See Two Governors Run From Blame

It’s a tale of two governors trying to craft the terms of debate for next year’s gubernatorial election, which could lock in a decade of Democratic dominance and, not incidentally, buff up their respective legacies.

One is Pete Wilson. Desperate to avoid a companion epitaph to his backfiring championing of the anti-immigrant Proposition 187, he seeks to absolve his Republican Party of its central role in the debacle known as electric-power deregulation.

The other is Gray Davis. Stung by the emerging consensus that his narrow political focus led him to respond tardily to the energy crisis, he seeks to cast a wide net of blame as he repeatedly declares the crisis is over. But he’s struggling with conflict-of-interest problems within his administration and a solution--$43 billion in long-term power contracts--that create a new problem: a “green blackout.”

After lying low when the energy crisis hit, Wilson has recently made some selected appearances to test the political waters. He has reasons to be choosey. Wilson conceived deregulation, pushed it through the Legislature after his Public Utilities Commission proposed to impose it by fiat and remained silent when problems began to emerge.

“I have concluded,” Wilson declared fatefully in 1993, “that the market can be trusted to engage in the planning, development and deployment of electric-generation capacity in California.”

Today, the father of deregulation retains his trust of the market. Well, a few little adjustments might be needed, like long-term contracts. But such contracts were antithetical to the workings of the capitalist spot market into which he cast California consumers. What early problems he foresaw, Wilson presumed would be fixed.

Unfortunately for the former governor, this is all nonsense. His final California Energy Commission deregulation plan, put out just three years ago, features his boast of a “lasting energy legacy.” His deregulation scheme, the plan claimed, would lead to lower prices and a declining rate of growth in electricity demand, in spite of the fact that the state’s population and economy were growing rapidly. And his PUC’s insistence that California utilities sell off their plants gave out-of-state power firms the whip hand in the California market.

Wilson’s claim that there were early warning signs is true, but not as he tells it. When Wilson was governor, there were internal reports of market manipulation in the summer of 1998 on the state’s Power Exchange, but they were not publicized. That would have been most inconvenient for deregulation’s industry and ideological backers.

Then-Lt. Gov. Davis got through what passed for debate during the 1996 enactment of deregulation without making a recorded comment. But one can walk through raindrops without getting wet only so long.

Davis reappointed Wilson’s Energy Commission chairman, William J. Keese, a Republican and former oil lobbyist who oversaw Wilson’s disastrously wrong energy plan and, it turns out, has invested for years in companies he regulates. Ironically, Keese occupies the commission’s “public interest” seat.

Energy wasn’t of much interest to Davis before the crisis. Though he approved plans for new power plants, he ignored advice to make energy conservation a major focus of his governorship. Instead, he emphasized education and crime, parroting the polls, and embarked on an unprecedented round of reelection fundraising. California’s vaunted new economy was humming, and Davis was presiding over prosperity, ladling out the budget surplus in relentlessly promoted media events. Minimalism was the mode, incrementalism the mantra.

After futilely waiting for former President Bill Clinton to solve the energy crisis for him, Davis acceded to the obvious when George W. Bush assumed the presidency. He hastily plunged the state into the power-buying business and belatedly embraced the suddenly very useful ethic of conservation.

With huge assists from the Democratic takeover of the U.S. Senate, an economic slowdown, the desire of some energy companies to expand into new regulated businesses and, not least what Tom Hannigan, director of the power-buying agency, calls an “extremely cool” June and July, the state has avoided the summer disaster that even Davis anticipated. Davis was a victim of circumstances in inheriting the crisis, so it is only fitting he should benefit from circumstances in avoiding apocalypse.

But his fortunate success has a price. The recent flurry of stories about his energy traders and consultants owning energy-company stocks is only the latest and perhaps least consequential example. This, after all, is a governor who sent a former Southern California Edison president to negotiate a state bailout of the executive’s former company, who offered Edison a deal that would pay for things the state can require by law, who stayed mum for months as the state picked up the huge tab for replacement power needed as a result of the accident at Edison’s San Onofre nuclear plant, who installed as top officials in the governor’s office two spinmeisters who also worked for Edison.

Small wonder that one of those officials, former Al Gore press secretary Chris Lehane, now departed, felt no qualms in telling me: “The governor and Edison have the same energy policy.”

That needs to change, and Edison’s standing as Davis’ biggest energy-industry contributor and one of the principal backers of the deregulation scheme it now wants to be rescued from may be the least of it. If Davis wants to avoid Wilson’s political ignominy, he needs to get beyond the rampant insiderdom that gave us deregulation and that continues to afflict his own energy operation.

Davis is under fire for huge long-term power contracts his administration negotiated that, after months of secrecy, turn out to be more expensive than advertised and ignore renewable-energy in favor of fossil-fuel generation--a green blackout. Not only do the contracts eschew renewables; a number of them financially underpin a new generation of fossil-fuel plants, guaranteeing their profitability for the companies developing them. A troubling result for a Democratic administration at a time when most of the rest of the world is criticizing a Republican administration in Washington for refusing to deal with the greenhouse effect.

With the state in panic mode, the long-term contracts were put together in understandable haste and with no leverage over power generators, which were anything but intimidated when told by Davis that he works with a portrait of Ronald Reagan watching over him. But the governor who missed the boat on conservation in 1999 should not be the governor who misses the boat on renewables in 2001.

The power contracts should be rethought and reworked to bring more affordable renewable power--wind, geothermal, solar, biomass, cogeneration--online. Beyond that, Davis should avail himself of a state law, authored by Sens. Tom Hayden and Byron Sher, giving the PUC authority to require more renewable power. And the state itself should do much more.

The new Power Authority can be a major catalyst for turning California into a world leader in the transition from greenhouse gases. But it won’t happen if insiders, corporate types and pliant careerists keep their usual stranglehold.

With a new spirit of openness and boldness, Davis can be far more than a governor who muddled through amid a disquieting air of business as usual. He can roll back the green blackout and live up to the motto he used to quote so often: “Bring me men to match my mountains.” Without it, he risks the Wilson’s fate: perhaps reelected but historically reviled.