Davis, Gray Gov

hiram j recall:  https://webbrain.com/brainpage/brain/6950F840-FB80-FCB0-D505-8AB1FA685F08#-1395

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https://en.wikipedia.org/wiki/California_electricity_crisis

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four California Coastal Commissionmembers appointed by Gov. Jerry Brown have been maneuvering to oust its outspoken executive director Dr. Charles Lester.This campaign to unseat Dr. Lester is an unsheathed assault on the coastal commission’s integrity and a dire threat to the California coast. It is also an audacious display of industry power, which will come to a head Wednesday at the commission’s quarterly meeting in Morro Bayon.

The 12-member coastal commission has regulatory authority over all permits, licenses and funding approvals for projects impacting coastal resources, including offshore oil and gas development. For more than 40 years the coastal commission has brought balance to the struggle between advocates of clean water, healthy wetlands, unspoiled vistas, unpaved agricultural farms and broad public access against the real estate and energy tycoons who now seek Dr. Lester’s ouster. Dr. Lester has been the commission’s most vocal champion for safeguarding California’s public trust assets and preserving the coast from unwise and shortsighted development.

Industry launched its campaign to topple Dr. Lester shortly after he expressed skepticism over the proposed Banning Ranch development, which would place nearly 1,400 homes with resort and retail space on environmentally sensitive coastal habitat and wetlands.Aera Energy, a jointly owned affiliate of Royal Dutch Shell PLC and ExxonMobil Corp, is a leading project promoter.

Californians are increasingly aware of the anti-democratic clout wielded by energy barons and developers.

The ongoing Porter Ranch gas leak offers striking parallels and strong cautions about Sacramento’s merger with corporate power. The Porter Ranch disaster is the offspring of a greedy company and its delinquent regulator who ignored a missing safety valve on a 62-year-old well for 31 years. When the inevitable blow out happened, it took Gov. Brown 40 days to declare a state of emergency to address the largest gas leak in history—one which has displaced 4,400 families, sickened hundreds of adults and children and drawn compelling comparisons to the BP oil spill.

Residents wonder if Gov. Brown’s cozy ties to petroleum and real estate interests inspired his lethargy. Brown has taken $1.1 million from real estate developers since 2011 and $2,014,570 from oil and gas barons since 2006. His sister, Kathleen Brown, sits on the board of Sempra Energy, whose affiliate, SoCal Gas, is the culprit in the Porter Ranch well collapse. Sempra paid her $188,380 in 2014 and $267,865 in 2013. Kathleen Brown also owns rights to Sempra stock worth $409,945. She is a partner at a law firm that represents the California Independent Petroleum Association (CIPA) and a defendant in a RICO—Racketeer Influenced and Corrupt Organization—lawsuit against Gov. Brown and the oil industry. CIPA and its members donated lavishly to Gov. Brown’s legacy ballot measure—Prop 30.

Beginning in 2011, CIPA joined with Occidental Petroleum to persuade Brown to approve a host of illegal injection wells of the kind that failed at Porter Ranch. In response to a direct request from Occidental’s attorney Gray Davis, Brown fired two diligent public servants—State Oil & Gas supervisor Elena Miller and her boss Derek Chernow, the acting director of the state Department of Conservation—when they refused to issue illegal well permits.

Two months later, on Jan. 9, 2012, Brown’s new State Oil & Gas supervisor, Tim Kustic, issued Occidental an illegal permit to drill a frack well in a Kern County almond orchard without the required environmental review designed to protect vital aquifers. Four days later, Occidental gave its first of two $250,000 contributions to the governor’s proposition to increase taxes. In a striking expression of fealty to the carbon czars, Brown pledged on the same day as the Occidental contribution that neither human health injuries nor the law would deter him from continuing to serve their interests. “There will be indictments and there will be deaths. But we’re going to keep going,” he said.

In total, grateful oil and gas tycoons contributed more than $1.2 million to Brown’s proposition to increase income taxes. Brown later boasted that firing Miller and Chernow facilitated oil development in Kern County. It also meant that millions of gallons of contaminated waste would be injected each month into the aquifers in the California San Joaquin Valley.

In her shocking new book, Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right, Jane Mayer reveals how a small cadre of oil titans have used their astonishing riches to game America’s political system, capture our regulatory agencies, corrupt our politicians in order to subvert democracy, defy our environmental laws and push American democracy toward a new Gilded Age for corporate kleptocracy.

California and a handful of other states have largely escaped this kind of hostile takeover of state government by corporate power. But California’s democratic values cannot flourish long with Sacramento politicians suckling at pipelines of oily cash. The move to oust the coastal commission director is a signal that public servants with courage and integrity that stand up to well-connected robber barons will be crushed and silenced by government officials on industry payroll.

As the coastal commission convenes tomorrow, the rest of the world will be watching California, not just for how she protects her coastlines, but how she safeguards her democracy

rfk2

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cbeg dan perrin busted

http://www.citizensforethics.org/page/-/PDFs/Legal/Letters/FEC/4_03_13_FEC_Complaint_Checks_and_Balances_for_Economic_Growth.pdf?nocdn=1

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bs?

david rivkin dereg pipelineOrder 636

In the mid-to-late 1980’s, the natural gas market was deregulated through a series of federal policies, most notably Federal Energy Regulatory Commission (FERC) Order No. 436, the Natural Gas Wellhead Decontrol Act of 1989 (NBGWDA), and FERC Order No. 636 of 1992.  Each of these policies was designed to eliminate the regulatory constraints by the federal government on the natural gas market, largely, to help avoid a repeat of the tough economic issues resulting from the 1970’s energy crisis (“The History of Regulation,” 2004).  Enron capitalized on the governmental deregulation of the natural gas marketby providing consumers with greater access to natural gas via their nationwide pipeline system.  Due to deregulation, as supplies increased and the price for natural gas fell by over 50 percent from 1985 to 1991, Enron was able to charge other firms for using their pipelines to transport gas.  Likewise, Enron was also able to transport gas through other companies’ pipelines (Culp and Hanke, 2003, p. 8).

Around this time, Jeffrey Skilling, an up and comer working for the consulting firm McKinsey and Company, began working with Enron.  Beginning in 1987, Skilling started his work in creating a forward market for Enron in the deregulated natural gas sector.  To help create this market, Skilling argued that Enron needed to set up a “gasbank” to help intermediate gas purchases, sales, and deliveries (Culp and Hanke, p. 8).Skilling’s major selling point to Enron CEO Kenneth Lay was that in an era of post deregulation, customers needed risk management solutions in the form of a natural gas derivatives market or, a place where consumers could purchase forward contracts to help alleviate price volatility commonly found in the natural gas industry.

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The Western Energy Crisis, the Enron Bankruptcy, and FERC’s Response

The State of California passed legislation in 1996 (California Assembly Bill 1890), and the California Public Utilities Commission issued orders in the same general time frame introducing competition into California’s electricity market.Key features of the Bill included establishing the California Independent System Operator (CAISO) to operate the transmission facilities of California investorowned utilities (IOUs), encouraging IOUs to sell off their generation assets, requiring them to buy all of their power in a newly created ‘spot’ market run by the California Power Exchange (CalPX), and forbidding IOUs from entering into long term, “bi-lateral” contracts. The legislation also capped retail rates that these utilities could charge customers below the then-current cost of electricity. From April 1998 when the California market commenced until late May of 2000, the plan worked relatively well.

But in May, 2000, spot prices began to rise notably. A number of factors contributed to the Western Energy Crisis of 2000 and 2001. These included: a low rate of generation having been built in California in the preceding years making California dependent on imports of electricity; northwestern drought conditions resulting in lower than expected water runoff for hydropower generation;arupture and subsequent capacity constraints on a major pipeline supplier of natural gas to California markets (California was heavily dependent on gas-fired generation due to state air standards); strong economic growth and thus increased electricity demand throughout the west; and unusually high temperatures coupled with an increase in unplanned plant outages of older plants that were being run to meet increased demand in California. Further, transmission line constraints within California, both for imports and exports of electricity, exacerbated an already marginal situation during this time period. Finally, some energy companies attempted to manipulate wholesale electric and gas markets. As prices continued to rise, California utilities had to purchase higher priced power but, because of the state rate freeze, were unable to pass along these price increases to customers, thus becoming financially unsound. In the summer of 2000, the CAISO also called ‘stage 3’ emergencies as reserves dropped below 1.5 per cent, interruptible power loads were curtailed, and rolling blackouts occurred in northern California. The Department of Energy issued emergency orders to require suppliers to continue to sell into the California market, and Governor Davis signed new legislation in early 2001 authorizing the California Department of Water Resources (CDWR) to buy and sell power. The CDWR subsequently attempted to break those same contracts. Throughout this entire time, the Federal Energy Regulatory Commission was involved due to the dual -2- scheme of regulation under the Federal Power Act, and the following abstract details the major Commission actions during and following the Western energy crisis and Enron’s collapse...

http://www.ferc.gov/industries/electric/indus-act/wec/chron/chronology.pdf

CAenergy.pdf 17 pp

tim phillips 131 goodlatte, ralph reed, century stratagy  xian; rec by rove led to 1st big gig:enron 380K$ for energy dereg --> energy crisis /recession 201 DAVIS?! 132 note 15 Public citizen blind faith  http://www.citizen.org/cmep/article_redirect.cfm?ID=7104  see below

BM?

CA prop 54 racist

The California Recall and Proposition 54

Rev. Jesse L. Jackson

Oakland, California

Reverend Jesse L. Jackson, Sr., founder and President of the Rainbow/PUSH Coalition issued the following statement regarding the California Recall and Proposition 54 -- August 10, 2003

On October 7 an election will be held that is critical to the integrity and stability of our democracy. The extremists' plan to control our vote, our government, and disrupt the orderly process of democracy, is at work.

There are two issues that will affect the nation that are at stake. Thus the historic civil rights movement and labor, religious leadership, the medical and health care community, and devotees of democracy, must speak out. There are two issues that compel us to Vote NO in October: the election recall, an attempt to torpedo our democratic process; and Proposition 54, the Connerly information ban initiative, whichattempts to ban race as a factor in pursuit of research, law enforcement, and other legitimate quests. Racial inclusion is an imperative, but we continue to confront historic patterns of racial exclusion. Tyrants would rather burn the books of history's library than seek the more difficult challenge of remedy and fairness.

We oppose the recall. It undermines order and the stability of our government. It is another attempt to overturn a legitimate democratic election by using an archaic law established in the early 20th century as a precautionary measure to fight against political corruption. The motive of the recall is to destroy rather than to build. This leads to democratic anarchy. The atmosphere may be a circus, but the ramifications are much too serious. As Stanford Professor David Kennedy states, "The recall is really a nuclear weapon in the political arsenal."

There is a standard for removing elected officials from office. If there is malfeasance, corruption or treason, or if someone is shown to be unfit for office based upon the standard, there should be orderly succession and the people's government continues. A privately funded, multimillion dollar petition drive to initiate a recall election is not the answer. The state is facing an historic budget deficit (as does nearly every other state), as well as the largest federal budget deficit in history. In part, this has been triggered by a massive cut in taxes without the corresponding capacity to generate revenue.

