Bailout Watch #10 – Feb 20, 2001

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BAILOUT WATCH: Keeping an eye on the energy industry and the politicians

Bailout Watch #10 – Feb 20, 2001

Governor unveils his consensus plan without consensus and without a plan.

In a strange press conference last Friday, Governor Gray Davis introduced a vague framework for a utility bailout that offers more questions than answers. Namely: how much? how long? and who will pay what? Clearly, the structure — the state purchasing the power grid and the application of a bailout tax, known as a "dedicated rate component," — creates a mechanism for Governor Davis to place the pain of the deregulation fiasco squarely on the backs of California consumers. But most striking about the news conference was that it failed to demonstrate the Legislative consensus for the framework that was the announcement’s stated purpose. None of the Democratic or Republican leaders who have been negotiating with Governor Davis joined the Governor for the news conference. In fact, the only confirmed meetings that Governor Davis had on Friday were with Edison CEO John Bryson and his PG&E counterpart Robert Glynn. He met with each of them for approximately two hours.

Governor Davis skating… on thin ice.

According to a recent poll, a majority of Californians appreciate Governor Davis’s efforts to solve the energy crisis. The public has a much harsher view of President Bush, the California Legislature and the energy industry. Governor Davis, who was recently referred to as "California’s Teflon Gov" in the SF Chronicle, has skated so far, largely by keeping himself out of the debates and public discussion about the crisis. Rarely has Governor Davis been quoted in the newspapers, and–other than some trips to power plants and the occasional news conference — the Governor has made few public appearances in the weeks since the crisis erupted. However, the public is not likely to be so generous when the terms of his plan start making its way on to electric bills. Nor will people be particularly pleased when the taxpayer’s spot-market energy bill comes due and our Recreation and Parks funding has all been squandered. The indulgence of the public will melt if Governor Davis turns his (not-yet-a)Plan (see above) into a major consumer rate increase.

Will New Power Plants End the Crisis?

Many elected officials seem convinced that this is The Answer. With old, polluting and nuclear plants on our hands, new construction can play a role in expanding our generating capacity, cleaning our air and securing energy independence (if construction is guided by a public power agency). But the cry for construction misses the chief failure of California’s energy policy: deregulation creates an incentive to tighten electricity supplies and drive up prices. Deregulation, not a lack of new plants, led to Stage 3 alerts and rolling blackouts during the year’s low-point in electricity consumption. Why didn’t we have this problem in the past? Why didn’t we have Stage 3 alerts in August 1998, when peak demand was 12,000 Megawatts higher than in December 2000? Moreover, with 6 major plants under construction, 3 more approved and 14 already under consideration, the posturing around new construction and efforts to remove those pesky health and safety regulations associated with plant siting is an act of political misdirection intended to distract from the failure of deregulation.

Consumer Watchdog
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