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The Perfect Crime 

As we're now finding out, Gov. Davis may be the only one who won't have to pay for his mishandling of the energy crisis

Wednesday, Dec 26 2001
The final chapter of the perfect crime needn't be dramatic, brilliant, or the result of careful planning; it can also be a matter of banal luck. Unseasonable storms might clean a blood-stained sidewalk; a detective might go on vacation; overtaxed police could become distracted by other people's crimes.

Or, in the case of Gray Davis, who last year fenced California's economic and fiscal future for his own political gain, the World Trade Center falls, America goes to war, and energy trading giant Enron Corp. collapses.

Recent events have so obscured Davis' mishandling of California's electricity meltdown last summer that the governor now appears poised to steamroll whomever emerges from the squabbling field of Republican pretenders in the 2002 gubernatorial race. And that's too bad, because the degree of damage caused by his shifty, demagogic bungling of our electricity crisis will hobble the state for decades.

The 1996 restructuring of the electricity industry forced utilities like PG&E to sell their generating plants and buy power from a centralized trading floor. This faulty system allowed wholesale providers to jack up prices by shutting down select plants during moments of shortage. Davis played himself off as government's only populist during this time, refusing to raise rates until utilities had accumulated billions of dollars in debt. He then whitewashed the horrific situation he'd created with an electricity buyout financed by a proposed $12 billion in public bonds.

Even as Davis was selling us down the river, he was positioning himself as an everyman maverick, claiming in interviews that "everybody wants me to raise rates and sock it to the ratepayers." His pollsters knew better: At the time, about two-thirds of Californians said they wanted their leaders to shun rate increases. They weren't aware that this policy would be far more expensive for Californians in the long run.

Now, Davis may be betting that the arduous economic effects of his deeds will enfeeble Californians only slowly, subtly, and in ways they don't understand. Such a scenario might allow Davis to continue his specious pose through next year's election campaign; he appears to have fed a story to the San Francisco Chronicle blaming former L.A. Mayor Richard Riordan for abetting California's energy woes -- we can expect more to come.

To a political consultant's way of thinking, Davis' strategy may seem sound: Recent events have stripped thoughts of electrons from most voters' minds. Inappropriate lessons drawn from the bankruptcy of Enron Corp. can only help matters for our governor: The vilification of that company's executives has added credence to Davis' cowardly blame-shifting game, in which he has portrayed himself as a white knight opposing malicious power companies (excepting PG&E, a heavy campaign donor).

"Texas has been great for us," a Davis political adviser was quoted as saying over the summer, even before the Enron collapse fell into the governor's lap. "I mean, the head of one of the Texas generating companies is named Joe Bob! Really! They've been ready-made villains for us."

For more than a year Davis was propagating a cartoon version of the state's energy crisis in which billions of dollars were flowing to Enron's Houston headquarters from California ratepayers.

Next came Davis' version of the vacationing detective or evidence-cleansing storm: Financial journalists reported that Enron executives had apparently concocted a series of illegal self-dealing schemes, hidden by shady accounting practices. Enron stock collapsed; the company filed for bankruptcy, and liberal columnists around the country derived illogical conclusions from the energy trader's demise.

Thomas Frank, writing for Salon. com, was characteristic: "Enron hoodwinked the world financially. But ultimately the more remarkable aspect of this tawdry corporate tale is the way Enron tricked us politically, the way its leaders persuaded the world that their passion for free markets, particularly in the field of electricity, was somehow equivalent to "revolution,' to "creativity,' to human freedom itself. That only when the corporations were free to romp the worlds as gods would we truly have achieved popular democracy."

Davis, who had crafted a public persona as an "opponent" of Enron, deregulation, and other red herrings, couldn't have commissioned better public relations for his disastrous handling of the crisis.

But during the past week a couple of weaknesses have appeared in Davis' near-perfect crime -- and they're related to the seemingly PR-positive Enron collapse.

In the Bay Area, the Enron bankruptcy has revealed one of the most pernicious yet least-noticed effects of Davis' bailout scheme: It forces businesses, schools, and other entities to buy power from PG&E, so that PG&E will buy power from Davis' Department of Water Resources, so that he can pay down $12 billion in proposed debt.

In San Francisco, that may mean an increase in electricity prices for downtown office buildings.

After the 1996 restructuring, only a small percentage of ordinary consumers took advantage of the opportunity to sign up with power suppliers other than PG&E. Large energy consumers such as the California State University system and the University of California, and trade groups such as the San Francisco Building Owners and Managers Association (S.F. BOMA), were more enterprising. They entered into low-price direct energy contracts with companies such as Enron.

But starting in September, legislation enabling the $12 billion bailout outlawed all new power contracts that don't involve PG&E, Southern California Edison Co., or San Diego Gas & Electric Co. These utilities need all available customers in order to finance the bailout, lawmakers reasoned when they drew up the bill.

Otherwise, "It would be like voluntary Social Security," says Public Utilities Commissioner Geoff Brown: Many customers would opt out.

Remember all those "green electricity" billboards that sprouted around the state two years ago? Buying green power is illegal now, unless it's from PG&E.

So last week S.F. BOMA sent a letter to the Public Utilities Commission asking if it could replace its Enron contract, which is destined to become null, with a contract with another cheap, outside producer. Brown was skeptical. "It's my sense that the commission is going to take a strict interpretation of direct access issues," he said.

Ken Cleaveland, governmental affairs director for S.F. BOMA, is realistic.

"I don't think we have a snowball's chance in hell to look for providers aside from PG&E," Cleaveland says. "We're kind of stuck."

As time goes on, California's public universities will pay millions of dollars in higher electricity bills, a cost they will pass on to taxpayers and students. San Francisco office building owners, a third of whose costs come in the form of electricity bills, will pass their coming rate hike on to commercial renters. Factories, farms, offices, builders, schools, consumers -- all the people and institutions playing a role in the state's economic recovery -- will find themselves fettered by the need to repay Davis' $12 billion bailout.

It's a high price to pay for political hay.

About The Author

Matt Smith


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