Commentary From Tomorrow's Electricity Daily

----- Forwarded by Jeff Dasovich/NA/Enron on 02/05/2001 10:26 AM -----

"Daniel Douglass" <Douglass@ArterHadden.com<
02/04/2001 01:22 PM

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Subject: Commentary From Tomorrow's Electricity Daily

Commentary: The Ongoing California Saga
In the continuing electrical soap opera in California, the role of villain
has been seized by the executive branch of the state government,
specifically, Gov. Gray Davis and his hand-picked head of the California
Public Utilities Commission, Loretta Lynch. Neither Davis nor Lynch are
contributing to solving the crisis, in either the short or the long run. They
are making things worse.
Their chief response to the electric catastrophe has been a search for
demons: the power generators and marketers, the federal government, the
utilities themselves, anybody but the politicians or the regulators. They
have mightily resisted measures that are clearly necessary to right the
sinking ship, including rate increases.
Columnist Dan Waters in the Sacramento Bee recently did a political scorecard
of California politicians. On Davis, he wrote, "A poll indicates that nearly
two-thirds of Californians believe the governor has performed poorly on the
crisis, and while some of the negative feeling may simply reflect their own
anxiety, much of it is well founded. Davis is essentially a passive, reactive
and self-protective politician, and his tendencies served him - and the store
- poorly when the crisis first arose last summer. Rather than recognize the
peril and spend some political capital, Davis played for time, hoping that
conditions would improve on their own and/or the federal government would
come to his rescue with price-cap orders and other actions. But he
miscalculated on both."
Of Lynch, Waters said, "Legislators from both parties are ready to lynch the
president of the state Public Utilities Commission for, they say,
consistently refusing to cooperate and feeding them blatantly false accounts.
Lynch, her critics say, appears to be more interested in protecting the PUC's
sorry reputation on utility regulation - its decrees caused many of the
problems - than in solving the crisis and may have misled Davis, who
appointed her. Southern California Edison took the extraordinary step of
issuing a highly detailed critique that stopped just short of accusing Lynch
of lying, and the legislature's chief auditor is ready to sue her to obtain
information on the PUC's role."
Both Davis and Lynch seem to have an information problem. I'm reminded of an
old Shoe cartoon by the late Jeff MacNelly, in which a heavy-set politician
stands at a podium in a news conference and makes the accusation, "You in the
media are playin' fast and loose with the facts." One of the stogie-smoking
hacks responds, "How's that? What did we do to the facts?" The politician
replies, "You printed the dang things!"
Davis demonstrated his rather loose, Clintonian, connection with the truth
late last month when he proudly announced that bids for long-term electricity
supply in response to the state's solicitation had come in an at "weighted
average" of $69/MWh. Some kind of weighting. The $69 price, it turns out,
didn't include high-priced bids for peaking power. Nor would the governor or
his lackeys tell us what the average was if the peak bids were included.
Lynch has been beating on, and berating, SCE and PG&E for their insistence
that they need financial relief and the ability to pass costs on to their
customers. The most outrageous act from Lynch was the 2-1decision by the CPUC
to issue restraining orders forbidding the two utilities from withdrawing
from their obligation to serve. She billed the move as a way to prevent
unilateral blackouts imposed by the utilities.
But both companies already had told the CPUC they had no intention of cutting
off service to customers. Calling the action "an abuse of power," SCE CEO
John Bryson said the order is "an insult to the ethic of the 13,000 employees
of SCE who have worked to keep the lights on for their customers. In fact,
SCE has borrowed billions of dollars, which threatens the company's solvency,
through 8
months of inaction and delay by the CPUC, in order to continue to
serve its customers."
Commissioner Henry Duque, who voted against the measure, cleared exposed the
move as gratuitous utility-bashing. "The obligation to serve is already in
California law," he said. "I fear that the order would simply poison the
atmosphere between government and the utilities, thereby making
communications even more difficult in this time of crisis. In my view, it may
even make a bankruptcy filing more likely."