In the last three years, nearly every state has gone from surplus to deficit, and every state has suffered a net loss of jobs. All have felt the impact of the corporate exploitation and thievery of Enron, Halliburton, Harken, MCI, and WorldCom. Corporations are allowed to go offshore to avoid paying taxes, while getting no-bid contracts.

...

http://www.inmotionmagazine.com/opin/jj_recall.html

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Besides Williams,four other major electricity suppliers - including Duke Energy, Dynegy Inc., Mirant Corp. and Reliant Energy Inc.- have been accused of seriously overcharging California for electricity.

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lat: One important difference is that Walker’s election came after a year in office while Davis was beginning his second term. Although Walker could rightly claim he’d barely had a chance to govern,Davis had already accumulated the detritus of four years in Sacramento: controversy over his aggressive fundraising (which now seems quaint, given the relatively meager amount involved), unhappiness over a boost in the state car tax, bruises from perennial budget fights and, not least, the energy debacle that marked his first term.

“All those sorts of things sort of morphed into, ‘We’re sick and tired of the game, tired of the state of affairs here in California’ and Gray Davis became the scapegoat for all of that,” said Paul Maslin, Davis' political pollster, who also had a front seat on the Walker recall as a Democratic strategist in Madison....

Walker also benefited from differences in the structure of the Wisconsin recall. The way the law was written, he had a five-month window to raise unlimited sums of money, which he did, tapping that national base of support to raise tens of millions of dollars for his defense. Davis, who’d dismantled his fundraising apparatus after being reelected in 2002, was never able to collect the sums that Walker managed.

The ballot was also structured differently in California. Although Walker ran against Barrett, giving voters an either-or choice, in California the recall was conducted in two parts. First, there was an up-or-down vote on whether to toss Davis from office, then a separate question on who should replace him.

Some Democrats urged Lt. Gov Cruz Bustamante into the race, seeing that as insurance they could hold on to the governor’s office, even if Davis was ousted. Instead, what they ended up doing was undermining the incumbent and clearing the way for Schwarzenegger to romp to Sacramento. (In one of the great, selfless acts of her career, Democratic Sen. Dianne Feinstein, who had long coveted the governor’s office, refused to run on principle; she alone might have been able to defeat the actor-turned-politician.)

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Davis was not as high ranking as Bill C, but was highest value target actually taken out; it was essential to do so, as he was exposing market manipulation in CA at precisely the time that Cheney was running the secret energy task force(building also on GOP bill in 2003 that failed, but passed in 2oo4. SETF rec'd also embodied in national Energy Plan, which I think became2005 Act (including language from lobbyists[hallib loophole?]; B2 also implemented some by Exec Order?).

Cheney, Rove, Gillespie engineered the PR hit on davis; this made him vulnerable. and set up recall; started by ted Costa but coopted by CA pols (called in Luntz?), Russo etc who had worked for tobacco co, since CA bellwether, important to beat (also Prop 13 1st big anti-tax , went national).  These pols then flew under TP banner hooked up with Ginny Thomas in the process of makeover).

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vice bk: apr 17 2001 dc meet ken lay, middle of CA crisis; enron taking pwer offline, booking movement of electr that never happened, shuttling elect across state lines to end-run price controls. p4 one power co decl bakrupt the orther asked and got gov't bailout; david beg for cap rate; kenny boy give 3 pp doc recs fr energy policy in works; most made it into Nat En Dev Gp report; dc say price caps good sht term for pol but do not help fund problem [more dereg needed]; sen and even gop hse CA beg; dc refused to say if ken told him enron in trouble, and ken died july 2006 while wait sentencing  on bank and secr fraud;

j leopold:

    In a televised speech to California residents on April 5, 2001, Davis resistedCheney'sand Hebert's calls to increase electricity rates for average consumers to keep the state's public utilities afloat, opting instead to increase electricity rates of the state's largest power customers such as manufacturing plants. The next morningPG&E filed for Chapter 11 bankruptcy protection.

    Davis publicly railed against the Bush administration's refusal to launch an investigation into wholesale energy companies trading practices, and its position on price caps. Davis's rhetoric started to impact the Bush administration's approval ratings.Rove, working closely with Cheney, entered into discussions on how the White House would respond to criticism by Davis that the Bush administration was turning its back on California.

    "Karl [Rove] started to talk about using the resources of former Republican National Committee staffersto put together an attack campaign against Davis, and pin the power problems on the governor and his administration," according to one former high-level Energy Department official who was privy to the conversation between Rove and Cheney.

    Rove enlisted the help offormer RNC staffers Ed Gillespie, then a lobbyist who was working for Enron and other energy companies, and Scott Reed, who used to work for the RNC and was the former manager of Robert Dole's presidential campaign, to start devising a strategy to attack Davis and lead people to believe that the energy crisis was entirely his fault. Gillespie was recently tapped by President Bush to replace Dan Bartlett as White House counselor.

    Reed and Gillespie, who was doing double duty advising Cheney's energy task force on behalf of Enron, advised Rove and the vice president that the PG&E bankruptcy left Davis vulnerable and the best course of action for the White House was to take advantage of Davis's vulnerability by stating that Davis single-handedly, in refusing to raise electricity rates, caused one of the largest bankruptcies in American history. Gillespie went a step further, according to Energy Department officials familiar with his conversations with Rove and Cheney, by suggesting that the White House start courting Republican gubernatorial candidates to replace Davis in the 2002 election.

    At the White House in April 2001, Rove met with Brad Freeman, President Bush's California finance chairman during the 2000 presidential campaign, and Gerald Parsky, an investment banker, who was Bush's top adviser in California. The discussion centered on Parsky and Freeman's interest in courting actor Arnold Schwarzenegger to discuss his bid for governor in 2002.

    "That would be nice," Rove said about the possibility of Schwarzenegger, a Republican, to replace Davis as governor, according to people who were briefed about the meeting. "That would be really, really nice."

    Davis said he could see now see how the energy crisis created a political opportunity for the White House in California.

    "In retrospect I could see how that happened," Davis said. "There's no question that the energy companies saw me as an adversary when I wouldn't buckle under their demands. I was vulnerable and the [energy companies and the White House] took advantage of it. This crisis took place in the early days of the Bush administration. I figured these guys are too busy picking out furniture for their offices. I didn't think they [the Bush administration] were spending their days in office involved in some full-scale conspiracy. But it turns out they were."

    Cheney Takes Aim at Davis

    Meanwhile, Cheney continued to meet with energy company officials who were instrumental in drafting key aspects of the National Energy Policy. At the same time, the usually reclusive vice president was granting interviews to numerous reporters discussing his take on the California energy crisis which continued to spiral out of control.

    In May 2001, the PBS news program "Frontline" interviewed Cheney who was asked by a correspondent whether energy companies were acting like a cartel and using manipulative tactics to cause electricity prices to spike in California.

    "No," Cheney said during the "Frontline" interview, even though he was personally briefed about energy companies manipulating the state. "The problem you had in California was caused by a combination of things - an unwise regulatory scheme, because they didn't really deregulate. Now they’re trapped from unwise regulatory schemes, plus, not having addressed the supply side of the issue. They've obviously created major problems for themselves and bankrupted PG&E in the process."

...

    "No one ever said life is fair," Davis said.

http://archive.truthout.org/article/jason-leopold-cheney-suppressed-evidence-california-energy-crisis

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ivins bushwacked

sec harvey pitt recuse 27x p5

Ferc  guy fired for good ol boy from Pt arthur tx

2 econ advisors ex-enron

sec incest used to be gw's lawyers (sec?) appt by b1

In a special election on October 7, 2003, Democrat Joseph Graham Davis, Jr. (1942- ), most commonly known as Gray Davis, became the first Governor to be recalled in California history and only the second to be recalled in American history. Davis was replaced by Republican Arnold Schwarzenegger. 44.6% of the electorate voted to retain Davis. Schwarzenegger had the support of 48.6% of the people.

Gray Davis's Gubernatorial biography:

Joseph Graham Davis, Jr. (nicknamed Gray by his mother) was overwhelmingly elected the 37th Governor of California on November 3, 1998, winning 58 percent of the statewide vote. In the June primary election, Davis shocked political observers by not only handily defeating two better funded Democratic opponents, but by also finishing ahead of the unopposed Republican nominee. It was the continuation of an old tradition; in his successful campaign for Lieutenant Governor in 1994, he received more votes than any other Democratic candidate in America.

Described by the San Jose Mercury News as "perhaps the best-trained Governor-in-waiting California has ever produced,"Governor Gray Davis has made improving public education his administration's number-one priority. As his first official act as Governor, he called a special session of the Legislature to address his proposals to ensure that every child can read by age 9, strengthen teacher training and education, and increase accountability in the schools.

As Lieutenant Governor, Gray Davis focused on efforts to keep jobs in California and encourage new and fast-growing industries to locate and expand in the state. He also led the fight to keep a college education affordable for California's middle-class families, pushing through the largest student-fee reduction in California history. As the state's second-highest officeholder, he also served as President of the State Senate, Chair of the Commission for Economic Development, Chair of the State Lands Commission, Regent of the University of California and Trustee of the California State University.

Prior to becoming Lieutenant Governor, Gray Davis served as State Controller for eight years. As California's chief fiscal officer, he saved taxpayers more than half a billion dollars by cracking down on Medi-Cal fraud, rooting out government waste and inefficiency, and exposing the misuse of public funds. He was the first Controller to withhold paychecks from all state elected officials, including himself, until the Governor and the Legislature passed a long-overdue budget; and he found and returned more than $1.8 billion in unclaimed property to California citizens, including forgotten bank accounts, insurance settlements, and stocks.

From 1983-1987, Gray Davis served in the State Assembly from Los Angeles County and was Chief of Staff to Governor Edmund G. Brown, Jr. from 1975-1981. As Chair of the California Council on Criminal Justice in the 1970s, he started the statewide Neighborhood Watch program.

Gray Davis was born in New York City on December 26, 1942. He attended Stanford University, graduating with distinction in 1964 with a degree in history. He went on to Columbia University Law School in New York where he won the Moot Court award in his freshman year. He graduated from Columbia in 1967 and then clerked at the law firm of Beekman & Bogue in New York City.

In 1961, while at Stanford University, Gray Davis joined the Reserve Officer Training Corps (ROTC) with a commitment to enter military service after completing law school. He entered active duty in the U.S. Army in 1967, rising to the rank of captain while serving in Vietnam in 1968-69. In Vietnam he earned the Bronze Star for meritorious service. He is a life member of the American Legion and the Veterans of Foreign Wars.

He has been married since 1983 to the former Sharon Ryer of Santee, San Diego County.

Gray Davis on Tobacco Issues

Under Governor Davis, California's anti-tobacco campaign became one of the largest and most effective in the nation. It was so effective, in fact, that R. J. Reynolds and Lorillard Tobacco sued to stop it. The suit was dismissed in July, 2003.

California was the first state to enact a 100% smokefree workplace law. Currently, California has the second lowest smoking rate in the nation. In addition, six out of nine cancer types linked to tobacco use have a lower incidence rate in California than the rest of the nation.

