International Socialist Review, February–March 2001

Jessie Muldoon & Todd Chretien

California’s Energy Crisis:
Power to the People?

From International Socialist Review, Issue 16, February–March 2001.
Downloaded with thanks from the ISR Archive.
Marked up by Einde O’Callaghan for the ETOL.

THE LIGHTS are out in California. Rolling blackouts have cut electricity to millions. Only this time, it’s not the San Andreas Fault that’s to blame. It’s the free market.

A year ago, electricity cost roughly 3.5 cents per kilowatt-hour on the wholesale market. Today, that same amount costs upward of 40 cents. Why? Back in 1996, energy companies and big businesses showered millions of dollars on California politicians, convincing them to vote unanimously to “deregulate” the publicly owned and managed state electrical utility system. The state would no longer set prices and supervise the industry. In exchange, the energy companies promised Californians lower prices and cleaner power brought on by free-market competition.

Instead, a handful of energy profiteers have made a killing, while millions of Californians suffer higher rates and the harmful effects of power outages. The results of the power crunch have been devastating to ordinary people. Nathaniel Goodwin, who is 73, has emphysema and needs an electrical oxygen concentrator to breathe. As rolling blackouts spread across California, he stocked up on crackers and peanut butter, arranged for a battery-powered backup, and hoped for the best. “I live by myself and I’ve got to have my oxygen,” he told a reporter. [1]

”We’ve got elderly folks with arthritis who have to have heat. Many of them have medical devices they need to live and no one knows what will happen when the electricity is turned off,” said Marie Harrison, a community leader in the Bay View Hunters Point district of San Francisco, which is predominantly Black. [2]

The utility companies claim that hospitals and fire stations will not be affected by the blackouts, but two hospitals – Valley Convalescent Hospital in Watsonville and Community Medical Centers in Fresno – suffered outages. Across the state, workers are paying the price for deregulation. California Steel Industries of Fontana, the largest steel plant on the West Coast, sent 400 workers home without pay because of skyrocketing electrical costs. The Miller Brewing Company plant in Irwindale laid off its whole workforce for a week without pay. [3]

Schools have lost power or have been forced to cut back on heat, leaving tens of thousands of children shivering in the dark. Contrary to popular belief, temperatures during California winters often hover between 40 and 50 degrees, and few buildings have proper insulation. Meanwhile, the crisis shut down some of California’s biggest oil refineries, which could quickly lead to a substantial hike in prices at the pumps. A dairy farmer put it this way: “This problem has the potential to be substantially more devastating than any earthquake we’ve seen.” [4]

One economist estimated that the state lost $1.7 billion in wages, sales, and productivity in just one week of blackouts. [5] And there is no end in sight. The Independent System Operator (ISO), the state-appointed agency that controls the California power grid, warned that Californians should get used to rolling blackouts for at least the next two years. [6]

This article explores how deregulation and the free market are behind the crisis, and why we should fight for public power as a solution.

How do you spell “scam?” D-E-R-E-G-U-L-A-T-I-O-N

California’s deregulation of electrical utilities arose as part of a national – and international – neoliberal trend based on the pillars of free trade, privatization, and deregulation. The 1980s and 1990s saw many industries and services escape government control, with disastrous results for consumers. Anyone who has bought an outrageously priced airline ticket only to lose the seat knows the downside of deregulating the airline industry. From for-profit charter schools and private prisons here in the United States to International Monetary Fund-enforced privatization schemes for water, oil, and other industries in Latin America and Asia, many utilities and social services were handed over to private interests.

The current California crisis stretches back to a deregulation bill passed unanimously in 1996 by the Democratic-controlled state legislature, which was signed into law by Governor Pete Wilson, a Republican. It came on the heels of a deep recession – that didn’t end in California until the mid-1990s – and electricity costs that were double the national average. Major industries threatened to leave the state if electricity costs couldn’t be brought down. Deregulation was supposed to be the answer.

