As California’s electricity crisis worsens, Gov. Gray Davis is pointing the finger of blame at out-of-state energy generators and the Bush administration. This is nonsense and has nothing to do with economics or reality. The truth is that California has only itself to blame for its current predicament, starting with a 1996 deregulation law that was fundamentally flawed.

The law deregulated the wholesale price for electricity paid by the state’s utilities but capped the retail price paid by consumers.

Most experts agree that had state government allowed retail rates to rise and allowed the utilities to enter into long-term contracts, the crisis could have been averted.

Instead, because they couldn’t pass on their wholesale costs to consumers, the state’s two main private utilities are $14 billion in debt, with one now in bankruptcy. California also failed to increase electricity supply in the face of surging consumer demand. No new major power plants had been built in 10 years because of regulatory and political roadblocks.

Although the state is now rushing to bring more plants on line, the supply gap won’t be bridged for the peak demand months this summer. Blackouts in California are a virtual certainty.

Failure to build more plants also means the state is at the mercy of the volatile daily spot market for electricity purchases, and must rely on aging in-state power plants. With 55 percent of the state’s plants more than 30 years old, many are forced to go out of service for maintenance, further increasing the chances of blackouts.

Davis has said, “Believe me, if I wanted to raise rates I could have solved this problem in 20 minutes.” Rather than displaying leadership, however, Davis did little for much of last year.

Of Davis’ non-performance, Dan Walters, respected columnist with the Sacramento Bee, says: “Despite later efforts by (Davis) administration spinners to rewrite history, it’s clear that Davis didn’t act last summer because he was afraid. He feared that long-term contracts (requested by utilities) could have been criticized if power prices dropped in the future, and that even a minor increase in rates would bring fire from consumer activists.”

When he did act this year, Davis crafted a massive and highly criticized program of government intervention. The state now buys electricity, with the utilities merely distributing it.

The current debacle is the result of California’s failure to allow the laws of supply and demand to work. For this, the state can only blame itself.

This article was distributed nationally on Knight Ridder News Service.

Lance Izumi is a Senior Fellow in California Studies at the California-based Pacific Research Institute for Public Policy. He can be reached via email at lizumi@pacificresearch.org.