Like most of you, I’ve been following the so-called electricity crisis with a high degree of skepticism trying to make some sense out of volumes of seemingly contradictory information. The governor’s State of the State message said there are bad guys out there and we’re not going to take it anymore. That makes for a good sound bite, but I have the uneasy feeling that it might not do much to solve the problem if, in fact, there really is a problem. So let’s begin with what we know:
We deregulated the power market a few years ago and the free market was supposed to give us an ample supply of power at reasonable prices. It was pushed through the legislature by Democratic Sen. Steve Peace of San Diego, a very bright and highly respected senator. It had significant bipartisan support and was signed by Republican Gov. Pete Wilson, who also thought deregulation was a good idea. As part of the deal, the utilities, like Pacific Gas and Electric and Southern California Edison, were required to charge old retail customers at old prices for a few years until old debts were paid off, which didn’t seem like such an onerous burden since power was cheap and plentiful at the time. After deregulation, many of the utilities sold off their power plants to national energy companies, took the money and paid off their debts.
So far, so good. But then something happened, and it’s far from clear why it did.
The wholesale price of power began to rise and rise, and the utilities, like Edison and PG&E, found themselves in a terrible squeeze because they were paying skyrocketing prices for their power but couldn’t raise retail prices. And it appears they are rapidly going broke.
Assuming that’s what’s happening, the question is: What do we do about it?
At first, we tried to do nothing. Everyone ran from the problem, particularly the governor, the legislature and the Public Utilities Commission (PUC). A very nervous Wall Street looked to investors to see what they intended to do. It was like a big game of chicken. A week or two ago, the PUC gave the utilities a relatively small increase and within minutes all the money boys and girls of the street quickly rendered their judgment. They said, “You got to be kidding.” These venerable old companies, with venerable old stock, started heading into the toilet and their bonds were downgraded to junk bond status and we in California, knew we had a serious problem on our hands.
We all know what the answer is, both the short-term and the long-term answer.
The short term is simple. We are going to have to pay a lot more for our electricity–probably upwards double of what we’re paying now. It’s infuriating to think that the state, the governor and the legislature screwed up, that a group of energy companies, probably more like an energy cartel, manipulated the hell out of supply and prices, and that utilities like Edison and PG&E messed up major, and we’re going to rescue them all with our checkbooks. It’s infuriating, but, unfortunately, we don’t have much choice because there are lots of things we can do without in life, but power isn’t one of them.
None of the things the governor proposed — building new power plants, conservation by the state government, conservation by the public, putting more public members on controlling groups, setting aside state land for power plants — is going to produce a quick fix, because they’re really all long-term solutions.
Ultimately, the state is going to have to make deals with energy wholesalers and other suppliers against a backdrop of a new federal government that’s not going to be too terribly sympathetic and we’re going to pay more.
But there is something we can do. We have all sorts of state criminal law relating to conspiracies. We have a Federal Racketeering statute (RICCO). I think it’s high time some ambitious attorney general or district attorney convened a few grand juries and started subpoenaing records and taking the testimony of power company officials and suppliers under oath. If someone is playing fast and loose with us, we find out and do something about it. It will be expensive, so the legislature ought to allocate a few $100 million to fund it all. But so what, there are billions at stake. Besides, if we’re going to have to negotiate, it helps to negotiate with a hammer in your hand.
Steal a piece of third-strike pizza in this state and you can go to prison for life, but stickup every single citizen of this state with a pen and they give you the state’s hero medal.
If it’s hardball time, let’s all play hardball.