A good start

One of the biggest misconceptions people have about California’s energy crisis is that it was caused by deregulation. A more accurate statement would be that we got screwed for not having enough of it.
As this piece in the Chronicle points out, Arnold intends to correct Pete Wilson’s mistakes. How?
…the governor-elect would not restrict utilities from entering into long-term contracts for power. The restriction imposed by the 1996 deregulation plan forced Pacific Gas & Electric and other utilities to buy at peak prices on the spot market. The earlier deregulation scheme also included a rate freeze that barred utilities from passing along the increased costs to customers.
Not surprisingly, some California Democrats prefer the popular misconception over facing the truth…

“Not only is the Legislature in no mood for it, the Legislature’s position is really a reflection of the fact that the public is in no mood for it,” said state Sen. Joseph Dunn, D-Garden Grove (Orange County), who is planning an initiative for the November 2004 ballot to regulate energy firms that do business in California. “The polling shows that 75 percent of Californians want to re-regulate the electricity system.”
Notwithstanding Mr. Dunn’s courageous stand for the majority, Arnold also plans on relieving the CAL-ISO bureaucrats of their coveted responsibilities…
The Republican governor-elect also embraced a proposal by the Federal Energy Regulatory Commission to consolidate local grid operators — such as California’s Independent System Operator (ISO) — into a regional organization that would oversee power transmission across a number of Western states. Proponents claim that standardizing the transmission system would encourage energy firms to invest in new plants, preventing supply shortages.
And boy has it pissed them off…
“The states don’t want to go there,” said PUC Commissioner Loretta Lynch, a Democrat. “The Western governors are against it, the Southern governors are against it. The only people who are for it are the energy companies and deregulation ideologues.” [Emphasis mine]
It’s a little early, yet, to get excited about real reform, but I’m pleased to hear that Arnold’s taking this issue so seriously. Even more encouraging, in his challenge of the popular misconception he’s demonstrated a willingness to push for reforms, absent polling support. Lastly, by publicly acknowledging the flaws in Wilson’s “deregulation” half-measure, he’s offered Californians the first glimpse of intellectual honesty they’ve seen on this issue – from either party – for quite some time. Here’s hoping the trend continues.
(Cross-posted at Velvet Hammers)



  1. Dave in LA

    Good commentary on this very complicated issue. You’re right — Our problems were caused primarily by flawed re-regulation sold to the public as deregulation. Even Pete Wilson, the governor at the time, subsequently said he knew the plan was flawed, but had assumed that the Legislature would fix the remaining problems before something bad happened. Subsequently of course, the worst possible combination of market conditions occurred.
    A bad situation was made worse by our other problem, indadeqate generating capacity in California. While we were busy “protecting our environment,” we were buying the extra juice we needed from Arizona and Nevada. Demand in both of those states had been growing to the point that, when the crisis hit, they did not have enough extra power to sell. At the worst possible time, our utilities were forced to buy electricity in the spot market, because that’s all the legislation allowed them to do.
    Gray Davis put the icing on the cake by refusing to allow rate increases that would have brought demand into line with supply. The rest of the story is pretty complicated, and is where baddies like Enron are often brought into the picture. If you want a really good explanation of the problem, Lynne Kiesling can explain it better than anyone.
    Unfortunately, people like Lynne had no part in the final legislative product. First Legislature and the media told us electricity had been deregulated. Now they tell us deregulation has failed.
    They were lying then and they are lying now.
    I hate to say it, but this crowd is almost universally unqualified to legislate or communicate on these issues.

  2. Rick T

    Just one other note: The author of the end-of-the-session abomination misnamed ‘deregulation’ was one Steve Peace, elected from San Diego. Where is he now? Gray Davis’s Budget Director………