by Lance T. Izumi, Fellow in California Studies
Pacific Research Institute
July 24, 2001

Announcer lead: Time for Perspectives. Lance Izumi says that while some of Gov. Davis’ electricity problems are easing, others are growing.

On the surface, things seem to be going pretty good for Gov. Gray Davis with regard to California’s electricity crisis. The governor has gotten nice publicity switching on some new power plants. The weather has been unseasonably cool. His sagging poll numbers are edging back up. Yet, for Davis, just beneath this optimistic picture lies some very troubling problems.

For example, Davis’ argument that out-of-state power generators are responsible for the electricity crisis has been falling apart. A top federal judge criticized Davis’ charge that private generators overcharged Californians by $8.9 billion saying that there was nothing to substantiate that claim. Further, documents show that on average major out-of-state power companies charged less than the average prices paid by the state during the first three months of the year. Indeed, California government utilities such as the Los Angeles Department of Water and Power charged the state much more for electricity than the out-of-state generators.

In addition, Democratic State Controller Kathleen Connell says that Davis’ plan to sell $13.4 billion in state bonds to pay for electricity seriously underestimates the cost of future government electricity purchases. The state controller also says that long-term purchase contracts negotiated by Davis will cost more than the governor claims and will lock in high prices, a criticism supported by economists.

Finally, Republican Secretary of State Bill Jones, a candidate for governor, has charged conflict of interest against a number of energy consultants hired by the Davis administration. The consultants owned stock in power generation companies during the time of their state contracts. Yet, many failed to complete financial disclosure statements until six months after they went to work for the state. Belatedly, Davis has ordered the consultants to sell their stock, but it’s still undetermined whether state electricity purchases were tainted by these possible conflicts of interest.

What these developments show is that Gray Davis is far from being out of the woods and that the forest is very big.

With a perspective, I’m Lance Izumi.

Lance Izumi is the Director of Center for School Reform at the California-based Pacific Research Institute for Public Policy. He can be reached via email at lizumi@pacificresearch.org.