The deregulators promised a period of robust competition, brought on by the breakup of the monopoly utilities. Consumers would have hundreds of power companies to choose from, and the competition would drive prices down and inspire technological innovations that would cut energy costs even further. The reality turned out to be different. Immediately after deregulation, at least 300 companies showed some interest in breaking into the new profitable California power market. But the prohibitively high costs of starting up soon cut the number of companies competing for a share of the power market to 10. [7]

So, instead of the many competitive, consumer-friendly power companies that deregulation promised, California residents were left with a small powerful cartel, in which a handful of power brokers cooperate to withhold electricity from the market until the prices suit their profit margins.

Of course, the utilities and the electricity producers claim that they are merely following the law of supply and demand. In a sense, they are. They control the supply, so they can demand whatever price they choose. Even if you buy their claim that oil and natural gas price increases have raised their production costs by up to 50 percent, they never quite get around to explaining why they’ve increased prices by about 1,000 percent.

The ramifications of the cartel became painfully clear in January 2000, when wholesale prices spiked from 3.5 cents to more than 40 cents per kilowatt-hour, on average. At some peak times, the price climbed to a dizzying $1.50 per kilowatt-hour. Consumers were initially shielded from this increase, due to a clause in the 1996 deregulation bill that stipulated that the state could still temporarily regulate end-use consumer prices. Because price caps were lifted first in San Diego, the effects of deregulation became clear there earlier than in other cities. Back in June 2000, prices doubled, then tripled in San Diego. Outrage at the rate increases prompted the state to step in to temporarily reestablish price caps for San Diego Gas and Electric customers. [8]

The electricity cartel

The electricity cartel has two principal factions. First, there are the “Big Three,” the longstanding California utility companies: Pacific Gas and Electric (PG&E), SoCal Edison, and San Diego Gas and Electric. Prior to deregulation, these giants owned the vast majority of power plants in California, as well as everything from the statewide distribution grid to the power lines that run into private homes and businesses. These private, vertical monopolies passed on billions in profits to stockholders, in exchange for submitting to state regulation, which put a cap on the prices they could charge. The cap was set high enough, at the time, to guarantee significant profits.

Initially, the Big Three opposed deregulation. After all, they had a good thing going. The state guaranteed them a profit year after year. And, even when they made disastrous business decisions, like building a nuclear power plant on a major earthquake fault line, they could use their massive political clout to force California consumers to pick up the tab. They only got on the deregulation bandwagon to plot out how they too could benefit once they realized that other sectors of California big business (steel, cement, and high tech) were going to get the deregulation they wanted.

The Big Three sent an army of lobbyists to Sacramento armed with briefcases full of campaign cash contributions. By the time the vote came, they had secured a clause in the deregulation law that paid them a whopping $28 billion in state bailout money and hiked rates to make good on debts they had incurred from building expensive nuclear power plants. The utilities spent $30 million in 1998 to defeat Proposition 9, a bill that would have forced shareholders rather than ratepayers to pay for the $28 billion bailout. Moreover, utilities were given financial incentives to sell off their fossil fuel-burning plants to out-of-state energy companies in order to stoke “competition.” Awash in cash, Edison and PG&E launched themselves into the national and international power markets, buying up electricity plants and other energy assets in dozens of U.S. states and abroad. In fact, PG&E now boasts more generating capacity in the deregulated Northeastern United States than it does in California. In the words of Wenonah Hauter and Tyson Slocum of corporate watchdog group Public Citizen, “The legislation, written and supported by utilities, privatized their profit and socialized their risks.” [9]

The second faction of the electricity cartel has become known as the Confederate Cartel because its members are mainly based in North Carolina and Texas. Texas-based Enron has become a major player in the California market. Enron, the world’s biggest energy trader, saw its fourth-quarter profit jump to $347 million from $259 million a year ago, while its revenue more than tripled, rising to $41 billion from $11 billion. Kenneth Lay, Enron’s CEO and largest single contributor to Bush’s presidential campaign, took home a cool $42 million last year. Duke Energy – a North Carolina firm, which recently bought up four major plants in California – did even better, posting fourth-quarter income of $284 million. Not bad after they lost $189 million the year before. These global energy pirates have made a killing in California. [10] They have seen the value of electricity sold in California increase from $7.43 billion in 1999 to $27.97 billion last year. [11]

