From: Spike Jones (spike66@attglobal.net)
Date: Tue Jun 05 2001 - 00:39:21 MDT
This is a remarkable article written by taxifornia's
previous governor. It sums up nicely my position
on the current power sitch:
Former governor Pete Wilson wrote:
Five years ago, when electricity deregulation
was passed by unanimous vote of both houses
of the Legislature (and without a murmur of
dissent from any Democratic constitutional
officer, including then-Lt. Gov. Gray Davis),
California enjoyed an excess of supply over
demand amounting to some 30 percent.
Deregulation was enacted to create free
market competition -first, to drive down
what were then among the very highest power
costs in the nation and, second, to attract
private power providers to invest in the
creation of new generating capacity to meet
the exploding power needs of the New Economy
and keep in California all the jobs that it
would produce.
And deregulation did succeed
in stimulating a significant increase in
applications to build power plants, especially
after the effec-tive date of the legislation
in 1998 and the defeat that year by California
voters of Prop. 9 (which unwisely sought to
repeal deregulation). The total megawattage
of the filings for 1998 doubled that for
1997. After the effective date (March 1998)
of the deregulation legislation, AB 1890,
and the de-feat of Prop. 9 (November 1998),
removing the threat of repeal, the total
for 1999 was double that of 1998 - exceeding
the 5,000 megawatt mark in '99 alone.
Far from causing the problem of energy
shortage, as the Davis administration charges,
deregulation caused providers to file -
by mid-2000 - applications to build new
power plants that promised to add 10,000
megawatts to California's power supply.
That's why I signed it.
I did so even though I disagreed with two
of the provisions of AB 1890 - just as I
(and every other governor m history)
signed other bills which, though imperfect,
promised significant and needed change
from the status quo, which was certainly
true of deregulation.
The reason we will suffer power blackouts
this summer is because the Davis
administration has by inaction allowed
a problem to be-come a crisis. Now the
power crisis threatens to become a
state fiscal crisis.
Gov. Davis has been quoted as saying,
"If T wanted to raise rates, I could
have solved this problem in 20 minutes."
Sadly, by temporiz-ing on needed actions
to raise rates and other steps required
to avert crisis, he made crisis
inevitable. As a result, California
bonds have suffered two down-grades
by Wall Street rating agen-cies, and
he has put in jeopardy state spending
for parks, schools, transportation and
other capital needs. He has been warned
by the state legislative analyst to
sharply reduce the state budget.
The Davis administration failed to
monitor either the explosive growth
in electricity consumption by the
New Economy in the last five years,
which ~bbled up the energy surplus
that existed at the time of deregulation,
or the cur-tailment of production of
natural gas, which led to price spikes
in recent years. It failed also to heed
early warnings from weather forecasting
agencies that the sum-mers ahead would
be among the hottest in a century.
It ignored a 1998 warning by the
California Energy Commission of
possible energy shortages by as
early as 2000. And when possibility
became hard, hot reality in San
Diego in 2000, the Davis administration
continued to ignore it, putting in
place a political, palliative rate
cap instead of dealing with the
problem.
Fully a year ago, or earlier had
he chosen to do so, Gov. Davis
could have invoked the almost
unlimited powers conferred upon the
governor of California by the State
Government Code to deal with an
emergency, including explicitly the
sudden and severe shortage of
electrical energy. These powers
include the suspension of statute
and regulation. It was this power
that I used after the Northridge
earthquake in 1994 to rebuild and
reopen Los Angeles' shattered
freeways - just 64 days after
their destruction.
Fully a year ago, Davis could
have acted unilaterally, without
the Legislature, to suspend the
rate cap that the investor-owned
utilities (PG&E, SCE and SDG&F have
complained about but eagerly
requested at the time of enactment.
He could have, by decree, suspended
the provision that prohibited the
utilities from forward contracting
with power wholesalers.
He could have, by executive order,
suspended and truncated the nightmarish
process required by state law for
approval of siting. Had he done so
early enough, he might even have made
a difference this summer, and done so
not just with peaker plants but also
with large plants. He might have
greatly accelerated construction of
the power plants that will be required
to allow us to escape from black-outs,
power price spikes and the severe job
loss and economic injury certain to
result from a power supply that is
neither reliable nor affordable.
Gov. Davis could have taken all of
these actions a year ago - or earlier.
A governor can foresee the emergency
and exercise his extra-ordinary powers
to prevent it. He is not required to
wait and compel California to suffer it.
Had the governor heeded the early
warnings - about hot weather, or the
threat of insolven-cy to the utffities -
and had he acted, using the full range
of his extraordinary emergency powers
when he should have, he could have
prevented the problem from becoming
the crisis it has become.
We might have given power providers
incentives to build enough new plants
fast enough to avoid blackouts this
summer.
PG&E would not have been compelled
to declare bankruptcy, and Southern
California Edison would not be
teetering on the brink.
Energy costs would not have spiked
to the present outrageous levels.
The state would not have burned
through billions of taxpayers'
dollars. And California's jobs would
not be threatened.
The blame game waged by the
governor's office adds insult to
injury. It will provide no comfort
to Californians sweltering in
darkness this summer. But it does
do a serious disservice to ratepayers
and taxpayers by seeking to mis-lead
those who are not aware of the real,
unhappy facts of California's present
crisis.
The honest explanation for it is simple,
not rocket science: State government
cannot ignore the law of supply and demand.
It is not the state's responsibility to
build power plants. But it is its
responsibility to create a regulatory
environment that will give incentives to
private sector providers to do so.
Deregulation, even with imperfections
that the governor could have cured by
fiat if the need arose, was a significant
advance in achieving that incentive as
subsequent filings by providers attest.
The problem grew into a crisis not
because of deregulation but because of
Gov. Davis' failure to act. That is the
plain, unhappy truth of the matter. I
take no joy m saying so. I have been
prepared to be helpful to the governor
during this very serious challenge to
our state's well-being, just as when I
responded to his request for my assistance
in passing Proposition 39 (the school
bond issue) in the most recent election.
Just as my perception of what was best
for California caused me to help him then,
I am compelled now to speak out to prevent
the rewriting of history and a deliberate
effort to mislead the public and to
discredit deregulation in order to shift
the blame for his own inaction.
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