Davis Leaves Edison Up the River Without a Paddle

OK, kids, let’s play Hot Potato, the game du jour in Sacramento. I refer, of course, to the ongoing desperate effort to stave off the imminent bankruptcy of Southern California Edison, the result of a deeply flawed 1996 electricity deregulation law that was nothing of the kind, combined with highly perverse rule-making by the state Public Utilities Commission.

The basic conundrum: Quite apart from issues of sound public policy, no proposal that can keep Edison out of Bankruptcy Court is feasible politically.

Full payment of all debts means even higher electricity rates, hardly a political winner. An attempt to force those costs onto a small slice of the largest industrial companies does not auger well for California’s attempts to attract businesses. A budget solution would require painful choices on spending programs.

For the “consumer” leftists, any solution that reduces the role of government is anathema, and the creation of the California Public Power Authority--a state takeover of the electricity business--is a dream come true, consumers be damned. And so “bailout” now is a “four-letter” word that public officials avoid like the plague.

Moreover, once the state started spending billions for electricity in a tight market--buying high then and selling low now--the political temptation to descend into deceit and demagoguery, shameless even by California standards, proved irresistible for Gov. Gray Davis, Atty. Gen. Bill Lockyer and others.

And so “profiteering” and “market manipulation” became the epithets favored in Sacramento, despite the fact that among the highest prices charged were those of our own municipal utilities and many decisions with respect to the operation of power plants were made by a state government agency.

Oh, what a tangled web we weave when first we practice to deceive. Having slammed the power producers for months, threatening lawsuits, criminal sanctions and on and on, Davis is in no position to suggest that the effort to keep Edison out of Bankruptcy Court include paying the billions owed the major power producers. Instead, the legislative proposal supported by Davis includes $2.9 billion in bonds to be used to repay only the banks and the producers of “alternative” power.

This hierarchy of favored and less-favored creditors is self-defeating. Those left out in the cold will be forced by their fiduciary responsibility to their shareholders to take Edison into Bankruptcy Court immediately to protect their interests.

This means that the state will remain in the power business for the foreseeable future.

This is not rocket science. Davis’ claim to prefer a solution that keeps Edison out of bankruptcy and that gradually removes the state from the electricity market is not credible because his proposal does the opposite on both counts. But the ensuing Edison bankruptcy will be forced by the power producers, so that Davis, or so he must believe, will be able to shift the blame.

Is that the purpose for which we elect public officials?