Davis Declares Official End to California Energy Crisis

Gov.-elect Arnold Schwarzenegger has said he hopes to sell California on the virtues of electricity deregulation again, despite the fiasco the first time around.

Published: 14-Nov-2003

e years and billions of dollars after California's botched attempt at electricity deregulation led to blackouts and bankruptcies, Gov. Gray Davis has declared an end to the energy crisis.

The recalled governor issued a proclamation Thursday ending the state of emergency he declared on Jan. 17, 2001, as wholesale electricity prices hit record highs and California suffered rolling blackouts. The crisis, which aggravated the state's budget deficit, played a key role in Davis ouster in last month's recall election.

The utilities had been struggling since May 2000, when wholesale prices suddenly soared but retail rates remained capped under California's 1996 deregulation rules.

The 2001 state of emergency let the state step in to buy energy for customers of three utilities that were nearly bankrupt and unable to purchase electricity on their own.

The emergency powers allowed Davis to seize power contracts, streamline the application process to build new power plants, demand rebates for consumers who conserve energy and tell shopping centers to reduce their outdoor lighting.

Legislation eventually allowed the state to buy $12 billion in electricity, repaid by revenue bonds that will be paid by customers, and to enter into 56 long-term energy contracts, which totaled $43 billion.

The state has contested the validity of many of the deals because they were signed when wholesale prices were at their peak. Many of the contracts have since been renegotiated at lower prices and for less power.

Though Davis said this is an official end of the energy crisis, California is still trying to recover nearly $9 billion it claims it was overcharged by energy companies like Enron who manipulated the state's newly deregulated market.

The state also still must build more renewable energy, improve transmission lines and lower electricity rates for customers who are still paying inflated costs for power, Davis said.

Gov.-elect Arnold Schwarzenegger has said he hopes to sell California on the virtues of electricity deregulation again, despite the fiasco the first time around.

Schwarzenegger's energy advisers say the new deregulation plan would avoid previous pitfalls, such as capping retail electricity prices without capping wholesale prices, and barring major utilities from signing long-term electricity contracts as a hedge against soaring prices.

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