----- Forwarded by Maureen McVicker/NA/Enron on 01/12/2001 02:08 PM -----

	Karen Denne
	01/12/2001 09:45 AM
		 
		 To: Jeff Dasovich/NA/Enron@Enron, Susan J Mara/NA/Enron@ENRON, Sandra 
McCubbin/NA/Enron@Enron, Paul Kaufman/PDX/ECT@ECT, Linda 
Robertson/NA/Enron@ENRON, Peggy Mahoney/HOU/EES@EES, Maureen 
McVicker/NA/Enron@Enron
		 cc: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, James D 
Steffes/NA/Enron@Enron
		 Subject: California Power Failure

Please see attached editorial, which ran in yesterday's New York Times and is 
in today's Houston Chronicle.  We are distributing to all key media who have 
been covering California energy.

SF team -- Please distribute to all legislators, trade and industry 
organizations,  etc.
Linda -- Please forward to Quinn Gillespie to distribute in Washington.
Maureen -- Please distribute to the internal GA team.

Thanks.
kd 


Editorial Desk; Section A
Essay
California Power Failure
By WILLIAM SAFIRE

01/11/2001
The New York Times
Page 31, Column 1
c. 2001 New York Times Company

LOS ANGELES -- In the past decade, California has become the most Democratic 
state in the nation. It has a Democratic governor, two liberal Democratic 
senators, and both houses of its legislature are firmly in Democratic hands. 
Not for nothing is it called the Left Coast. 
Then why, Californians now ask themselves, is their state the most troubled 
in the nation? Bad enough that Hollywood's writers are preparing to strike; 
worse that speculators in Silicon Valley start-ups are watching their stack 
of chips dwindle; worst of all is the unforeseen electricity shock that is 
making the state's hair stand on end.
The price of electricity is soaring, yet the big electric utilities are 
threatened by bankruptcy. Who's to blame? 
The chosen villain: deregulation. As soon as cruel market forces were allowed 
to work, cry liberal voices, those heartless capitalists drove up prices. 
Bring back the cool, calm days of inefficient monopolies under government 
control. 
But in fact, the first villain is botched deregulation -- not as bad as in 
Russia, but 'tis enough, 'twill do. 
California's politicians deregulated halfway, which is the worst way: 
wholesale prices were freed from controls, but retail prices were not. 
Consumers remained seemingly protected, but the utility companies -- which 
foolishly thought wholesale prices would go down forever -- were enabled to 
buy on the spot market. Legislators believing they were protecting consumers 
forbade long-term contracts, which are hedges against sudden price 
fluctuations. 
This halfway dereg ran smack into the inexorable law of supply and demand. 
The good times of the 90's sharply increased demand for electric power. But 
all sorts of obstacles were put in the way of increasing the supply of that 
power. 
Result: upward pressure on prices, calls for rationing, utilities going 
broke, government intervention that frightens off private investment, and the 
danger of an economic Big One in the state responsible for 13 percent of the 
nation's product. 
The unspoken issue in this bastion of liberalism is ''nimby'' -- the real 
villain in the current supply crisis, that says ''not in my backyard'' to 
power plants. In San Jose, epicenter of the computer industry's drain on 
electric power, New Economy voters recently rejected a new power facility 
that offended their aesthetic sensibilities. Red tape and purple rhetoric are 
the reasons no major power station has been built in California in 10 years. 
Contrary to popular belief, electricity does not come from the socket in the 
wall. The steady flow of low-cost power comes from factories that convert 
energy from other sources into the stuff that makes toasters pop, 
air-conditioners wheeze and computers beep. Unless energy is dug up and 
produced in real places and transmitted through real lines, nothing comes out 
of the wall. 
Environmentalists recoil in horror at suggestions of nuclear power, now a 
safe and clean source of electricity, or the use of cleaned-up coal to lower 
the price of natural gas that generates it. Reducing pollution sensibly is 
laudable, but clean-air extremists become local heroes without telling 
constituents the danger of loss of Intel jobs and cheap electricity's 
household convenience. 
The answer is not re-regulation, nor more halfwayism, nor federal bailout. 
When Gov. Gray Davis of California raced to Washington, D.C., to ask for 
wholesale price controls, he found Bill Clinton too busy carving up Jerusalem 
to mediate; Clinton-appointed federal energy bureaucrats offer only 
palliatives, with photo op to follow. 
Davis's panicked proposal to build state-owned plants (in Nevada? On the 
moon?) and his threat to seize the assets of ''price gougers'' may please 
some new breed of dot-communists. But such populist pap destroys private 
incentive to invest and is hardly the path for a presidential hopeful 
professing to be a centrist. 
After short-term action to alleviate hardship caused by past and present 
political-industrial blindness, our biggest state should avoid regressing 
into more stultifying regulation and instead get out of the way of 
stimulating supply. 
Why do I sound like a reformed drunk on this? Because I wrote the Nixon 
speech imposing wage and price controls. They never work in peacetime. Never.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.