Very thought provoking post. Grampsand the WaspMan need to read this one...
1965And this:California energy-crunch news, continued: there was a superbly expressive photo in the San Francisco Chronicle of Gov. Gray Davis, 64, and John Bryson, chair of Edison International. The governor announced the April agreement that the state would purchase transmission lines from Southern California Edison for $2.76 billion.
What Enron could learn from Gov. Davis, EdisonCopyright 2002 Union-Tribune Publishing Co.
By Thayer C. Scott
March 20, 2002
Many of the elements of the Enron debacle should look depressingly familiar to Californians as we consider the fortunes of one of our own giant energy companies.
Like Enron, this publicly traded corporation had close political, financial and personal ties to its host state government. Like Enron, this company badly bungled deregulation and miscalculated on the future of energy markets. And like Enron, this company turned to its friends in government as it teetered on the verge of bankruptcy.
But where Enron got the proverbial stiff-arm from the Bush administration in its moment of despair, this company got a helping hand from its state's governor and his aides. The company in question is Southern California Edison, and its benefactor is Gov. Gray Davis.
The Texas ties between Bush and Enron from baseball outings to campaign contributions have been reported and commented on ad nauseum. Enron, as a once-major energy company, certainly had its views considered when the Bush administration considered the broad outlines of energy policy. But when it came to their very survival, all Enron's connections got them was a door in the face.
Meanwhile, California's much more blatant version of politicians bedding down with corporations and actually bailing them out has been at best glossed over and largely forgotten.
Edison, like Pacific Gas & Electric and Sempra Energy, was crippled by a combination of skyrocketing wholesale energy prices and an inability to raise retail electricity rates. But even before the crisis hit in the summer of 2000, Edison's future was looking shaky. Its unregulated subsidiary was posting large losses after getting huge initial cash infusions from the sale of Edison's power plants. Furthermore, Edison was also losing large corporate customers like TRW and signing very few new ones.
PG&E's relationship with Davis would worsen as the crisis deepened, and it would ultimately declare bankruptcy and throw itself at the mercy of the courts. By contrast, Edison would enlist Davis in attacking out-of-state generators and federal regulators. When Edison faced financial oblivion in 2001, Davis would come to the rescue, a development that came as little surprise to those who had tracked the history of this governor and the century-old electricity giant.
Davis probably never called Edison International CEO John Bryson "Johnny Boy" (Bush had a similar nickname for Enron CEO Kenneth Lay) in their private moments. But the two Jerry Brown alumni and the key members of their respective regimes go back a long way.
Davis and Bryson attended Stanford together in the early 1960s. They both served Gov. Jerry Brown, Bryson as president of the Public Utilities Commission and Davis as Brown's chief of staff. Lynne Schenk, a former Brown Cabinet secretary, worked as an Edison consultant in the late 1980s and later became Davis' chief of staff. Both Davis and Bryson have close ties to (current anti-Enron crusader) Rep. Henry Waxman's Los Angeles political machine. Davis would take $235,000 from Edison during the 1998 gubernatorial election year, almost three times the amount he raised from the other utilities combined. (Davis' second highest contributor, incidentally, was Enron).
In March 2001, with Edison on the brink of collapse, the Davis administration would agree to a rate increase-and-rescue agreement for Edison that was almost universally derided as a bailout. By May 2001, Edison and the Davis administration would share both media consultants (former Gore aides Chris Lehane and Mark Fabiani) and lobbyists (former Sen. S. Bennett Johnston). Davis also had picked former Edison executives to negotiate long-term contracts with generators and rescue plans with utilities; manage those long-term contracts; and oversea the construction of new energy plants. Lehane would tell an LA Weekly columnist "the governor and Edison have the same energy policy." Much like CNN's "zipper" ad touting Paula Zahn's looks over her intellect, Lehane's comment was a priceless example of accidentally blurting out the obvious.
Desperately needing the semblance of solution, Davis would pursue legislative approval of the Edison package that summer with such a frenetic intensity that many Capitol veterans thought him unhinged. A Public Utilities Commission dominated by Davis appointees would ultimately agree to a settlement that allowed the utility to levy record price hikes on ratepayers to pay down a $3 billion debt. On Monday, Edison's stock price was $17.07 per share. Enron has been delisted.
Davis' Edison rescue may haunt him in this November's gubernatorial election, as several of the former Edison people he hired to shape energy policy are currently the targets of SEC investigations for insider trading. At this time, however, Davis appears oblivious to his vulnerability on Edison. His recently announced latest nominee to the PUC is none other than Michael Peevey, former president of Southern California Edison.
Meanwhile, congressional Democrats and various pundits are straining to tar anything remotely Republican with an Enron brush. If they are seeking a real, versus imagined, "quid pro quo," they should begin with the California governor's office.
Scott is a Republican consultant with MB Associates, a Sacramento-based research and communications firm.