Life After the Crisis

For six months, Californians have been riding an energy crisis that is like some movie monster--a weird, hard-to-comprehend creature that morphs and fragments day by day.

Now, finally, the state is gaining a measure of control. The threat of near-constant rolling blackouts through the summer is fading, though not gone, and Washington has halfheartedly come to the rescue. What’s still needed is a long-term plan, a way to turn this monstrous puzzle into a coherent whole.

As Chairwoman Debra Bowen (D-Marina del Rey) of the state Senate’s Energy Committee said, “What do we want this beast to look like? We’ve got to have pieces that fit together.”

What California will have by the end of this year is a ragged mosaic of emergency edicts from Gov. Gray Davis, lots of hasty legislative action and a multibillion-dollar debt from turning the state into the chief power purchaser. Consumers already are paying higher electricity bills--much higher ones for those who don’t conserve. There is constant action in the federal Bankruptcy Court and the acronymic stew of state and federal agencies.

The experience is unique in California history and might be likened to Franklin D. Roosevelt’s First 100 Days effort to battle the Depression. Need more money? State Treasurer Phil Angelides goes to Wall Street and borrows $3.5 billion. Need more power? The Legislature creates a California Power Authority to build the state’s own plants if necessary.

The crisis atmosphere eased last week, due in part to stronger federal controls over wholesale power rates. Prices moderated. More plants were back on line. The weather was hot, but no blackouts followed. The state finally released details of its $43 billion in long-term energy contracts. Angelides’ loan will help end the bleeding of the state’s general fund for power purchases. And FERC promised to vigorously pursue refunds from the giant power companies that grossly overcharged California this past year. It’s about time.

Soon, payment of back debt will have to be apportioned. First, what percentage should be paid? Generators should be prepared to accept less than 100%. After that, taxpayers, utility customers and the utilities’ parent companies may have to shoulder more burden. That will be unpleasant.

Then what? Bowen plans to hold a hearing soon on “What should California’s electricity marketplace look like?” Topics that need to be covered include the future role of the utilities, improving natural gas supplies to the state and restoring suspended environmental controls. The state should aggressively increase alternative and renewable energy. It also needs to decide whether there is any advantage in taking over the transmission grid and to figure out the best way to get itself out of the power-buying business.

There can be no return to the old regulated system since most of the utilities’ old power plants are now owned by private generators. The disastrous 1996 deregulation has already been largely undone. We know from the state’s hard experience that electric power is too critical to be trusted entirely to the free market. What is not clear yet is how much regulatory control is needed and who should supply it. There will be no easy answers, but if we define the right questions, the beastly puzzle will start to make sense.