SACRAMENTO -- That deep, mellow voice of Vice President Dick Cheney still resonates in my ear. It's accentuated now by reverberations from the Enron smoking gun.

"Frankly, California is looked on by many folks as a classic example of the kinds of problems that arise when you do use price caps," Cheney told me in April of last year. "Your problem is that your demand for electricity is up and your supplies have actually declined.... "Ultimately, of course, the peak power period this summer will exceed any capacity the state has and you'll end up in those rolling brownouts. There's no magic wand that Washington can wave."

Cheney was reflecting the laissez-faire, hidebound ideology of the new Bush administration. And he could not have been more wrong.

California then did not have wholesale price caps. It had consumer rate caps that had left private utilities short of enough money to pay their gouging suppliers.

The power pirates--many of them pals and political patrons of Cheney and President Bush--were reaping profits of 400% to 600%. The cost of electricity that private utilities (Edison, PG&E, SDG&E) were sending consumers soared from $7.4 billion in 1999 to

$27.6 billion in 2000 and seemed headed for $70 billion in 2001.

Demand had not been up significantly; indeed, it then was falling. Supplies were rising.

There was a magic wand Washington could wave. And it finally did get waved in June after dogged goading by Gov. Gray Davis, other West Coast Democrats and a new Democratic U.S. Senate. The wand was regional price caps, imposed by the Federal Energy Regulatory Commission.

Those caps--so abhorred by the Bushies--worked with new long-term power contracts negotiated by Davis, plus a mild summer, to quash the energy crisis.

Megawatts that had sold for $321--and frequently exceeded $1,000--were capped at $92. They soon slid to $60 and now are back down to $30. That's about where they were when California naively set out on its ill-fated deregulation venture, which shifted control over most electricity from the state Public Utilities Commission to the pro-profiteer FERC.

Despite Cheney's glum prophecy, there were no rolling brownouts last summer, nor have there been any since.

Rather than the feared $70-billion electricity bill, the tab last year again was about

$27 billion. Still, if you assume that 1999's $7-billion charge was reasonable, it means the gougers--most of them out-of-staters--sucked $40 billion in excess profits out of California over a two-year period. They broke Edison and PG&E and forced the state into the power-buying business.

Davis is asking FERC to order refunds totaling $9 billion. Atty. Gen. Bill Lockyer also is suing energy companies for billions in penalties, charging they ripped off California.

Now comes the smoking gun, the Enron internal memos disclosed by FERC that show clear evidence of market manipulation. The documents indicate that not only Enron, but other companies were fleecing Californians by driving up prices and triggering blackouts. The Enron sharpies had brazenly dubbed their strategies Death Star, Fat Boy and Get Shorty.

One particularly galling scheme was to buy electricity produced by California plants during blackout threats and sell it for huge profits in Oregon.

The California public--and the governor--had it right after all: The shortage was not real, it was contrived by the power pirates. A Times poll in January 2001 found that most people believed the crisis was created by profiteers.

"This is going to be the most egregious example in history of greedy and unethical corporate interests--with the complicity of the U.S. government--going into a state and raping it economically," says Garry South, Davis' chief political strategist.

Davis' problem is that although a smoking gun was found, he already had been seriously wounded. His job performance rating plummeted a year ago because of the energy crisis and never has recovered. (Approval 42%, disapproval 49% in the latest Field poll.)

Voters are irked because he procrastinated jumping into the fight in 2000 and later signed

$43 billion in long-term contracts many consider overpriced. Some pacts have been renegotiated.

How much will Davis benefit from the smoking gun?

The Republican theory is not a lot. Any benefits are counterbalanced by other Davis baggage: a software scandal, obsessive fund-raising and a gaping budget deficit.

However, he's bound to be cut some slack.

Davis' message will be that while the feds stood by, he fended off pirates. Davis slew Goliath.

As for Bush and Cheney, people should listen skeptically to their future messages about what's good for California.

Copyright 2002 Los Angeles Times

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