In September 2002, Governor Davis signed bills to ensure age verification was obtained for cigarettes and other tobacco products sold over the Internet or through the mail, ensured that all state taxes are being fully paid on tobacco purchases, and increased the penalty for possessing or purchasing untaxed cigarettes. He also signed legislation to expand smoke-free zones around public buildings. In addition, he introduced a new hard-hitting anti-smoking ad that graphically depicts the damage caused by secondhand smoke.

Other Related SourceWatch Resources

• California 2003 Gubernatorial recall election

External links

General Links

• Governor Gray Davis Committee at Gray-Davis.com.

Breaking News

• Gray Davis Headlines at Yahoo!.com.
• 11 August 2003: "Davis Calls Recall an 'Insult' to Voters" by Tom Chorneau, AP News.
• 13 August 2003: "Gov. Davis Cranks Out Judge Appointments" by David Kravits, AP News.
• 13 August 2003: "Davis Strategy: Run Outside Recall Circus" by Tom Chorneau, AP News.

This article may include information from Tobacco Documents Online.

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The California 2003 Gubernatorial recall election was held on October 7, 2003: "California voters will be allowed to cast a ballot for a potential successor to Gov. Gray Davis even if they do not vote on whether he should be removed from office, a federal judge ruled ... in striking down part of California's recall law. The ruling will not stop the Oct. 7 recall election to remove Davis."

55.4% of the electorate voted to recall Davis, a Democrat. 48.6% of the people selected Republican Arnold Schwarzenegger over 134 other candidates to replace Davis as Governor. Democratic Lieutenant Governor Cruz Bustamante received 31.5% of the vote while 13.5% of Californians supported Republican State Senator Tom McClintock.

On August 7, 2003, The Washington Post quipped "Schwarzenegger adds his muscle to California gubernatorial race":

California's bizarre recall election turned even stranger Wednesday when actor Arnold Schwarzenegger jumped into the race -- announcing his Republican candidacy to Jay Leno on The Tonight Show -- hours after Sen. Dianne Feinstein said she would not be a candidate to replace fellow Democrat Gov. Gray Davis.

On a day that saw author and columnist Arianna Huffington also announce she would run[1] as a "populist progressive" and actor Gary Coleman pay the $3,500 fee to throw his hat into the ring, Schwarzenegger's decision made an already complicated recall race even more complex. Some 400 people have registered with the secretary of state's office as potential candidates to become governor if Californians vote to oust Davis.

In a move reminiscent for some of another actor, Ronald Reagan, who was twice elected governor of California, Schwarzenegger said he would be putting his movie career on hold so he can devote his time to running for governor.

 It punctuated an already odd day in U.S. politics, with TV talk show host Jerry Springer telling voters in Ohio he won't run for U.S. Senate. And in New York, former Gov. Mario Cuomo urged former Vice President Al Gore to reconsider a bid for the Democratic presidential nominee. Gore's people said it won't happen.

"I have defended California in season and out, but I'm throwing in the towel this time," says Kevin Starr, the State Librarian and author of several books on California history. "We sort of deserve it this time, don't we? You've got a leading candidate deciding or not deciding on Leno. This is a society melting down into deliberate self-parody."

With the extraordinary race capturing national attention amid a carnival atmosphere, an embattled Davis issued a statement dismissing Schwarzenegger as just the latest in a long list of people who had declared their candidacy, noting that the field even includedHustler magazine publisher Larry Flynt.

Feinstein said in a statement that Davis had been elected just nine months ago and should be allowed to finish his term.

"After thinking a great deal about this recall, its implications for the future, and its misguided nature, I have decided that I will not place my name on the ballot," she said.

Lt. Governor Cruz Bustamante announced late Wednesday he plans to run in the state's gubernatorial recall election, becoming the first prominent Democrat to abandon Davis' efforts to keep fellow party members off the ballot.

Combined with strong support from organized labor, Davis had appeared to be gaining support for his strategy to defeat the recall proponents. He won ringing endorsements[2] from the AFL-CIO on Tuesday and then saw Feinstein refuse to run, a move that Davis and organized labor had urged.

But as the day wore on, several state officeholders were weighing a jump into the race. Rep. Loretta Sanchez, D-Calif., said Tuesday that she might run if Feinstein did not. The deadline for candidates to enter the race is Saturday.

It was unclear Wednesday night if Schwarzenegger had a last-minute change of heart about running, or had engineered an elaborate ruse to fool Davis and other candidates who are contemplating campaigns into thinking that they did not have to worry about him.

 Former Los Angeles Mayor Richard Riordan, another moderate Republican, has said he would enter the race if Schwarzenegger did not, and polls have shown Riordan would be a stronger candidate than the actor.

Schwarzenegger had dropped hints all summer about his ambition to be governor, and had assembled an informal campaign team that had been taking polls and polishing his stands on a range of issues in California.

But his aides also had said repeatedly over the past two weeks that he was unlikely to run because his wife, television journalist Maria Shriver, was objecting to the burdens a campaign would impose on their family.

During his appearance on The Tonight Show, Schwarzenegger said that he thought politicians in the state were failing Californians. More than a decade after he starred in the action flick Total Recall, Schwarzenegger noted that 1.6 million people had signed petitions that led to the recall vote.

Harkening to a well-known phrase from his Terminator movies, he said the message to politicians was: "Do your job well or hasta la vista, baby."

After his appearance with Leno, Schwarzenegger told reporters that his decision to run was "the most difficult decision of my life. I felt in the end it was my duty to jump into the race. People are sick and tired of politicians."

The oddity of the recall -- being used for the first time against a California officeholder -- has spawned a profusion of candidates, including Flynt, billboard pinup Angelyne and an 18-year-old high school student. Their entrance has enabled the Davis campaign to portray the recall as a circus, a framing that Feinstein echoed Wednesday.

"This is the political equivalent of streaking: You show up, you run across the room naked and you get attention," said Stan Oftelie, executive director of the Orange County Business Council.

SourceWatch resources

• Russo Marsh & Rogers
• Sal Russo
• soft money

External links

• representative recall - from Wikipedia

Recall Davis Links

• DavisRecall.com.
• People's Advocate.
• Recall Gray Davis.

Information Links

• Complete Coverage Of The California Gubernatorial Recall, NBCSanDiego.com. Begins with May 6, 2003 article "Issa Bankrolls New Davis Recall Effort."
• California Gubernatorial Recall FAQ, ABC KGO TV, San Francisco, Oakland, San Jose.
• Recall in California, Institute of Governmental Studies, University of California web site.
• Recall Information from the Office of the California Secretary of State.
• SmartVoter.org voter information site

Breaking News

• 22 July 2003: "The California Gubernatorial Recall Debate and the Courts: Why Litigation Has Begun (and Likely Will Continue)" by Richard L. Hasen, FindLaw.com.
• 2 August 2003: "California 2003, Gubernatorial Recall Election, Information and Opinion."
• 13 August 2003: "Dems Edge GOP in Calif. Recall Candidates" by Jim Wasserman, AP News.

http://articles.latimes.com/print/2003/jul/13/local/me-history13  hist of recall

Recall Idea Got Its Start in L.A. in 1898

July 13, 2003|Matea Gold | Times Staff Writer

The year was 1910, and the Southern Pacific Railroad had a lock on California's political institutions. Disgusted with graft and corruption, a little-known San Francisco prosecutor rode a wave of public discontent into the governor's office, promising to release the state from the hold of powerful companies and their political allies.

In his inaugural speech the following January, newly elected Gov. Hiram Johnson argued for the adoption of a statewide recall measure, saying citizens should have the power to throw out "a recalcitrant official."

Nearly a century later, California is headed for its first gubernatorial recall election, and once-arcane constitutional provisions -- from whether the governor can run to succeed himself to whether he can be reimbursed for the campaign from the state treasury if he prevails -- suddenly have become the focus of more than academic interest.

Last week, proponents of a recall of Gov. Gray Davis said they had gathered enough signatures to put the issue to a vote, and Davis advisors have conceded that an election appears likely, as soon as this fall.

Each side in the Davis recall debate says history supports its approach.

Recall supporters say Davis has fallen under the control of large political donors and other interests, and that the recall is being used as intended: to let the people of California clean house.

The recall was created in "reaction to special interests controlling the Legislature in that era," said Dave Gilliard, a political strategist hired by millionaire Rep. Darrell Issa (R-Vista), who funded the recall drive and is a candidate to replace Davis. "Because the governor has sold his political soul to various groups -- mostly public employee labor unions -- our state budget has been put so far out of balance there's almost no light at the end of the tunnel," Gilliard added.

Davis backers counter that the recall distorts the intent of the Progressives who wanted to give average citizens a way to remove a corrupt leader.

"The recall mechanism was designed to be able to take care of problems that arise when a leader has committed some gross malfeasance," said Roger Salazar, a Democratic consultant advising Davis. "What we have here is essentially a manipulation of the existing process by a multimillionaire who is bent on buying himself a seat in the governor's office."

Larry Gerston, a political science professor at San Jose State, agreed that the current campaign little resembles the one that Hiram Johnson and his allies might have envisioned.

"If the Progressives were here," Gerston said, "they would be rolling in their graves."

When the recall was born, the Southern Pacific Railroad controlled a powerful political machine known as "the Octopus" that held sway over state and local governments, as well as the judiciary.

In an attempt to keep its monopoly and control shipping rates, the railroad bribed state legislators, offering them free passes and hotel rooms. And the railroad effectively chose nominees for office, including the 1906 Republican candidate for governor.

Reacting to public outrage over the widespread corruption, a Los Angeles physician named John Randolph Haynes proposed in 1898 a recall measure as part of a trio of city reforms designed to rid the political process of corruption and restore power to the citizens.

"He looked at it as a kind of remedy, for once you established someone was corrupt, there would be a way to get them out of office," said Tom Sitton, author of "John Randolph Haynes: California Progressive."

From his seat on a citizens board elected to reform the City Charter, Haynes worked for the establishment of initiative and referendum mechanisms in local government to give more power to the public. In a draft of the new charter, he also slipped in the recall, then a relatively unknown and radical idea.

In October 1900, the Los Angeles Herald described the concept to readers: "The supporters of the innovation point out that there is now no way in which the people themselves can secure the removal of any official before the expiration of his time, no matter how bad his record might be."

Haynes was then the family physician and personal friend of Harrison Gray Otis, the conservative owner of the Los Angeles Times, which called the three-pronged reform package "the most salient feature of the proposed new charter."

The City Council approved the measures for the ballot, apparently viewing the recall as a "whimsical notion which both the politicians and the serious-minded voters could be trusted to suppress," according to "The Recall of Public Officials," a 1930 book detailing the history of the recall written by two political science professors at Occidental College.

Los Angeles voters eventually approved the new City Charter, backing the recall by a ratio of 4 to 1, and after the Legislature ratified it on Jan. 22, 1903, Los Angeles became the first city in the United States to adopt the recall.

