Many trace California Governor Gray Davis’ political problems back to his handling of the electricity crisis

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National Public Radio – All Things Considered

MICHELE NORRIS, host: Less than 24 hours to go before the polls open for California’s recall
election and Governor Gray Davis is fighting for his political life. Analysts say one reason Davis finds himself in this position is his handling of the power crisis three years ago. Californians remember a roller-coaster ride of blackouts and political panic that ended in higher prices for millions of customers. From member station KPCC in Los Angeles, Rachael Myrow reports.

RACHAEL MYROW reporting: For many California voters, and especially Harvey Rosenfield, there’s a direct connection between the power crisis and frayed feelings for Governor Gray Davis today. Rosenfield heads the Foundation for Taxpayer and Consumer Rights, and he’s a longtime foe of electricity deregulation.

Mr. HARVEY ROSENFIELD (Foundation for Taxpayer and Consumer Rights): This recall is focused on him, but this is going to be the way that the California consumer protests the corruption of our political system that led to the energy crisis and then led to these higher electricity rates. It’s all of a piece.

MYROW: Back in mid-2000, skyrocketing wholesale power prices began to throw California’s partially deregulated energy system out of whack. The first signs of trouble popped up in May, but Davis didn’t move until months later, when the state’s two big private utilities warned of impending bankruptcy, and citizens braced themselves against the threat of massive blackouts. By January, the governor devoted much of his State of the State speech to the crisis.

Governor GRAY DAVIS (Democrat, California): California’s deregulation scheme is a colossal and dangerous failure. It has not lowered consumer prices. It has not increased supply. In fact, it has resulted in skyrocketing prices, price gouging and an unreliable supply of electricity. In short, an energy nightmare.

MYROW: Rather than turn back from deregulated energy altogether and commandeer the power plants or let utilities pass on the full cost of the crisis to consumers, Davis tried to find a middle way. He called on consumers to cut demand while he fast-tracked new power plant construction, and the governor began to point fingers, claiming power suppliers were gaming the market, and
federal regulators were refusing to step in and stop it. Finally, in the spring of 2001, Davis signed a package of long-term energy contracts with power companies. Almost overnight, prices on the spot market dropped. The crisis was over, but at a cost of $43 billion in bond money and a host of economic and legal loose ends that remain unresolved even today.

Ms. ELIZABETH McCARTHY (Editor, California Energy Circuit): Davis did not create this deregulation scheme. This is a scheme he inherited.

MYROW: Elizabeth McCarthy is editor of California Energy Circuit, a weekly trade publication.

Ms. McCARTHY: OK, he might have aggravated the situation by signing long-term contracts behind closed doors, but he didn’t create the problem. The problem blew up in his face.

MYROW: Voters don’t necessarily blame Davis, says political science professor Raphael Sonenshein of California State University in Fullerton, but Davis didn’t exactly look good struggling to gain control of a complicated mess.

Professor RAPHAEL SONENSHEIN (California State University in Fullerton): When the electricity bills began to skyrocket, voters looked up and they noticed Governor Gray Davis, and they began to pin the blame of this lack of control, lack of power in a sense, on him.

MYROW: Internal Enron memos released last year provided the smoking gun Davis had been looking for. They proved California’s energy market had been manipulated, but…

Prof. SONENSHEIN: By the time those memos came out, the power crisis had morphed into a budget crisis, into a political crisis, into all sorts of other issues going on. So when the evidence came out, the damage had already been done. You’re closing the barn door after the horse got out, because the debate was no longer about the power crisis.

MYROW: For customers of California’s big private utilities, the power crisis never quite ended. They’re still paying 15 to 40 percent more for electricity than before the trouble started. That unpleasant reality may not be the deciding factor for voters in the recall election, but it sure doesn’t help the governor’s chances. For NPR News, I’m Rachael Myrow in Los Angeles.

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