Davis Can Help Himself by Helping Ratepayers

More than a year before the next campaign for governor kicks into gear, California ratepayers have not yet begun to think of themselves as California voters. As the state’s power crisis continues to worsen, however, and as homeowners and small businesses face electricity bills that have doubled and tripled over the last several months, the stirrings of Campaign 2002 have begun.

Already, the slogan that will be featured on bumper stickers and yard signs across the state is coming into focus. It says: “Repeal Gray Davis’ Energy Tax.”

Davis is now preparing a solution that he plans to offer on the crisis in his State of the State address next week. Because California’s two largest electricity suppliers have requested large rate hikes, he will attempt to position himself on the side of the consumers simply by agreeing to a somewhat smaller increase. But by next November, California ratepayers won’t remember that Davis’ compromise is costing us less than the utilities wanted. All we’ll know is that we’re paying more for our electricity under Davis. His opponents will call it an energy tax.

Davis has other vulnerabilities in this fight as well. Opponents will charge that his appointees to the Public Utilities Commission have made the crisis worse by refusing to permit the state’s utilities to lock down long-term contracts with major power suppliers. Similarly, Davis will face criticism for not embarking on a more aggressive program to build additional power plants. Finally, the hundreds of thousands of dollars in campaign contributions that Davis has collected from the major power players will cause him perception problems with an electorate that has been supportive of campaign finance reform.

Davis’ cautious approach to governing has been well-suited for steering the state through a period of economic growth. If he is to be equally successful at leading California through the worst crisis of his term in office, he must display a boldness that has not yet been in evidence.

The state’s continuing economic growth has produced another budget surplus of several billion dollars. Rather than agreeing to additional government spending that would have to be cut during the next recession, Davis should propose using the surplus for rebates to California’s ratepayers for the increased cost of their electricity.

Davis is famously reluctant to commit to any long-term spending or permanent tax cuts, preferring to use budget surpluses on one-time projects. Spending the next two years’ surpluses on electricity rebates would be in keeping with that approach, and would provide a bridge to longer-term solutions that would increase the state’s ability to generate its own power.

The Davis energy tax then becomes the Davis energy tax cut. That is the kind of budgeting that keeps ratepayers happy, avoids long-term spending commitments and helps governors get reelected.

The second part of an energy solution would involve speeding up the construction of new power generation facilities. After the 1994 Northridge earthquake, then-Gov. Pete Wilson instituted emergency measures that allowed Los Angeles’ freeways to be rebuilt and reopened far ahead of schedule. Similarly, streamlining the permitting process and suspending the customary competitive bid process for the construction of new plants would eliminate the major obstacles to expanding California’s energy production capacity.

So far, Davis’ strategy for dealing with the state’s electricity shortages has consisted primarily of reminding us that the problem is not of his making. Davis never complained about the wave of economic expansion that he has ridden since taking office. He has never protested that education reforms such as class-size reduction and mandatory student testing were enacted well before his election. But as California’s energy problems have worsened in recent months, he has not been bashful about pointing out that electricity deregulation is something he inherited.

When Wilson took office during California’s recession in 1991, he knew there was nothing to be gained by placing blame on the politicians who had allowed state spending to grow so rapidly over the previous decade. Instead, he embarked on an agenda that brought the state’s budget back into balance and laid the groundwork for today’s economic growth.

Davis will soon learn the same lesson. California voters believe that it is his responsibility to provide a solution. Whether that solution’s centerpiece is a Davis energy tax or an energy tax cut will be the first decision of his reelection campaign.