Making Rockefeller proud: A primer in price gouging

Most people quite clearly saw through the cartel’s smokescreen. A recent Sacramento Bee poll showed that most Californians believe that there is enough electricity to go around. Why are there blackouts? Fifty-seven percent of those polled blame the crisis on “a strategic corporate attempt to drive up their rates,” while only 36 percent say the shortage is “real.” [12] Notwithstanding the adamant denials of the energy companies, most Californians are absolutely right. No less a pro-market source than the Wall Street Journal explained how energy companies conspire to fix prices:

Frank Wolak, a professor of economics at Stanford University, is a member of the Independent System Operator’s market-monitoring committee. As such, he is one of a small number of people privy to most market data. Mr. Wolak says he believes generators are holding some power off the market and are deliberately driving up prices. “One of the things we expected, with deregulation, was incentive to keep plants well maintained,” he says. “Instead, it’s profitable to keep them” out of service because it creates artificial scarcity that pushes up prices. [13]

Evidence that the shortages are artificial comes from the fact that last summer, when power demands were much greater, California had no rolling blackouts:

Last summer, the Independent System Operator met demand of 45,000 megawatts without resorting to rolling blackouts. “But now we are having blackouts at less than 30,000 megawatts” of demand, Mr. Wolak says. He doesn’t deny that plants, run hard for months, are breaking down in large numbers. But his observations of plants’ down time have led him to conclude that “owners are in no hurry to bring them back on line,” he says.

Mr. Wolak says there is another way that integrated natural-gas and electricity companies can make the most of the California market, even with new market rules that require generators bidding in excess of $150 per megawatt-hour to prove they have costs high enough to justify it. Wholesale prices have topped $600 per megawatt-hour several times over the course of the past month despite the rules. Mr. Wolak says integrated companies can sell natural gas, which they bought cheap, at higher spot-market prices and take a profit. Then their generators can buy it back at a higher price in the spot market and use that to justify the higher bid price of electricity.

”It’s all perfectly legal,” Mr. Wolak says, but the result is far from what was intended. “It’s not a market anymore. It’s ask and you shall receive,” he says. [14]

The cartel has succeeded in manipulating prices so successfully, in part, because the bidding process stays locked behind closed doors. As Kent Pollock, executive director of the California First Amendment Coalition, recently wrote in the San Francisco Bay Guardian, “The San Jose Mercury News sued the two agencies that oversee wholesale electricity auctions and the power grid to force disclosure of information vital to scrutinizing whether price manipulation is occurring. But a Sacramento Superior Court ruled that neither agency is subject to the state’s open-government laws. No appeal was filed.” [15]

Bankruptcy or blackmail?

The Big Three utility companies have cried bankruptcy every day for the past two months. They owe roughly $12 billion to the electricity-producing companies and to creditors. This stems from a clause in the deregulation law that capped rates during a transition period of several years. Back in 1998, these caps were actually set artificially high (at 5.5 cents per kilowatt-hour, compared to the estimated cost of production of 3.5 to 4 cents per kilowatt-hour), so that the Big Three could rake in extra billions in profit in exchange for losing their monopoly on electricity generation.

Originally, this was a “have your cake and eat it, too” scenario for the Big Three. They sold off their plants at highly inflated prices to the Confederate Cartel and continued raking in money from consumers’ monthly bills. But when prices spiked in January 2000 to more than 40 cents per kilowatt-hour – due to both rises in electricity generating fuel costs and the cartel’s price-fixing – the utilities became helpless victims, so their story goes. They had to buy electricity on the new “free market” at 40 cents, but could only sell it at the capped rate of 5.5 cents.

The Big Three, their backers on Wall Street, and President Bush all favor removing the caps and letting the rates rip as a means of allowing the Big Three to avoid bankruptcy. But claims of impending bankruptcy are dubious at best.