The new measure was quickly put to the test. In 1904, labor unions organized the successful recall of a city councilman who had voted to give a city printing contract to The Times, even though other newspapers had submitted substantially lower bids.

The Times quickly changed its view of the recall, calling it "freak legislation" that was "conceived in rottenness."

But in the next seven years, 25 other California cities adopted similar measures.

"The mood at the time was, there's corruption everywhere, and when we see corruption we must root it out," said Gerston of San Jose State.

Johnson, the future governor, came to fame as part of a Progressive crusade against machine politics in San Francisco. When an assistant district attorney was shot during a trial of the city's political boss for extortion, Johnson, a 42-year-old labor lawyer, successfully took over the case.

In 1910, the Progressives recruited Johnson to run for governor, and he stumped around the state for months in a crimson steam powerred] Locomobile promising to "kick the Southern Pacific out of politics in California."

In his inauguration speech on Jan. 3, 1911, the new Republican governor called for the state to implement the reforms that Haynes had introduced in Los Angeles. "While I do not by any means believe the initiative, the referendum and the recall are the panacea for all our political ills," Johnson said, "yet they do give to the electorate the power of action when desired, and they do place in the hands of the people the means by which they may protect themselves."

On Oct. 10, 1911, California voters agreed with him, approving the recall overwhelmingly.

"He had faith in the people, and the people's ability once made aware of the truth," said Richard Coke Lower, author of "A Bloc of One: The Political Career of Hiram W. Johnson." The recall was "a response to the conditions of the time and the charges that the people lacked any real involvement."

Over the years, there have been various amendments, and the Constitution now spells out everything from when the lieutenant governor has to call a special election after the petitions are certified (within 60 to 80 days, unless there's a state election already scheduled within 180 days) to who is subject to campaign finance limits (candidates, but not the incumbent fighting the recall).

The target of the recall cannot run to succeed himself, and if he resigns before the election is held, the recall goes forward. The lieutenant governor would temporarily run the state only until there was a winner of the recall (whoever gets the most votes). If the target of the recall prevails, however, he is entitled to ask the state for reimbursement for all campaign and legal expenses.

After the initial measure passed in 1911, some of the most ardent proponents of the new measure, including Haynes, acknowledged that it was not perfect.

"He expected that it was a very well-informed citizenry that would use it," said Sitton, a curator at the Los Angeles County Museum of Natural History.

"Soon after it passed, Dr. Haynes had to admit that it could very easily be used for the wrong purposes," Sitton added.

In one of its first applications, state Sen. Edwin Grant was recalled in 1913 for opposing prostitution, which had angered constituents of the red-light district he represented in San Francisco. Since then, only three other state officials have been recalled in California despite 117 attempts.

There have been 31 efforts to recall a California governor, including an attempt to replace then-Gov. Ronald Reagan in 1968, but none of them qualified for the ballot.

Initiatives in California in recent years rarely have been handled with the populist spirit that Haynes and others envisioned.

They have become a regular fact of the state's political life, employed by groups that can afford to pay signature gatherers, often in pursuit of legislation that favors their industries or interests.

Summary: this is a more or less chronological response to the development of the California electricity crisis in 2001, in which the evidence that the shortage is being artificially created by the generating companies gradually mounts.  The most important thing I discovered early on is simply that our usage is down significantly from before the crisis.  Any claims that we have really outgrown our system's capacity are lies.  The problem, I believe, is that the artificial pricing rules under "deregulation" essentially don't really allow generating companies to underprice each other.  Hence there is no competition.

When I started this page, I never expected to encounter the level of corruption that the story below brings out...

Here are some shortcut links to the more important findings along the way:

  - January: half of PG&E is losing money, the other half is making tons of it

  - usage during early blackouts was **lower than it was a year earlier**

  - SoCalEd admits high prices not caused by insufficient supply

  - April: PG&E demands immunity from losing money as generator industry airs lies in radio ads

  - Dick Cheney claims conservation is pointless and doesn't help

  - public officials finally make open accusations of holding back power to drive up prices

  - graph of gigantic growth in **generating capacity kept idle**

  - June: first drop in prices as countermeasures begin to bear fruit

  - FERC notes that price caps have driven costs down despite Republican predictions otherwise

  - court finds that price fixing was not illegal

  - Duke Energy employees **blow the whistle, under oath!**

  - GAO finds FERC's investigation of price fixing was bogus

  - FERC judge makes bizarre ruling: California owed miniscule refund

  - natural gas price gouging: accusations fly between companies

  - Legislature goes for SoCalEd bailout

  - October: PUC repudiates Davis's long-term contracts

  - San Francisco ballot measures to establish a public utility

  - Ballot measure loses, barely

The Enron scandal which followed after the California power crisis is covered in a new page here.  That page is being continually updated; this one is now historical.

http://www.paulkienitz.net/electricity-2001.html

From The American Prospect,8/13/03:

http://www.prospect.org/webfeatures/2003/08/blumenthal-m-08-13.html

California Confidential

Who are the mystery men behind the recall push?

By Max Blumenthal

"It's a victory. A total victory!"

Howard Kaloogian exclaimed on the right-wing Worldmag.com after

hearing that the petition to recall the election of California's

embattled Gov. Gray Davis had gained enough signatures to qualify as a

ballot question.

Kaloogian, a former Republican California legislator, had plenty of

reason to cheer.

:{Because while the media have presented Rep. Darrell Issa (D-Calif.),

the wealthy car-alarm magnate, as the man who drove the recall, he's

actually been little more than a useful idiot for a stealthy group of

GOP operatives who laid the groundwork.}:

Months before the recall was even a blip on the media radar, this

consultant cabal began manipulating California's idiosyncratic

electoral system, creating a muscular funding mechanism and exploiting

it for its members' own ends.

The cabal includes Kaloogian, who was a:{ right-wing backbencher in the

state Assembly, Sal Russo, who handled banker Bill Simon's hapless

2002 gubernatorial campaign, and David Gilliard, a veteran GOP

strategist with a career steeped in scandal.}:

They're:{ joined by former Enron pollster and Republican tactician Frank

Luntz, }:who devised a strategy for the recall campaign centering around

negative character attacks and avoidance of policy discussion.

With the surprise announcement of actor Arnold Schwarzenegger -- who

boasted on The Tonight Show Aug. 6, :{"I have plenty of money. Nobody

can buy me off." -- the movie star's high-priced uber-consultants

George Gorton and Don Sipple}: have grabbed the baton in the recall

race, eager to take it the last mile to the state capitol.

Thanks to this handful of men and the millionaires who bankrolled

them, what started with a petition and a few phone calls has become an

election that may unseat a twice-elected governor and dramatically

affect the lives of one in seven Americans.

The recall saga began in February when Ted Costa, a self-styled

"anti-tax activist," started gathering the requisite 100 signatures to

file a recall petition.

:{(It took an additional 899,900 signatures to turn that petition into a

ballot initiative.) Kaloogian and Russo urged Costa to hold off.}:

They wanted time to get their own recall committee off the ground to

solicit donations.

But Costa went ahead on his own and filed the petition, forcing them

to improvise.

:{With little public interest in a recall despite Davis' low approval

rating and the state's fiscal crisis, Russo and Kaloogian realized

that a movement would have to be manufactured from the top down.}:

In order to find a funding source to jump-start the movement,

Kaloogian enlisted Ray Haynes, a Republican leader in the state

Assembly's far-right caucus.

:{To his chagrin, Haynes was rebuffed by Simon, Schwarzenegger and

Gerald Parsky, George W. Bush's chief California fund-raiser.}:

Parsky initially distanced himself from the recall out of concern that

it might backfire or divert funds away from Bush's 2004 re-election

drive.

:{Only after these rejections did Haynes call on fellow right-winger

Issa, who was planning to run for governor in 2006.}:

Issa enthusiastically stepped forward to form his own recall

committee, Rescue California, with $1.7 million from his personal

fortune.

Suddenly, droves of clipboard-waving petitioners were descending upon

the nucleus of California civic life -- shopping-mall parking lots --

and were paid $1 per signature.

To direct Rescue California, essentially the recall's funding

mechanism, Issa hired :{Dave Gilliard, a Republican operative with a

reputation for using underhanded tactics to help his archconservative

clients' campaigns.

In 1988, for example, in a stunt reminiscent of Mississippi's

Reconstruction-era "shotgun policy," Gilliard arranged for uniformed

guards to stand outside Orange County polling places in predominately

Latino districts to deter the kinds of voters who might cast ballots

against his conservative Republican client.}:

As the director of Rescue California, Gilliard contrived an ingenious

plan to get contributions from state legislators who were his clients

in exchange for political favors.

The Sacramento Bee first reported in May that:{ Gilliard had sent 1

million mailers to heavily Republican -- and highly affluent -- zip

codes in the state soliciting donations and support for the recall.

These letters bore the signatures of a number of Gilliard's clients,

giving them much-needed name recognition in next year's Republican

primaries against opponents not included in the letters.}:

For the privilege of inclusion in Gilliard's promotions, the

politicians were prepared to pay him.

One of Gilliard's clients, Republican Assembly member John Campbell,

signed letters sent to Irvine, where he is facing a primary challenge

in the overwhelmingly Republican district from fellow Republican Ken

Maddox, who was not included in the letters.

Campbell donated $10,000 to Rescue California and gained the

endorsement of the Lincoln Club, an organization of businesspeople and

executives that has also coughed up $100,000 for Rescue California.

Another of Gilliard's clients who signed the letters, Cristi

Milazzo-Cristich, is a Lincoln Club activist and a candidate for the

Assembly in Orange County; she has kicked in $7,000 to the committee.

:{Meanwhile, Republican State Sen. Rico Oller paid Rescue California

$30,000 for the honor of being the voice of a radio spot on behalf of

the recall.}:

Though Gilliard told The Sacramento Bee that "involving many

politicians is a good way for Rescue California to cover costs," in

late July he told me that the notion that his clients have donated to

Rescue California to advance their own campaigns is "idiotic."

"We asked every member of the legislature if they would like to sign

the letter for Rescue California," he said.

:{"Most of my clients accepted because my clients happen to be smarter.

The other half that didn't accept are not my clients.}:"

:{

Russo, who directs the Recall Gray Davis committee along with

Kaloogian, called Gilliard's fund-raising ploy the natural byproduct

of a dog-eat-dog political atmosphere.}:

"People in politics always do things for their own advantage, like

Issa funding the recall with his own money, so that's the way politics

works," Russo told me. "I don't see anything wrong with that." Both

Russo and Gilliard have been enriched considerably by the donations to

their own committees: :{Russo has run up a $67,000 tab while Gilliard

sent Issa a $72,000 bill for June alone.}:

:{While the consultants paid by Issa propelled the recall, Issa

personally intimidated one Republican consultant to shut down his

operation against it. As founder of Republicans Against the Recall,

political consultant and former Lincoln Club CEO Scott Barnett called

the recall "a political weapon of mass destruction."}: Even though he

shares Republicans' disdain for Davis, Barnett opposes the recall

because he believes it will :{set a dangerous precedent that will widen

the partisan divide. "If this recall goes through here, there will be

retribution by Democrats against Republican officeholders across

California," he said. "This will open the door to say, 'It's

acceptable to go after officeholders who have committed no crime and

are mentally and physically capable of governing.'" Barnett claims

that in retribution for his own principled stance, Issa personally

called one of his clients, a Republican state legislator, and told him

to fire Barnett as his pollster. Barnett also claims that Andy

Gharakhani, Issa's district director, called another of his clients

and threatened to run a Republican against Barnett's client in the

upcoming primaries if the client did not fire the dissident Barnett.}:

"I don't take it personally," said Barnett. "You know,Darrell Issa

has got a lot of money and because of that he has very little

accountability -- that's just Darrell."

