More than a year removed from the worst part of California’s power crisis, the state has the highest power rates in the nation, no clear direction on how to fix the problem and is swamped in legal battles over who to blame. Yet the situation has failed to materialize as a viable gubernatorial campaign issue, in large part because the Republican challenger, Bill Simon, has thoroughly failed to capitalize on voters’ distaste for how Gov. Gray Davis (D) handled the meltdown, according to electricity experts and political observers in the state.
When Simon won the GOP nomination from former Los Angeles Mayor Richard Riordan in March, it appeared Republicans would be able to attack and hurt Davis for having reacted slowly during the crisis of 2000-1, when prices skyrocketed, rolling blackouts consumed the state and utilities flirted with bankruptcy. But Simon’s campaign has faltered from the outset, and all signs now suggest Davis will easily retake the governor’s mansion.
Experts point to two reasons why electricity has not emerged as a wedge between the incumbent Democrat and voters. First, Simon has been ineffective as a candidate on all levels, they say, and has failed to challenge Davis with an energy vision of his own for the future. Second, from the early days of the crisis until the present, Davis managed to shift much of the blame — perhaps justifiably — onto federal regulators and energy brokers who engaged in questionable trading practices.
“Davis’s handling of the energy crisis could have been used much more effectively by a candidate who had delved into the issues more thoroughly,” said Mindy Spatt, of The Utility Reform Network. “But Simon’s campaign doesn’t seem like it has anything going for it. He is not a viable candidate.”
And while Davis lacks credibility on the issue, so does Simon, primarily because Republican criticism has not been backed by a concrete plan for solving the real problems associated with supply shortfalls, trading oversight and reforming a broken state regulatory system, says Foundation for Taxpayer and Consumer Rights analyst Doug Heller.
“Simon’s campaign is in a tailspin, so voters have no alternative to Davis,” Heller said. “Everybody is covering their noses because it stinks. They don’t want to vote for either of the candidates.”
He added: “California voters have a real bad taste in their mouths, but because the competition from the Republican is so pathetic, the energy crisis is not rising to the top.”
It also appears an early Davis strategy to go after Riordan with attack ads during the Republican primary has paid dividends. Positioned as a popular moderate who at one point oversaw the Los Angeles Department of Water and Power, a public utility that was shielded from the crisis because it never deregulated, Riordan would probably have been able to better separate himself from Davis on the issue and paint the governor as culpable for missteps, observers said.
Simon, in contrast, during their first and only debate this month, charged Davis with panicking while utilities went into a freefall, but Davis shot back at Simon for owning stock in El Paso Corp., a company the Federal Energy Regulatory Commission has determined withheld natural gas supply during the crisis. That was the end of their exchange on energy, prompting observers to criticize Simon for not pressing, saying Riordan would have been more aggressive.
“The energy crisis essentially ceased being an issue when Dick Riordan got knocked out of the Republican primary,” said Arthur O’Donnell, an independent energy analyst at The Energy Overseer. “Simon made a feeble attempt to criticize Davis’s handling of the emergencies, but since he had no involvement or alternative program to offer, it went nowhere.”
Davis probably knew early on that his strongest threat, on power politics and otherwise, came from Riordan, and that’s why he ran attack ads in Southern California before the GOP primary implying the LADWP profited on the backs of California consumers during the crisis, O’Donnell explained. That strategy has apparently paid off.
“Energy is MIA in this campaign,” O’Donnell said.
Heller agreed, saying Riordan polls much better on electricity than either Davis or Simon. “Had Riordan won, we would have seen a much broader debate about the energy crisis and Davis’s handling of it,” Heller said.
THE FERC ANGLE
Throughout the power crisis, Davis repeatedly called on regulators at FERC to impose wholesale price caps, a measure that he and other Democrats claimed would help stop the bleeding by reimposing price controls. When the commission hesitated, under the leadership of former Chairman Curt Hebert, it gave Davis an opening, and he has not stopped beating on that opening
ever since, Spatt said.
“Davis has been very successful in bringing out FERC’s mistakes, and let’s face it, they did waffle on price caps,” Spatt said. “FERC didn’t seem to know what they were doing, and there was plenty of blame to go around. Davis has very effectively used FERC’s mistakes to deflect blame off of himself.”
Much of the state government took up the same strategy, as the chairwoman of the California Public Utility Commission, Loretta Lynch, and Capitol Hill Democrats time and time again blasted the commission for its inaction. Led by Davis from the outset, the anti-FERC rhetoric was perceived in the state as a dig at the Bush administration, and may then have undercut Simon’s campaign by making his free-market leanings a liability.
“I don’t think that Simon has had a lot of credibility on the issue because what Davis has done is blame the Bush administration,” said Public Citizen energy expert Tyson Slocum. “I think that made it very difficult for [Simon] to offer some sort of contrary solution.”
Still, Heller thinks voters don’t buy into Davis passing the buck. Californians in large part blame Davis, not FERC, for the crisis, he said, but they have no way to express their anger given the lack of an alternative.
“There is no way to hold [Davis] responsible,” Heller said.
Davis may also have been aided by FERC’s decision to not act on California’s request for $8.9 billion in refunds until after the Nov. 5 election. During his campaign, Davis has run ads claiming he led the state out of the crisis, even as he keeps up the FERC pressure by roundly condemning regulators for not acting on refunds sooner. In response, FERC Chairman Pat Wood says the commission’s schedule is not politically motivated, but the delay may resonate with voters who lean toward blaming bureaucrats in Washington, observers said.
And the real pain of the crisis may not be felt for some time, according to Brattle Group energy analyst Phil Hanser, since long-term power contracts signed in the heat of the crisis at levels well above the current market value will not hurt consumers until well after Nov. 5. Ten-year contracts signed at upward of $80 per megawatt-hour (MWh), as opposed to the current $20 to $25 per MWh current market rate, “will be felt on down the road” when and if the state has to renegotiate, Hanser explained.
“The impact of the fallout of the market won’t be felt until after the election,” Hanser said. “That is probably fortunate for the incumbent.”