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Posted at 8:42 a.m. PST Sunday, Jan. 28, 2001

Power suppliers gaining clout in Sacramento BY MARK GLADSTONE Mercury News Sacramento Bureau

SACRAMENTO -- Just weeks before a rolling blackout hit the Bay Area in June, Gov. Gray Davis attended a small private fundraiser with power suppliers, who were trying to raise $100,000 for his campaign war chest.

For the governor, who has amassed at least $21 million for his anticipated re-election bid, such events are routine. But for generators seeking the governor's ear it was a rare chance to sit down with Davis and discuss energy issues.

The dinner at the exclusive Sutter Club also was a symbol of how the political landscape has begun to shift in the capital, where generators formerly were only bit players.

Giant utility companies such as Pacific Gas & Electric Co., long among the most influential special interests in Sacramento, now face their biggest political challenge in the aftermath of deregulation. Not only are they taking the backlash from rising energy costs, but they find themselves sharing influence with companies that either generate or market crucial electrical power.

Boosting donations

While lawmakers debate how to help the cash-starved utilities, energy suppliers have dramatically boosted the amount of money they pump into the state's political system.

Enron Corp., one of the nation's largest suppliers of energy, has increased its campaign donations eight-fold, from $11,000 in 1997 to more than $91,000, including $10,000 to the governor in the first six months of last year.

Likewise, San Jose's Calpine Corp. and related companies, which are building power plants, have tripled donations from $28,000 in 1999 to at least $80,000 last year, including $10,000 to Davis.

While Enron has been a force behind the scenes since the partial deregulation of the utilities was enacted in 1996, Calpine, Duke Energy and other generators are now emerging as modest, but important forces in the energy debate.

``That's the free market for you,'' said Harvey Rosenfield, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. But, he asserted, the utilities' ``political power has not been short-circuited by this crisis,'' which Southern California Edison Co. and PG&E say has brought them to the edge of bankruptcy.

The utilities' have had a centurylong partnership with the state. In exchange for exclusive sales territories in most of California, the utilities were allowed to generate, transmit and distribute electricity and earn a modest, though all but certain, profit.

In 1998, the new rules of the partnership, which were backed by the utilities, took full effect. Moved by a desire to cut prices by spurring competition, the utilities were directed to sell off much of their own generating capacity.

As result, they don't control the state's electricity markets the way they once did. Nor are they the only voice on electricity issues in the capital.

Still, they have a long history as big givers.

The state's two largest utilities -- along with Sempra Energy, parent of San Diego Gas & Electric -- in the past three years have spent more than $4 million, mostly on state political campaigns. Davis has received about $400,000 in their donations, based on a review of state-required disclosure forms.

Likewise, utilities gave to Dan Lungren, Davis' Republican opponent in 1998. In fact, the utilities and the other energy companies seem to follow a well-worn tradition of giving to both sides of the aisle.

In 1998, the utilities also shelled out more than $40 million to crush Proposition 9, a plan to re-regulate the companies that was backed by Rosenfield.

But that was before the electric crunch turned into a crisis.

Now, utility industry lobbyists say politicians are beginning to view their donations as a potential liability, in the same way money from tobacco interests has come to be anathema for many candidates.

It might not matter, however, since the utilities say they have little cash left to give away.

In December, Edison stopped making political donations. ``We don't have any money,'' said Robert G. Foster, vice president of Edison International, parent of Southern California Edison.

Foster left open the door to future donations, saying ``campaign contributions are part of being a good corporate citizen.''

Likewise, PG&E quietly stopped making donations last month. ``We just suspended political contributions as part of an overall cash conservation effort,'' said PG&E spokesman Ron Low.

And earlier this month, Davis' campaign committee announced it had not accepted ``any contributions from an investor-owned utility since October of 2000.''

In a statement, Garry South, Davis' senior political adviser said, ``the independent energy producers approached us in December and offered to hold a fundraising event for him and we turned them down.''

Earlier in the year, Davis was more than happy to attend the generators' Sutter Club dinner. Still, he later blasted some of the suppliers for price gouging when bills in San Diego tripled last summer.

``We obviously didn't win over his heart,'' said Jan Smutny-Jones, head of the Independent Energy Producers Assn., which put on the dinner for about 20 people last spring.

Smutney Jones said the association's event raised about $100,000 for Davis.

Joseph E. Ronan, vice president of government and regulatory affairs at Calpine, said he did not attend the dinner but understood that Davis was trying to learn about the energy business. Ronan said electricity is a public policy issue and Calpine, which is seeking to build a controversial plant in South San Jose, needs to educate officeholders.

``I don't think any money we give would influence a vote,'' he said.

Their experience with the governor didn't lead generators to abandon political contributions. On the eve of last November's election, Calpine gave $9,000 to three legislators. The corporation and its partner in the plan to build a plant in Coyote Valley also gave Assemblywoman Rebecca Cohn, D-Campbell, $5,000 and Sen. Jim Battin, R-La Quinta, $5,000.

Ronan acknowledged that the political environment in Sacramento seems to be changing, saying he's no longer ``sure of the influence of Edison and PG&E.''

Overwhelming problem

Legislators say that the magnitude of the energy crunch overwhelms the potential impact of donations or lobbying, whether from PG&E or Calpine.

Last week, lawmakers called on state regulators to approve Calpine's San Jose project despite opposition from the city's leaders.

But legislators and the governor maintain that there is no connection between donations and decisions.

``I think discussions of campaign contributions and policy is illegal. There is no relevance,'' said Assemblyman Rod Wright, D-Los Angeles, chairman of the lower house's Energy Committee.

In the past year, Wright has received funds from utilities and generators. Wright, considered one of the most knowledgeable lawmakers on energy matters, received $3,000 from Enron and $16,000 from Edison.

Determining access

A contrasting view was offered by Robert C. Fellmeth, director of the Center for Public Interest Law based at the University of San Diego Law School.

``This is a classic example of how access is important and how contributions determine access. They, the power generators and the utilities, are at the table. They can come up with a deal that puts at risk or extracts money from those who are not at the table,'' Fellmeth said.

As relative newcomers to Sacramento, generators may have a hard time catching up with the utilities.

Working within the system, the utilities have spent years banking their political clout. They have poured millions of dollars into lobbying, including dinners with lawmakers and aides, tickets to Sacramento Kings basketball games and flowers.

What's unclear is whether utilities -- which favored deregulation -- wield the same clout in an era when lawmakers are only allowed to spend six years in the Assembly and eight years in the Senate.

With quicker turnover prompted by voter-mandated term limits, newer companies like Calpine have just as much chance to grab the attention of a lawmaker as PG&E.

``I think we're so hungry for information and points and counterpoints, we'll listen to anybody,'' said Assemblyman Bill Leonard, R-Rancho Cucamonga, who got $10,000 from PG&E last July.

http://www0.mercurycenter.com/local/center/pwrlobby0128.htm

-- Martin Thompson (mthom1927@aol.com), January 28, 2001