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Race for Power Misses a Certain Spark

State's electricity crisis was never debated, but it will remain an issue.

November 05, 2002|Peter Navarro | Peter Navarro is a business professor at UC Irvine.

The state's gubernatorial and legislative candidates must have skipped civic class on the day when the rest of us were taught that campaigns should be about big issues. How else to explain the silence in this election on our long-running but unresolved electricity crisis?

Here are five issues that the candidates should have debated and the winners will have to address:

* A SoCal bailout: A federal judge has swatted down the backroom bailout that state regulators cut, which would have allowed Southern California Edison to use billions of ratepayer dollars to pay off creditors. If the bailout is ruled illegal by an appeals court, it will be a big victory for consumer advocates.

However, there is no Plan B to deal with an Edison bankruptcy and the probable ensuing chaos. A renewed debate over the possibility of a "buyout" in which the state would receive at least some Edison assets, rather than a bailout, would have been timely and refreshing.

* A NoCal plot: Pacific Gas & Electric Corp. is asking a bankruptcy judge to approve a plan that would allow it to slip the bonds of state regulation and sell its power to the highest bidder anywhere in the West. That's a recipe for price gouging and power shortages, but where was the candidate outrage? PG&E also wants to sell off its hydroelectric assets. Environmentalists fear that some pristine land could fall into the hands of mining and development interests, but where was the debate?

* Shams are us: Literally, in the crisis' darkest hour, Gov. Gray Davis signed $40 billion worth of overpriced long-term contracts, saddling California with the highest rates in the country for years. Now, the governor has ample evidence of rampant market manipulation -- grounds to break the contracts. Instead, he engages in sham renegotiations that trumpet "billions" in savings.

The fine print reveals the alleged savings are at the very back ends of the contracts, ensuring that we will continue to pay through the nose for years.

Among Bill Simon's many missed issue opportunities, this was perhaps his biggest.

* Blackouts redux: For the next few years, newly commissioned plants will give us a glut of power. The Enron scandal and ensuing collapse of the energy market, however, have led to severe cash flow problems at many of the companies building the state's long-term supply. Many generators -- most notably Calpine -- have drastically cut back construction. We face a possible replay of rolling blackouts within three to five years. It takes that long to plan and build new power plants. Shouldn't the candidates have debated this issue?

* Fully deregulate or tightly re-regulate: California's electricity market is neither deregulated fish nor tightly regulated fowl but rather a rogue camel designed by hapless committee. At some point, our politicians must decide whether to embark on the full deregulation that was never really implemented or return to the strict, old-style rate regulation of new plants.

Now, we are in the worst of both worlds. With no real deregulated market in place, we can't benefit from falling energy prices. With the unresolved specter of a regulatory crackdown, generators are finding it increasingly risky to put new plants in the state, raising fears about inadequacy of long-term supply. The only thing more remarkable about this situation is the failure of the 2002 gubernatorial and legislative campaigns to offer any constructive solutions.

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