... And Democrats May Pay the Price

What began six months ago as a principled “dollar for a hot dog” Edison buyout may come down to an anti-business “bailout for workers’ compensation reform.” Here’s how the political logrolling is shaping up:

The state Assembly narrowly passed a $2.9-billion bill late Thursday that would allow Southern California Edison to pay off most of its debt. This bailout money would come from the sale of bonds, financed by higher electricity rates on 180,000 businesses. The bill now goes to the state Senate, which until this point has rejected the Assembly versions of any bailout as too rich. Senate opposition to a full bailout dates to February when its president pro tem, John Burton (D-San Francisco), bluntly put it: “I give you a dollar. You give me a hot dog.” Burton’s message: Any deal with Edison must involve a transfer of cash for hard assets such as the company’s transmission grid or hydro generating plants. That was then. This is now.

The Assembly also has passed an unrelated bill backed by Burton and labor unions to increase workers’ compensation by $2.5 billion. Gov. Gray Davis has vetoed similar legislation twice on the grounds that it would be anti-business. Whispers around the capital indicate that it may be time for some horse trading.

The scenario would go like this: Burton gives Davis the lucrative Edison bailout he so desperately seeks if Davis gives Burton his coveted workers’ comp bill. Such a deal--totaling almost $6 billion in new business costs--raises compelling political and policy questions.

On the policy front, there used to be at least one solid argument to get Edison back on its feet: A restored Edison could take back its role as a power purchaser of record from an unskilled state bureaucracy and use its experience to get cheaper power from the market. Unfortunately, this argument is now moot. Recent actions by the state Public Utilities Commission ensure that the bumbling state Department of Water Resources will continue to be the power purchaser for years while Edison simply will be the middleman.

As for the politics of the deal, it may turn out to be the Democrats’ act of hara-kiri. Should the Burton-Davis logroll happen, it will do so with few if any Republican votes. That means come November 2002, with the bailout anathema to voters, Republicans will have a very potent weapon.

The Democrats’ problem likely will be compounded by a consumer group’s initiative on the November ballot to repeal the bailout. This initiative will draw heightened attention to the pro-bailout Democratic incumbents. But it also could serve as a stealth vehicle for Republicans to funnel additional money into the campaign since there are no contribution limits on ballot initiatives.

As bad as this is for vulnerable Democratic legislators, it will be worse for Davis. Remember what voters did to former President Bush in 1992 after he broke his pledge of “no new taxes”? In this case, Davis made an equally compelling promise when he launched his original Edison rescue package February. That package included an exchange of the utility’s transmission grid for the cash, and Davis repeatedly defended it as “a buyout, not a bailout.”

Imagine, then, a GOP rival such as Richard Riordan or Bill Jones horsewhipping Davis--not only for breaking his bailout promise but also for his “left wing” horse trading on workers’ comp. Davis rose to power in the 1998 election by hugging the middle of the road and portraying himself as pro-business. By flip-flopping on the workers’ comp issue even as he is burdening the business community with an onerous utility bailout, Davis would be clearly falling to the left, and that would be a dream come true to a centrist like Riordan.