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ON CALIFORNIA

State May Be Re-Energized, but Powerful Questions Remain

January 20, 2002|PETER H. KING

It's remarkable to recall, one year later, how bleak it all seemed at the time. In the third week of January 2001, after months of worrisome forecasts, the energy crisis finally appeared to crash down upon California.

Northern California was hit with back-to-back rounds of rolling blackouts, creating chaos at unlighted intersections, trapping people in elevators, making battery vendors rich.

Pacific Gas & Electric Co. and Southern California Edison, staggered by ever-rising wholesale electricity prices, disclosed in federal filings that they could no longer make payments for power purchases.

Looking at a projected 14,000-megawatt shortage for the next day, Gov. Gray Davis, pale as a frosted lightbulb, summoned reporters to a late-night news conference and announced:

"Tonight I am declaring a state of emergency in California. I am calling on the Legislature . . . to give the state the authority and the resources to keep the lights on."

This emergency declaration was made in a Capitol that had been rammed the night before by a suicidal big-rig trucker, adding to the surreal atmosphere. California seemed more than ever an island on the land--albeit one surrounded by sharks.

A newly elected president, not yet installed in the White House, was sending out signals that, in this fix, California would be on its own. The Wall Street Journal clucked on its editorial page: "The comedy is almost too broad to bear. In the past month, the country's showcase state has come to look like a hapless banana republic."

Enron offered to assist California, if the price was right.

A year later, of course, much has changed.

California is up and running, fully lighted; after a frantic drive for more generation capacity, would-be plant builders are now reluctant to pursue their construction plans, fearing low prices and oversupply. At least this time around they will acknowledge their hesitancy to build is grounded in economics, as it always has been, and is not a byproduct of excessive red tape or tree-hugging environmentalists.

Electricity conservation, which a year ago, according to private polls done for the governor, showed little promise of success, not only flourished during the crisis but has continued at a near double-digit pace. If nothing else, Californians in a single year have weaned themselves off the notion that a second fridge is a vital component of the good life.

President Bush eventually went ahead and appointed a federal energy regulator who actually seems to believe in federal energy regulation--no small breakthrough. And the energy mess no longer is of much interest to the national media . . . or even the California media, for that matter. The headlines now are all about Enron, then a champion of the drive to deregulate electricity, now a toppled monument to hubris, greed and "aggressive" accounting.

"Remember the energy crisis?" consumer activist Harvey Rosenfield felt compelled to ask last Thursday at the outset of a teleconference. The point of the conference was to release a report by the Santa Monica-based Foundation for Taxpayer and Consumer Rights. The title of the report was "Hoax," neatly summarizing the contention of Rosenfield and Co. that the energy fiasco was manufactured from the get-go, a ploy to hold back supply and jack up prices.

And certainly there is evidence to suggest that Californians were ambushed--lots of smoke on that grassy knoll known as the spot market. A case also can be made that the state set itself up for a fall, designing a deregulation program that was tantamount to leaving the lights on and the doors unlocked, all but inviting the energy bandits to back up their trucks and load up.

All of this, of course, has been kicked around thoroughly in the past 12 months, and to no great end. For whatever reasons, the crisis came and the crisis went. Presumably the villains and heroes will be sorted out in due time. This is not to say, however, that the matter is closed. A year later, even as the plants and power lines thrum, fundamental questions wait to be addressed:

If the old-style regulation was flawed, and deregulation has failed, then what now? What is the energy model for California's long-term future: public, private, co-op, competitive? Is electricity something Californians want to subject to the boom-and-bust cycles of the market? Is the power grid best left to the government, as a sort of DMV for electrons? Or is there some other way? Without a backdrop of rolling blackouts and flaming big rigs, such questions no longer seem quite so exciting, I know. Still, one year and several hundred headlines later, they remain.

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