SACRAMENTO, CA - With more blackouts occurring and with the California legislature passing his centerpiece $13.4 billion electricity bonds, Governor Gray Davis continues to find scapegoats for his disastrous energy policies. When Republican State Assembly members voted against the bond sale, Davis claimed that Republicans were obstructing the solution to the electricity mess. Sorry governor, if you want to see who’s preventing a real solution, just look in the mirror. Take, for example, Davis’s ill-conceived bond scheme.

According to the governor, the $13.4 billion bond sale is needed to allow the state to pay back the state general fund, which has been the revenue source for the government’s electricity purchases, and to create a fund for future power purchases into 2003. The plan, however, is based on unrealistic assumptions.

For instance, when he released documents to support the bond scheme, the governor forecast that 90 percent of the state’s alternative generators, which use non-traditional energy sources, would be back on line by June. Remember, California’s March blackouts were caused by these generators going off line because they hadn’t been paid by the debt-ridden utilities. Since the economic situation hasn’t changed, one-third of such generators remains off line. Jerry Bloom of the California Cogeneration Council says that Davis’s assumption that nearly all alternative generators would be back on line by next month “is complete lunacy at this point” and “simply does not reflect the reality of the market.” Bloom concludes that “It shows once again that the governor is not listening.”

Davis also assumes that the state can buy electricity on the daily spot market at prices way below the prices it has been paying. However, only an economic illiterate could believe that the higher demand for electricity during the summer would not result in higher spot prices. Sacramento Bee columnist Dan Walters points out that the futures market for electricity indicates that wholesale power prices will jump 50 percent by midsummer.

Davis claims that the long-term contracts he has signed will help the state through the summer. Yet, his own aides told a legislative hearing in April that the state will have to purchase as much as 70 percent of its summer electricity needs either through the spot market or through short-term contracts. Democratic state Senator Joe Dunn suggests that the state will pay up to $150 million a day for electricity during the summer versus the current $70 million a day.

Dan Walters notes that if Davis’s assumptions are wrong, “the state could be spending as much as $5 billion a month by midsummer, and even the proposed bond issue, the largest in the history of the state, would be consumed within a few weeks.” Meeting with Davis aides last month, Wall Street bankers said that the state would have to borrow up to $23 billion before the crisis was over.

As Davis drives California up a blind alley, he ignores realistic solutions such as real-time retail pricing, which charges consumers a market-determined rate at the precise time of use. Experts, including Nobel Laureate economist Daniel McFadden and UC Energy Institute Director Severin Borenstein, advocate real-time pricing to induce vital conservation among consumers. That Governor Davis ignores such advice demonstrates why he is the problem, not the solution.

- By Lance T. Izumi