Attack of the Self-Serving Pol!

A deft film in which a southland legislator and lazy journalists rewrite history, blame Enron for the energy crisis, and leave Sacramento corruption untouched

Comments (0) By Matt Smith Wednesday, Feb 13 2002

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To this end Peace embarked on a monthlong haggling session remembered by lobbyists as the "Steve Peace Death March." Peace kept lobbyists for the California Large Energy Consumers Association, the California Manufacturers' Association, Southern California Edison, and the Independent Energy Producers Association locked inside hotel conference rooms, the Manufacturers' Association's Sacramento offices, and the governor's office for marathon bargaining meetings typically lasting until 2 a.m. The idea was to come out with a law that distributed enough goodies to those present that everyone would sign on. After two weeks of failing to modify PG&E's nuclear-plant payback plan, Enron quit these negotiations.

Enron had achieved its secondary goal of seeing the Power Exchange and System Operator entities made separate. But Enron representatives considered this achievement to be small potatoes compared to what they saw as an anti-competitive scheme to reimburse the state's long-standing electric utilities for building white elephant nuclear power plants. "They saw there was no way this was going to work, so Enron stopped participating," says a lawyer who was involved in the negotiations.

Scott Musgrove

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Finally, the remaining lobbyists signed on to an energy-restructuring bill that went on to make history. PG&E got its $16.5 billion in nuclear-plant reimbursements and was allowed to sell off its other generating plants. Edison got its pooled, state-run energy trading floor. And during the summer of 2000, Californians got the shaft.

In subsequent interviews, Peace blamed the state's millennial electricity disaster on the one concession given Enron, which separated the trading floor and System Operator functions. If only the two agencies had been one, he seemed to suggest, it would have operated the market more efficiently, and foiled the generators and wholesalers who eventually gouged everyone.

Most analysts, however, say Peace paints a fictional, Hollywood scenario of the power crisis. They say the summer 2000 energy disaster was caused primarily by the system's penchant for concentrating all power purchases on a single, malleable spot market. They blame the crisis on the absence of a healthy market in direct, long-term energy contracts -- contracts of the type Enron had previously negotiated with California's public universities. And they blame Peace's bill, drafted more with an eye to PG&E's business plan than with any real concern for California citizens, for the gouging of the public.

"The problem is that it was an overdesigned system," says current PUC Commissioner Geoff Brown. "It was so intricately tied together that everything had to work perfectly, and it didn't."

Which was pretty much Enron's argument back in 1996.

During the months since regulators caught self-dealing Enron executives in multiple acts of financial fraud, the story of the Texas company's collapse has been offered as a parable illustrating all sorts of ideological agendas. I recently spoke with a Greenpeace representative who wished to be quoted describing Enron as an example of environmental malfeasance, even though Enron, a heavy investor in wind-, solar-, and natural gas-based electricity, was one of the energy industry's greener firms. California gubernatorial candidates Gray Davis, Richard Riordan, and Bill Jones, meanwhile, have attempted to tar each other by linking their opponents with Enron, only to have reporters discover that each man had consummated relations of one type or another with the Texas firm.

I don't mind the use of misleading hyperbole to promote the environment or squabbling among candidates. But when Steve Peace -- a state senator who has come to symbolize the corrupting links among corporations, campaign contributions, and political access -- is able to pass Enron off as the architect of his own perfidy, I think we've got a real rewriting-of-history problem.

The Enron collapse is certainly a cautionary tale; its lessons point to the need for greater regulatory oversight to prevent the kind of financial fraud its executives are accused of, and for better government supervision of private pension plans. Enron should not, however, be allowed to divert Californians' eyes from the money-corrupted swamp monster our own Statehouse has become.

During the past few decades campaign money has so infiltrated California government that we have a governor whose every act appears motivated by campaign dollars. We have a Legislature with no ambition greater than negotiating between competing campaign contributors. One horrifying result of the system we've created has been the electricity crisis and last year's $12 billion state utility bailout. The state budget shortfalls spawned by the crisis and bailout will cripple the education and health care of Californians for years to come. Steve Peace's revisionism, lazily accepted by a local daily newspaper, can only postpone the day when Californians wake up to the fact that our system of governance has turned into a real-life version of an awful horror film.