PG&E, which serves most of Northern California, recently claimed in a letter mailed out to all of its customers that it “doesn’t make a nickel” on power generation. It’s just a utility distribution company. But the San Francisco Bay Guardian points out that this is a lie. As of today, PG&E produces approximately half of the electricity it distributes to consumers. But rather than selling that electricity to its customers at the price it costs to produce it (roughly 4 to 5 cents per kilowatt-hour), it first launders it through the cartel-dominated wholesale markets and then buys it back – from itself – at 40 cents a kilowatt-hour. In other words, one half of PG&E is selling power to the other half at inflated prices and then claiming that it is being driven bankrupt because it can not pass on the costs to its retail customers. [16]

Even more damning to PG&E’s claims of poverty is the fact that it is a rich company. It holds assets valued at $30 billion and last year had revenue of $21 billion. PG&E maintains the fiction that its California utility unit, which it calls PG&E Company, is completely separate from the parent holding company, PG&E Corporation, notwithstanding the fact that two have the same CEO and the same stock. While admitting that PG&E Corporation made record profits in the third quarter of 2000 (partially from revenue gained by selling electricity in California), they claim that the PG&E Company is $6.7 billion in debt, a great deal of which it owes, as it turns out, to itself. Unbelievably, even while Gray Davis, the Democratic governor of California, met with company executives in Sacramento, PG&E’s lawyers snuck to Washington, D.C., to obtain an order from the Federal Energy Regulatory Commission to safeguard the profits, credit, and assets of PG&E Corporation from the debts of PG&E Company. This transparent legal maneuver has enraged consumers and dramatically damaged any remaining credibility the company hoped to salvage. [17]

As part of the Big Three’s bankruptcy scare campaign, they have announced layoffs affecting almost 3,000 workers. This comes on top of years of already devastating downsizing. When a major storm tore down power lines across the state in mid-January 2001, the impact of fewer workers to repair the damage highlighted the dangerous consequences of these layoffs.

In the end, one or more of the Big Three may file for bankruptcy. But this will be because they decide it is the best strategy to save their profitable assets or to avoid a state takeover, not because they are poor. Keeping the Big Three’s scare tactics in mind, there is another side to the bankruptcy debacle. Back in 1996, when they threw their weight behind deregulation, the utilities thought they could get the best of both worlds. They could sell off their old plants at grossly inflated prices, while keeping an ironfisted grip over the distribution grid. They thought that they would be able to use their monopoly on distribution to exact low bids from the new kids on the block who moved in to buy up and build power plants in California, while charging consumers high prices on the other end. The Confederate Cartel very quickly gave the Big Three a taste of their own medicine, proving much more adept at monopoly price-fixing than anyone ever imagined. So, while the Big Three have plenty of assets to cover their losses, the wolves at Enron, Dynergy, and Duke turned out to be bigger and badder than their Big Three rivals. Of course, that hasn’t stopped them all from insisting that the sheep pick up the tab.

Fiddling while California burns

Even before taking the oath of office, President Bush leapt to the cartel’s defense. He blundered his way into the crisis, suggesting that “[i]f there’s any environmental regulations that’s preventing California from having a 100 percent max output at their plants – as I understand there may be – then we need to relax those regulations.” [18] Bush’s position in this crisis is far from neutral. He hopes to push deregulation even further than his predecessor Bill Clinton in order to fatten the returns of the corporations that have helped him into power. Moreover, Bush also has a vested interest in making Governor Davis look bad, since Davis is said to be planning a bid for the presidency in 2004.

Bush is so eager to help his friends in the energy business make money at any cost that he is using the California crisis to push for opening up the Arctic National Wildlife Refuge in Alaska to oil drilling.

Bush’s comments represent the “deregulation didn’t go far enough” school of thought. Some ultra free-marketeers, led by the Wall Street Journal, argue that removing all or most environmental safeguards on the operation of existing plants and the construction of future plants, as well as eliminating any cap on what companies can charge their customers, will encourage a flood of new energy investment, thereby eliminating the crisis.

But the claim of deregulation advocates is based on the fact that some price ceilings were fixed on energy sales to customers. They fail to point out that “over the past few months, the cost of wholesale electricity has at times been almost 4,000 percent higher than before deregulation because of the speculative nature of the electricity market,” argue Hauter and Slocum for Public Citizen. “If all the costs were passed on to consumers, the average residential monthly consumer, who paid approximately $55 a month before deregulation, would have paid approximately $600 a month when prices spiked in California this winter.” [19]

Moreover, as the Wall Street Journal itself has noted, prices have shot up as a result of speculation rather than real shortages. California has 55,500 megawatts of power generation capacity. The recent rolling blackouts have taken place when demand is less than 30,000 megawatts, “approximately 15,600 megawatts less demand than the peak amount of electricity needed in California this summer.” [20]

