POWER ON, SMIRKS TOO POLITICAL POSTURING WON'T RESTORE STATE'S ENERGY HEALTH.

Byline: Richard Nemec Local View

CALIFORNIA'S electricity crisis appears to be a distant memory. One clear indicator is the lack of e-mail alerts the governor's press office has distributed on the issue of late.

More telling yet is the increase in the smirks on the mouths of most state elected officials who will admit publicly they had anything to do with the 1996 unanimously passed state law that restructured the electricity industry in California (Assembly Bill 1890).

One of the fathers of that law who is still in the state Legislature, Sen. Steve Peace, D-La Mesa, reappeared recently now that power prices are low and supplies stable.

Peace was last heard from on energy in January 2000 publicly bragging about how the state politicians connived to get the out-of-state energy firms to pay way too much for outdated, inefficient fossil fuel-fired generation plants owned by the state's three major investor-owned utilities.

A few months later, all hell broke loose, and Sen. Peace was rarely found saying much of anything about the state's electricity crisis as defined by the governor and his band of energy advisers.

The smell of blood and some measure of political vindication has brought Peace out of the woodwork. A Houston-based energy titan with whom Peace has tussled in the past, Enron Corp., went sour real fast and is now the subject of a takeover bid by another Houston energy firm about a quarter of Enron's size.

While Enron deserves no sympathy (although its shareholders surely do) because its top management and board of directors brought financial pain onto themselves with a combination of unparalleled hubris and creative accounting, the firm does not deserve the public tongue-lashing it has been receiving from Peace, who is known for his particularly caustic, combative remarks when he sees any measure of vulnerability from his self-proclaimed opponents.

To quote the state senator, both Enron and California's ill-fated electricity restructuring are major failures, seemingly intertwined, with no mention of his own authorship in state's failure.

A popular political spin, and one Gov. Gray Davis surely will use as part of his re-election rhetoric, is that over-reliance on market-based solutions caused California's fundamental weaknesses, which the unethical energy titans, such as Enron, took advantage of by raising prices sky-high, and their recent financial comeuppance is just another indication that market solutions are inherently corrupt because they can create as many big losers as winners.

In reality, Enron is not dead as an energy power, and consumers in California should not wish for financial ruin for Enron and the other major merchant power companies, such as Duke, Mirant, Dynegy, Reliant and others.

If the state is going to ever resolve its growing financial crisis that carries a heavy energy price tag, it needs a healthy, viable private-sector energy industry.

The electricity suppliers and marketers' energy operations have not failed in California. The market structure has been badly flawed by what are now well-recognized problems, many of which are being addressed by both the governor's administration and by the private- and public-sector energy stakeholders, Enron included.

California's problems are centered on how the structural flaws were addressed by both government and the private sector, and for that, both Davis and Enron can share some of the blame.

In the meantime, the state has reached a crossroads in which it can either try to foster a revised, more enlightened version of industry restructuring, or it can continue its current path toward a return to more traditional command-and-control regulation of the electricity industry, while California's power market takes a siesta.

Through a combination of bankruptcy reorganization, a court settlement and a record $12.5 billion state bond issue, the California treasury can be repaid for the state's foray into wholesale power purchasing this year, and the two major investor-owned utilities can pay off their debts, regain their creditworthiness and get back to buying the extra power supplies needed to meet peak-demand times.

The state can back out of its wholesale electricity-buying role and scale back its vision for the newly created state power authority headed by the ever-proactive public power guru, S. David Freeman.

But all of this will not come together in the next 12 months without continued investment and support from all of the major energy companies that already have multibillion-dollar investments here, but are rethinking additional future investments.

Gov. Davis just recently has indicated that not all of the private-sector energy firms are on his ``price-gougers'' list.

In response to criticism for accepting two $25,000 political contributions from separate New York and Florida energy firms that sell electricity from renewable energy plants they own in California, Davis strongly defended his energy industry political backers as among the ``good guys.''

Consumers should hope many other firms continue to invest in major energy projects in the state whether or not they make it to the governor's ``good guy'' list by making a political contribution. The energy market and our nation/state are more democratic than that sort of apparent quid pro quo would indicate.