The Dim Holiday.

TURN off the tree! That's the cheerless message California energy officials are delivering this holiday season, as even those little Christmas lights have created havoc with the state's power grid. It's a not-so-welcome present otherwise known as deregulated power.

With power supplies at precarious levels and utility bills skyrocketing, it's hard to believe that this beneficial idea -- letting the marketplace determine electric rates -- could have gone so wrong so soon. Yet considering the circumstances and the players behind deregulation, perhaps it's not that surprising.

In retrospect, the most obvious blunder was lack of supply -- not having enough power plants to keep up with demand. This has forced utilities to buy electricity elsewhere at highway-robbing prices averaging $120 per megawatt hour, 10 times the cost just two years ago. Why didn't the utilities bulk up? Mostly because the costs were higher than what they wanted to saddle shareholders with -- as evidenced by the $5.8 billion that Pacific Gas & Electric spent on its Diablo Canyon plant over a decade ago. That's 18 times original projections.

As it was, the utilities already were burdened with huge debt loads they had expected to pay down through a scheme in which they would buy cheap power on the wholesale market and then sell it at higher rates that the Public Utilities Commission agreed to keep in place until 2002. After that, the rate freeze would be lifted and customers would pay based on marketplace prices. But when deregulation was signed into law four years ago, no one expected that the state economy would keep soaring the way it did, thus increasing demand. Nor did utilities expect to pay so much for wholesale power that nothing was left over to handle debt. Now the major utilities want to jack up rates beyond those previously established levels. Meanwhile, the natives are getting restless -- and the flap over holiday lights is the least of it. Consider the folks in San Diego, who last summer saw their rates double and triple because San Diego Gas & Electric Co. lifted its rate freeze earlier than the other utilities and proceeded to cha rge its customers astronomical market rates, at least relative to what people had been paying.

None of this represents true deregulation but rather a poorly planned and executed transitional stage. It's now up to the state Legislature and federal regulators to smooth out the rough edges. Among the possible options: Allow utilities to buy power through stable, long-term contracts instead of the more volatile spot market; and expedite the approval process for new power plant construction. Already, the California Energy Commission has approved six major power plant projects with a combined generating capacity of 4,708 megawatts.

Unfortunately, special interests are primed to gum up the process. On one side are consumer activists who are mulling over a ballot initiative that would establish a state-owned power system -- an especially scary prospect not only because it's a bad idea but because in the current climate it might get voted in. On the other side are the utilities whose control of the legislative agenda helped create the current mess. What's really needed is a centrist, common-sense approach that encourages deregulation to play out in an orderly way. Reverting to a marketplace system should not be a burden for ratepayers -- it should provide benefits for now and the future.