Power failure

Let’s stipulate that Enron is evil and helped worsen the California energy crisis while its agents chuckled on the phone about shaking down old ladies and that the company richly deserves to be sued for hundreds of millions of dollars by California Attorney General Bill Lockyer.

Let’s also stipulate that most of the politicians currently getting media coverage for their hatred of Enron share the blame if California endures a single blackout this summer and that most of the politicians currently using our legitimate disgust toward Enron to get their mugs on TV have failed to address the fact that not nearly enough power capacity has been added in the four years since the energy crisis.

The energy crisis and blackouts of 2000-2001 seem like a distant memory. I have no idea where I put my flashlight. We seem quite fine in California these days.

We aren’t.

Knowledgeable people in the energy field watched with muted horror as the California Legislature, former Governor Gray Davis, the state Public Utilities Commission and the California Energy Commission all dropped the ball after the crisis calmed down. Now they pray that Governor Arnold Schwarzenegger is different. He says he plans to actually do something about the insufficient supply and badly overwhelmed transmission lines that cannot pass enough power to Southern California. But that all takes time.

Right now, we face the unwelcome problem of a long, hot summer. Sitrick And Co.’s Lew Phelps, a Southern California-based consultant to the energy industry, noted that “California is the only state in the nation facing a serious prospect of energy shortages this summer. New York and Michigan face small threats. California? If everything does not go right, we could indeed see blackouts.”

Energy author and analyst Arthur J. O’Donnell concurred: “California is still growing by leaps and bounds, yet we have lost power plants recently and could be in trouble if something goes wrong this summer.” The infamous bottlenecked north-south transmission line known as Path 15 remains jammed. Experts are quietly praying we don’t see a 2000-2001 redux.

If you’ll recall, as the long, hot summer and fall of 2000 wore on, prices began to rise, but Gray Davis refused to allow the big utilities to sign long-term contracts to lock in wholesale power deals before prices soared out of control. Davis, who had no cojones when confronted with crises, froze in place as electricity prices skyrocketed. Everything Davis and his cronies could have screwed up, they did.

Enron and others gamed the system and drove prices higher by creating fake needs and fake shortages. But California’s disaster went much deeper than that. It still does.

California couldn’t handle the load, Enron or no Enron. Little has changed today despite promises that the state’s bizarre regulations would be reformed, key transmission lines would be modernized to take more capacity, and major new power plants would be built. Some plants were built; others have closed. Path 15 cannot handle a super-hot Southern California summer. It’s as jammed as the 405 at 5:15 p.m. Ironically, some experts say Path 15 should be ready for extra capacity this fall—too late for possible heat waves.

I’m glad Lockyer is suing Enron. I hope the feisty attorney general nails Enron to the wall. If California can prove that Enron committed fraud, even though the company is largely broke, a slimmed-down power-trading company is expected to emerge from Enron’s bankruptcy proceedings. The new Enron will generate earnings, and because the victims of fraud are first in line for payback after bankruptcies, it’s likely that the new Enron will be forced to pay California back its money—no matter how long it takes.

That’s very satisfying, and kudos to Lockyer if he pulls it off.

However, a lot of politicos are using the outrageous behavior by Enron to pass the buck and get TV face time.

For example, I watch California Treasurer Phil Angelides, a shameless grandstander, using Enron as a whipping boy to promote himself. The company not only worsened the Davis energy crisis, but also tempted the University of California Board of Regents and others to invest far too much public money in its house-of-cards Texas company. But harping on Enron lets our political leaders shrug off the past and sit on their hands. It’s become a great diversionary tactic.

O’Donnell, an insightful commentator on the current energy situation and author of Soul of the Grid: A Cultural Biography of the California Independent System Operator, points to the lack of urgency in Sacramento since the energy crisis. “You have to remember than even if Enron’s fraud amounted to $100 million or far, far more, the extra costs we saw in the market during the crisis ran up to $40 billion,” he said. “Enron didn’t cause $40 billion, by any means. Our complex system with all its uncertainties caused that. We caused that.”

Today, he noted, 10,000 megawatts of new power generation has been installed since the crisis. Unfortunately, many other plants have gone off line. The worst trouble spot, San Diego, has a slim reserve of power—a reserve that will hold only if normal summer weather conditions persist.

But watch out if California has a big, unexpected heat wave or a sudden emergency-repair-related outage at one of its five nuclear plants or another huge power plant, or—my favorite—if serious fires in the West interrupt the flow of power in the grid. It turns out that when regional fires break out, floating ashes can act as conductors for power, and major transmission lines have to be shut down if ashes fall near the lines. Who knew?

But these are pragmatic issues. We do not have a pragmatic Legislature that believes in problem solving. As with the workers’-comp crisis and budget-deficit crisis, our hand-wringing Legislature waits until the disaster is fully upon California. Then, the Legislature must be forced to act while pointing fingers at everyone but itself.

Legislators are behaving exactly this way on our simmering energy crunch. Almost from the beginning, leaders in the Legislature have poured most of their effort into blaming evil corporations and scheming energy traders. With a few notable exceptions, legislators have spent little time actually trying to fix California’s self-created energy troubles.

In 2000, even before the dust had settled, state Senate President Pro Tem John Burton was huffing about nefarious corporations and bringing in new laws to register and license electricity marketers and generators. At the time, he said, “It’s a symbol to these companies that we mean absolute business.” But Burton was referring to the “blame” business, not the “solution” business.

Meanwhile, Senator Joseph Dunn, a loud trial lawyer who, God forbid, thinks he should be the next attorney general, dug up dirt he said indicated that Perot Systems Corp. of Texas had created strategies to exploit loopholes in the inane California power system.

It was all very exciting. Dunn and Burton get plenty of press for whacking evil power marketers and generators. But along with the constantly camera-seeking Angelides—who wants to be the next governor—they utterly and outrageously failed to address the massive problems that now leave Californians paying 150 percent more for electricity than the rest of the nation.

And it’s all self-inflicted.

Said Phelps, “Shame on Enron for what they did, but it’s a little like leaving the safe open and telling all the guards to go home and then spending a tremendous amount of time later bemoaning the fact that you got robbed. What Enron did was probably preventable, if California had designed a decent system and undertaken policy measures to create more [power] generation. Since the crisis, they have done very little of either.”

It’s truly absurd that Californians have to worry about a very hot summer—as if we’re adrift in a poverty-stricken Russian satellite nation where the lights can go off without warning.

The energy squeeze and the nutty power bills that drive businesses out of California are a problem that only serious political leadership can fix. We haven’t had serious political leadership—until Schwarzenegger. His communications director, Rob Stutzman, says the governor will take on the energy crunch in steps, with the goal of “moving California toward a more free-market approach that will encourage more diverse power supplies” while also trying to fix the overtaxed transmission system.

Schwarzenegger wants to begin weaning California off its pricey hydropower from the Pacific Northwest, in part by attracting serious private financing into California’s power-plant-development industry. A lot of the private money was scared off by grandstanders like Dunn, Angelides and Burton, who behave as if California is a choice spot the big power generators are dying to break into.

It’s not, and it’s pathetic that they don’t know this. Phelps represents a major power generator who owns sites in California “ripe for development.” But California’s completely unique, barrier-like system to new plants is giving the company cold feet. “They realize there’s a clear, clear need for power generation in California, but it’s the single most inhospitable place in the nation to undertake it. Why bother?” he asked.

Until the grandstanders get out-shouted by the adults and Enron is seen as a juicy side issue—but a side issue nonetheless—keep your flashlight nearby.