Most Californians scoff at Bush’s babbling and the Journal’s unsolicited advice. Even as their lights flicker, they solidly reject such environmentally disastrous proposals. According to a recent poll, “By 59 percent to 32 percent, those polled said maintaining air quality standards is more important than relaxing standards to produce more electricity.” [21] And a majority of Americans – 55 percent – oppose oil exploration in the Alaskan wilderness, compared to 33 percent who favor it. [22]

The argument that environmental laws are limiting electrical capacity is also wrong. Leaving aside the fact that electrical capacity exceeds demand, it was the utility companies that declined to build more energy plants in California because they did not want to assume the economic risk that deregulation brought.

Removing the last vestiges of control over the very companies that are today quite openly fixing electricity prices does not get high marks in California these days. Yet PG&E and Edison are currently pressing a lawsuit to allow them to raise prices by up to 40 percent this year, with options for another 12 separate hikes in the next three years. In short, more deregulation in California means removing any remaining price caps on what utilities can charge customers, thereby passing the cost of the energy pirates’ profit bonanza onto the public, while encouraging worse pollution in the process.

This may make the energy cartel a killing in the short term, but it would also drive California’s economy into a sharp recession. Hundreds of thousands would be laid off as small- and medium-sized businesses failed and large corporations stampeded out of California in search of cheaper energy. Workers and the poor would have to cut back even more dramatically on spending for everything from food and rent to consumer goods, as they struggled to pay their utility bills. Lifting environmental controls would devastate millions of people’s health in the short term, and cause long-term environmental damage.

The idea that California’s problems are caused by only partial deregulation is nonsense. Evidence is abundant that the complete deregulation of the nation’s communications industry, which Clinton signed into law five years ago, has not produced cheap rates but rather monopoly concentration and higher rates for consumers. A recent Chicago Tribune outlines the impact:

Local residential phone competition? No.
Cable competition and lower rates. No and no.
Bigger media companies controlling more broadcasting stations? Yes.
Satisfied investment bankers, fattened by the fees from unprecedented merger activity? You bet.

And what have consumers gotten from this landmark legislation?

„Nothing. Maybe a few extra phone calls at the dinner hour,” said Robert Rosenberg, president of Insight Research Corp., a New Jersey telecommunications industry consultant. “I know what the goals were, and the law has actually run 180 degrees opposite of those goals ... By any stretch of the imagination, it has failed abysmally.” [23]

Energy deregulation hasn’t been a great success in other states either. As in California, utilities in Illinois, Massachusetts, Michigan, Montana, New Hampshire, New Jersey, New York, Pennsylvania, Ohio, and Texas were “all given huge bailouts for their bad investments in nuclear power...as part of deregulation deals in their states. These so-called “stranded costs” were passed on to consumers.” In New York, price spikes have raised customer rates by as much as 49 percent. [24]

California began this year with a $10 billion surplus, much of which Governor Davis promised to use to repair California’s crumbling school system. The utility crisis now threatens to eat through the money in a matter of weeks. One economist estimates that if the state steps in to buy power directly on the wholesale markets to bailout the utility companies, it could cost upwards of $5.5 billion in just three months. It could also wreck the state’s credit rating, costing California taxpayers billions in higher interest rates. [25]

Davis knows his presidential ambitions ride on how he handles the crisis, and he has talked a tough game at times. In his January 8, 2001, State of the State speech, Davis called deregulation a “colossal and dangerous disaster.” Most dramatically, he broke with free-market orthodoxy, raising the specter of a public takeover. “There is no easy solution. But if I have to use the power of eminent domain to prevent generators from driving consumers into the dark and utilities into bankruptcy – then that’s what I will do,” Davis threatened. [26] Yet, since that speech, Davis has gone out of his way to use state money to bail out the Big Three and stick ratepayers with the tab.

