Governor to Stress Price Caps to Bush

Gov. Gray Davis will present a letter to President Bush today from top economists advocating wholesale electricity price controls, warning Monday that a failure by Bush to help California solve its energy crisis could signal to other regions that he may ignore their pleas.

Bush, making his first trip to California, has set aside 20 minutes this afternoon to meet with Davis in Century City. In an interview with The Times, the Democratic governor vowed to repeat his request that the federal government move to cap wholesale power prices. Failure to act swiftly threatens the state and national economy, Davis said.

“I want him to understand,” Davis said, “that if California has to pay 700 times more for electricity in 2001 than it did just two years ago, it could well drag our economy into a recession and could conceivably trigger a national recession. That is not good for anyone.”

In the letter, 10 economists, including Cornell professor emeritus Alfred Kahn, a major proponent of airline deregulation, told of their “deep concern” about the failure of the Federal Energy Regulatory Commission to stabilize wholesale electricity prices in California. The economists faxed the letter to the White House on Friday afternoon, and provided the governor with a copy to present to Bush today.

“FERC’s failure to act now will have dire consequences for the state of California and will set back, potentially fatally, the diffusion of competitive electricity markets across the country,” the economists, led by Frank Wolak of Stanford University, wrote. “Moreover, this negative experience with electricity restructuring could delay or reverse current efforts to introduce competition into other formerly regulated industries.”

Davis called the letter “very significant validation of what we’ve been saying: The marketplace is not working and FERC has an obligation to act.”

“We’re not pleading for relief; we’re entitled to it,” Davis said.

Bush and Vice President Dick Cheney repeatedly have said such controls never work. In California, caps might worsen the situation by limiting supply, they have argued, resulting in more blackouts this summer when demand for electricity is highest.

The Bush-Davis meeting has had all the buildup of the political equivalent of a title fight: On one side, the Democratic governor of the nation’s most populous state, which Bush lost by more than 1 million votes in November. On the other, the new president, coming off a roller coaster week of political defeat (the shift in control of the Senate) and victory (passage of his tax-cut plan), whose work in the Texas oil industry gives him a special history in the topic at hand.

From afar, Davis has battled the Bush administration’s energy policy. But, said Dan Bartlett, one of the president’s chief communications advisors, “The president has some interesting views on this topic as well, with some experience himself.”

Bush’s Energy secretary, Spencer Abraham, took steps Monday to increase electricity transmission capacity in California. He ordered the Western Area Power Administration, a division of the Energy Department that is responsible for marketing electricity from federal water projects in 15 Western states, to finish its planning for extra transmission capacity.

At issue is so-called Path 15, an 84-mile stretch of power lines with insufficient capacity to carry the necessary load between Southern California and the northern part of the state, especially during peak hours. The central question is whether financing is available for a new transmission line.

Davis lauded the action but said the president needs to do more.

“If I have any advice to him of a political nature, it is take a chapter out of President Clinton’s book.

“[Clinton] was very attentive to California, and as a result did better in 1996 than he did in ’92. People felt he was here for us when we needed help. We need help.”

Davis said that on a recent trip to Chicago, officials there worried that if Bush “won’t offer California some relief, he may not offer us relief,” in a catastrophe.

Among the facts and figures Davis intends to show the president is a chart showing that California paid $1.2 billion for electricity in the first quarter of 1999, $1.8 billion for the same period last year, and as much as $10.3 billion for electricity in the first three months of this year--at a time when conservation efforts had been taking hold and demand was down.

“I hope the president will be as stunned as I am,” said Davis, who is watching as the state spends more than $55 million a day to buy electricity that private utilities can no longer afford.

Davis said that though he is trying to speed construction of power plants, encourage conservation, and return the private utilities to financial stability, the federal government has control over wholesale power prices.

“Therein lies the final piece of this puzzle,” Davis said. “If it falls into place, we’re on the way to putting this issue behind us. If it doesn’t fall into place, it could create real economic havoc here and across the country.”

Davis said that if Bush refuses to impose price controls, he should “find some way to help us, consistent with his own belief.”

“Turning a deaf ear not only won’t be well received here,” Davis said. “It likely won’t be received well elsewhere.”

The state’s energy crisis has posed a ticklish dilemma for Bush’s busy travel schedulers: Had he visited earlier, it would have been awkward not to focus on energy issues. But until 11 days ago when a task force led by Cheney produced energy proposals, there would have been little Bush could say.

Karen Hughes, the president’s counselor, made it clear that regardless of the pressure, Bush will not yield on price caps.

“We want to help. The president is very concerned about the energy situation and blackouts,” she said. But limiting the wholesale price of energy would only discourage its production,” Hughes said.

California is the 30th state Bush has visited since taking office Jan. 20. His staff said the delay had to do not with energy issues but with politics and geography.

With the administration focused in its first months on winning approval of the tax cut, the president’s travels were largely dictated by that effort, his aides said.

Besides, the president confided recently, even with Air Force One at the ready, it just takes too long to fly from Washington to California.

Still, Hughes said, the president is not ignoring California. Condoleezza Rice, the president’s national security advisor and a former Californian, sits next to Hughes every morning at the daily meeting of the White House senior staff, she said.

What’s more, the president “has many friends in California,” Hughes said, adding: “Ernie has a home in California these days.” Ernie is the Bush family cat that is living with a friend in Brentwood while the First Family lives in the White House.

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Times Staff Writer Massie Ritsch contributed to this story.