Waiting for Gray

Yet some in Davis’ own operation share some of Rosenfield‘s frustration. The administration is spending billions from the general fund to buy power, yet it is having to fight with the utilities over the question of passing through the price-controlled payments they continue to receive from their customers to the state as at least partial reimbursement for the state’s present buying of power distributed through utility networks. ”So far,“ says a Davis adviser, ”everything goes in to the utilities and nothing comes out!“

And some were troubled by last week‘s negotiations with the utilities. Edison started by demanding an exorbitant $6 billion for its portion of the grid, assuming it decided to sell at all. That price came down by more than half, a process helped in part by some public saber rattling by Davis chief political strategist Garry South, who mused about seizing the grid under police powers granted the governor in his declared state of emergency.

But another Davis associate worries that the governor’s negotiators in the room, former Edison president Michael Peevey, who oddly sees no conflict of interest, and San Francisco attorney Michael Kahn, are out of sync with his public statements. Worse, that they have been negotiating for things they need not negotiate for, in effect paying for things the state already can get under its existing authority.

Specifically, this associate feels that it is foolhardy to use up negotiating capital to get the utilities to agree to provide cost-based rates for 10 years and to hold on to their remaining power plants when these seeming concessions can already be forced by the state. And assigning value to a utility agreement to drop lawsuits aimed at forcing immediate rate increases is especially foolhardy, since prospects for this legal action are poor.

In this view, the agreement to sell the transmission lines, already in hand from Edison and all but certain from the much smaller San Diego Gas & Electric, is a breakthrough. But the price is very sweet, especially since the utilities haven‘t performed upgrades on the system for over 15 years.

And then we come to PG&E, which remains loathe to sell its transmission lines and threatens to take its chances in bankruptcy court when it is not demanding an even sweeter deal than Edison’s. Perhaps, say Davis aides, it would be best to simply seize PG&E‘s transmission lines.

Davis cabinet secretary Susan Kennedy, who is quarterbacking much of this for the governor, was not available for comment.

Davis has wandered very far afield from his original game plan for this governorship. If he harbors hopes of mounting a presidential candidacy as a self-proclaimed moderate friendly to Wall Street, seizing facilities would be an odd way of going about it.

In any event, the entrenched powers at PG&E may not find the threat credible. There is a special arrogance about PG&E, stemming from its San Francisco base at the hub of what was the power center of the Old Far West.

Yet PG&E is by far the least popular of the utilities in private political research. ”And this is before Julia Roberts wins the Oscar for Erin Brockovich!“ exclaims a Davis associate, referring to the true-life tale of a fight against the utility for its toxic contamination.

Davis advisers did discuss using California National Guard troops to inspect suspiciously non-operating plants earlier in the crisis.

But would Davis move in to seize the grid from the recalcitrant corporation?

According to an associate, he is certainly closer to the frame of mind necessary to do that than he was two months ago. However, unless Davis has done it himself, it does not appear that anyone has mapped this out, as his advisers and operatives are busy scrambling buying power, negotiating with the utilities, pushing for new generating capacity, and working on conservation plans.

Gray Davis, the reluctant interventionist, has often been criticized for reacting rather than acting. He may soon get the opportunity to reverse that perception once and for all.