The governor and the state legislature are spending billions of dollars to prop up the private energy market. In a 60 to 5 vote, the Democratic-controlled state assembly authorized the Department of Water Resources to buy $400 million of electricity at grossly inflated free-market prices. Best estimates predict that this money (roughly 5 percent of the state surplus) will buy electricity for only about a week or 10 days. On February 1, the governor signed a bill that will commit the state to a $10 billion 10-year contract to buy electricity at roughly double the cost it takes to produce it. The state will sell this electricity to consumers at a markup, which will be used to help the private utilities pay off their debts. The state has put forward legislation for plans to sell up to $12 billion in bonds to pay off the Big Three. The legislation allows the state to sell bonds and use the money to sign long-term contracts with energy wholesalers in attempt to provide power-starved California and its cash-strapped utilities with reliable and affordable energy sources for as long as a decade.

All taxpayers will get in return are stock options, with no guarantees as to whether their value will go up or down. Other giveaways include a state purchase of the utility transmission grid or PG&E’s hydroelectric system at dramatically inflated prices. Lastly, the “temporary” 9 percent rate hike the state allowed in January will become permanent, with the money going to the utilities to pay off their debts. It will likely not be the last hike. “It is the most appalling piece of legislation I have ever seen,” said lawyer Mike Florio of The Utility Reform Network and a Davis appointee to the newly reconstituted board that oversees California’s power grid. “This is a complete and total bailout to the last dime. This is an absolute capitulation to the utilities.” [27]

By way of comparison, the federal government put up roughly $1.2 billion to bailout Chrysler back in the late 1970s. Worse still, this arrangement does nothing to prevent another round of price gouging when the contracts run out. Davis’ reluctance to move against the energy cartel stems in no small part from the $500,000 they poured into his last election campaign.

Public power: The only solution

The only genuine solution to the California crisis is to take the profit motive out of the utility business. The state could take over the entire production, distribution, and servicing of the electrical system and run it as a public service. As Doug Heller from the Foundation for Taxpayer and Consumer Rights put it, “It’s time we stop trying to figure out how to solve the utility companies’ financial crisis and start proposing solutions to California’s energy crisis. Public power is the answer.” [28]

The private energy corporations will never go along with a return to public power, so the state government will have to use the power of eminent domain to seize the plants and the utility grid. The state would then negotiate with them over how much they would be reimbursed for these assets.

There are many obvious benefits to public power, especially for workers and the poor. First, all of the profits that the private corporations are passing onto their executives and their stockholders could be either reinvested in the system or passed on to consumers through lower prices. Second, by eliminating the drive to please Wall Street, high-paying unionized jobs could be guaranteed. As it stands now, thousands of utility and service workers have been downsized, dramatically reducing the quality of utility services, especially when storms hit. Third, a serious, rational plan could be set out to develop renewable energy and promote conservation. Obviously, corporations in the business of selling as much electricity as possible have no interest in either of these goals. Fourth, electricity would be guaranteed to the poor, the sick, and the elderly, regardless of their ability to pay. Lastly, Californians could democratically elect representatives to supervise the system who would be much more accountable than a handful of secretive CEOs.

Los Angeles, the biggest city in the country and home to roughly one in 10 Californians, already has a public power system, as does the capital city, Sacramento. The Los Angeles municipality generates sufficient energy for its own needs, so it has remained immune from the disaster of deregulation. It is time for the rest of California to follow that example. Just a few weeks ago, only a handful of radicals advocated the idea of a total state takeover of the electricity system. Now the idea has gained a serious hearing among tens of thousands of Californians, thanks to the severity of the crisis and the hard work of public power activists.

For nearly a quarter of a century, bosses and governments, especially in the United States, have pushed to deregulate, privatize, and downsize. Everywhere, ordinary people have watched as multinational corporations have extended their power over public services – from the schools where our children learn, to the hospitals where our sick go for care, to the transportation we need to get around and the water we need to live.

More than a narrow strategy pursued by certain companies in pursuit of profit, deregulation, privatization, and downsizing have become crucial ideological touchstones for the bosses. But the California crisis has placed a big question mark over the free-market mantra of deregulation and privatization. Rolling blackouts in the richest state in the country have thrown into question copycat deregulation plans in other states. That is at least one positive outcome. However, unless challenged, the free-marketeers will try to sweep the California crisis under the rug and go about their business.

Public power can only come into being through mass pressure. Literally every single one of the politicians in Sacramento has received money from the energy companies that stand to lose their profits. The new Bush administration is dead against any infringement on free-market dogma, and Governor Davis has built his career as a pro-business Democrat. However, millions of working-class and poor Californians are fed up. If that frustration and anger can be organized into petitions, phone calls, teach-ins, and protests – a real movement for public power – then we might come out of this whole mess as the victors instead of the victims.

