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So Bush is in a bind--caught between his principles and moneymen on one side and the prospect of summertime blackouts, spiraling prices and mutinous legislators on the other. He needs a way out, and may have found one. This week a little-known agency called the Federal Energy Regulatory Commission meets in a special session, its first with two new Bush appointees in place. For the past year, FERC has ignored pleas for sweeping electricity price controls in California and other Western states. Last fall, at a congressional subcommittee hearing in San Diego, chairman Curtis Hebert suggested that consumers should learn to live with higher electricity prices. "If the truth kills Granny," he declared, "let her die." When things got really bad last spring, FERC limited prices only during the worst power emergencies. But this week FERC is expected to approve full-time price controls.
Why is FERC relenting? The argument against price caps is that they do infinitely more harm than good, as Jimmy Carter and Richard Nixon discovered when they allowed government bureaucrats to clog the gears of a free market. Price caps, says Energy Secretary Spence Abraham, are merely a formula for "an increase in the scope, duration and frequency of blackouts."
But Davis, along with virtually the entire California congressional delegation, Democratic and Republican, says the market now is anything but free. It is being manipulated, in their view, by energy companies that have wrung billions out of California consumers by squeezing supply to create artificial shortages. Why else, they say, would California power suppliers like Enron Corp.--a Houston-based trading giant headed by one of Bush's top donors and informal energy advisers--be seeing their revenues jump 281% in the first quarter? Even a respected free-marketeer like Alfred Kahn, the father of airline deregulation, has had enough. "The notion that caps automatically interfere with the increase of supply in the electric industry is absurd," he says.
Word of FERC's expected action comes as Californians are getting a break from towering prices. Last Wednesday, Davis says, the state paid only $29 million for its power--a sharp drop from the $100 million a day it spent in mid-May. While FERC credits its own emergency measures for the lower costs, Davis political adviser Garry South says it is more likely the result of unseasonably cool weather and power companies "trying to lay low until the posse passes by."
For Bush, the beauty of having the nominally independent FERC send an EMS team to Granny's house is that it allows him to keep his distance and take credit at the same time--to escape the bind without seeming to try. At a frosty meeting with California lawmakers last week, Cheney repeated his opposition to price controls even as he suggested help from FERC could be on the way. The White House believes in the free market, but it will crow this week that FERC acted because Bush had called on it to be vigilant. "He has not been looking for the short-term political fix but addressing long-term problems," says Gerry Parsky, who chaired Bush's California campaign. "But what he has done is tell FERC to do its job."