Monday, July 10, 2006

Politicians Share Blame for California Energy Debacle

What happened? Was Ken Lay and Enron the one to blame. Let’s review a little history by reading Dan Walters July 7, 2006 Sacramento Bee column Don't forget: Politicians share blame with Lay for energy debacle

The column includes:
Ø Many are trying to promote “the myth that were it not for Enron and Lay, California wouldn't have experienced its 2001 energy crisis.”
Ø “Gray Davis, the governor when the crisis struck, claimed vindication last May when Lay was convicted along with associate Jeffrey Skilling. The energy meltdown -- soaring costs and blackout-inducing shortages -- began Davis' political slide that culminated in his 2003 recall.”
Ø “Properly constructed, deregulated energy markets have worked elsewhere and could work in California, but the state's politicians fumbled.”
Ø In the mid-1990s, then-Gov. Pete Wilson and Daniel Fessler, Wilson's Public Utilities Commission president, pushed for deregulation, saying that competition could bring down California's high power rates. The PUC formulated a plan but the Legislature -- especially a state senator named Steve Peace -- decided to intervene. Lobbyists for utilities, power generators, traders such as Enron and consumer advocates engaged in marathon negotiating sessions known in the Capitol as the "Steve Peace death march" and produced a scheme that legislators, including [current Attorney General Bill] Lockyer as a state senator, unanimously endorsed in 1996.”
Ø “Retail power rates were frozen while utilities bought juice from a newly created wholesale market at prices that had no caps. It worked well enough for a few years because wholesale rates were low and stable, but when power shortages -- chiefly from a drought in the Pacific Northwest -- emerged in 2000, utilities began experiencing billions of dollars in new costs that they could not pass on to their retail customers, driving them toward bankruptcy. The illogical system began to collapse.”
Ø “The scheme's flaws were compounded by Davis' paralysis when the first shortages hit in 2000. Had he and his PUC president, Loretta Lynch, acceded to utilities' pleas to abandon the spot market and sign long-term supply contracts, the crisis could have been averted.”
Ø “It's convenient for politicians such as Lockyer and Davis to blame Enron, but if they had been doing their jobs 10 years ago and six years ago, the crisis wouldn't have occurred.”


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