Catch A Wave And You’re Sitting On Top Of the World.

Or: Viewing California From Your Rear View Mirror

Born and raised in California and living here now, I clearly have a Californian’s bias. It was only for a few short years, four or five, that I lived in Ohio, in what we call the Midwest but, upon viewing a map, is most anything BUT midwest. Ah, that’s history for you. And what did I know? I was in my teens and early 20’s at the time. I primarily recall Ohio as being very humid. My first year, when I was 16, my parents had to literally pull me out of my bedroom to engage and meet my surrounding peers. And after a while, the humidity didn’t seem to matter. It became Home. With a capital H.

I graduated from Fairmont East High School in 1972, whilst commuting from nearby Kettering. My parents and I moved into a beautiful two-story brick house (with a basement — whoever heard of a basement in California!) at 444 E Street, on Wright-Patterson Air Force Base. I can still recall the zip code: 45440. What a magnificent home for the family of an early 70’s full bird Colonel in the USAF!

The visions come back even now: having apparent carte blanche on the base, visiting the on-base official Air Force Museum so many times that the staff just let me in any time I wanted, riding my bicycle (and later my red Yamaha 125 motorcycle) anywhere I wanted, making voyages and discoveries at will, the entire base my proverbial oyster. I can recall laying on the hood of my first car: a pristine, white four-door 1966 Ford Fairlane on base at dusk, near Fairborn, watching incoming SAC B-52s crabbing into the wind, making their western approach directly over my head — JUST like the opening scene in the original Star Wars movie. I can smell the clouds of kerosene settling over me even now. How glorious that was!

And my greatest, most vivid memory: driving to the west end of WPAFB, again at dusk in the early 70s, parking, getting out and watching B-52 after B-52 after B-52 after B-52 que up for an eastbound night-time departure, running up their horribly loud, filthy and smoking engines and I saluted them, individually, as they made the final hard right nosehweel turn to the concrete active runway. And watching, with pride, as some of them saw me, took notice and saluted back, unknown faces behind perspex canopies. Who were they and where were they going? I never knew. How many came back from their mission? I never knew.

Another last minute thought: coming and going from WPAFB anyone was subject to search, even the son of an USAF Colonel. Having my car searched two or three times. And being stopped at exit gates, at the conclusion of the day, by USAF APs who turned to the flag when the Star Spangled Banner played. During this time, no one entered or exited any WPAFB gate until the conclusion of our national anthem. Soldiers, citizens, airmen and women would exit their cars, hands on heart, facing the flag, as the music played through speakers.

That was a bit of what I remember about Ohio. And recalling that I always wanted to go back to California, to see my friends, to resume my life. Getting into radio in 1973 at Wright State University’s WWSU, and using the Move’s “California Man” as my anthem: I may be here in Ohio, but you know where my heart lies. . .

Fast forward. My mother passed away on May 14th in 2002, a few days past her 80th birthday and her 60th wedding anniversary. My father still lives in Sacramento, in the house he originally purchased for $4,000 in the late 40’s, now worth $250,000 +. Both of my older brothers have done much better than me in their lives: Jim lives with his wife in the paradise of Coronado, occupying a $1 million dollar + home, having raised one boy and two girls — he recently purchased his own 40-foot fishing boat which plies the San Diego harbor and even a bit of coastal blue water; my other brother Don, an electrical engineer, helped to found Motion Control Engineering in Rancho Cordova (east of Sacramento) and had his portion of the stake bought out recently for more than a few million bucks. Me? I work for the County of Sacramento, sucking at the government tit for my pay.

But go ahead: ask my brothers, either Jim or Don, what they think of the state of California and its “business-friendly climate.” Jim works in real estate and Don works with corporations. Both have real world experience with state mandates, laws, policies and the real world results of California’s politics.

Ah. California politics. How ex-Governor Gray Davis managed to readily turn a billion dollar + surplus to a billion dollar + deficit in the blink of an eye, one summer in 2001.

An overview: in 1996, Gray Davis signs the deregulation law which allows the market to determine prices. Following his election as governor in 1998, electricity prices climb in Southern California and, by May of 2000 in San Diego, prices rose 300%. 2000

” Electricity prices climb. The effect is felt first in San Diego and south

Orange County, then throughout the state. In the spring, energy executives

warn Davis a crisis looms. By May, energy costs have risen 300 percent in

San Diego. Summer shortages reported.

” Consumer groups, lawmakers and utilities demand Davis intervene with

emergency authority. He declines.

” Edison and PG&E, unlike SDG&E, are unable to pass their costs on to

consumers because, by law, they can’t raise their rates. Edison loses $1

billion by the end of July.

” The Davis administration – and others – blame the crisis on energy

profiteers, federal inaction, the failure of previous administrations to

build power plants and the flawed deregulation law.

” On July 31, Duke Energy offers to sell California 2,000 megawatt hours at

$55 per megawatt – less than the state was paying in the spot market at the

time. Davis declines. Other power companies also offer long-term contracts.

All are rejected.

