Smoking Gun Shoots Down Bush View of Power Crisis

SACRAMENTO -- That deep, mellow voice of Vice President Dick Cheney still resonates in my ear. It's accentuated now by reverberations from the Enron smoking gun.

"Frankly, California is looked on by many folks as a classic example of the kinds of problems that arise when you do use price caps," Cheney told me in April of last year. "Your problem is that your demand for electricity is up and your supplies have actually declined.... "Ultimately, of course, the peak power period this summer will exceed any capacity the state has and you'll end up in those rolling brownouts. There's no magic wand that Washington can wave."

Cheney was reflecting the laissez-faire, hidebound ideology of the new Bush administration. And he could not have been more wrong.

California then did not have wholesale price caps. It had consumer rate caps that had left private utilities short of enough money to pay their gouging suppliers.

The power pirates--many of them pals and political patrons of Cheney and President Bush--were reaping profits of 400% to 600%. The cost of electricity that private utilities (Edison, PG&E, SDG&E) were sending consumers soared from $7.4 billion in 1999 to

$27.6 billion in 2000 and seemed headed for $70 billion in 2001.

Demand had not been up significantly; indeed, it then was falling. Supplies were rising.

There was a magic wand Washington could wave. And it finally did get waved in June after dogged goading by Gov. Gray Davis, other West Coast Democrats and a new Democratic U.S. Senate. The wand was regional price caps, imposed by the Federal Energy Regulatory Commission.

Those caps--so abhorred by the Bushies--worked with new long-term power contracts negotiated by Davis, plus a mild summer, to quash the energy crisis.

Megawatts that had sold for $321--and frequently exceeded $1,000--were capped at $92. They soon slid to $60 and now are back down to $30. That's about where they were when California naively set out on its ill-fated deregulation venture, which shifted control over most electricity from the state Public Utilities Commission to the pro-profiteer FERC.

Despite Cheney's glum prophecy, there were no rolling brownouts last summer, nor have there been any since.