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Blackouts Leave Black Eye

October 19, 2002

When Development Counsellors International recently asked executives to identify the states with the worst business climate, 57% pointed to California -- a higher percentage than the combined negative rankings for New York (36%) and Massachusetts (18%). What's strange is that when the research firm surveyed executives in 1999, only a quarter put California at the bottom, and a near-equal percentage described this as the nation's best business location.

What's changed? The New York-based economic development marketing firm suspects that business leaders have been blinded by the "dark afterglow that remains from the energy crisis." Perceptions formed during the blackouts have stayed frozen, with many executives believing that Californians are still struggling to get by with candles and portable generators.

Californians have made it clear that they don't want to change certain policies that give some businesses the willies: tough environmental regulations that make running a company easier in other states, living-wage laws that make doing so cheaper and the new family leave policy that makes doing business elsewhere less complicated. Demanding that firms treat workers fairly and the environment responsibly undoubtedly can increase the costs of goods and services.

But Californians think the trade-offs -- a cleaner environment and healthier, more-productive workers -- are worth the expense. The real and perceived energy problems that seem to be fueling business leaders' misgivings are another matter.

The last thing California needs when it courts new business is outsiders dulling the Golden State's image among those with the power to build plants, warehouses and factories in job-hungry communities. But that's what has happened since 2001 when energy companies played games with the power supply. And business leaders are apparently left with the false impression that electricity blackouts continue to roll and power bills still soar.

The state must refine its rocky attempt at deregulating energy markets. When possible, it must renegotiate costly long-term electric supply contracts signed at the height of the crisis. And it must continue to go after companies that, as evidence uncovered by state and federal investigations strongly suggests, improperly manipulated the energy market to bolster profit.

California shouldn't waste time wooing businesses that aren't willing to do what's right by its residents, but it can't let responsible companies be chased away because greedy energy companies have created woes real and mythic.

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