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In
a city where bad ideas never die, Sacramento is once again host
to a variety of plans for the government takeover of
California's power system. The private sector, it is said, has
done such a terrible job of providing electricity that
government must now step in to save the day. Thus, the
Legislature is awash in proposals to spend billions of dollars
of public money to acquire existing power facilities. Fifteen
billion dollars has already been authorized for this purpose,
and an additional $10 billion is pending in the Senate.
Meanwhile,
Gov. Davis is losing about a $1.5 billion a month day-trading in
the electricity market. The irony is that after the expenditure
of as much as $25 billion for "public power,'' not a single
inch will have been added to the transmission lines, nor a
single watt to the generating capacity of California.
The
root of California's crisis is a catastrophic shortage of
electricity. In a shortage, prices rise or blackouts occur. To
reduce prices and avoid blackouts, the only permanent solution
is to increase the supply. Merely changing the ownership of
existing facilities leaves Californians with exactly the same
shortage, only billions of dollars the poorer for it. Government
takeover advocates argue that at least a government power
authority will protect consumers against price gouging and poor
management.
Unfortunately,
government power authorities don't insulate against price
gouging. The biggest price gouger in this entire crisis has been
the Los Angeles Department of Water and Power, which was
generating electricity for $51 per megawatt hour and selling it
back to California ratepayers for as much as $1,400.
Nor
does a government takeover assure better management. Just a few
years ago, the LADWP was buried in $7 billion in debt. The
Sacramento Municipal Utilities District was a managerial
laughing stock, having squandered hundreds of millions of
dollars for a nuclear plant it barely used.
"Say
what you will,'' the government takeover advocates reply,
"when push came to shove, the municipal utility districts
of California are in great shape, while the private utilities
are a basket case.'' But one needs to look at the reason. Ever
since the state reorganized the electricity market in 1996, the
municipal utility districts were allowed to trade in a free
market, while the private utilities were forced to buy power
exclusively in a Soviet-style power exchange where the highest
bid during an hour set all prices.
The
municipal utilities were able to retain their generators.
Government forced the private utilities to sell theirs. The
municipal utilities were able to enter into long-term contracts.
Government prevented the private utilities from doing the same
thing. The municipal utilities were able to negotiate the lowest
prices available for power. Government forced the private
utilities to pay the outlandish prices on the government's power
exchange. The municipal utilities were allowed to adjust their
rates to reflect the actual cost of power to consumers.
Government forced the private utilities to sell at astronomical
losses.
The
final argument is simply an ideological one: that power is just
too important to be left in private hands. Really? Food is a
great deal more important and private hands have kept this
nation well fed for centuries. Picturing the Department of Motor
Vehicles running the local supermarket should sober even the
most euphoric of the government takeover advocates.
California's
Independent System Operator is predicting a 6,000-megawatt
shortfall this summer. When there is no electricity on the
transmission lines, it really won't matter who owns them. During
the hottest hours of the hottest days of the year, when as many
as 6 million homes are without electricity, it may begin to dawn
on most people that socialism doesn't work any better in
California than it did in the Soviet Union.
Tom
McClintock is a state Senator from California. See his
website at http://www.tommcclintock.com.
You can e-mail him at [email protected].
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