President Bush talks to California Gov. Gray Davis in Los Angeles
''I explained to the president if he were governor, like I, he would be doing everything in his power to fight for the 34 million people who are getting a raw deal,'' a stone-faced Davis said at a post-meeting press conference that the president did not attend.
Responding later was White House chief of staff Andrew Card, who attended the meeting. Bush, Card said, ''reiterated his opposition to price caps, and the governor reiterated his interest in price caps.''
Bush himself was apparently satisfied to stand on comments he'd made at stump stops earlier in the day talking down the federally-ordered price caps on wholesale electricity prices that Davis so badly wants. "Price caps do nothing to reduce demand, and they do nothing to increase supply,'' Bush said, adding that price limits are politically appealing but create ''more serious shortages and therefore, even higher prices.''
For Bush, now it's on to two more days of campaign-style events in California's more Republican-friendly enclaves. Tuesday he passed out one consolation prize — he'll ask Congress to kick in an extra $150 million into the $300 million already budgeted for part of the Low Income Home Energy Assistance Program.
For Davis, the only thing left is to pull the trigger on a proposed lawsuit against the FERC — "I'm going to pursue every recourse available to me" — and try to force the Bush-stacked federal power regulatory board to break down and admit what Davis has been repeating for months: That Texas energy companies have been gouging California utilities as deeply as the traffic will bear. Which in the Blackout State, is pretty deep indeed. For Bush, the only thing left may be to start the process burying said lawsuit.
To Cap Or Not To Cap
Let's review: California underwent electricity deregulation a bit half-heartedly, freeing up prices on the wholesale level — the price at which a California utility like, say, Pacific Gas and Electric buys a megawatt from an energy producer like, say, Enron. But the plan left caps on retail prices — which limited the way PG&E would get its money back from consumers.
This was supposed to protect California ratepayers — and California politicians — from glitches in the marketplace (like, say, not enough electricity) until supply and demand came into line and everybody got the lower electricity rates they'd been promised by legislators.
But the glitches broke the camel's back. In the Silicon Valley days of the late 90's, demand — unfettered by those nasty higher rates — spiked. Supply — slowed by California's strict enviro-regulatory gatekeeping — stayed pretty constant. The utilities went bankrupt. The state started buying power on its own, reluctantly let rates float up a bit, and basically has been biting its nails ever since, waiting for the whole thing to blow over.
Which it will, as soon as two years from now, when enough power suppliers — lured into the market by those higher wholesale rates — get enough power plants built to level out the market again. Bush says capping wholesale prices now would delay that gold rush and messes up the free-market mechanism, just like the retail caps did this winter; Davis says reasonable caps — cost plus 30 to 40 percent profits — would merely keep things tolerable until 14 new Davis-approved power plants come on line.
The Political Component
Bush's approval rating stands around 57 percent; Davis' is at 46 percent. But 54 percent of Californians rate Bush's handling of energy troubles as poor or very poor; just 38 percent said the same of Davis. And 74 percent of Californians, for whom deregulation has been an unexpectedly rocky ride, support some kind of temporary price controls.
And Davis has a bogeyman to blame; not just Bush — who he's called "AWOL" on the price-caps issue — but Big Energy companies, who Davis has accused of fleecing Californians with trumped-up shortages, exorbitant whatever-the-market-will-bear wholesale rates and just plain profiteering, all at the expense of his constituents. Big Energy companies that just happen to be based mostly in Texas.
"What we're seeing is a massive transfer of wealth from California to Houston," Davis said Monday.
If that makes it a grudge match, the Bushies haven't been letting on. The unwavering line out of the White House is that Bush has had California's problems very much on his mind all along, and not just to help sell his tax cut and energy plan. But he's going to have to stick to his principles — not go for the "short-term political fix," as advisers like to term it — and cave into price caps that go against every free-market fiber of his being. (Or, as Dick Cheney put it more succinctly, "We think that's a mistake.")
But with Bush wiping his cowboy boots on his carpet, Davis is upping the ante, making the rounds of the news channels to calmly insist that keeping California's power market "fair and reasonable" is not just a matter of politics but a matter of law. What's more, he notes that the Federal Energy Regulatory Commission has already found sufficient flaws in the current market to justify price caps, and argues that if Bush stacks the new appointee deck to find otherwise, he'll be derelict in his duty. (Davis is also fond of quoting Alan Greenspan, who warned that a recession in California could bring the rest of the country down with it.)
Tuesday, in fact, Davis was threatening to sue.
So Bush, with the 2002 congressional elections looming, finally came out all the way out west to do a little care and feeding. He'll spend the rest of his trip stumping, pressing flesh and deflecting blame back onto the shoulders of the Democratic governor of the state that Al Gore carried by a million votes.
But he's done talking to Davis.