California power outage

National danger: If not contained, business failure from blackouts and shortages would cause recession.

January 25, 2001

THE STATE of California made its bed.

It enacted partial electric power deregulation - wholesale but not retail - in the hope that a permanent supply surplus would always keep price down.

California grew its economy, increasing power use by one-fourth in the past five years while building no generating capacity in a decade.

California was legally, structurally and emotionally unprepared for a shortage. Then the rains stopped in neighboring states, on whose hydroelectric power generation California arrogantly depends.

But merely condemning California to lie in that bed will not do. Aside from the cruel indifference to human suffering, it would harm the national interest.

California's economy is more than one-tenth of the nation's, and is one-sixth of the world's. No recession could be contained within its borders. Any mushrooming of business failure, bad debt, unemployment and investment loss from a collapse of the power system in the greatest state would spread to all.

Another national interest is the commitment to creating power markets. States behind California need models of getting it right.

So President Bush was correct to extend for two weeks the federal orders requiring power producers outside the state to sell surplus electricity and natural gas to California. This goes against his instinctive opposition to intervention. But he errs only in insisting that two weeks will end it.

This is a stopgap. So is California's state purchase of electric power that two big utilities lack the credit rating to buy.

Getting the fundamentals right requires a longer cushion. And it requires California politicians to drop their rigid commitment to steady retail prices. How long can they require investor-owned utilities to sell power at half its cost?

Democratic Gov. Gray Davis owes the nation a speedy end or relaxation of retail price regulation. In times of shortage, consumers pay more.

California must expedite the permitting of power plant construction. An environmentalism that merely exports degradation to other states is no environmentalism at all. A price must be paid for population influx, economic growth and lifestyle comforts.

The tradeoffs required are clear. For national help through crisis, California must put its own house in order. That can start only with an admission that something needs fixing.

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