Still another consultant who has been instrumental in setting the

recall in motion -- and profiting from it -- is the Washington-based

Luntz, a former pollster for Enron and Newt Gingrich.

His services were retained by Issa's Rescue California to :{develop an

anti-Davis strategy based on focus-group research conducted in Orange

and Sacramento counties.}:

His memo, provided in July by U.S. House Minority Leader Nancy Pelosi

to the San Francisco Chronicle, outlined 17 ways to "kill Davis

softly."

your recall effort."

:{Luntz pointed out that the majority of Californians "are unfamiliar

with the recall process -- and this uncertainty means voters can be

easily swayed in either direction."

}:

Luntz's tactics were on bold display during Schwarzenegger's

boisterous :{Tonight Show appearance.

The actor used the spot to announce his surprise candidacy while

launching a withering attack on Davis and the Sacramento establishment

before a national audience.

Carefully avoiding mentioning the budget or any policy, Schwarzenegger

boomed the Luntz-tested line, "Do your job for the people and do it

well, otherwise you are 'Hasta la vista, baby!'"}:

Cheering in the audience were a gaggle of Republican operatives,

including Schwarzenegger handler George Gorton.

:{Gorton was first hired by Schwarzenegger in 2002 to direct the star's

campaign for Proposition 49, a feel-good ballot measure providing

grants for after-school programs (and intended as a vehicle to

establish Schwarzenegger's political credibility before a run for

governor in 2006).}:

Gorton is a veteran consultant known for his work with Republican

moderates like former Gov. Pete Wilson.

He is highly regarded in California political circles, and for that,

his services carry a hefty price tag.

During the Prop. 49 campaign, :{Schwarzenegger heaped $780,000 on

Gorton's California Group.}:

This June, with the premature arrival of a gubernatorial campaign

thanks to the recall, the money started rolling again with a:{ $60,000

payment to Gorton through the Prop. 49 committee.}:

In this new effort, Gorton has taken on Sipple, his former partner

from Wilson's campaigns, as Schwarzenegger's media director.

Sipplegained a reputation as a hard-hitting media consultant by

fashioning ads to push viewers' emotional buttons.

:{These negative, character-based attacks on opponents were instrumental

in securing a series of Republican victories, notably George W. Bush's

defeat of Ann Richards in the 1994 Texas gubernatorial race.}:

:{But after working on Bob Dole's 1996 presidential campaign, which

ended in a landslide defeat, and weathering a personal scandal in

1997, which caused his resignation from his ongoing political work,

Sipple's luster was tarnished.

In 2000, Sipple again found himself embroiled in scandal, exposed for

accepting $120,000 from then-California Insurance Commissioner Chuck

Quackenbush -- a client planning to run for Senate -- to craft a

veiled campaign ad in which the commissioner played a starring role.

The money Sipple received was part of $13 million intended for

earthquake victims.}:

The victims never saw a penny of it, and Quackenbush was forced to

resign in disgrace.

But now as Schwarzenegger's media consultant, Sipple is positioned to

return to his former influence and paycheck.

On Aug. 13, Schwarzenegger shuffled his team, demoting Gorton and

:{adding another consultant embroiled in the Quackenbush scandal, Martin

Wilson, who accepted $375,000 from the former insurance commissioner.}:

Gorton's role as Schwarzenegger's chief strategist has been assumed by

Bob White, Gov. Wilson's former chief of staff.

The move highlights Schwarzegger's close ties to Wilson, who is

persona non grata among Latino voters for his support of the

anti-immigrant initiative Prop. 187 in 1994.

After The Tonight Show, Gorton told a reporter from the San Francisco

Chronicle that he was unaware of Schwarzenegger's intentions prior to

the program.

Besides his impending demotion, there are other signs that Gorton may

have been telling the truth.

Russo recounts a series of private meetings, while Schwarzenegger was

in Mexico City promoting Terminator 3, between Gorton and former Los

Angeles Mayor Richard Riordan, who lost to Simon in the 2002

Republican gubernatorial primary.

As Russo explained to me, Gorton was planning to jump ship and join

Riordan's campaign if Schwarzenegger did not declare, moving from one

self-funding client to the next.

:{But Schwarzenegger's announcement came as the greatest shock to Issa,

who had already spent some of his car-alarm fortune to warm up a

gubernatorial campaign.}:

He had taken out radio ads, printed up posters and hired a new team of

consultants, including:{ Ken Khachigian, a veteran speechwriter who

served on President Richard Nixon's 1972 campaign "attack group}:," and

Larry McCarthy, the media producer of the infamous Willie Horton ad

that helped elect George Bush Senior in 1988.

However, with the Republican Party suddenly lined up behind

Schwarzenegger, Issa's ambition was crushed.

:{He found himself at a press conference, the victim of a vast

Republican conspiracy, and he cried}:.

Make way for Schwarzenegger and his team of consultants, whose credo

can be best summarized by a statement Gorton made in Mother Jones

while working on then-Russian President Boris Yeltsin's 1996

re-election campaign:

"Unless you're going to make some serious money, it's not worth it."

__ __

http://www.mombu.com/politics/politics/t-does-anyone-really-believe-ah-nuld-is-a-liberal-far-right-right-wing-13169563.html

Now how can anyone *really* believe Ah-nuld is a liberal.

davis

EXCERPT 3: THE CALIFORNIA ENERGY CRISI

In a meeting room down from his Washington office, Alan Greenspan,the Federal Reserve chairman, took a seat at the head of the conference table. To his left sat Lawrence Summers, the Treasury Secretary, and a few staffers. On the right was Gray Davis, the California Governor who had flown in that day,December 26, to discuss his state’s power crisis with the country’s two most influential economists

“Mr. Chairman, Mr. Secretary, thank you for meeting with me. I’m hoping that we can find some solutions to the troubles facing my state. The thing is, if deregulation fails in California, it will fail in the United States.”

Greenspan placed his hand on a thick briefing book in front of him. He and Summers had met privately minutes before and decided to throw a splash of cold water on Davis. The man needed to understand there were limited answers to California’s problems, all of them unpleasant.

“Truthfully, Governor, California hasn’t deregulated,” Greenspan said. “The state simply replaced one form of regulation with another. It’s become a system of central planning run amok.”

Summers joined in. “You have a fixed price set by the state for selling electricity to the public. But you have a variable, floating price when you buy electricity.”

“That’s not sustainable,” Greenspan said. “The problem is your regulatory system. And there are a very limited number of solutions. But the first step is that prices for consumers are going to have to go up.”

Davis showed no emotion. “I really feel the problem is the energy producers,” he said. “They’re manipulating the markets and forcing up prices.”

“They may be,” Greenspan said. “But that’s beside the point. That’s not causing the problem; that’s making it worse. The real problem is a supply-and-demand imbalance.”

Davis objected. There was plenty evidence, he said, that energy producers were withholding power from the market. Greenspan and Summers didn’t argue the point, stressing that it made economic sense for power to be withheld. The utilities weren’t making good on their bills already. With the utilities now careening toward bankruptcy, it would be folly for power companies to keep pumping electricity into the state without limits. It would just increase their exposure to the likely bankruptcies.

Gently, the two economists suggested that the state government hadn’t helped matters. By attacking power companies, accusing them of crimes and refusing to meet with them, Davis and other politicians had signaled an unwillingness to deal with the structural problems. In a market, perceptions could be as important as reality. Until California took a more realistic approach, power companies would continue to be reluctant to do business with the state.

“Governor,” Summers said, “this is classic supply and demand. The only way to fix this is ultimately by allowing retail prices to go wherever they have to go.”

Davis’s face hardened. He didn’t like being lectured from the ivory tower. “Fine,” he said. “You two live in your world of economics, supply and demand and pricing.”

He leaned in. “Let me tell you about my world,” he said. “About California politics. About referendums, where anybody with enough signatures can take a ballot initiative to the voters and overrule anything that we’re doing.”

Greenspan and Summers listened as Davis laid out his political dilemma. The words made it obvious that the power problems in California would become much worse. Economics and politics were in conflict. And for now, politics would rule.

Two days later, a black sedan pulled to the front of the Ronald Reagan State Office Building in downtown Los Angeles. Ken Lay emerged from the back, followed by Steve Kean, his chief of staff and Enron’s government-relations specialist. They had interrupted their vacations for this quick trip to California to meet with Gray Davis.

Lay and Kean headed to the fifteenth floor and were taken to the Governor’s conference room. After a couple of minutes, Davis came in and walked to Lay, who put out a hand.

“Governor, I’m Ken Lay.”

“Good to meet you, Ken.”

Davis sat at the head of the table, while Lay and Kean took seats on one side, across from a member of the Governor’s staff. “Governor,” Lay began, “as you know, Enron is a major participant in the California market. And clearly the state has some serious problems.”

Lay broached the next subject cautiously. He understood the politics and—Republican though he was—suggested that Davis shift the blame for all the troubles onto his Republican predecessor.

“Governor, you didn’t cause this problem; you inherited it,” he said. “But you can solve it by giving the state true competition and consumer choice.”

The advice he gave could have come out of the mouths of Greenspan and Summers. Supply had to be increased and demand cut, he said. The market had to see the state was serious. Announce plans to build power plants, with temporary waivers from environmental regulations. Allow for pricing models that would result in lower costs during nonpeak hours. Then let the consumers feel the effects of higher prices, in order to change behaviors.

“I can’t do that,” Davis said sharply. “I’m not going to raise rates.”

“Governor,” Lay said, “it’s going to be very difficult to get consumers acting rationally if they’re paying five cents a kilowatt hour for electricity that costs twenty-five cents.”

If Davis took those steps, Lay said, prices would ultimately drop. Then the state could enter into long-term fixed contracts and never face this problem again.

Couldn’t happen, Davis said. And he couldn’t suspend the environmental rules. Voters wouldn’t stand for it.

The conversation dragged on. Davis tossed out a few ideas he was considering—orchestrating state takeovers of power plants, invoking emergency powers. Lay cautioned the market would react terribly to such moves, and again stressed that he had to address supply-and-demand issues. At the meeting’s end, Lay left confident Davis was ready to act decisively, one way or the other.

Cash flow. That was always Enron’s Achilles’ heel.

No matter how much it stitched together in mark-to-market earnings, it simply couldn’t force cash to appear. Sure, it borrowed plenty of money through the complex transactions known as prepays and reported those billions of dollars as cash from operations. But that just pumped up debt without taking care of the real shortfall.

