Arnie Already Shows His Enron Side

by Steve Soto

Before the Davis people have cleared out of their offices or before the first intern is groped, Arnie is already repaying Ken Lay and Enron for their ongoing relationship. According to today’s San Francisco Chronicle, Schwarzenegger will be pushing for a new round of electricity deregulation in California, after the state has seen its initial industry-written foray into a deregulatory hell cost it $50 billion.

The actor-turned-politician made little mention of his plan to reduce state regulation of energy markets during the recall race, devoting his time instead to bashing Gov. Gray Davis for saddling the state with expensive long-term contracts for power. But with many of those contracts set to expire in the next two years, the governor-elect will have to present his solutions or risk facing his own energy crisis.

Schwarzenegger's energy strategy is being driven by some of the same members of former Gov. Pete Wilson's team who led the push for energy deregulation in the mid-1990s. The governor-elect, for example, picked for his transition team Jessie Knight, a former Wilson appointee to the Public Utilities Commission and a leading proponent of deregulation.

Consumer groups already are warning that the proposals made by Schwarzenegger during the campaign would expose electricity users to greater fluctuations in prices while limiting state oversight of power trading -- a combination that could allow the type of market manipulation that plagued California during the state's energy crisis in 2000-01.

Under the new plan, large users would be allowed to leave the current utility supply system and buy their power from private generators and suppliers. This would leave small business and residential rate payers with the tab for paying off the debts of the utilities, who under the new Schwarzenegger plan could pass along their full price increases to their ratepayers instead of being responsible for their bad decisions themselves. In other words, it’s a plan that Ken Lay would love, and one that he probably sold Arnie on when they met back in early 2001.

Schwarzenegger is also going to push a typically Republican idea for dealing with the state’s current structural gap between revenues and expenses. Instead of having the courage to raise taxes, Arnie like Bush will just say "Charge it, please." The state GOP adamantly opposes any tax increases and in fact will be attempting to roll back existing taxes. The GOP doesn’t want to specify what cuts they propose to make up for the gap between revenue and expenses, so Arnie has decided to borrow his way out of the entire $20 billion current and budget-year gap with one huge bond measure.

You read that correctly: Arnie will be proposing a $20 billion bond measure and then bash the Democrats on top of that to still cut spending to bring the insufficient revenues in line with spending. The GOP base will love that all of this happens without them paying any more, and in fact they will probably get tax cuts. And future bond measures for schools and parks will be adversely affected by this monster indebtedness.

Well, that certainly is bold, isn’t it?