A Stronger Jolt Is Needed

The state finally acted Thursday to alleviate California’s electric power crisis, but Southern California Edison and Pacific Gas & Electric, the state’s two biggest privately owned electric power distributors, found themselves in a worse situation, at least for the moment. More government action, though not necessarily a bigger rate hike, is needed.

Within minutes of the Public Utilities Commission’s 5-0 approval of an emergency rate hike, the stock of Edison’s and PG&E;’s parent firms plunged on the New York Stock Exchange. The utilities’ credit ratings were downgraded by two Wall Street firms to virtual junk-bond levels.

The temporary rate increase--about 9% for home users--was supposed to shore up the utilities’ credit so they could continue to buy power on the volatile deregulated market. But the action fell far short of the financial market’s expectations and the electric power situation went from chaotic to desperate. The utilities recovered a little lost ground at the end of the day on investors’ expectation that the state might act, perhaps by issuing bonds to help utilities pay providers. Talks were underway between Gov. Gray Davis and state legislators Thursday.

The state and federal governments must take strong action to keep electric power flowing to 25 million Edison and PG&E; customers. Officials should try again to get the Federal Energy Regulatory Commission to immediately establish a reasonable cap on the wholesale price of electric power in the West. If necessary, both President Clinton and President-elect George W. Bush should try to persuade the commission, which has blindly expressed faith in the deregulated market.

State and federal officials should assure the generating companies they will be paid for the power they provide to California. If necessary, the state government could use part of its budget surplus to back this promise. In return for such a guarantee, and if the federal commission does not impose a cap, the generators should lower their prices to a reasonable level.

Any aid given to the firms to avert bankruptcy would have to be repaid in a manner determined later. And consumers must be protected against price shock. The immediate goal is to keep the electric power flowing and avoid tearing California’s economy apart.

Los Angeles, Sacramento, Riverside, Pasadena and other cities with public power systems are not affected by the rate hikes and most of the vagaries of the deregulated market. But they will not be immune from the rippling economic effects of deregulation gone awry.

Gov. Davis, so far all but publicly silent, is to outline his plan to combat the power crisis Monday evening. It should come sooner. The futility of the PUC’s action Thursday should impress on Davis the need for a strong, specific program that will shore up the system right now and then provide fixes for the long run.