Will California send Schwarzenegger on quest for bail-out?

Bob Tippee

Arnold Schwarzenegger could be the best thing to happen to California since Enron Corp.

Also like Enron, he could be a problem for the rest of the US.

Schwarzenegger, muscular star of action movies, is one of 135 candidates hoping to replace Gray Davis as California's governor in an Oct. 7 recall election.

A bigger-than-life governor would complement the bigger-than-life scapegoat into which Davis has turned the energy business by association with Enron.

California, with a fiscal deficit larger than the budgets of some states, is going broke. Reasons are many and complex. Large among them is the state's energy crisis of 2000 and 2001.

California created the crisis. Through the 1990s, while demand for electricity was zooming, it discouraged construction of power plants. In 1996 it restructured electricity regulation in ways that encouraged consumption, hamstrung major utilities, and contrived a market unable to handle constriction of supply.

When supplies of electricity and natural gas tightened in 2000, the system collapsed.

Davis responded by making the state government a buyer and seller of electricity and rushing it into long-term contracts—which the scuttled restructuring discouraged—during a period of elevated price.

The agency responsible for doing business this way now staggers under debt exceeding $10 billion, more than a fourth of the whole deficit.

Political mythologists easily shift blame for the mess to traders who abused arbitrage opportunities rife in California's fragmented market and who deservedly fell into disrepute when Enron imploded. The ludicrous suggestion persists that trading mischief generated billions of dollars in overcharges, as though acute shortage and perverse regulation had nothing to do with it.

California, of course, is the home of Hollywood, which specializes in making people believe the unbelievable.

It's not difficult to imagine Gov. Schwarzenegger swashbuckling to Capitol Hill next year in heroic quest of federal money for his victimized state.

Life-sized lawmakers would find the appeal difficult to resist, especially with a presidential election looming.

So here's a preemptive cheer for anyone, including Schwarzenegger, willing to defy celebrity and insist that California solve the problems it created for itself.

(Author's e-mail: bobt@ogjonline.com)

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