Bush Suggests Easing Curbs on Pollution

President-elect George W. Bush on Thursday dismissed the price caps sought by Gov. Gray Davis as a way out of California’s deepening electricity crisis, and instead proposed relaxing environmental rules that he said keep the state’s power plants from running full tilt.

Bush, in interviews with the Associated Press and several television networks, signaled that the state will be pretty much on its own in resolving the roiling crisis that threatens daily life and economic growth in one of the nation’s richest regions.

“It’s their law,” Bush said in the AP interview, referring to the state’s 1996 deregulation legislation. “California is going to have to address and correct the law that has caused some of this to happen.”

The president-elect and his chief economic advisor, Lawrence B. Lindsey, discounted the danger that the state’s problems pose for the national economy. “It remains to be seen how long and severe the effects will be,” Lindsey said in an interview.

The Bush team’s assessment of California’s problem squares with that of other politicians, policy makers and independent experts who believe that the first steps out of the crisis must be taken in Sacramento, not Washington.

But coming as rolling blackouts darken wide swaths of the state, it seems certain to provoke comparisons to President Gerald Ford’s refusal to help New York City out of its fiscal morass in 1975, a decision memorialized by the tabloid headline: “Ford to City: Drop Dead.”

And while he is correct that the deregulation law is of California’s own making, many of the environmental regulations that Bush appeared to be referring to are created by federal, not state, law.

The outcry from state politicians began only minutes after Bush’s remarks were made public Thursday.

“It’s one thing to blame California,” Sen Dianne Feinstein (D-Calif.) said in an interview. “At the same time, you’re going to have people who are going to die. You’re going to have businesses that go out of business.

“For a president to put a thumb in the eye of the state makes very little long-term sense,” Feinstein said. “It is shortsighted, and it does not show a deep understanding of the issue.”

She said she will ask for a meeting with Bush in an attempt to persuade him to support a temporary price cap on wholesale electricity prices.

“Why would the new president ignore the largest, most populous state in the nation?” asked Rep. Anna G. Eshoo (D-Atherton).

“This crisis threatens the future of high technology. As a representative of Silicon Valley, I can’t understand why President-elect Bush or the Congress would turn their backs on the industry that has produced the New Economy.”

In Sacramento, Davis portrayed the need for price caps as one that reaches beyond California’s borders. He sought to ally himself with other Western governors, many of them Republicans.

“Hopefully, as a Western region, we can speak with one voice about the need to have some adjustment in the wholesale prices that the utilities in all of our states are absorbing,” he said. “We need, for at least a relatively brief period of time, some reduction in the wholesale prices to stabilize markets in all the Western states, not just in California.”

Bush’s comments, together with those of other top Republicans, suggest that about the best that California can hope for from the new administration is what it got under the old one: a willingness by federal officials to act as mediators in the complex bargaining among the state, its near-bankrupt utilities and its big power providers.

“To the extent that the federal government can help California help itself, I will do so, and my administration will do so,” Bush said in an interview with Fox News.

Some of Bush’s prescriptions for fixing what ails California seem calculated to enrage environmentally conscious voters who handed the state to Democrat Al Gore in the November election.

In the AP interview, Bush said: “California must be aggressive about increasing the amount of supply of power. We cannot conserve our way to independence.”

And in a separate interview with CNN, he put much of the blame for the state’s problems on strict environmental rules. “If there’s any environmental regulations that’s preventing California from having a 100% max output at their plants--as I understand there may be--then we need to relax those regulations,” he said.

Several of the companies that own power plants in the state have complained that clean-air rules limit how much power they can generate. Executives at some of those companies--Houston-based Enron, for example--have close ties to Bush and his advisors.

The clean-air rules Bush appeared to be referring to are not imposed by state law, however, but by a federal statute--the 1990 Clean Air Act amendments--signed into law by his father as president.

The law sets strict deadlines for every city to meet health standards for air quality. States have flexibility in how to meet the targets but can be sued by the federal government or citizens if they fail to act.

California has moved more aggressively than other states to comply with the law. But other states that have lagged behind, including Bush’s home state of Texas, are now beginning to impose California-style regulations in order to meet the deadlines.

In addition to Bush, other GOP officials made comments likely to upset many Californians.

“The California consumer has to feel the hit,” said Sen. Frank Murkowski (R-Alaska), incoming chairman of the Senate Energy and Natural Resources Committee. He made his remarks during a confirmation hearing on Bush’s Energy secretary nominee, former Michigan Sen. Spencer Abraham.

Abraham declined during the hearing to say whether he would extend the latest order issued by outgoing Energy Secretary Bill Richardson that has required power provides to sell into the California market.

While some Californians saw political payback in the president-elect’s tough stand on the electrical crisis, independent analysts said it also reflects an uncomfortable reality: that there is little the federal government can do to help the state out of the immediate problem.

Even analysts sympathetic to Davis’ claims that power providers have been withholding supply to drive up prices now say it is up to the state to hammer out a solution.

“The state has to help itself,” said Paul L. Joskow, a Massachusetts Institute of Technology economist who found indications of price manipulation last summer in a study for Edison. State officials “have got to deal with the credit problems of the utilities,” he said.

Members of the state’s usually activist congressional delegation have largely let their counterparts in Sacramento try to solve the crisis--and take the political heat.

But as the lights in California have flickered off and the two utilities have edged closer to bankruptcy, an increasing number of the state’s Washington representatives have begun pressing for congressional intervention.

The battle they face was apparent at Thursday’s hearing for Abraham, as lawmakers from other states placed blame for the crisis squarely on the California.

Sen. Gordon Smith (R-Ore.) said he has received calls from at least three businesses in his state complaining that their electricity rates are rising 30% to 40% because of the added demand from California.

“I think my state is being set up to be an energy farm for California,” he said.

Feinstein warned her colleagues that it would be irresponsible to ignore California’s predicament.

“It’s very easy for some to say that California has been hoisted on its own petard and we can sit back and let them work it out. I think that is very dangerous,” she said.

“The worst possible thing, in my view, is to allow our two blue-chip utilities to go bankrupt,” she said. “It will have strong ripple effects through the California economy, through the regional economy, through the national economy and--yes--the international economy.”

Suppliers oppose price caps, saying they would discourage the building of new power plants.

“What California needs to do is open the doors and say come on in,” said Eugene F. Peters, vice president of legislative affairs for the Electric Power Supply Assn., a Washington-based trade group. “With price cap legislation, what they’re saying is stay away.”

Meanwhile, House Energy and Commerce Committee Chairman Billy Tauzin (R-La.) announced plans to conduct a “top-to-bottom review of America’s strategic energy policies.”

Times staff writers Ricardo Alonso-Zaldivar in Washington and Dan Morain in Sacramento contributed to this report.