The Heat Is On

You can’t accuse Governor Gray Davis of losing focus.

When the state suffered rolling blackouts, he was determined to rescue financially ailing Southern California Edison. For the good of California, he said. The rolling blackouts eventually stopped, but not Davis, who remained committed to sending billions to the private utility. Now, even though the state Legislature has gone home for the year, Davis is still on the job -- the job of bailing out Edison.

The governor‘s current plan is to call everyone back next week, to take part in this year’s third special session on the energy crisis. The one and only item of business would be crafting an Edison bailout. Stubborn though he is, however, Davis has little hope of reviving the generous terms envisioned by Edison.

His last best chance may have been the end of the regular legislative session earlier this month. At the time, the state Assembly narrowly passed a $5 billion bill only because of the support of Los Angeles progressives Jackie Goldberg and Gil Cedillo. But state Senate leader John Burton (D--San Francisco) denounced the Assembly bill as “just a corporate bailout” and “a pile of shit.” The tougher Senate version was not to Edison‘s liking, so Davis balked.

In the intervening weeks, Burton has not flinched, while Davis could lose a key Assembly supporter, namely Jackie Goldberg. “I won’t support what we did in the Assembly,” she said. “There‘s no point. The Senate doesn’t want it. I don‘t know that they want anything. I could easily vote against anything now.

”This has been very difficult,“ she added. ”Things were much simpler on the L.A. City Council. There’s too much happening too fast in Sacramento. It seems like every time I find something wrong with this Edison rescue, Fred Keeley [a Santa Cruz assemblyman who is a top bailout proponent] says, ‘Oh, Jackie, but it’s a different bill now.‘“

Nonetheless, if Davis’ Edison rescue falters, it won‘t be either for lack of trying or a lack of circuitous reasoning.

First Davis said a bailout was necessary to pay the renewable-power generators who provide a portion of Edison’s power supply. Edison has stiffed these companies for months. But compensating these power generators would cost less than a quarter of what Davis sought for Edison.

Then Davis said that an Edison bankruptcy would be especially bad for California given the uncertain economic climate that has followed the September 11 terrorist attacks. But a moderate Democratic senator, speaking not for attribution, cited these same events as a reason to oppose Davis. ”I won‘t vote for any Edison bailout now,“ said the senator, who added that the airlines are in far more need of help.

Davis also continues to argue that a bailout is better than allowing Edison to fall into bankruptcy, which is what happened to Pacific Gas & Electric, the mega-utility in Northern California. As Exhibit A, Davis invokes PG&E’s new proposal on how it plans to emerge from bankruptcy. PG&E would like to transfer its power plants to a new, unregulated subsidiary, a process that would allegedly enable the company to borrow enough money to pay all creditors in full and guarantee low-cost power to Californians for 12 years.

Although that spinoff is what PG&E wants, it clearly violates state law, which forbids the utility from surrendering ownership of its remaining power plants. Thus far, the federal bankruptcy judge has been very respectful of continued state regulation of PG&E. So the scenario Davis fears may never even come to pass. But one element of the PG&E proposal raises an interesting question that does, in fact, apply to Edison: Why isn‘t help for Edison structured as a loan?

The shell-gamecatch-as-catch-can quality of the Edison debate was underscored in a conversation with Senator Sheila Kuehl (D-Los Angeles), who cited State Treasurer Phil Angelides as a convert to an Edison bailout. Angelides had purportedly said that the rescue was needed in order for the state to successfully sell power bonds on Wall Street.

Angelides, however, insists he made no such statement. To the contrary, he makes it clear that there is no connection between an Edison bailout and the power-bonds sale. Informed of this, Kuehl reported that several people had told her the Angelides story, illustrating how effectively disinformation can spread in a hothouse atmosphere.

Several sources have indicated that the Davis team wants to use Senator Kuehl, a former Assembly leader, to undermine the pull of Senator Burton -- who opposes the Davis bailout -- in the Senate Democratic caucus. Told of this, Kuehl reaffirmed her support for Burton’s leadership.

She added that the Davis team has not been talking to her about Burton, but rather about how to make an Edison ”rescue“ (her preferred term) work. Kuehl said she has no clear sense of what a revised Davis plan would look like, and also noted that she plans to be on the East Coast next week.

Davis won‘t say what his new plan to help Edison might be. But if he still wants a special session next week, as his office claims, the clock is ticking.

Meanwhile, the governor has other problems to mull over. Sources tell the Weekly that the state’s sale of $13 billion in energy bonds, the largest bond issue in U.S. history, has been postponed, probably until next year. The state desperately needs this bond sale to make the general fund whole, especially given the specter of a looming recession. The only bonds looking good now is Barry.

Nor is the Public Utilities Commission winning any points with the governor. It has launched an investigation, prompted in part by this year‘s accident at the San Onofre nuclear plant, into Edison’s safety record. The PUC cited 4,721 safety violations between 1998 and 2000, five of which resulted in deaths. The commission could also stand in the way of a Davis plan to have Northern Californians pay more for electricity than Southern Californians, which amounts to another effort by Davis to help Edison.

Commission President Loretta Lynch, a veteran Davis aide, has broken with the governor on this issue; she could join with two Republican commission members to block Davis‘ plan. The Weekly reported last spring that Davis tried to force Lynch off the commission, but that she wouldn’t budge. Consumer and environmental advocates increasingly praise Lynch‘s work and independence.

Davis can’t fire her -- her term runs until 2005 -- but he can replace her as commission president, and is said by well-informed sources to be contemplating doing just that. There is just one problem: Appointments have to go through the Senate Rules Committee. Which is controlled by one John Burton.

Then there‘s the new statewide poll by the nonpartisan Field Institute. It shows that registered voters oppose a ”rescue“ of Edison, by a whopping 68 percent to 21 percent. The opposition rises to 70 percent in Edison’s own service area. And if there‘s anything that Davis pays more attention to than Edison lobbyists, it’s polls of registered voters.

It‘s almost enough to make the governor want to take the rest of the year off.


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