” On Aug. 2, Davis issues executive orders to speed up power-plant licensing

and cut energy consumption. He asks the attorney general to investigate

possible price gouging.

2001

” Early January: Davis threatens “drastic action” – possibly including

seizing power plants.

” Jan. 17: Davis orders the state to buy energy on behalf of credit-starved

utilities.

” The spot-market price of energy reaches $1,000 per megawatt. The state

suffers rolling blackouts Jan. 17, 18 and 21.

” Consumer groups and state Treasurer Phil Angelides say Davis should seize

power plants. He declines.

” PG&E declares bankruptcy.

” The Davis administration buys $43 billion worth of energy through long-

and short-term contracts. The average cost per megawatt is about $80; later,

the market price drops to the $50 range. Also, some contracts require

California to buy power when it doesn’t need it, forcing the state to sell

back energy for cents on the dollar.

THE AFTERMATH

” Price tag of energy crisis is put at $50 billion.

” Davis appeals to the Federal Energy Regulatory Commission, demanding

nearly $10 billion in refunds for California consumers. Consumers might get

back $3.2 billion, although that hasn’t happened yet and many believe it

never will.

” Davis renegotiates the $43 billion in contracts down to about $35 billion.

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SACRAMENTO Gov. Gray Davis confronted California’s electricity crisis in

fits and starts, at first hesitant as outraged consumers and utilities

clamored for help, then fearful that a misstep could cost him votes as the

state spent $50 million a day to keep the lights on.

Foes and some supporters of the governor agree that he didn’t intervene

early enough and forcefully enough in the crisis during the first half of

2000. They say he missed an early chance to buy power at reasonable prices

and that he declined to raise rates because he feared the political fallout.

They also said Davis was bluffed by wily energy merchants, who pushed prices

through the roof because they knew he wanted to avoid blackouts at all

costs.

“There was a game of electric chicken going on,” said San Diego consumer

advocate Michael Shames.

Two years later, Davis said this: “I know many of you feel that I was too

slow to act during the energy crisis. I accept that criticism. I played the

hand I was dealt as best I could.”

Voters will pass judgment Oct. 7, in part, on his handling of the crisis.

It erupted in spring 2000 in San Diego. The governor’s first major actions

occurred in August, when he issued orders to speed up power-plant licensing

and boost conservation, while asking the state attorney general to

investigate the electricity market.

Energy experts acknowledge now that delays occurred but that what appears

clear in hindsight was obscure during this time of great confusion.

“I give him great credit,” said Sen. Joe Dunn, D-Santa Ana, who headed a

Senate investigation into alleged market manipulation. “As we rolled into

the spring and summer of 2000, the market was getting more and more

dysfunctional.”

Davis demanded that federal energy regulators step in. He approved

conservation measures. He set up task forces to resolve the problem. He met

with power company executives and threatened sanctions to force action. He

lobbied for wholesale caps on prices, which went from $750 per megawatt hour

at the beginning of the year to $250 by the fall, and then were reduced

further to $100 – although this was still more than double the pre-crisis

cost of energy.

“There wasn’t a thing that we could have done that we didn’t do,” said

Michael Kahn, picked by Davis to head the state’s power grid at the height

of the crisis.

In the end, California’s strapped power grid suffered 39 days of high

emergency between Dec. 7, 2000, and summer 2001, as the cost of wholesale

power skyrocketed 10-fold and beyond. On seven of those days, the state had

rolling blackouts. In 1999, the state’s electric bill was about $7 billion.

In 2000 and 2001, it was about $27 billion each year.

By spring 2000, San Diego’s electricity rates were spiraling as SDG&E

struggled to pass on the soaring wholesale costs to its customers. The

state’s two largest utilities, Southern California Edison and Pacific Gas

and Electric Co., racked up huge debts. They were refused the right to raise

rates.

Many agree that Davis’ Jan. 17, 2001, decision – his most important action

during the crisis – to order the state to buy energy for the utilities on

the spot market ultimately broke the back of the crisis, although at

enormous cost to the state.

The state also bought $43 billion worth of future energy on contract, which

ultimately stabilized the roiling market. By the middle of 2001, the

skyrocketing prices were over.

But what Davis did, and when he did it, is not nearly as significant as what

he didn’t do, his sharpest critics contend.

“In the spring of 2000, the merchant generators met with him personally,

warning him of rising costs and potential shortages. The reaction we got was

just a wave of the hand,” said Gary Ackerman of the Western Power Trading

Forum.

At least four power companies offered long-term energy contracts at prices

slightly higher than existed before the crisis but far less than hit the

state just weeks later. One company, Duke Energy, wrote directly to Davis on

July 31, offering 2,000 megawatt hours over five years at $55 per megawatt.

Davis declined. Later, prices hit $1,000 per megawatt.

One consumer critic said Davis’ fundamental problem was failing to act early

in three critical areas – seizing power plants, raising rates and signing

power contracts – because he feared political backlash.

“He stood on the sidelines as opportunity after opportunity passed. He had

his finger up, testing the political winds,” said Doug Heller of the

Foundation for Taxpayer and Consumer Rights.