The unlikely populist

California's Gray Davis is scoring political points by bashing Bush and "greedy" Texas energy firms, but the cautious centrist probably won't become the scourge of the energy industry.

By William Bradley

Jun 1, 2001 | Now that Gov. Gray Davis and President Bush have had their summit, which changed absolutely nothing, one question remains: While Davis has escalated his rhetoric recently, declaring that California is "at war with greedy power generators from Texas," does he plan to wage a real war? Or will it merely be, to borrow a phrase from Winston Churchill, a "phony war," designed to prop up his sagging poll numbers but leaving the energy mess and those "greedy" Texas profiteers essentially untouched?

Davis says he wants federal price caps on sales of wholesale electric power to California, which now costs more than 10 times what it cost two years ago. Bush won't grant them. Which isn't exactly a shock: Neither would President Clinton, and he wasn't an ex-governor of Texas close to the firms now reaping record profits from California's power crisis.

For all Davis' attempts at seeming outraged at Bush's attitude, of course it should surprise no one. After all, Bush's Florida recount consigliere, former Secretary of State James Baker, is on the board of Houston's Reliant, one of the most controversial Texas firms in the power crisis. And Bush's close friend and frequent host for campaign plane trips, Ken Lay, is both head of the nation's leading electricity marketer, Enron, and the leading advocate for continued deregulation of the California market.

It's easy to say that Texas has California by the throat because of the changeover in the White House. California is the Democrats' megastate, its bastion of campaign funds, electoral votes and cultural energy; Texas is the Republicans'. The favored child of the Clinton administration is the unwanted orphan of the Bush administration. Bush is not unmindful of the fact that his embarrassing defeat in the national popular vote came as a result of a tidal wave of California votes for Al Gore.

Plus, the Clinton/Gore crew was sympathetic to "soft path" notions of conservation and renewable energy, pioneered by California in the Jerry Brown day. The Bush/Cheney crew regards that as unmanly. California and Texas may well be at war economically -- with California's dot-coms displaced on the Forbes 500 list of the nation's most valuable companies by Texas' energy outfits.

But all this doesn't quite explain how California lost power over its destiny to Texas. In fact, it was the work of Californians, Republican and Democratic politicians alike, along with state energy executives looking for bigger profits and an asleep-at-the-switch media. And while Davis may well have to go to war with Texas energy profiteers to ease the crisis, to date the evidence shows he'd rather wage a rhetorical war against Washington and Texas than a real one.

California's energy woes, of course, are mostly the result of a homegrown deregulation scheme hatched by Republican Gov. Pete Wilson and his Public Utilities Commission, inspired by the example of Margaret Thatcher's Britain. Democrats, under the influence of Clinton-era market ideology and blitzed by lobbyists, went along. The state's major media ignored the issue. California's Big 3 private utilities spent over $50 million on political campaigns and lobbying from 1994 to 2000, most of it on behalf of deregulation. A few people, like former state Sen. Tom Hayden and consumer advocate Harvey Rosenfield, tried to sound an alarm. But they failed.

After deregulation, California's private utilities proceeded to sell off many of their power plants to a group of Southern power companies, most of them based in Texas. This moved the generating capacity from under the state's regulatory aegis into a wide open market. The utilities thought they'd made a killing. Actually, they'd made a little over $3 billion, much of which they passed through to holding companies and invested in power plants in the Northeastern U.S., Latin America and Asia. That's less than half what the state has already spent this year making up for the utilities' shortfall.

Continuing the decade-long pattern under Republican Govs. Wilson and George Deukmejian, neither the Southern power companies nor the California utilities built new plants in the state. (Some were built by municipal utilities, and Davis moved to build plants after he took office in 1999.) The danger for California was masked by wet years in 1998 and 1999, making hydroelectric power plentiful and cheap. But as the weather changed in 2000, rainfall declined, the Sierra snowpack diminished, hydropower dried up and the Texas cartel tightened its grip on California's electric power market. Since greater scarcity equals greater profit in an unregulated market, the Southern boys were in clover. A state that spent $7 billion on electric power in 1999 spent $27 billion in 2000 and looks to spend at least twice that in 2001.

Now Davis is blaming Washington for California's woes, but his stance is somewhat disingenuous. With Bush refusing to intervene to help solve the energy crisis -- most notably by imposing price caps -- Davis says he'll sue the Bush-controlled Federal Energy Regulatory Commission to force it to use its authority to rein in exorbitant electricity costs. But here's the reality: That lawsuit wouldn't actually come until late June; the Davis team just filed for administrative relief from FERC last week. Relief is a long way away.

And while Democrats, including Davis, have begun to talk of state action against price-gouging energy firms -- in the form of a windfall-profits tax, or the state's seizing or operating power plants -- it remains just talk for now. It's hard to imagine the centrist, cautious Davis becoming the populist scourge of the energy industry and truly playing hardball. It's far more likely that he'll continue to call on the hostile Bush administration for help, while knowing that rejection may in fact be far more helpful politically.

But that's a dangerous course, too. Bush is not the governor, and he's not on next year's California ballot. The buck has to stop somewhere, and voters may decide it's much closer to home than Texas or Washington.

Next Page: Davis: "Ronald Reagan is watching over me"

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