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Former Calif. Gov Blames Successor for Power Crisis Nigel Hunt Reuters - June 28, 2001

The man who signed into law a California power deregulation bill that some believe has helped to bankrupt the state's largest electricity utility and contributed to increasingly frequent rolling blackouts pointed the finger of blame firmly at his successor on Thursday.

"Davis administration inaction has let the problem become a crisis," former Calif. Gov. Pete Wilson told an economic forum here, referring to his successor as governor, Gray Davis.

Wilson, a Republican, signed trailblazing bipartisan power deregulation legislation in 1996 and the new laws were enacted in 1998. Davis, a Democrat, took over in January 1999.

The former governor said Davis had failed to respond to warnings, some made as early as late 1998, that electricity operating reserves had dipped to dangerously low levels.

Wilson said when he signed deregulation laws in 1996 those reserves were a comfortable 30 percent.

He said the subsequent decline in reserves was due to factors such as drought, which cut hydropower supplies, increased demand linked partly to hotter than normal summers, and lower available imports from neighboring states.

"Deregulation did not cause the shortage," he said.

Wilson pointed to statistics showing a sharp increase in applications to build new power plants after deregulation laws were passed.

"Deregulation did succeed in stimulating a significant increase in applications to build new and larger power plants," Wilson said.

The state's deregulation plan has been criticized by many, including federal regulators, for forcing utilities to buy power in the spot market rather than sign long-term contracts.

PRICE CAP

A retail price cap, which prevented the utilities from passing on skyrocketing wholesale power costs of their customers, also helped to drive the state's largest utility, PG&E Corp unit Pacific Gas & Electric, to seek Chapter 11 bankruptcy protection earlier this year.

Wilson said Davis should have used his emergency powers to suspend both provisions. He noted that one California utility, Sempra Energy unit San Diego Gas & Electric, has seen a retail cap lifted last year only for Davis to sign legislation imposing a new cap.

The former governor was also critical of strong rhetoric used by Davis against power producers, some of whom reaped huge profits as prices soared. Wilson said this caused "predictable and understandable resentment."

"The blame game waged by the governor's office added insult to injury," Wilson said.

Wilson said some power producers were now expressing doubts about whether to proceed with plants for which they have already received regulatory approval.

Davis also signed legislation last month to create a new state power authority which could buy, build and operate generating plants.

Wilson said the concept of a state power authority was "about as new and exciting as socialism."

"It is not the state's responsibility to build power plants but it is their responsibility to create a regulatory environment for the private sector to do so. Deregulation was a significant advance," he said.

Related Sites:
Energy Department electricity statistics: http://www.eia.doe.gov
North American Electric Reliability Council: http://www.nerc.com