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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

Wednesday, Feb 13 2002
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Actor/producer/writer J. Stephen "Rock" Peace's 1978 film Attack of the Killer Tomatoes! set such a high standard of campiness that for two decades nothing topped it -- not Return of the Killer Tomatoes! (1988), not Killer Tomatoes Strike Back (1990), not even Killer Tomatoes Eat France! (1991).

During the ensuing years Peace became a state senator (D-El Cajon) best known for drafting the energy-restructuring bill that preceded the 2000 California electricity disaster. As surreal as that production was, Peace didn't quite re-create Tomatoes' genius for defying plausibility.

Then, 24 years after Tomatoes' release, Peace finally outdid himself; on Sunday, Feb. 3, 2002, Peace's office contributed to a front-page article in the San Francisco Chronicle that blamed the nation's current catch-all scapegoat, Enron Corp., for hoodwinking California into passing a disastrous 1996 energy-deregulation law that Peace created.

The article opened by quoting Peace aide John Rozsa as saying, "Enron's fingerprints are all over all of the dysfunctional parts of the market," in one short sentence negating the prevalent view that it was Peace and his fellow lawmakers, with the help of big-money lobbyists for PG&E, Southern California Edison, California manufacturers, and the state's labor unions, who actually bear responsibility for California's electricity debacle.

Under the headline "California system was easy pickings/Enron helped build market, then exploited weaknesses," Chron writer Mick Martin went on to suggest that Peace, PG&E, and the rest of the campaign contributors who helped the senator draft the bill witlessly allowed Enron lobbyists to fool them into spawning the California energy disaster. Peace has been telling reporters different versions of this story for years. Last year, Peace even used campaign donations to have his Tomatoes production company, Four Square Productions, make a video absolving him of blame for the electricity crisis. He played the video for a while on his state Senate Web site. No word yet on when it hits theaters.

The video, the Chron article, and Peace's other efforts at rewriting history are ludicrous, of course. Peace is right in telling reporters that California's energy-restructuring debacle was a clear example of the corrupting, destructive role money and lobbyists play in California politics. But the culprit wasn't that Texas bugaboo Enron. During the years leading up to the 2000 electricity fiasco, it was California companies and labor unions that gave money to California politicians, who in turn made policy based on contributors' wishes. The grossly mutated energy law that eventually passed the Legislature threw our state into financial disaster. California suffered an electricity catastrophe because it had become a campaign-finance house of horrors. The idea that Steve Peace might enlist hyperbole surrounding the unrelated collapse of Enron Corp. to explain away his own role in the electricity debacle, and the corrupted mess our Statehouse has become, is not merely unbelievable. It's as bizarre as the idea that killer tomatoes might someday take over the world.


For lobbyists who represented companies in the electricity business, the summer of 1996 was surreal in a way that is unmatched outside low-budget scary movies. Legislative aides present during that time recall oceans of Gucci shoes topped by a land mass of panicked lobbyists. The deregulation law was the highest-stakes piece of legislation to come along in decades, and the special-interest sharks were swirling. Naturally, legislators involved with the bill, including Peace, saw campaign contributions from electric utilities triple during the deregulation years.

There were differing motives for manipulating Peace's forthcoming electricity law. Peace ally PG&E Corp. wanted to be paid swiftly, and in full, for the $16 billion worth of nuclear power plants and other bad investments it had made during the regulated-monopoly years. PG&E was also enthusiastic about a plan encouraging it to sell off billions of dollars of old power plants. The company was undergoing a corporate restructuring aimed at transforming PG&E from a California-based utility into a global energy giant along the lines of Enron. According to this PG&E corporate pipe dream, the California utility would be fattened with deregulation cash, then would buy up electricity and gas companies and trading operations around the globe. It had even dallied with Bechtel in an overseas private-energy venture.

California manufacturers wanted cheap, reliable energy. Labor unions wanted to keep their old public-utility jobs. Lobbyists for these interests began to converge on a system imported from Britain that would channel the vast majority of wholesale energy purchases through a single regulated trading floor, similar to a commodities exchange.

Enron opposed many aspects of this plan. The company had negotiated successful direct-power deals with the University of California and the San Francisco Building Owners and Managers Association, and it saw the trading floor/nuclear bailout- focused system as an obstacle to more such direct, long-term contract deals.

Enron's lobbyists supported separating the Independent System Operator, the state agency that would manage the electricity grid, and the Power Exchange pooled trading floor into two agencies. The existence of a single agency might create conflicts of interest, Enron said at the time.

Though Peace's electricity bill involved highly technical issues involving electricity infrastructure, untested commodity markets, and massive, widespread economic reorganization, he seemed to view his job as less a task of expertly crafting a restructured electricity market and more a matter of reconciling big-moneyed political interests.

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.

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.

About The Author

Matt Smith

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