Dim prospects for more help Power industry leaders are Bush allies

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Sacramento Bee

Some of the same power producers who have profited handsomely from California’s energy debacle are key contributors to and philosophical allies of President Bush.

They helped bankroll his elections as governor of Texas. They advise him on energy policy. They helped pay for the inaugural parties to celebrate his assumption of the presidency.

But now that Bush is on the job, aides to Democratic Gov. Gray Davis argue that the Republican president will have to act to crack down on his friends to avoid an economic meltdown that would affect not only California but the nation.

“He can lollygag around there 3,000 miles away in his new digs and think somehow this isn’t his problem, but he’s going to learn very quickly it is his problem,” said Davis political adviser Garry South. “If a president of the United States allows the California economy to collapse, it’s going to have dire impacts on the national economy.”

None of that is to suggest that the Davis administration was satisfied with the help it got from the Clinton White House, which also pressed a free-market philosophy.

But California GOP political analyst Dan Schnur said Democrats will be more vocal in denouncing Bush than they were a president of their own party.

“The new administration may not see this as a federal problem, but Gray Davis and (U.S. Sen.) Dianne Feinstein are going to do everything they can to lay it at the White House doorstep,” Schnur said.

California political leaders looking for immediate action from the Bush administration have not been encouraged by what they have seen so far.

They wanted Bush’s new energy secretary, Spencer Abraham, to renew emergency orders issued in the closing days of President Clinton’s administration directing producers to provide electricity and natural gas for the California market. Abraham agreed to do so for two weeks, but California officials see that step as a “finger-in-the-dike” action, not a solution.

They also want the Federal Energy Regulatory Commission, now headed by Bush appointee Curt L. Hebert Jr., to do what the board refused to do under Clinton: Institute wholesale price caps or other controls to give the national electricity market a chance to settle down.

But Hebert, who has served on the commission since 1997, is a staunch defender of the free market.

He once argued in a New England case before the commission, for example, that “there are no market ‘flaws’ that can surgically be remedied by the price cap bludgeon.”

Rose sellers inflate their prices every February, Hebert noted. “But I would not malign such behavior with the vaguely sinister label of ‘strategic bidding’ or condemn Valentine’s Day rose prices as ‘arbitrarily high and unreasonable,’ ” he said. “And I would certainly hope that the federal government would not intercede to limit the prices that FTD or 1-800-FLOWERS … would charge for their merchandise.”

Bush himself has taken pains to suggest that the problem lies with California’s 1996 deregulation law, not the concept of deregulation itself.

“California has a faulty law on its books. And it needs to correct it,” Bush told CNN last week, suggesting that his administration’s help may be limited to relaxing environmental regulations to encourage energy production and promoting more oil and gas exploration.

To Davis aides, his remarks stopped just short of “Bush to California: Drop Dead.” South called Hebert’s rose comparison “ludicrous,” saying: “Anyone who believes they can equate roses with electricity should not be on the FERC.”

And he said Bush may simply have “a constitutional inability to understand or respond to this kind of situation that involves an industry that he came out of essentially. The guy’s a Texas oilman.”

When top state and federal officials met in Washington earlier this month behind closed doors to talk about California’s electricity crisis, executives of some of the country’s top energy generators and marketers – including Enron, Duke Power and Reliant Energy Wholesale Group – were at the table with California’s troubled utility companies.

Davis, who has proven he can raise money from all sides of virtually every issue, took $445,000 from Pacific Gas and Electric Co. and Southern California Edison Co. and $99,000 from power producers between Jan. 1, 1998, and June 30, 2000.

But the generators, denounced by Davis in his State of the State address as “out-of-state profiteers” holding California hostage, have even closer ties to Bush:

* Enron and the company’s CEO, Kenneth Lay, each gave $100,000 to help Bush pay for inaugural events, as did Enron President Jeffrey Skilling and Reliant CEO Steve Letbetter. Lay also was a member of Bush’s energy advisory team during the transition.

* Several energy company officials were also Bush “Pioneers,” a select group of supporters who raised at least $100,000 each for Bush’s presidential run, according to an analysis by the Center for Responsive Politics. Among them: Letbetter, Lay and Don Jordan, former CEO of Reliant.

* Electric utilities and generators, including Enron, contributed $546,389 to Bush’s campaign, compared to $73,200 to Al Gore, the Democratic presidential candidate.

* When Bush ran for governor in Texas in 1994 and 1998, energy companies were some of his biggest supporters, including Enron and Reliant, then known as Houston Industries.

Texas-based consumer advocates say Bush is also philosophically aligned with the generators. Moving to cap wholesale prices, they say, would not be the new president’s first instinct.

“His first preference would always be to let the market handle it,” said Janee Briesemeister, senior policy analyst for Consumers Union Southwest regional office.

California consumer groups say Bush can’t afford to take that approach.

“Mr. Bush needs to ignore his friends and advisers who are in the energy business and do some homework on what is happening here,” said Harvey Rosenfield of The Foundation for Taxpayer and Consumer Rights. “Blind reliance on the free-market ideologues got California into this mess. A federal policy of ‘California be damned’ will crush the California dream – and destroy the concept of deregulation forever.”

Others suggest another reason Bush can’t afford politically to let California go under: His allies in the private sector probably wouldn’t be able to collect on the billions they’re owed by Edison and PG&E.

The wholesale generators would become unsecured creditors in a utility bankruptcy and would have a difficult time collecting on their debts, said Richard Levin, a veteran utility-bankruptcy lawyer.

“The producers have to walk a fine line,” said UCLA economist Bradford Cornell. “They can only collect what the utilities can reasonably afford to pay.”

California Senate Republican leader Jim Brulte noted it didn’t take long for the “Democratic attack dogs” to begin partisan attacks on Bush.

He said he would “be very surprised,” however, “if a Bush FERC was willing to do what a Clinton FERC wouldn’t.”

GOP analyst Schnur nevertheless said he sees opportunities for Bush in the current crisis.

“Just because he doesn’t believe in the Gray Davis solution of price-fixing doesn’t mean that there aren’t other options for the federal government to pursue,” Schnur said. “The public perception right now is that California state politicians don’t have any idea what to do. The new president could fill that leadership gap.”

It doesn’t help California, necessarily, that it voted decisively for Gore despite Bush’s aggressive campaign in the state, or that Davis is mentioned – or was until the energy crisis hit – as a possible presidential challenger to Bush in four years.

But South argues that Bush will have to rise above any petty political sentiments.

“It’s not politically tenable to disregard or do deliberate damage to the largest state (by population) in America,” he said, “just to take a few bites out of the rear end of a sitting governor.”

Consumer Watchdog
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