GOP contenders wrestle with California’s energy woes

The Associated Press

After following the energy crisis for more than a year, Davis resident Dobey Fleeman has had enough. He’s installing a solar system on his roof, determined to cut his electric bill this year.

And he’s listening to what candidates for the state’s highest office say they’ll do to help him.

“In terms of politics, I think it’s going to be an issue for Gov. Davis, to explain why the decisions he made were good ones,” Fleeman said.

In normal times, a candidate for California governor could get through a campaign without mentioning energy policy.

But these are not normal times for California, which is recovering from more than a year of soaring energy costs, electricity shortages that led to rolling blackouts and the bankruptcy of its largest utility as the state tried to change to a deregulated energy market.

“It’s a question of do we try to stick with a deregulated market, or do we go back to some sort of government control over the market?” said Clark Kelso, a professor at the McGeorge School of Law in Sacramento.

The next governor will likely shape California’s energy market – making decisions such as whether the state should continue in the power business.

“We don’t have a plan going forward and someone is going to have to deal with that,” said Severin Borenstein, director of the University of California Energy Institute at Berkeley. “We’re not in a place that’s stable.”

And if California’s state of emergency continues through the fall, the governor elected Nov. 5 will have extraordinary authority to affect the state’s electricity market and shape the future of California’s energy market, Kelso said.

When months of sky-high wholesale electricity prices, coupled with capped retail rates, left three California utilities broke, the state stepped in to buy power for their customers.

Declaring a state of emergency last January gave Davis extraordinary power to waive regulations, reorganize executive offices and implement new programs.

He has used that authority to move the state away from deregulation – authorizing the state’s Department of Water Resources to buy power, approving $43 billion in long-term power contracts over the next 10 years, and creating conservation programs. He also signed the law that created the state’s Consumer Power and Conservation Financing Authority.

The lights stayed on and wholesale prices dropped, but those actions are prime targets for the three GOP candidates.

All three said, if elected, they would immediately do away with the Power Authority, which opened for business in August and has $5 billion in bonds available to build, buy or lease power plants.

The three challengers – former Los Angeles mayor Richard Riordan, Secretary of State Bill Jones and businessman Bill Simon – have also criticized the long-term contracts that Davis says tamed the runaway wholesale market. But none has specific plans on how to renegotiate the binding agreements, some of which Davis administration officials are now trying to rework.

Harvey Rosenfield, executive director of the Foundation for Taxpayer and Consumer Rights, expects the energy crisis will be a major campaign issue because there’s a lot of fodder for Davis’ critics.

And even if campaign ads don’t jog voters’ memory, “they’ll be reminded every month when they open their electricity bills and they’re paying higher prices,” he said.

A poll by the Public Policy Institute of California this month found that electricity prices and deregulation still ranked high among voters’ concerns. The survey found 14 percent of voters questioned named energy as their highest priority. In 2001, as the state was running out of electricity and running up huge tabs to buy power, 25 percent of voters surveyed said it was their biggest concern.

Voters’ assessments of Davis’ handling of the crisis has improved, the PPIC found, but 54 percent still disapprove of what he has done. But that’s up from last year’s poll, which found 62 percent disapproved of Davis’ job.

Though unhappy about how the state’s attempt at deregulation has gone so far, Fleeman, the Davis homeowner, said he’s not ready to abandon the idea.

“I’m more of a free-market advocate,” he said. “If rates are lower yet in Texas, maybe we ought to look at their models. There are other states that have deregulated that have done it well.”

Simon said he believes in the free-market argument – that left alone from excessive regulation, demand and supply will level out and competition will result.

“It’s not the fault of deregulation what happened,” Simon said. “I’d go back to the free market. The best way to ensure cheap, safe, reliable power is to get as close to a free-market situation as possible.”

Jones, too, advocates the continued deregulation of the energy market.

“Markets eventually seek their own level,” he said. The state should have removed caps on wholesale and retail prices simultaneously, he said.

Riordan, however, opted to keep the Los Angeles Department of Water and Power out of the deregulated market. The municipal utility was one of the few “islands” within the state that escaped rolling blackouts and price hikes in 2001 because of that decision.

Riordan now says that it wasn’t a philosophical decision – that LADWP “didn’t have a very efficient infrastructure at the time.”

Fleeman, a Republican, said he also wants to hear what the GOP candidates have to say on tax credits and other incentives for renewable energy systems.

“There’s a lot of alternatives, a lot of things we can do. We have to put some dollars into renewable and nonpolluting technologies,” he said. “There’s energy cells and some interesting geothermal technology. We still have some oil reserves, but energy that we pull out of the ground is a limited resource.”

Each of the Republicans have criticized Davis, the Democratic incumbent, for relying too heavily on natural gas-fired plants instead of renewables.

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