Dan Walters: It's time for politicians to be honest about the energy crisis

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(Published April 25, 2001) Gov. Gray Davis is continuing to tell Californians that he's on top of the state's energy crisis and, as he said at one gathering last week, "in three years, this problem will be a distant memory." Fat chance. All major aspects of the situation are growing worse, not better, minute by minute.

Politicians took over the crisis in January as the state's major utilities exhausted their cash reserves and lines of credit. Davis began what he said then would be a short-term emergency program of power purchases to keep electrons flowing into homes and businesses.

From that moment forward, the situation has steadily deteriorated, moving toward a three-pronged disaster: severe summer blackouts, the bankruptcy of the utilities and sharply escalating power bills. With the bankruptcy filing by Pacific Gas and Electric Co. and decisions by Davis and the state Public Utilities Commission to begin ratcheting up utility rates, two of the three negative scenarios are now in place. And everyone involved in the crisis expects blackouts this summer as demands for power soar and supplies dwindle.

The Davis strategy, if there is one, is to continue the state's massive power purchases while negotiating longer-term and presumably cheaper supply contracts, encourage conservation, help utilities pay off their debts by selling their intercity transmission system to the state and tapping ratepayers, and build more power plants to ease the supply crunch.

Currently, the governor is touting his deal with Edison International, parent company of Southern California Edison, to sell its portion of the power grid and is working on a similar deal with Sempra, the parent of San Diego Gas & and Electric. But PG&E's bankruptcy filing casts doubt on the viability of the cash-for-grid concept, and legislators, particularly Davis' fellow Democrats, are very skeptical of the Edison deal.

Clearly, Davis rushed into the Edison deal just three days after PG&E made its bankruptcy filing, in hopes of erasing the political stain of the latter action, but its provisions are being labeled a bailout by critics. It places only a token financial burden on Edison International while guaranteeing the profitability of its utility subsidiary by charging its customers whatever is required to cover its costs and past debts.

Meanwhile, the state is spending -- by Davis' own account -- about $70 million a day or $2 billion-plus a month on spot power purchases, paying roughly five times what consumers are being charged at the retail level. And the futures market for power indicates that wholesale power prices will jump 50 percent by midsummer; higher prices and greater purchases could increase the drain on the state treasury to as much as $5 billion a month.

State Treasurer Phil Angelides is desperately trying to arrange a bridge loan to relieve pressure on the state's rapidly vanishing reserves, but Wall Street is reluctant to lend without a fuller explanation of what's happening and a specific authorization from a suspicious Legislature. Meanwhile, bankers are sending strong signals that the state government is becoming as poor a lending risk as the utilities.

Davis, for some reason, is unwilling to declare this situation the emergency that it is truly becoming -- one that could take a toll on human life if major blackouts shut down air conditioners, respirators and traffic lights. He insists on issuing his periodic -- and wholly unrealistic -- assurances that things will turn out all right, even declaring to reporters on Tuesday, "We think we'll have this thing licked by the end of fall."

It's time for someone -- the governor, preferably, but someone -- to lay out for Californians exactly what's happening, the downside financial and power supply risks, and what's being done to deal with the looming disaster facing this state. It's time for politicians to treat us as adults who can face reality, not as children to be fed sugar-coated sound bites and slogans.


-- Martin Thompson (mthom1927@aol.com), April 25, 2001

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