Bush speaks at the Department of Energy
It's not at the White House, just nearby — at the Federal Energy Regulatory Committee (just call it FERC), negotiators for the State of California and the Companies of Houston have closed their briefcases after spending all the allotted 15-day talks in utter disagreement as to the events (and price tags) that comprised the so-called California power crisis.
To sum up, California says Houston owes them $8.9 billion in price-gouging of its utilities — which it had to bail out. Houston says California should come back either never or when the utilities have settled their tab with the power companies, somewhere around $4.5 billion. Both sides use different math, different records, different allegations that nobody can seem to prove one way or the other. The designated referee, veteran federal mediator (and FERC chief judge) Curtis L. Wagner, wasn't getting paid to find and declare the truth — he was just mediating a private negotiation, and it was a doozy.
Who owes who what?
So at the end of it all, Wagner mentioned that he had an offer on the table from power generators, including the "Big Five" — AES/Williams, Duke, Dynegy, Mirant and Reliant — for oh, $700 million, which clearly did not satisfy the California people. But perhaps for the front page, Wagner shrugged and took a more generous guess: Maybe a refund to the state of perhaps $1 billion was due, but there was the matter of the utilities' unpaid bills.
Comparing it to a car accident in which he hit a man who owed him a ton of money — and thus would receive only a reduction in the size of his debt as damages, Wagner asked, "Can a refund be required when overcharges are less than the outstanding bill? The case judge thinks not." Citing the Rashomonic mathematics and closely guarded ledgers in the case, however, Wagner said he would recommend to the FERC that it conduct a full evidentiary hearing and take its own accounting.
So what was the result? Both sides claimed victory.
This thing, in other words, just went back to sleep. The FERC decided to let Wagner take a whack at the dispute on June 18, the same day the agency upshifted its "price mitigation plan" to 24-hours-a-day, 7-days-a-week wholesale price caps on the electricity markets of "the entire 11-state Western region." That little number was widely seen to give Bush some badly needed cover, as FERC was an independent agency doing the politically smart thing for apparently pure motives. Bush the pure-bred capitalist could look graceful simply by not squealing like a pig.
This one's a little more explosive. First, the calendar: Wagner has seven days to submit his formal report to Chairman Curt L. Hebert, a Bush appointee, and the rest of the five-man FERC board. Three more of whom are Bush appointees. If, as seems likely, the FERC bosses take Wagner's advice about getting a better class of advice and holds the hearing, that's another 60 days on top of that. At which point the FERC can start think about offering a decision.
Say the FERC takes another month after that, and the three Bush appointees on the five-member committee do what they were nominated to do and give the benefit of the doubt to the invisible hand. Cut a deal like Wagner had in mind — a little victory for both sides. Bush gets another winning setback.
But Gov. Davis has a different idea
Davis, however, is up for re-election in 2002 — he needs to draw blood. If he doesn't like the FERC's take on things, he says, he'll sue. In a real court. For $20 billion. For as long as it takes.
"We're in a war with generators, mostly out of state, that are trying to bleed us dry," Davis said back home — where he was proudly cutting the ribbon on a brand new Bay Area power plant. "Clearly they don't have the best interests of Californians at heart, and they're trying to ship every dime out of our state and back to Houston, Texas."
The generators were publicly philosophical about Wagner's mixed bag, and seem resigned to the fact that the law always tries to take a bite. But as Davis gets his lawyers together at the border, they must know that Davis isn't after a negotiated settlement — he wants to hit them for the whole $20 billion, total surrender, with all the voters watching.
What if he wins — or at least is fighting hard — in the fall of 2002, or 2004? Twenty billion is a sum which, Davis will not hesitate to point out, could have been sloshing around in the nation's biggest economy during the nation's first good look at a recession in ten years if not for somebody having gotten screwed. By Houston. And the White House.
In Houston's view, of course, Davis simply screwed up, and is using them to hide his shame. In fact, on closer examination "Houston" isn't really even Houston. According to the LA Times, state records show that over the first three months of this year — some of the worst of the crisis — the power generator charging the most on average for a megawatt-hour, at $498, was Powerex, the trading arm of a Canadian public utility. After Powerex was a subsidiary of San Diego Gas & Electric's parent company — third-highest, at $292, went to the Los Angeles Department of Power and Water.
Dynegy, Duke and Mirant averaged $146 to $240.
"You have to look at the whole picture," Davis spokesman Steve Maviglio explained. "The governor was expressing his displeasure with the arrogance of the generators who wear cowboy hats," he said. "Their profits were 100 percent to 400 percent above last year... Just because there are other entities who are charging us more doesn't change the fact that we are getting ripped off by companies from Houston, Tulsa, Atlanta or Charlotte."
Davis knows taking on Bush and the Republicans through his rich Houston friends is his only shot to stick around in California — when it's all a painful memory, the governor will need a villain besides himself. Nationwide? Putting aside the new tilt that a Republican slaughter in California would do the House, two-thirds of America believe Bush and Big Energy are in bed together, and cooked up this whole crisis as a moneymaking scheme. If a judge agreed and wrote Davis a $20 billion check At the very least, it gives the Democrats a nice one-two punch with the tax cut.
To Bush, it's just another potential explosion.