Hey, Who Turned Off the Lights?

As the rest of the nation giggles about those loopy Californians sitting in self-inflicted darkness, it might be helpful to revisit one little historical point: We did not ask for this. At no time did hordes of consumer-populists storm into Sacramento and bombard the State Capitol with toasters and clock radios, demanding deregulation.

No, the current mess can be traced back in large measure to a wave of political hysteria that enveloped Sacramento in the early 1990s. A recession was on, and lawmakers of both partisan stripes were cranking out pro-business legislation by the truckload--workers’ compensation reforms, tax breaks for manufacturers, energy deregulation, anything to keep CEOs from following through on threats to abandon California for greener pastures.

Initially, even Edison and Pacific Gas & Electric Co. had to be coaxed on board. In hurried negotiations, the deregulation deal was sweetened considerably to the benefit of the big utilities. For instance, retail prices would be kept at fixed rates at first. The idea was to keep prices propped up for a few years so that the utilities could recoup billions of dollars invested in plants that presumably would not pencil out in an unregulated world.

In other words, the retail price freezes that the utilities now claim are driving them toward the poorhouse were designed not as a ceiling, but as a floor. Only in the wind-fog of crisis politics has the canard taken hold that Californians are hooked on something-for-nothing power. We scurried into the deregulation era paying some of the steepest prices for power in the land. We will stagger out of it the same way.

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It’s also instructive to note that the utilities did just fine by those frozen prices for a long time: “Edison profited handsomely when market fluctuations drove wholesale prices down in prior years,” the state Power Exchange argued last week in a legal brief. “That the wholesale prices for electricity have risen substantially in recent months could not be an unanticipated event for Edison. No financial or commodity market goes in one direction forever.”

Deregulation brought other benefits. Private power company executives bristle these days when they hear talk of how under deregulation PG&E; and Edison were required to sell all their generation plants. They weren’t. What happened was that some of the older plants were placed on the market and promptly sold for about two times their book value. This seemed to the utilities like a swell game to keep playing.

And as they sold off California plants, they ventured across the nation and into the world, purchasing new plants and growing whole new power companies. Whether these flush new companies ought to help bail out their impoverished California cousins is a complicated legal and even ethical question--but also one that should not be allowed to vanish into the vapor.

Of course, the utilities are now about $12 billion in the red--minus, arguably, the billions they owe back to themselves by way of their multi-pocketed approach to bookkeeping. Either way, that’s real money, and ultimately the bill must be paid by someone. Guess who? Doug Bosco, a former state legislator familiar with the vagaries of utility finance, provided what sounds, unfortunately enough, like the correct answer.

“There’s a misconception,” he told a Times reporter earlier this month, “that only some costs get passed on to consumers. All costs get passed on to consumers. This is a giant shell game that goes on all the time, but when it’s all said and done consumers are the only source of revenue that utilities have. And sooner or later they always foot the bill.”

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If this is the case, then the only mysteries left involve the mechanics of how this unavoidable economic canon will be carried out. Will it come in the form of taxpayer bailout or floated bonds or consumer rate increases spread over years, so as to enhance consumer (read “voter”) amnesia? Will the bailout plan be handed down by a bankruptcy judge or politicians?

While such questions are sorted out, it would be helpful if the players could tone down the doomsday rhetoric. Fender benders and a few fellows stuck in an elevator do not an Armageddon make. Rolling 90-minute blackouts are not exactly an unmanageable hardship.

In fact, the blackouts could be made to seem almost routine--and save a lot more energy--if the utilities simply would put them on a regular, knowable schedule for the duration, sort of like garbage pickup day. That they haven’t done so seems strange. A skeptic might wonder if the power companies sense some strategic advantage in keeping the public panicky as they negotiate their exit from the hole, but there’s nothing in the saga of California energy to justify skepticism, now is there?