This year, though, would be different. With energy prices in California so high, Enron’s trading partners were forced to put up huge amounts of cash as collateral—some two billion dollars by late December. The cash wasn’t really Enron’s to use; it was more like a security deposit, which the company would probably have to hand back in a few months.

Still, to the untrained eye, the collateral allowed Enron to appear flush. The company reported the two billion dollars as cash flow from operations. If Enron had to return the money when prices dropped, so be it. Its finance team would deal with that later.

Appearing stiff, Gray Davis stood in the Assembly chambers at the state Capitol, delivering his third State of the State address.

“We will regain control over the power that’s generated in California and commit it to the public good,” he said. “Never again can we allow out-of-state profiteers to hold California hostage.”

Davis listed a series of hard-nosed solutions: forbidding generators from conducting unscheduled maintenance, making it illegal to withhold power from the grid, expanding his emergency authority, prosecuting evildoers.

“The remedies I am proposing tonight are reasonable and necessary,” Davis said. “There are other, more drastic measures I am prepared to take if I have to.”

After all the advice from the free-market evangelists, Davis had chosen another path—all-out war.

Rick Causey’s voice was icy.

In Washington, Dick Cheney, the Vice President–elect, was on the telephone with Ken Lay.

Months of uncertainty had followed the November presidential elections, with the Bush and Gore campaigns fighting it out in court over the razor-thin margins of victory in Florida. Now, with Bush declared the victor, the Administration was assembling its Cabinet.

A number of candidates had already been selected—including Don Evans, the campaign’s national finance chairman and an old friend of Lay’s, to serve as Commerce Secretary. Lay himself had interest in one particular job, which was why Cheney was on the phone to Houston this day.

“Ken,” Cheney said, “I’m sure you know, we’ve been seriously considering you for Treasury Secretary.”

Lay could already tell the news wasn’t good.

“The President has decided that with he and Don Evans and I all from Texas, all from the energy business, things were getting too top-heavy. Nominating a fourth person that was in the energy business and from Houston would probably just create too many problems.”

“Well, I certainly understand, Dick,” Lay replied.

Lay wasn’t all that disappointed, though. He didn’t lust for Washington. He was happy staying Enron’s chairman.

Usually, the final weeks of a presidential Administration are like the last days of high school. Nothing much gets accomplished as years of belongings are packed and people prepare for the next stage of life.

So by early January, with George Bush preparing to move into the White House, members of the Clinton Administration might have been expected to be kicking back. Instead, Treasury officials decided to take one last shot at fixing the California electricity mess. They tried to bring everybody together—the energy producers, the Secretary of the Treasury, the governor— for a final bargaining session.

But Davis refused to return to Washington and rejected efforts to meet halfway in Kansas City or St. Louis. Everyone, Davis said, needed to come to California, but the Clinton Administration officials declined.

Instead, this crucial meeting—the last chance for the Democratic governor to obtain help from a Democratic Administration—would be handled by conference call.

On January 13, a series of officials made their way down a hallway deep in the Energy Department. They were all dressed casually, not surprising for a Saturday. Summers, the Treasury Secretary, led the pack, followed by members of his department. Clinton’s National Economic Adviser, Gene Sperling, joined the group, along with an assortment of executives from some of the nation’s leading energy companies.

They arrived in a secure room filled with flashing monitors and high-tech communications devices designed for use in a national energy emergency. The government’s conference call with Gray Davis was about to begin.

About that same time, Ken Lay, Steve Kean, and Rick Shapiro, a company lobbyist, found seats around a conference table in Davis’s Los Angeles office. Lay greeted the other industry executives in the room, including Steve Bergstrom, the president of Dynegy, a top Enron competitor.

The video hookup with Washington was switched on. Larry Summers appeared, sitting at the head of the conference table in the Energy Department’s secure room. They could see Sperling from the White House, as well as the rest of the officials, staffers, and executives.

Everyone on the call was ready to get started, but the sound was left on mute. Governor Davis hadn’t arrived.

Minutes passed. In Washington, Summers fumed. He didn’t want to sacrifice the weekend with family waiting around for Davis to show up. He switched on the sound.

“Do we know where the Governor is?” he asked.

A voice responded. “No, but he’s expected soon.”

Lay watched Summers on the video screen. The answer from the Governor’s aide had clearly annoyed him.

He turned to chat with some of the others at the table, then glanced back at the video screen.

Summers was gone.

After five minutes out of the room, Summers walked back in and switched on the sound. “Okay, anybody know where the Governor is?” he asked.

Again, no real answer.

Back in Los Angeles, Lay leaned toward Steve Bergstrom from Dynegy. “If the Governor doesn’t show up soon,” he said softly, “no matter what we talk about, this isn’t going to be a good meeting.”

After thirty minutes Davis walked into his conference room. Aides scurried to be sure that the sound was on.

“Okay,” Davis said. “Let’s go.”

He offered no apologies or explanations.

Summers kicked things off, reviewing a series of recent recommendations. Long-term electricity prices needed to be stabilized, the market calmed, so California could enter into long-term power contracts. Announcing plans to temporarily suspend the environmental studies required to build a power plant would be a big step forward.

Some analysis had already been conducted, one industry executive said. The companies agreed that long-term prices could be locked in at just under seven cents per kilowatt hour. That was a little more than a penny above the current mandated retail price. A small rate hike, and the utilities could be back in financial health.

Davis looked straight into the monitor.

“That’s all very interesting,” he said. “But as I said in Washington, I cannot agree to any rate increase. And no environmental waivers for the power plants.”

The energy executives spoke up. They had gone as far as they could. Lay suggested that they dig through the numbers to show how closely everything had been shaved.

On the television screen in Los Angeles, Larry Summers looked like he was about to jump out of his skin.

“Governor,” Summers said, fixing his eyes on the screen in front of him, “it appears to me that these guys have done a pretty good job figuring out what the markets will do if the political leaders in California make the tough decisions to get things stabilized.”

The numbers were close, and certainly would help circumvent disaster. “We have to do what’s doable,” he said, “and not just what we want politically.”

Lay watched Davis stiffen. This isn’t working.

“The political reality is that I cannot agree to any rate increase or any environmental waivers,” Davis said. “We’ve got to find some other way to solve the problem.”

The answer should be price caps, Davis said. Just knock down the amount that the energy companies could charge. Some of the other state officials in the room agreed.

Summers’s voice rang through the room. “Price caps are just something temporary while we put together a bigger packet of reforms. It would distort the market.”

The Clinton Administration had allowed California to impose temporary caps, but it would be up to the Bush Administration to decide if those continued. And in the long term, Summers said, they were destructive, because they would push energy producers out of the California market.

The discussion meandered around the table. Neither side would budge. The attitude of some energy-industry executives was almost detached, as if they were indifferent to the prospect of a financial collapse in California.

About thirty minutes had passed. Then, without explanation, Davis abruptly left the room.

With Davis gone, the conversation continued for several minutes. Finally Summers spoke.

“I see the governor hasn’t returned,” he said. “I think we should suspend the conversation until he does.”

Everyone sat in silence for ten minutes. Finally Summers stood, signaling for some of the industry executives to follow him to a nearby anteroom. Sperling from the White House and several Treasury aides followed.

Away from the camera, Summers lectured the energy executives. They couldn’t just shrug the crisis off as California’s problem. They needed to bend over backward to find a way out. Their business was on the line.

“Do you guys understand the political reality?” Summers asked. “If you don’t agree to something that works for California, they are going to come at you with every political and legal gun blazing.”

Sperling agreed. “Without some arrangement, they have to come after you. You may think you’ve done nothing wrong legally. We don’t know. But they have to come after you.”

The executives objected. They had worked hard to make a deal work, they said, but the Governor refused to budge.

“It doesn’t matter!” Summers snapped. “Regardless of whether it’s a bad system, or whether they need a price increase. They are going to dig into your companies, upward, left, and right. You’re going to be the demons.”

In fact, Summers said, if this was handled badly, the prospects for deregulation were going to dim. “The whole trend could go the other way,” he said.

One executive started to argue that California’s system wasn’t real deregulation.

“You’re missing the point!” Summers shot back. “What state legislature is ever going to consider deregulation again if this problem isn’t solved?”

Davis hadn’t returned. Lay caught the eye of Bergstrom from Dynegy and signaled they should head out into the hall. They huddled outside the doorway.

“This is really strange,” Bergstrom said.

Lay agreed. “You can’t make any progress when one of your principals keeps leaving the meeting.”

“I’m not even sure it was worth coming.” Bergstrom shook his head. Maybe Davis just wasn’t serious. There was all this talk about him as a top contender for the Democratic presidential nomination in 2004; maybe he was just setting up a showdown with the Bush Administration.

“Well, one thing’s for sure,” Lay said. “He’s got a better chance of solving this with these guys than he will with the Bush Administration.”

Davis returned about thirty minutes after he had left. Someone told Washington to find Summers, who was still lecturing energy executives off camera. A minute later, Summers returned. He took his seat, furious.

“Governor,” he said sharply, “a lot of us here have given up our Saturday afternoon to make progress on this problem. Some of us have commitments tonight. We’re willing to keep working if we can make some progress.”

He pressed his hands against the table. “But if we can’t make any progress, we really shouldn’t waste time,” he said. “Let’s just decide now we’re not going to get this solved, certainly not in this Administration’s lifetime.”

Davis looked unruffled. “Larry, I really appreciate what everybody’s trying to do,” he said. “But I have made it clear from the beginning that I cannot and will not agree to any solution that increases rates to consumers in California or requires any type of environmental waiver.”

He glanced around the room. “And if all of you think that’s the only way we can solve this, then we might as well go in a different direction,” he said.

The solution was price caps, Davis said again.

In Washington, Summers launched into one final lecture about the evils of price controls. Then he threw in the towel.

“I wonder if, in fact, it’s not best to decide that we are not going to solve this problem today, and let everybody go home to be with their families,” he said.

On the video screen, Davis appeared calm.

“I think that’s right,” he said.

The meeting ended, and the video was shut off. Several officials gathered in the anteroom, frustrated and angry. They complained that Davis was too big a stumbling block, seemingly focused on just saving his political skin.

“So if we get to the 2004 Democratic convention and this guy is a serious contender for President,” one Treasury official said, “which one of us is going to lead the ‘Anybody but Davis’ crowd?”

Next Excerpt: "Blowing The Whistle"

Legacy of Gov. Gray Davis' recall endures

Grassroots reforms inspired by removing Gov. Gray Davis are still transforming California politics a decade later

http://www.sfchronicle.com/politics/article/Legacy-of-Gov-Gray-Davis-recall-endures-4432913.php

Mike Kepka, The Chronicle

Ted Costa, whose DavisRecall. com started the ball rolling, sits outside his Citrus Heights home and recalls: "All the ingredients were there."

By Carla Marinucci and Joe Garofoli

April 14, 2013

A decade ago, furious California voters lined up to sign petitions for a longshot drive to recall Democratic Gov. Gray Davis - the start of a grassroots revolution that continues to transform state politics.

Months later, the improbable unseating of a California governor for the first time brought a more improbable successor: "Terminator" movie action hero Arnold Schwarzenegger, who had not served a day in elected office.

