Dim Bulbs

Greedy out-of-state profiteers make easy targets, but the real villains of California's energy debacle are the ones under the state capitol dome.

As part of the scheme, the utilities would buy and sell their power through a pool, but to placate the manufacturers, all consumers would be free (in theory, at least) to buy from suppliers outside the pool. But the real zinger -- the backroom provision deemed essential to win the utilities' support -- was an agreement that any deregulation plan ensure that the utilities be reimbursed for their "stranded costs." The provision potentially meant $12 billion to Edison alone, whose chief executive officer, John Bryson, was a key figure among the utility players. In December 1995, the PUC -- whose five-member board counted four Wilson appointees -- rubber-stamped the deal. Consumer advocates were outraged, mostly over the idea of bailing out Edison and the others for their nuclear boondoggles. They soon had even more to be angry about.


Although elated with the PUC's decision, the behind-the-scenes players Wilson had brought together weren't satisfied. As an appointive body whose members are chosen by the governor to serve staggered six-year terms, the PUC's decisions are subject to revision, not only by the Legislature and the courts but by the commission itself. The utilities and industrial users, who had written their own ticket, wanted their gains locked in by law, not subject to bureaucratic whim. Critics of deregulation say that, at the same time, lawmakers' willingness to get into the act was fueled by campaign contributions flowing from a host of powerful interests, including the utilities, big business, oil companies, and organized labor. "[Legislators] knew they couldn't get any contributions if the PUC decided the issue," says Snyder, the Consumers Union lobbyist.

State Senator Steve Peace disavows his reputation as the "architect of deregulation."
State Senator Steve Peace disavows his reputation as the "architect of deregulation."
State Senator Jim Brulte, a key deregulation player, has been able to avoid political fallout thus far.
State Senator Jim Brulte, a key deregulation player, has been able to avoid political fallout thus far.

The job of championing the bill to codify the PUC's actions fell to then-assemblyman and current state Senator Jim Brulte, the bill's official sponsor. But it was Peace, a Democrat from the San Diego suburbs, who was responsible for shepherding it through a legislative conference committee. His role earned him the tag "architect of deregulation," a title he has since pointedly disavowed.

As chairman of the Senate Energy Committee, Peace had established a reputation for being bright, brash, and a pit bull when it came to tackling difficult issues. As a young filmmaker, before entering politics, he had cowritten, produced, and co-starred in the 1978 low-budget cult flick, Attack of the Killer Tomatoes. But as the deregulation bill began sailing through the Legislature, politicos began referring to the then-43-year-old senator's iron-fisted control of the hearings as the "Steve Peace Death March." One lawmaker referred to it as "consensus by exhaustion." During 18 days in August 1996, he ramrodded more than 140 hours of hearings that often stretched from early morning to past midnight. He became notorious for his caustic style, including a penchant for banishing contentious parties from the hearing room with orders to settle their differences or not come back.

Snyder calls the crafting of the deregulation law "the most undemocratic process for any bill that has ever gone through the Assembly and Senate." Waiving numerous rules, lawmakers initiated the bill, officially designated AB 1890, in a conference committee composed of three members from each chamber, whose role ordinarily is to smooth out differences between competing versions of bills that the Assembly and the Senate have already debated. But astonishingly, for such an important piece of legislation, rank-and-file lawmakers relied heavily on just six of their colleagues, and many didn't even become familiar with the particulars of the bill until it was time to vote.

Navarro, the UC Irvine professor, likens the process to "a snowball moving downhill." Nothing could slow it down, not even questions raised within the Wilson administration itself. For instance, a 23-page analysis by the state Department of General Services questioned the bailout of the utilities' nuclear investments. "Is it really appropriate," the report asked, for utilities and their shareholders to "bear no burden whatsoever for poor decisions in the past?" Yet the report, which also raised other questions, recommended approval, saying the bill was an improvement on the PUC's original plan. As a sop to consumers, the legislation included a rollback of electricity rates by 10 percent for customers of the big three utilities as well as a rate freeze until March 2002, or until the utilities paid off all their "stranded costs," whichever came first. But the utilities were allowed to float $7 billion in bonds to pay for the rate rollback -- bonds that those same customers are paying for over a 10-year period. Critics say that since rates were frozen at artificially high levels, and bonds were used to finance the "cut," the actual price break was closer to 3 percent.

Neither was it a proud moment for most of the consumer, environmental, and labor advocates who muted their criticism after goodies were doled out to their constituencies. As part of the provisions Peace helped to engineer, environmentalists got $540 million in subsidies for renewable energy. Unions were promised some job protection and $100 million for retraining and severance benefits for any workers laid off. Other pork barrel deals included $200 million in price breaks for individual large consumers, including the Bay Area Rapid Transit District, the University of California, and even chicken farmers in the San Joaquin Valley.

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