The fight for public power in California must be seen as part of the fight against private school vouchers, welfare reform, growing mass layoffs, and HMOs. We also can offer an example to our brothers and sisters fighting the same battles around the world. But the fight for public power also needs to be linked to the struggle for public ownership and democratic control over all of our resources and institutions – to socialism. Price gouging, kickbacks for public utility bosses, pollution, and profiteering are features of the state utilities that remain public, just as they did in California before deregulation. The same logic that says that power is a good that should be democratically and publicly controlled and allocated to all equitably applies to water, food, health care, and other essentials that have been turned into commodities to be bought and sold for profit under capitalism. The current energy crisis in California exposes the failures of the market and why we need to struggle for a socialist society.

* * *

Notes

1. Danny Pollock, California blackouts a fear for elderly, Associated Press, January 18, 2001.

2. Marie Harrison, interview with author, press conference at PG&E’s San Francisco headquarters, January 16, 2001.

3. Jennifer Coleman, Calif. struggles with power crisis, Associated Press, January 20, 2001.

4. Jerry Hirsch and Rebecca Trounson, Power crunch leaves economy bruised, Los Angeles Times, January 20, 2001.

5. Laura M. Holson, California crisis hurts businesses and idles workers, New York Times, January 20, 2001, National section.

6. Jonathan Curiel, Greg Lucas, and Bob Egelko, Get used to it! Alerts, blackouts predicted for next 2 years, San Francisco Chronicle, January 22, 2001, sec. A, p. 1.

7. Nancy Vogel, How state’s consumers lost with electricity deregulation, Los Angeles Times, December 9, 2001.

8. Vogel, How state’s consumers lost.

9. Wenonah Hauter and Tyson Slocum, It’s Greed, Stupid! Debunking the Ten Myths of Utility Deregulation, Public Citizen report, January 3, 2001. Available on-line at www.citizen.org.

10. David Lazarus, Enron reports 34% increase in its profits: State’s energy crisis a boon for Houston-based supplier, San Francisco Chronicle, January 23, 2001.

11. Chip Cummins and Rebecca Smith, Power suppliers see California lose its golden glow amid woes, Wall Street Journal, January 25, 2001.

12. Amy Chance, Energy firms stick it to us, a majority tell survey, Sacramento Bee, January 18, 2001.

13. Cummins and Smith, California loses golden glow.

14. Cummins and Smith, California loses golden glow.

15. Kent Pollock, opinion, Power policy, in the dark, San Francisco Bay Guardian, January 24, 2001, p. 11.

16. Rachel Brahinsky, PG&E’s propaganda war: Unmasking five big lies from the private utilities’ P.R. campaign, San Francisco Bay Guardian, January 3, 2001.

17. Christian Berthelsen, Stealthy deal protects profits of PG&E’s parents, San Francisco Chronicle, January 16, 2001.

18. Richard Simon and Peter G. Gosselin, Bush suggests easing curbs on pollution, Los Angeles Times, January 19, 2001, home edition.

19. Hauter and Slocum, It’s Greed, Stupid!

20. Hauter and Slocum, It’s Greed, Stupid!

21. Chance, Firms stick it to us.

22. Jimmy Carter opposes Alaska oil drilling, Seattle Post-Intelligencer, February 3, 2001.

23. Tim Jones, Consumers yet to see benefits of telecom act, Chicago Tribune, January 28, 2001.

24. Hauter and Slocum, It’s Greed, Stupid!

25. Nancy Vogel and Dan Morain, State may face bill of $5 billion for power, Los Angeles Times, January 20, 2001, home edition.

26. Lynda Gledhill, Greg Lucas, and Robert Salladay, Davis offers energy plan in state of the state, he proposes steps to crack down on power producers, San Francisco Chronicle, January 9, 2001.

27. Dan Morain and Miguel Bustillo, Legislation would give state a stake in private utilities, Los Angeles Times, January 6, 2001.

28. Doug Heller, interview with authors, California State Capitol in Sacramento, January 22, 2001.