Here’s another good Dan Walters column on the California energy crisis via Kausfiles:
* If Enron et al manipulated California’s energy market, it could happen only because former Gov. Pete Wilson and the Legislature — particularly former Sen. Steve Peace — created an unworkable, complex and irrational system in 1996. Those who really knew the energy business could see its flaws immediately and some, perhaps, exploited them. Whether they acted illegally, or materially affected the market, remains to be seen.
* When the crisis first arose in 2000 in the form of sharply rising wholesale power costs, Davis and other politicians refused to act decisively to nip it in the bud. California utility executives begged Davis and state utility regulators to allow them to raise rates and sign long-term supply contracts, but officials delayed for six critical months, until the utilities had their financial backs to the wall. Had they acted boldly in 2000, we would not have had such a severe energy crisis in 2001.
* California still doesn’t have in place a workable substitute for the discredited 1996 plan, nor do its politicians show any signs of working on the problem. Californians’ power rates are still among the nation’s highest, and with many much-touted generation projects on indefinite hold due to chaotic market conditions, the state is very vulnerable to another supply squeeze.
The history was like this: in June of 2000, San Diego became fully de-regulated and prices went up for a number of reasons, some of which were: A) a natural gas price spike, B) a drought that reduced hydro-power supplies, and C) a PUC order forbidding utilities from signing long-term energy contracts. Republicans urged the Governor to call a special session to amend the 1996 law creating the energy market, and he refused. In January, 2001, the blackouts started.
Davis was very much involved in all of this, and not just because he was on Enron’s payroll along with Paul Krugman. His inaction made a serious problem that could have been fixed into a major crisis.