Deregulation writer to head up governor’s budget team

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The Associated Press

SACRAMENTO: Gov. Gray Davis‘ choice of Steve Peace – a former lawmaker and key architect of the state’s failed electricity deregulation plan – as his top budget adviser during the state’s worst fiscal crisis is being called bold by some and baffling by others.

“It’s ironic that Davis would bring Peace in to fix the problem that has at its roots the disaster that Peace helped create,” said Doug Heller of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

Peace will replace outgoing Finance Director Tim Gage, who is leaving after writing Davis’ first four budgets, with California facing a $34.8 billion budget shortfall over the next 18 months – the worst in the state’s history and in the nation.

The choice is surprising, coming from a Democratic governor known for being overly cautious and bland – and who nearly lost his job in November because of voters’ dissatisfaction with his handling of the energy crisis.

Peace, a maverick Democrat from San Diego County forced out by term limits, is the lawmaker most widely blamed for the electricity deregulation that led to spiraling power bills and blackouts.

He also is known for his intellect and often blunt and angry outbursts, and is famous for producing the cult movie classic “Attack of the Killer Tomatoes” in his youth.

“It’s an inspired and risky choice,” said Michael Shames, executive director for the San Diego-based Utility Consumers’ Action Network. “Steve clearly has the intellectual firepower to do an amazing job. He also has the emotional firepower to destroy anybody in his way and create a lot of wake wherever he goes.”

Davis called Peace “a trusted and experienced legislative leader on matters of budget and finances” and said he was seeking someone to help serve as a bridge to the Legislature during the upcoming battles over how to fill the state’s gaping budget hole.

Davis already has proposed $10 billion in cuts and has said he will pitch more cuts and likely tax increases in January.

“I wanted to pick someone who had good relationships with the Legislature, whose credibility is beyond question and who understood the subject,” Davis said Thursday.

As chairman of the state Senate energy committee, Peace helped write the 1996 legislation that led to the electricity deregulation plan that has been blamed for much of the energy crisis that hit the state in 2000 and 2001. He headed the two-house committee that produced the final plan approved unanimously by the Legislature and signed by Republican Gov. Pete Wilson.

Peace released a video last year countering charges that he engineered deregulation. The tape portrayed Peace as an outspoken skeptic of deregulation who shepherded the policy through the Legislature only to guarantee that consumer protection would be included in the final version.

Supporters say he did, in fact, negotiate a better bill for consumers than what Wilson and the state Public Utilities Commission proposed.

Peace “injected some things in there that were necessary,” but “verbally was very skeptical of the entire scheme,” Shames said.

California’s current budget woes are largely the result of a national recession and stock market implosion over the past two years. But many also blame the power crisis, which forced California to draw from budget surpluses to purchase electricity to keep its lights on.

“Things were shaky economically in 2000, but when California began to fall apart as a result of deregulation, the house fell off the cliff,” Heller said.

Peace, first elected to the Legislature in 1982, was chairman of the Senate Budget and Fiscal Review Committee for the past six years and is known for holding marathon meetings that were nicknamed “The Peace Death March” during deregulation hearings.

In the late 1980s, he was part of the rebellious “Gang of Five” who tried to engineer the ouster of Assembly Speaker Willie Brown. He also is known for his ownership of a video production company that produced the “Killer Tomatoes” movie and three sequels.


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