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at least nine months now, California Gov. Gray Davis has been screaming
bloody murder about how corporate power pirates out of Houston have
economically raped and pillaged the state of California, creating
an artificial electricity crisis out of thin deregulated air. The
story didn't appear to add up. But because the governor's office
refused to release information about how much the state paid to
whom for electricity over the past several months, who was to say?
Lawsuits finally
pried that information out of Davis last week and — lo and behold!
— "the biggest snakes on the planet" (Davis's words) were
charging less than the publicly owned utilities of California itself
and even less than the price charged by his right-hand man, David
Freeman, head of the L.A. Department of Water & Power. And Davis
turns out to have known it all along.
Until Davis
coughed-up the data, the Left was in hog heaven, scoring point after
point about how socialism — at least in the electricity business
— was far preferable to capitalism. Alan Richardson, president of
the American Public Power Association, recently told an audience
that, "California is a great example of municipal utilities
that have … taken care of their customers while investor-owned
utilities have taken care of their shareholders … Every customer
of a private utility is seen as a profit center. With public power,
every customer is seen as our owner and neighbor." Anti-utility
activist Harvey Wasserman wrote in The Nation that, "dereg
apologists are having a hard time explaining why two California
power companies were immune to the crisis: the Los Angeles Department
of Water & Power and the Sacramento Municipal Utility District.
Both are owned by the public … during the crisis, rates charged
by both companies have been stable."
It turns out,
however, that publicly owned utilities charged the state an average
of $344 for a megawatt of electricity during the first three months
of the year. Private companies were meanwhile charging less than
an average of $250 per megawatt. And those Houston-based "snakes"
— Reliant, Dynergy, and Enron — were charging less than the publicly
owned utilities, less than the sainted and celebrated L.A. Department
of Water & Power ($292 per megawatt), less than the Sacramento
Municipal Utility District ($330 per megawatt), less than other
investor-owned California-based power marketers, and less than the
overall market average. Other more ambitious sellers include those
municipal "good neighbors" at Seattle's City Light Department
($634 per megawatt), BC Hydro ($498), and virtually every other
socialist power entity that bellied up to the California wholesale
power market.
But that's
not to say that the municipals did anything wrong. They had an obligation
to local taxpayers to maximize their revenues. Moreover, it turns
out that the markups weren't all that great. The cost of producing
electricity at the margin was so high because of the run-up of natural
gas costs; most of the asking price reflected the cost of spinning
electrons back at the plant. "It's insulting to ask for any
money back. We weren't part of the problem, and we helped the state
in a crisis," Peter Fletcher of the Sacramento Municipal Utility
District told theSan Francisco Chronicle. "And it's
not like we're doing well."
Another interesting
revelation is how inept California state agents were when they tried
to run a power system previously managed satisfactorily by the utilities.
The state "called us and said, 'we're looking for power at
$500 a megawatt hour for a seven-hour period,'" Kate Hora of
the Modesto Irrigation District told the Chronicle. "There
was no negotiation. We just helped them out at the price they named."
These are the business wizards that Davis wants to take over the
whole system?
It should go
without saying that this doesn't help the governor's price-gouging
argument. The story Hora tells of how the state behaved with her
utility is consistent with the stories related by the private marketers.
The state asks for power and names a price. The company agrees.
And several weeks later, Davis & Co. scream about "the
gougers." The story Fletcher tells — of prices mostly reflecting
costs — likewise belies Davis's contention that greed explains all.
If Sacramento's municipal utility found it hard to make any money
even with sales of emergency power at $330 a megawatt, what makes
anyone think it was easier for Enron et al.?
The Left's
entire California story, it turns out, was built upon a breathtaking
series of gubernatorial falsehoods and demagoguery. If Davis and
his duplicitous henchman, David Freeman, have an ounce of credibility
left, it's only because the nation is too riveted on the Chandra
Levy matter to pay any attention to the bomb that went off in Sacramento
last week.
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