Flips and Switches

Davis recognizes that this astronomical tab is a political bombshell. ”As you know,“ the governor said last week, ”there will be a period of time when citizens will be paying less than the true cost of electricity. And then there will be a period when they‘ll be paying more than the true cost of electricity. But that’s the only way you‘ll avoid sticker shock, which I think is important to consumers who were promised that rates would go down, not up.“ To avoid the fallout, the governor stealthily admitted, he ”will instead adopt a rate-stabilization plan that may last for five to 10 years.“

Add that new plan to the roughly $20 billion consumers have been forced to pay to the utilities for their ”stranded assets“ -- bum deals on nuclear-power plants -- and the cost of deregulation climbs to as much as $50 billion.

A few facts and figures can put the governor’s plan into sharp perspective. When deregulation began, California‘s three private utilities sold off nine power plants, which produce 20,000 megawatts of electricity, for $3.1 billion -- or two months’ worth of the state‘s recent power purchases. The companies that bought the power plants have collected profits from California’s crisis, estimated by Public Citizen at $1.2 billion, a windfall the governor called ”gouging.“ Instead of paying these generators $10 billion for 12,000 megawatts, taxpayers could have acquired a permanent source of nearly double that amount of electricity. The final irony here is that one of the largest companies, Duke Energy North America, which has four power plants in California, has declared that it will not sign any long-term contracts with the state until it is paid in full for power it sold to the private utilities. ”Those who think we‘re bluffing are wrong,“ a Duke spokesman said.

Back on January 8, Davis threatened to use his powers of eminent domain ”to prevent generators from driving consumers into the dark and utilities into bankruptcy.“ Talk of such seizures has disappeared from the governor’s rhetorical refrain. ”We want [a] shared paying contribution from all parties,“ Davis said last week. ”The result being solvent utilities, functioning utilities.“ Welcome to Deregulation II.