Such a result, Schwarzenegger mused on his election night, could happen "only in America."Or perhaps, only in California.

Looking back at the path torched by the political wildfire that consumed California in 2003, many of the recall's major players - and its critics - acknowledge that the state will never be the same as a result of reforms inspired by the recall.

Political activist Ted Costa launched DavisRecall.com in March 2003 and the recall petition drive took hold in April, fueled by voters angered over Davis' move to triple the vehicle license fee, the ballooning state budget deficit and his handling of a statewide energy crisis.

"History is going to have to judge if it was good, bad or indifferent," Davis said in a recent interview with The Chronicle. "An unscheduled election," he added, "tends to throw a monkey wrench into the process of government."

The threat of recall has since served as a raised club over elected officials - "a degree of humility that all politicians should learn to love," said former state GOP Chair Shawn Steele, the first Californian to put his name on a 2003 petition.

To the outside world, the recall was a seven-month reality show starring a cast of 135 candidates that included a porn actress, performance artists, a ferret enthusiast and onetime "Diff'rent Strokes" child star Gary Coleman, each basking in Andy Warhol's proverbial 15 minutes of fame. Getting on the ballot was relatively easy - collecting 65 signatures and paying a $3,500 fee.

[Ten years after being recall as the governor of California, Gov. Gray Davis sits for a portrait in the Four Seasons Hotel on March 19, 2013 in San Francisco, Calif. March 25, 2013 marked a decade since the birth of a groundbreaking grassroots political movement that rocked California and the nation — and planted the seeds of the Tea Party movement that has since reshaped national politics. The great 2003 California Recall of Democratic Gov. Gray Davis, begun by a few stalwart conservative activists and talk show hosts angered over the state’s car tax, started a political tidal wave that galvanized a new voter force and upended political convention. It also flashed the early power of online political organizing — it was the first major race where voters could download petitions online.]

Election's legacy

But while the sideshow performers disappeared after the ballots were counted, the recall's legacy has grown over a decade.

The "people's revolution," as it was dubbed at the time, laid the groundwork for a series of reforms that are transforming the way Californians choose their leaders - reforms that would not have occurred without the voter frustration expressed in the recall.

Among them: the top-two primary system, in which the two candidates receiving the most votes advance to the general election, regardless of their political affiliation, and a citizen-led effort to draw new political districts in the state.

The recall's rebellious conservative grassroots spirit helped give birth to the national Tea Party movement a few years later and magnified the political power of conservative talk radio personalities who fanned voter anger through the campaign.

In addition, the movement "was one of the first campaigns in which we saw a grassroots-based technology," with the first signatures to recall Davis collected on the Internet, recalled USC political scientist Dan Schnur, who advised business leader Peter Ueberroth, a recall candidate.

"You could make the case that the descendants of the California recall include everyone from Howard Dean to the Tea Party," Schnur said.

Ted Costa, designated by the state as the authorized signature gatherer, prepared recall petitions and circulated them online.

Jim Mayer, executive director of the nonpartisan government reform group California Forward, said the recall "was a voter intervention on a government they saw being out of control."

Since then, "California has been on its own version of a 12-step process," Mayer said, a political "recovery" that has resulted in landmark reforms that have made some state races more competitive. The election's legacy also can be seen in some of Gov. Jerry Brown's efforts to streamline government.

"We don't know whether we're at the beginning, middle or end of that process," Mayer said. "But we're in it."

Davis, who became only the second U.S. governor removed from office by voters, is philosophical about such political revolts.

Since former Gov. Hiram Johnson helped introduce an agenda of political reforms to the state in 1911, Davis said, "anyone who goes into politics in California knows that initiative, referendum and recall are part of the process."

"If you don't like it," Davis said, "go into some other line of work."

A 'perfect storm'

The seeds of California voters' discontent were planted in 2002, when Davis emerged battered from an exhausting, expensive battle with GOP opponent Bill Simon. Only 36 percent of California voters bothered to cast ballots in the November election.

The low turnout would boomerang on Davis. The threshold for the number of petition signatures required to trigger a recall is based on 12 percent of voter turnout from the previous gubernatorial election.

"We were so negative," said former Davis adviser Susan Kennedy, that by the time the contest ended, "the voters were in such a bad mood. I remember thinking we should not have won."

In his first term, Davis earned goodwill and buzz as a potential presidential candidate.

But the positive bounce quickly dissipated in what former Davis senior adviser Garry South called a "perfect storm" of cascading political problems that rocked Davis' second term, which began in January 2003, and hit average Californians in the wallet.

When the dot-com boom came to a screeching halt, the falling stock market pummeled the state budget, leaving a deficit of $38 billion.

Davis, a moderate, was caught in a furious political eddy. Republicans fumed about the budget deficit while Democratic lawmakers and major labor unions pressed for liberal favorites like driver's licenses for undocumented immigrants and reforms in workers' compensation. Such moves weakened the governor even more, Kennedy said.

"To this day, I look back and I say, 'It was the Democrats who threw him out of office,' " said Kennedy, who went on to become chief of staff to Schwarzenegger.

A major energy crisis, which some people still believe was manufactured by Republicans and energy companies, and a flawed deregulation plan resulted in rolling power blackouts and skyrocketing energy rates.

A revolt begins

"All the ingredients were there," said Costa, CEO of People's Advocate, a grassroots group founded by antitax crusaders Paul Gann and Howard Jarvis, the iconic organizers behind another state voter revolt - the property tax-cutting Proposition 13 in 1978. Costa had been involved in many local recalls. He knew the time was ripe. He and conservative radio hosts, including Melanie Morgan at San Francisco's KSFO-AM, began talking up a recall. Designated by the secretary of state as the authorized signature gatherer, he prepared petitions - and started circulating them online.

Supporters had 160 days to gather 897,158 valid signatures. But they needed money and key organizers who could manage the ensuing chaos.

Joining them was GOP strategist and veteran organizer Sal Russo, who has since co-founded Tea Party Express, a grassroots revolution that borrowed many organizing techniques from the state's recall. At first, Russo remembers trying to discourage the "unholy alliance" of recall forces. "I thought the grounds were insufficient," Russo said.

But Russo changed his mind after he got a call from California Teachers Association executive John Hein, a traditional Democratic ally. The union's internal polling showed Davis to be vulnerable to a recall, "and if you take charge," Russo recalled Hein telling him, "we can succeed."

Hein said union leaders were unhappy with Davis because they saw the governor as unsupportive of their political aims, but never directly encouraged Davis' ouster.

Still, that was enough encouragement for Russo. He and former Republican Assemblyman Howard Kaloogian plunged into the recall, believing GOP activists could be "pioneers ... and technology would enable us to reach people and get it done."

Fast money

In early April 2003, veteran Sacramento GOP consultant Dave Gilliard heard from his client, Rep. Darrell Issa, R-Vista (San Diego County), a multimillionaire car alarm magnate mulling a run for governor. He wanted to know if the recall was real.

"I told Darrell that it would take a lot of money, very fast," Gilliard said.

Issa served up $1.7 million, enabling Gilliard to found Rescue California and hire professional signature gatherers, a necessity in a statewide campaign.

Gilliard remembered sending a young staffer to the post office to pick up petitions in the first week, "and I expected a tray, maybe 500."

"He came back with the car full, jammed top to bottom," Gilliard said. "I realized we had something."

By July, organizers had gathered nearly 1.3 million valid signatures, more than enough to qualify the measure for the ballot.

Former Davis adviser South said recently that Issa used his millions for "a total perversion" of the recall provision in the state Constitution, which was designed to remove officeholders for malfeasance and corruption. The movement to oust Davis "never would have qualified" without Issa, South said.

In a recent interview, Issa said he remains convinced that the recall was valid and justified.

"The recall was never about a Republican governor," Issa insisted. "It was about getting rid of someone who wouldn't act when the state needed him to act."

Despite efforts to draft him as candidate, Issa declined to run after Republican Schwarzenegger leapt into the race at the last minute.

Asked if he regretted not jumping in as a candidate in 2003, Issa said. "I have no regrets."

Cracking alliances

By then, the recall had shredded many of California's traditional political alliances.

The upcoming election had cornered Davis into making uncomfortable policy choices. Facing the end of his career, he found himself confronting a political truism: "Every ass you kick on the way up, you'll have to kiss on the way down," Kennedy said. "Every (special interest) group was thinking, 'What can I get out of this? I can finally get my bill.' "

Some Democrats wanted a backup plan should Davis be recalled. Democratic Lt. Gov. Cruz Bustamante announced plans to run for governor.

On the right, Republicans faced a similar dilemma: Should they support Schwarzenegger, a more liberal candidate who they thought could win, or a true conservative like then-state Sen. Tom McClintock?

McClintock, like Bustamante, resisted pressure from his party's leaders and donors to bow out.

The whirlwind recall campaign, certified in July for the ballot in October, ushered in "the celebrity era of politics," said Democratic consultant Richie Ross, who advised Bustamante. Bustamante declined to be interviewed.

The campaign was dominated by Schwarzenegger's memorable photo ops. In one, he wielded a broom to "sweep" Sacramento clean. In another, he staged the dramatic "crushing" of the Davis car tax.

"People love a show and he was a showman," Ross said. "It was the Super Bowl halftime show of politics."

The condensed campaign allowed little time to scrutinize the candidates. On Oct. 7, with 61 percent of voters participating, Schwarzenegger was elected governor with 49 percent of the vote.

Fiscal problems

But the Terminator didn't solve the state's problems. The recall's more serious legacy remains its long-lasting impact on California's finances.

Schwarzenegger cut the vehicle license fee that Davis had raised, a move that continues to hamper cities and counties that receive those funds. Over the years, the hit to state finances from the vehicle license fee has been about $50 billion, said Sen. Mark Leno, D-San Francisco, chairman of the Senate budget committee.

Leno said Schwarzenegger also convinced voters to take out $15 billion in debt via "economic recovery bonds" that were on the 2004 ballot. The state is still paying those off, with $1.5 billion due this year - and payments scheduled to continue until 2016.

Much of what Brown calls the state's "wall of debt" was generated during Schwarzenegger's time in office, including billions in delayed payments to public schools.

"The candidate who promised to cut up the state's credit card dug us deeper into debt than any governor in modern history," Leno said. Schwarzenegger declined to be interviewed.

By July 2010, just 22 percent of California voters approved of Schwarzenegger's job performance, according to the state's nonpartisan Field Poll. Ironically, that's the same level of support Davis had in August 2003, two months before he was recalled.

"People got engorged on celebrity - and we've now moved into an era now of emphasis of competency and practicality," said consultant Ross. "It's created this Jerry Brown era where the emphasis is really on not a lot of flash."

Reforms hailed

The attitudinal changes inspired by the recall have started to change Sacramento, said Mark Baldassare, co-author with Cheryl Katz of "The Coming Age of Direct Democracy: California's Recall and Beyond."

He pointed to Brown's 2010 campaign promise not to raise taxes without a vote of the people. Last year, Californians approved Proposition 30, which raises taxes, a major political victory for Brown.

