Davis Needs to Take Charge of Power Crisis

The current electrical power situation reminds me of an old movie that could have been made: “Laurel and Hardy Meet Neville Chamberlain.”

The “deregulation” system in California was fundamentally flawed. It failed to connect end-user prices to supply and demand. It failed to provide price or structural incentives for capacity. It created a situation in which out-of-state electricity generators could manipulate the market.

Instead of addressing these root causes of the power crisis, however, Gov. Davis’ response so far has been to make sure that all the special-interest players are happy. He has proposed retention of frozen retail prices, appeasing the consumer groups. He has implemented state government power brokerage, appeasing the out-of-state owners of California’s power plants who are skittish about selling power to utilities on the verge of bankruptcy. He has appeased the utilities by offering them a bailout.

Just about every represented interest group with a special stake in electricity utility service has gotten something that it wants.

Who hasn’t been taken into account? The governor has taken back funds appropriated for badly needed playground equipment and other recreational facilities in many communities, including Garden Grove. There is no big, booming voice in Sacramento speaking for playgrounds. What will be next? Funding for highways, sound walls, flood control and other necessary infrastructure improvements? Are we to sacrifice our quality of life to appease Sacramento’s special interests?

Another forgotten group are the ordinary citizens disturbed by the lack of any visible investigation of the possibility that power producers “gamed” the system.

Most of Sacramento has just played along. Our own state Sen. Joe Dunn (D-Santa Ana) is one of the few members of the majority party who has had the good sense to stand against the proposed bailout of the utilities.

Rather than appease everyone, the state needs to take bold action that will actually address our power problems. First, we need to reregulate wholesale power prices. This will provide certainty for those selling power to the utilities that their bills will be able to be paid. It will ensure a fair rate of return on investment and will provide a stable situation in which the utilities can recover.

Second, we need to impose must-run and must-sell regulations on power generation facilities within the state to ensure that generators cannot create artificial shortages or route power out of state before selling it in California. Finally, if we do decide that deregulation is the answer to our long-term power future, we must do it fully, creating markets that take into account not just production but capacity.

History has shown that suing for peace during a losing battle rarely produces a better long-term outcome than retreating, regrouping and rejoining the battle under a better plan of attack. The governor needs to stop trying to make everybody happy and move boldly to create a lasting system that will serve the power needs of California into the future.