Gouger Gray Davis 
California's petulant governor ignores reality as he overpays for electricity

LANCE T. IZUMI Mr. Izumi is a senior fellow in California Studies at the San 
Francisco- based Pacific Research Institute.
On the surface, things seem to be going pretty good for Gov. Gray Davis with 
regard to California's electricity crisis. The governor has scored some nice 
publicity by switching on some new power plants. The weather has been 
unseasonably cool. His poll numbers are edging back up. Yet beneath this 
optimistic picture lie troubling problems. For example, Davis's argument that 
out-of-state power generators are responsible for the electricity crisis has 
been falling apart. For months, Davis has been claiming that private 
generators have overcharged California by $8.9 billion and demanded that this 
amount be refunded to the state. However, after a two-week mediation between 
state officials and the generators, Curtis Wagner, the federal government's 
chief energy regulatory judge, rebuked Davis's claim saying that such a huge 
overcharge "has not and cannot be substantiated." Further, while the 
generators may be liable to refund a much smaller amount to the state, 
perhaps $1 billion, Wagner said that generators are owed more money by the 
state than they owe the state in refunds: "Can a cash refund be required 
where a much larger amount is due the seller? The chief judge thinks not." 
Davis reacted to the judge's ruling by calling it a "raw deal" and by urging 
the Federal Energy Regulatory Commission to ignore the lack of evidence and 
the judge's conclusions and to "step up and provide the refunds we've asked 
for." Davis's position, as usual, is motivated purely by politics. Indeed, 
Dan Walters of the Sacramento Bee says that Davis is operating in a 
"melodramatic virtual world" de-linked from reality. 
Davis's blame-the-generators argument took another body blow when newly 
released documents showed that, on average, major out-of-state power 
companies such as Enron, Duke, Dynergy and Mirant charged less than the 
average prices paid by the state during the first three months of the year. 
California government utilities, on the other hand, such as the Los Angeles 
Department of Water and Power and the Sacramento Municipal Utility District 
(SMUD), charged the state much more for electricity than the out-of-state 
generators. For example, while Texas-based Enron, a favorite Davis whipping 
boy, charged an average $181 per megawatt hour, SMUD charged an average $330 
per megawatt hour. 
Davis responded to this revelation in typical political fashion. A Davis 
spokesman said that the governor had expressed his anger at "the generators 
who wear cowboy hats" and that "just because there are other entities that 
are charging us more doesn't change the fact that we are getting ripped off 
by companies from Houston, Tulsa, Atlanta or Charlotte." 
Yet, for all Davis' feigned indignation about consumers being ripped off, it 
turns out that he and his regulators are poised to ensure that business 
consumers are ripped off by state government. Davis has signed $43 billion in 
ill-advised long-term purchase contracts at rates above-market-price. The 
state must, therefore, ensure that enough business customers remain in the 
current state-controlled distribution system to pay for high-priced state 
power purchases. This is especially important to Davis since the high prices 
are borne disproportionately by business. Thus, Davis' regulators are set to 
eliminate "direct access," which allows businesses to shop for cheaper power. 
Who's the real gouger? No matter how much Davis points the finger, 
Californians are paying dearly for his political opportunism and bad 
policies.