Time to Give Some of the Power Players a Haircut

Gray and the Grid. Sounds like an old rock group. And it’s slipping fast on the Capitol charts.

Same with MOU. That’s not a rapper, but it’s making about as much sense to most legislators.

MOU--Memo of Understanding--is the complex deal Gov. Gray Davis cut with Southern California Edison last month to rescue the utility from bankruptcy. The key provision is Davis’ offer to buy Edison’s high-voltage lines--its grid--for $2.76 billion.

Of that, $1.5 billion would go to Edison’s creditors, the electricity suppliers the utility has stiffed. Edison customers would kick in another $2 billion to pay off the total debt, estimated at $3.5 billion.

The state would repair and expand the clogged grid--for less money than Edison could--and collect transmission fees to pay for the lines. It also would be in better position to possibly buy bankrupt PG&E;’s lines and ultimately place the entire California grid under public ownership.

Problem is, this deal must be approved by the Legislature. And the governor can’t even find a lawmaker willing to sponsor the bill.

Politicians have looked at polls and seen that voters regard private utilities as the No. 1 villain in this energy mugging. They’re leery of supporting anything that might smack of a public bailout for Edison.

“It’s seen as a gift,” Senate leader John Burton (D-San Francisco) says of the MOU.

The Davis deal seems DOA. So both legislative houses are drafting alternatives.

Most Democrats--who own Sacramento--think the creditors should “take a haircut.” That’s Capitol jargon for discounting the debt.

Burton figures that a 30% haircut will be necessary for any Edison deal. That’s justified, he and others say, because the creditors--mainly out-of-state power companies--have been gouging the utilities anyway.

On Wednesday, Davis agreed. He proposed a 30% haircut in a meeting with stunned power generators, who had little response.

There must be shared pain, Davis and Burton assert. Shared by creditors, Edison’s parent company, the utility itself and ratepayers. Under the MOU, only ratepayers suffer pain.

The liberal Senate leader was an early advocate of acquiring the grid. And he still is. But he asserts this MOU isn’t needed for that. Perhaps the grid can be picked up as a separate ticket.

Across the Capitol, freshman Assemblywoman Jackie Goldberg (D-Los Angeles)--the former L.A. council member--has been meeting with a small group that is looking for alternatives to the Davis deal.

“It’s uncertain whether we can pass the MOU in its current form,” she says. “But nobody wants to leave this hanging in limbo.”

Among the options, she says, is acquiring the grid without paying for it. Edison would just shift title. That way there’d be no legislative haggling over price.

But the state would take care of the utility’s debts after creditor haircuts. Good trims.

“There’s no definition of gouging that wouldn’t be appropriate here,” Goldberg says.

“Maybe the governor could have moved faster. There are a lot of shouldas, wouldas. But when I get angry, I get angry at FERC and the price gougers.”

FERC and the Price Gougers--at the very bottom of the Capitol charts.

Burton and Assembly Speaker Bob Hertzberg (D-Sherman Oaks) announced plans Monday to sue the Federal Energy Regulatory Commission. They want to force FERC to protect California consumers against the gougers. Obey the law and make sure the power pirates charge only “just and reasonable” prices. Return unfair profits. Set wholesale price caps.

“This case is about old people in convalescent homes, which are not exempt from blackouts,” said the legislators’ veteran trial attorney, Joseph Cotchett. “We’re talking about health and welfare. People on life support machines. This is not about swimming pool heaters.”

It’s a longshot suit--two legislative leaders suing the federal government. There’s a doctrine about separation of powers. But the action illustrates Sacramento’s current frustration.

On Wednesday, there was a new group: Gray and the Generators.

The governor invited in the gougers for some frank talk in his office. Earlier, he had accused them of “just satisfying their greed and sucking money out of the state.”

They weren’t in the mood for a Capitol haircut.

But one power official confided that many do wish FERC would be more aggressive--set hard rules, order refunds if justified and just handle it. The state Capitol wouldn’t be so overheated and there’d be less pressure on the generators if the Feds did their job.

In that regard, Californians now are beginning to discover another group: Bush and the Blackouts.

The boos are becoming more raucous.