of emergency power have brought a measure of order to what once seemed pure chaos. Time has been purchased--albeit at shakedown prices.

In the first phase of the crisis, there was heavy emphasis placed on trying to sort out how it had happened and who was to blame. And while these questions have yet to be fully answered, it's apparent enough that the truck that flattened us was fueled by greed and steered by the blind disciples of the free market. And the rest is all just details; or, as an energy executive I know likes to say, "In the end, it's all about accounting."

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Beyond cause and blame looms what is perhaps a more important question. So far it has received scant attention: When an airplane pitches into a death spiral, the pilot tends not to focus much on the flight plan. Soon, though, California will need to decide what sort of energy model it wants in the future. Re-regulated? Deregulated? Public? Private? A mix of some of the above?

Obviously, the Humpty Dumpty that was deregulation took a big fall. Can it be glued back together again? Should it be glued back together? The only people who seem to think so are Texas energy tycoons. There have been calls for re-regulation, but that might prove awkward. Too much hardware was sold off by the big utilities during the first years of deregulation, that happy period when the numbers all were running their way.

As for public vs. private power, there is a movement afoot in San Francisco to follow the lead of Los Angeles and develop its own power authority. Maybe other cities will go down the path of municipal power. Certainly the state government, with its purchase of long-term contracts and standing offer to buy the transmission grid, has put itself--and taxpayers--into the energy business.

It's amazing. All most Californians ever wanted by way of energy was the ability to flip a switch and see lights come on, and for this service pay a monthly bill. And now here we are on the road to owning 32,000 miles of wires, Path 15 included. Well, why stop there? If we are to jump into the energy business, why not go whole hog and buy or seize the power plants and all the other moving parts that go with them? Why merely join a market when we can dominate it? Why let Texans have all the fun?

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These are questions, only questions, more easily asked than answered. What does seem clear is that, when California plots its energy future this time around, it won't be as it was in 1996, when the deregulation plan was hatched. California pretty much slept through the process, waking only to hear the hosannas of politicians, lobbyists and assorted wonks: Prices will fall. Reliability is assured. Sleep on, California, sleep on. Trust us.

Well, another thing that seems clear, now, is that there never was much of anything in the original deregulation plan for rank-and-file consumers. As energy consultants William Marcus and Jan Hamrin have noted in a cogent analysis of the crisis: "Though the market players in California behaved rationally, given their self-interests, no one took responsibility for looking after the public's interests.

"Most government entities saw their roles as protecting incumbent utilities, large business [electricity] consumers and the new gas and electric conglomerates that entered the electric generation arena. What's good for the utility is not necessarily good for the public in a market-driven system."

This time, I suspect, the public--read voters, ratepayers, consumers--will be keeping a closer watch as a new energy model is assembled from the wreckage of the old. Californians might even want to take on the task themselves. Ballot propositions tend to be blunt instruments, forged in anger, but they do have their purposes. Meanwhile, enjoy the pretty blossoms.

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