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Power Politics

We can add energy deregulation to abortion as topics Republican gubernatorial nominee Bill Simon Jr. doesn’t want to talk about.

Appearing at a Republican unity event last week in the capital, Simon and Republican national chairman Marc Racicot, a former Montana governor, began by complaining about the attention being paid to Simon‘s anti-choice stance on abortion. ”I’m the candidate of ideas,“ declared Simon. ”We need to focus on the big issues facing the state.“

The Weekly invited Simon to do just that, choosing one of the biggest issues and most prominent ideas he has pushed, energy deregulation. ”Mr. Simon, you‘re campaigning this week with a lobbyist for Enron, Governor Racicot, and you have championed deregulation. Will deregulation continue to be a centerpiece of your campaign?“

”I have a three-part approach on that,“ replied the novice candidate, who proceeded to unspool two parts -- an attack on Democratic Governor Gray Davis’ controversial long-term power contracts and support for building new power plants -- without ever answering the question about deregulation.

”Next question,“ he said, pointing to someone else.

The Weekly returned to the matter at hand. ”Mr. Simon, what about deregulation? Where is it in your campaign?“ Reluctantly answering, Simon again dodged. ”Well, my short-term focus must be on the contracts.“

Racicot took the microphone a few minutes later. ”For the record,“ the Republican national chairman intoned. ”I want to clear up a major inaccuracy. I was not a lobbyist for Enron. I certainly worked for a law firm that provided legal representation for them.“ The press conference ended soon after. The Weekly caught up with Racicot as he made his way through the lobby of the Senator Hotel to a private Simon fund-raiser.

In what way were you not an Enron lobbyist, governor, since you were registered as one? ”Well, yes,“ replied Racicot, smiling hesitantly. ”Under federal law I was a lobbyist. I just wanted to clarify.“ Clarify what? ”I mean, I wasn‘t their top lobbyist.“

Davis shook his head in amusement when asked to comment on Simon’s deregulation dance. ”I‘m working to re-regulate the market. We successfully pushed for price caps and created the Power Authority to help keep the market honest. Whether he wants to talk about it or not, Simon is against price caps and wants to kill the Power Authority.“

Simon’s deregulation dodge was just an early skirmish in the re-emergence of energy in the campaign. The round-the-clock crisis of last year appears to be over, but problems remain, in many forms. On balance, the news has definitely improved for the embattled Davis, with the massive bond issue needed to repay the state‘s general fund for the emergency power-buying of last year seemingly set to move forward later this year.

But the Weekly has learned that efforts by state officials to rework the state’s much-criticized $44 billion portfolio of long-term power contracts -- touted by the governor in an interview earlier this month -- have hit a new snag.

The supposedly stellar Calpine Corp., pride of the California-based merchant power business and a onetime exemplar on Wall Street that the Davis administration praised last year as a ”white hat“ power generator, has told state officials seeking to rework its rich contracts that it will go bankrupt unless the state increases its payments for power-contracts purchases over the next two years by up to $300 million. Calpine officials claim that, once the supposed bankruptcy is staved off by state funds, contract payments can be reduced in future years. This secret attempt at a backdoor bailout could greatly complicate an effort that Davis spoke of proudly earlier in the month.

”We are close to reworking a multi-billion-dollar reduction in several contracts,“ he told the Weekly. ”We‘ve been doing a lot of negotiating with the companies. Twenty-five percent of what we’re getting is serious, 25 percent is in-between, 50 percent is take a flying you-know-what.“

”FERC [the Federal Energy Regulatory Commission] should help with investigations,“ bringing more pressure to bear on the companies to accept prices more in line with the market, Davis said. The contracts have been widely criticized for having been made under duress, in a state of panic near the peak of the market last year.

In addition to bringing down the costs, Davis said he wants to reverse the Green Blackout inherent in the power contracts, in which almost all the new electric power is to be generated by natural gas--fired plants to the exclusion of power generated by renewable sources such as wind, solar, geothermal and biomass. But he disputes estimates that the contracts have left the state with an oversupply of power, which would make new renewable power unnecessary.

”One of the effects of the collapse of Enron is the drying up of capital for some new central station power plant projects,“ the governor notes. ”We‘re already seeing projects that we had anticipated being in the mix evaporating away. So there will be room for a major increase in renewable energy use in California.“

So much so that Davis is backing a bill by Senator Byron Sher (D--Palo Alto), a Renewable Portfolio Standard that would require that 20 percent of California’s electric power be generated by renewable sources by 2010, which would roughly double the state‘s use of renewables and put California well ahead of any other state in shifting to green energy.

”This makes sense for the present a and is key to the future,“ says Davis. Environmental sources say his support is more than rhetorical. The Governor’s Office is urging L.A. Assemblyman Rod Wright, the Assembly Energy Committee chairman and staunch utility ally who blocked the renewable requirement last year, to get with the program.

”With the utilities required to buy more cost-competitive renewable power,“ says Davis, ”the new state Power Authority can provide financing to get the private sector entrepreneurs who will provide the energy up and running with their projects. And we should provide even more incentives to develop a new generation of renewable power.“

But Davis‘ more familiar caution returns when discussing L.A. Assemblywoman Fran Pavley’s global warming bill, which would force reductions in the emission of carbon dioxide by cars, SUVs, and light trucks, which account for 60 percent of the state‘s carbon dioxide emissions. With California accounting for 10 percent of national car sales, the bill could play a major forcing function with the automobile industry, which is unenthusiastic. The Pavley bill narrowly passed the Assembly two months ago, but Davis said earlier this month that he hasn’t read it.

”I want to act on global warming,“ says Davis, ”but I want to be careful. I‘m happy with California taking the lead nationally on renewable energy, but I’m not sure we know enough yet on this. Bush certainly isn‘t taking the lead.“ Sounding skeptical about Pavley’s bill, Davis opines: ”It is good because it forces debate. At some point we‘ll come up with something that can work.“

Similarly, the governor is taking a more cautious approach to the phase-out of MTBE, the additive that makes gasoline burn more cleanly but also turns out, in one of those unintended consequences of reform, to make groundwater unpalatable and perhaps unhealthy when it leaks from storage tanks. Citing the lack of alternatives in place and fearing a massive run-up in gas prices, Davis reversed his own decree, delaying the banning of MTBE for a year, prompting protests from water agencies and environmentalists.

Davis has also come under fire from consumer advocates for appointing former Edison president Michael Peevey to the Public Utilities Commission. Peevey is controversial for having negotiated an unsuccessful bailout deal of his former company for the governor, and for having been an early champion of electric power deregulation. Davis defends the appointment, saying he needed to appoint a business executive after naming ”three consumer advocates“ -- PUC chief Loretta Lynch, labor representative Carl Wood and former San Francisco Public Defender Jeff Brown (cousin to Jerry and Kathleen). Many consumer advocates view Brown as inconstant.

Davis says that Peevey, an old friend of his, was actually not one of his first choices for the slot. ”I had a lot of trouble finding a business person to take the job,“ he says. ”I know he’s somewhat controversial, but he‘s a good man and I think you’ll be pleasantly surprised by some of the things he does.“

Some progressives feared that Davis would replace Lynch, who has stood up to some business interests, in the PUC presidency with Peevey, but that appears unlikely.

Needless to say, the complicated energy stuff is still with us. Which should provide an ongoing source of amusement as candidate Simon attempts, or not, to apply his canned answers to a set of very demanding issues.


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