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The Mad Energy Hackers of California by Editors Seattle Times, January 10, 2001

Confronted with a mess, the politician instinctively points his finger at someone else, preferably an outsider. The latest such exercise in demagogy is by Gray Davis, governor of California, who now threatens to bring down the wrath of California on any power plant that sells electricity outside the Golden State.

"On many days, 10 to 12 percent of the electricity generated in California leaves our state," he said Monday. "On some occasions, the merchant generators have brought the state to the very brink of blackouts by refusing to sell us back our own power because they could find higher prices elsewhere."

And he said, "Think about it: they're refusing to sell us our own power."

It's not California's "own" power. The power had belonged to the shareholders of utility companies, who had agreed to reserve it for the use of local customers first. In a sense, that made it California's "own" power. But a few years ago, the California Legislature ordered the three largest utilities to sell most of their power plants.

The new owners were freed from local obligations; because of that, they paid more for the power plants than the plants had been worth. The utilities liked that. They booked one-time profits and paid executives bonuses for their smart management. That they had committed to buying power at a market price and selling it at a state-controlled price somehow did not strike them as foolhardy.

That formula has now hammered California's three largest electric utilities to within sight of Chapter 11. The weather has brought a shortage of power; California utilities are obliged to buy power at whatever the market price is; and they cannot pass obscene costs on to their customers, who thereby have no incentive to use less.

A mad hacker could not design a worse formula than that. But there it is. It got the overwhelming support of the California Legislature, Democrats and Republicans together.

Gov. Davis now proposes to create a state power authority to acquire plants, by negotiation or eminent domain, to recreate a group of power plants dedicated to serving California. He threatens to mandate that city-owned utilities sell no power outside of California, and that any entrepreneur proposing to build a power plant be forbidden to sell outside of California.

"There's no point in building more plants in our state if the electricity will flow out of our state," he said.

To have a group of dedicated plants is a good idea. California had that, and should have kept it. Certainly this region has that. But to raise a rhetorical barrier against exports is to wander into the realm of demagogy.

The problem with such proposals is that the network is connected, from California all the way to British Columbia, and it is in the interest of all sub-regions that it be so. Market-rate power fetches about the same price everywhere.

That is the way markets work. Usually, it means we send surplus power in the summer to California, so they can run air conditioners; and they send surplus power to us in winter, so we can produce light and heat.

There are people here who would disconnect us from California. At hearings last fall, some citizens demanded that the Sumas Energy project, a natural-gas turbine plant proposed for Whatcom County, be required to sell part of its output--from 20 percent to 80 percent--in Washington, or even in Whatcom County.

It seems so logical. Like Gray Davis, we might say, "There's no point in building more plants in our state if the electricity will flow out of our state."

The point is to generate electricity for people who need it and want to buy it. Sometimes those people will be here, sometimes in California. At the moment it is California - and not to our short-term benefit. But the connection is to our long-term benefit, as it is to theirs. In their zeal to correct their own mistakes, they should not threaten to cut that connection.