When former Republican Governor Pete Wilson & Co. started the ball rolling on electric power deregulation in California, there were probably many results they didn't anticipate. Not least is a revival of social-democratic and populist politics in the Golden State.
The Left Coast may turn out to be just the left coast after all. Having gone into eclipse in the mid-nineties with the passage of the anti-immigrant Proposition 187 and the rise of deregulation fervor, and suffering through two years of disappointment under moderate Democratic Governor Gray Davis, progressives are again on the move, with even the preternaturally cautious Davis, a potential 2004 presidential contender, along for much of the ride.
Most Californians now favor both a state takeover of the power grid and the establishment of a public power authority. Most don't believe there's a real power shortage and blame their utilities and the out-of-state power companies for manipulating the situation. Two-thirds oppose deregulation, and in a Los Angeles Times poll 60 percent opposed new nuclear power plants. Meanwhile, organized labor, consumer advocates and environmentalists are coming together to urge a dramatic expansion of public ownership of power and an end to the decades of private utility dominance in California politics that led to the debacle. "We're fighting to protect jobs, hold the line on the environment, protect against rate increases for fixed-income consumers and to keep the utilities out of bankruptcy to protect workers," says California Labor Federation chief Art Pulaski.
Coalitions have come and gone over the years, but shifts in political tectonics caused by the power crisis make this one's prospects far better. "The atmosphere is dramatically different," notes former State Senator Tom Hayden. "You can work for years hitting your head against the wall. Then crisis can lend clarity, making many things possible."
Even some Republicans are questioning the utilities' decision to shovel money from their nearly bankrupt operating companies into the safe havens of their holding companies. But that's as far as they'll go. It doesn't matter, though. Democrats control the governorship and both houses of the legislature, and although they needed Republican votes to pass emergency bills allowing the state to enter into long-term contracts to buy power and distribute it through the utilities, they don't need Republicans to enact more far-reaching measures.
Outside the political establishment, a populist consumer movement has been revitalized, with former Nader associate Harvey Rosenfield making credible threats of an omnibus energy initiative on next year's state ballot. Lost on few is the fact that the 30 percent of Californians with municipal power are in good shape. "I want a coherent plan to restore reliable and affordable electric power with a public power authority as its centerpiece," says Rosenfield, head of Ratepayer Revolt. "It would look a lot like Prop 103 [an insurance reform initiative he wrote in 1988], with re-regulation of the market and consolidation of duplicate agencies." He goes on to say, "If they pass a bailout, we'll reverse it at the ballot box."
Governor Davis, like others in the establishment, sees Rosenfield as a gadfly who finally finds himself in the right place at the right time. Davis believes he can head off an initiative by limiting rate increases through the election. That's far easier said than done, however, even with the state on the verge of entering into long-term electric power contracts. And no one wants to look like they're caving in to utilities' demands for a second bailout in five years (the first being the $28 billion they got as part of the 1996 deregulation package). So the debate has shifted--away from an earlier proposal of Davis and Assembly Speaker Bob Hertzberg to get stock options from the utilities in exchange for an infusion of state money and toward a proposal by State Senate President John Burton and State Treasurer Phil Angelides for a state takeover of hard assets and an ongoing role in the power business.
Davis and Hertzberg have been more solicitous of the utilities than Burton and Angelides, with Davis neglecting to mention the utilities' central role in crafting the disastrous deregulation in his tough-sounding State of the State address in January. Indeed, Davis opposed Rosenfield's unsuccessful 1998 anti-deregulation initiative, a move Hayden describes as "part of an overall shift of the Democratic Party to market ideology and deregulation to avoid the 'big government' image."
But as the crisis has worn on, the utilities have tried to push the blame onto the Davis administration, and Davis has moved closer to Angelides and Burton (brother of the late Congressman Phil Burton, whose most famous saying was, "The only way to deal with exploiters is to terrorize the bastards"). There's a very good reason for that. Public polls show widespread disdain for the utilities and their role in fomenting the crisis. Private research goes further, indicating that people are very open to sweeping government solutions. Says one Davis associate: "Even some people who don't like government have had enough. They want a sense of control. They think government can give them that, and the market's given them chaos." The coalition of consumer and environmental groups backing Rosenfield's initiative also supports Burton and Angelides's plans for a takeover of the power grid and a state power authority, as does organized labor.
While generally supportive, Davis's old boss, former Governor Jerry Brown, who pioneered conservation and renewable energy programs in his administration, sounded a note of caution. "We have to be careful about centralizing power in opposing the centralization of power," says Brown. "It requires a lot of thought to make sure that government doesn't merely replicate the same old patterns."
The price for a grid takeover remains unclear, as does the price of other efforts to stabilize the utilities. If any action looks more like a bailout than a buyout, Rosenfield's initiative, and Davis--still looking good in the polls--could be in trouble. This is especially true given future rate increases, which are assured. By next year (because a "temporary" increase in January will be permanent and a 10 percent reduction that was part of the dereg scheme expires) rates will be at least 20 percent higher than they were at the beginning of this year.
The state's big utilities have ridden high, wide and handsome over California's political range for a century, so much so that their leaders felt free to junket off to England with their putative regulators to gain inspiration from Thatcherite deregulation. But that's over. It's a supreme irony that a scheme designed to further the dominance of radical capitalism would trigger its opposite. Just as Pete Wilson didn't foresee that his anti-immigrant Prop 187 would lead to overwhelming Latino support for Democratic candidates a few years later, he and the other Republican free-marketeers who started deregulation didn't foresee that their market nostrums would trigger a resurgence of public power and populism. But in yet another of the unintended consequences that mark the deregulation debacle, they have.