"I wonder if that would have happened if we hadn't gotten to the point where the voters are part of the decision-making process now," said Baldassare, president of the nonpartisan Public Policy Institute of California.

The specter of another recall also has made the Democrat-controlled Legislature "very much aware of the power of direct democracy," Baldassare said.

Davis said Schwarzenegger "gets credit" for the "top-two" primary system and a citizens panel to redraw the state's political lines. Both reforms were opposed by both major parties, but were only enacted after the recall delivered a governor from outside the political establishment.

The reforms, designed to create more centrist candidates, could "make a significant difference in California politics" over time, said Daniel Mitchell, professor emeritus of management and public policy at UCLA.

Brown's plan to realign government services from the state level to the local level "is out of the reform playbook" that the recall inspired, reform advocate Mayer said. So was Brown's move last year to reduce the number of state agencies from 12 to 10, consolidate some departments and eliminate others.

But others warn there are some downsides.

South, Davis' former adviser, said partisan special interests backed by big money super PACs and the power of social media could make it easier to recall a governor.

Former GOP leader Steele thinks California's recall drama is not likely to be repeated given the message of the recall a decade ago: "It's a notice to future politicians that they, too, can be vanquished," Steele said.

Issa, who bankrolled the 2003 effort, smiled at the possibility ,"People keep coming to me," he said, "and telling me we're due again."

-- Online: Read more at www.sfgate.com/recall.

Recall timeline

Nov. 5, 2002: Democrat Gray Davis is elected to a second term as governor of California.

Nov. 11, 2002: Freelance writer Thomas Elias pens an op-ed, with the headline "Recall Gray Davis," in the San Gabriel (Los Angeles County) Tribune, saying record-low turnout and a negative race call for a "new progressive movement."

Feb. 5, 2003: California GOP Chair Shawn Steele, Assemblyman Dennis Mountjoy, former Assemblyman Howard Kaloogian, antitax advocate Ted Costa and conservative talk-show host Melanie Morgan announce plans to raise money for a recall drive through Costa's People's Advocate group.

Feb. 24, 2003: State Republican Party overwhelmingly backs a recall at its statewide convention. Davis blasts their action as "sour grapes."

March 5, 2003: California's Green Party, after hinting that it would join the recall, declines to join the movement, with spokesman Ross Mirkarimi saying the effort would not be viable.

March 25, 2003: Secretary of State Kevin Shelley certifies the recall petition for circulation. Proponents have 160 days to gather nearly 1 million signatures.

April 15, 2003: Gov. Davis' popularity hits an all-time low - 67 percent of California voters hold an unfavorable view of him thanks to the state's $38 billion debt and an electricity crisis; but 60 percent still don't favor a recall, a Field Poll shows.

April 27, 2003: Rep. Darrell Issa, R-Vista (San Diego County) says he will "seriously consider" running for governor if the recall qualifies for the ballot, which electrifies his fellow Republicans in the state.

May 30, 2003: Assemblyman John Campbell and Sen. Rico Oller become the first state lawmakers to donate to the Rescue California recall drive. Issa starts pumping $1.71 million of his fortune into the effort.

July 8, 2003: Rescue California organizers turn in nearly 1.3 million petition signatures to the secretary of state's office.

July 10, 2003: Republican Bill Simon, who was defeated by Gray Davis in the 2002 election, hints that he is getting into the race, while Issa is backed by GOP business leaders in Southern California.

July 23, 2003: Secretary of State Kevin Shelley certifies the recall election.

July 24, 2003: The October special election is set.

Aug. 13, 2003: The certified list of 135 gubernatorial candidates, including Republican Arnold Schwarzenegger, is released.

Sept. 24, 2003: Schwarzenegger, Lt. Gov. Cruz Bustamante, Republican state Sen. Tom McClintock, Green Party candidate Peter Camejo and Arianna Huffington hold their only debate.

Oct. 7, 2003: Recall election day.

Nov. 14, 2003: Secretary of State Shelley certifies the election results, with Schwarzenegger the winner and Bustamante finishing second.

Nov. 17, 2003: Schwarzenegger is sworn in as governor.

Sources: UCLA Library, S.F. Chronicle library

San Francisco Chronicle political writer Wyatt Buchanan contributed to this report. Carla Marinucci and Joe Garofoli are San Francisco Chronicle political writers. E-mail: cmarinucci@sfchronicle.com, jgarofoli@sfchronicle.com Twitter: @cmarinucci, @joegarofoli

==

wiki

The California electricity crisis, also known as the Western U.S. Energy Crisis of 2000 and 2001, was a situation in which California had a shortage of electricity caused by market manipulations, illegal^[5] shutdowns of pipelines by the Texas energy consortium Enron, and capped retail electricity prices.^[6] The state suffered from multiple large-scale blackouts, one of the state's largest energy companies collapsed, and the economic fall-out greatly harmedGovernor Gray Davis's standing.

Drought, delays in approval of new power plants,^[7] and market manipulation decreased supply. This caused 800% increase in wholesale prices from April 2000 to December 2000.^[8] In addition, rolling blackouts adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced a large number of retail consumers.

California had an installed generating capacity of 45GW. At the time of the blackouts, demand was 28GW. A demand supply gap was created by energy companies, mainly Enron, to create an artificial shortage. Energy traders took power plants offline for maintenance in days of peak demand to increase the price.^[9][10] Traders were thus able to sell power at premium prices, sometimes up to a factor of 20 times its normal value. Because the state government had a cap on retail electricity charges, this market manipulation squeezed the industry's revenue margins, causing the bankruptcy of Pacific Gas and Electric Company (PG&E) and near bankruptcy of Southern California Edison in early 2001.^[11]

The financial crisis was possible because of partial deregulation legislation instituted in 1996 by the California Legislature (AB 1890) and Governor Pete Wilson. Enron took advantage of this deregulation and was involved in economic withholding and inflated price bidding in California's spot markets.^[12]

The crisis cost between $40 to $45 billion.^[13]

Causes

Market manipulation

As the FERC report concluded, market manipulation was only possible as a result of the complex market design produced by the process of partial deregulation. Manipulation strategies were known to energy traders under names such as "Fat Boy", "Death Star", "Forney Perpetual Loop", "Ricochet", "Ping Pong", "Black Widow", "Big Foot", "Red Congo", "Cong Catcher" and "Get Shorty".^[14] Some of these have been extensively investigated and described in reports.

Megawatt laundering is the term, analogous to money laundering, coined to describe the process of obscuring the true origins of specific quantities of electricity being sold on the energy market. The California energy market allowed for energy companies to charge higher prices for electricity produced out-of-state. It was therefore advantageous to make it appear that electricity was being generated somewhere other than California.

Overscheduling is a term used in describing the manipulation of capacity available for the transportation of electricity along power lines. Power lines have a defined maximum load. Lines must be booked (or scheduled) in advance for transporting bought-and-sold quantities of electricity. "Overscheduling" means a deliberate reservation of more line usage than is actually required and can create the appearance that the power lines are congested. Overscheduling was one of the building blocks of a number of scams. For example, the Death Star group of scams played on the market rules which required the state to pay "congestion fees" to alleviate congestion on major power lines. "Congestion fees" were a variety of financial incentives aimed at ensuring power providers solved the congestion problem. But in the Death Star scenario, the congestion was entirely illusory and the congestion fees would therefore simply increase profits.

In a letter sent from David Fabian to Senator Boxer in 2002, it was alleged that:

"There is a single connection between northern and southern California's power grids. I heard that Enron traders purposely overbooked that line, then caused others to need it. Next, by California's free-market rules, Enron was allowed to price-gouge at will."^[15]

Effects of partial deregulation

Part of California's deregulation process, which was promoted as a means of increasing competition, involved the partial divestiture in March 1998 ofelectricity generation stations by the incumbent utilities, who were still responsible for electricity distribution and were competing with independents in theretail market. A total of 40% of installed capacity — 20 gigawatts — was sold to what were called "independent power producers." These included Mirant,Reliant, Williams, Dynegy, and AES. The utilities were then required to buy their electricity from the newly created day-ahead only market, the California Power Exchange (PX). Utilities were precluded from entering into longer-term agreements that would have allowed them to hedge their energy purchases and mitigate day-to-day swings in prices due to transient supply disruptions and demand spikes from hot weather.

:{

Energy deregulation put the three companies that distribute electricity into a tough situation. Energy deregulation policy froze or capped the existing price of energy that the three energy distributors could charge.}:^[16] Deregulating the producers of energy did not lower the cost of energy. Deregulation did not encourage new producers to create more power and drive down prices. Instead, with increasing demand for electricity, the producers of energy charged more for electricity.^[17] The producers used moments of spike energy production to inflate the price of energy.^[17] In January 2001, energy producers began shutting down plants to increase prices.^[17]Then, in 2000, wholesale prices were deregulated, but retail prices were regulated for the incumbents as part of a deal with the regulator, allowing the incumbent utilities to recover the cost of assets that would be stranded as a result of greater competition, based on the expectation that "frozen" rates would remain higher than wholesale prices. This assumption remained true from April 1998 through May 2000.

When electricity wholesale prices exceeded retail prices, end user demand was unaffected, but the incumbent utility companies still had to purchase power, albeit at a loss. This allowed independent producers to manipulate prices in the electricity market by withholding electricity generation, arbitraging the price between internal generation and imported (interstate) power, and causing artificial transmission constraints. This was a procedure referred to as "gaming the market." In economic terms, the incumbents who were still subject to retail price caps were faced with inelastic demand (see also: Demand response). They were unable to pass the higher prices on to consumers without approval from the public utilities commission. The affected incumbents were Southern California Edison (SCE) and Pacific Gas & Electric (PG&E). Pro-privatization advocates insist the cause of the problem was that the regulator still held too much control over the market, and true market processes were stymied — whereas opponents of deregulation assert that the fully regulated system had worked for 40 years without blackouts.

Government price caps

By keeping the consumer price of electricity artificially low, the California government discouraged citizens from practicing conservation. In February 2001, California governor Gray Davis stated, "Believe me, if I wanted to raise rates I could have solved this problem in 20 minutes."^[18]

Energy price regulation incentivized suppliers to ration their electricity supply rather than expand production. The resulting scarcity created opportunities for market manipulation by energy speculators.

State lawmakers expected the price of electricity to decrease due to the resulting competition; hence they capped the price of electricity at the pre-deregulation level. Since they also saw it as imperative that the supply of electricity remain uninterrupted, utility companies were required by law to buy electricity from spot markets at uncapped prices when faced with imminent power shortages.

When the electricity demand in California rose, utilities had no financial incentive to expand production, as long term prices were capped. Instead, wholesalers such as Enron manipulated the market to force utility companies into daily spot markets for short term gain. For example, in a market technique known as megawatt laundering, wholesalers bought up electricity in California at below cap price to sell out of state, creating shortages. In some instances, wholesalers scheduled power transmission to create congestion and drive up prices.

After extensive investigation The Federal Energy Regulatory Commission (FERC) substantially agreed in 2003:^[19]

"...supply-demand imbalance, flawed market design and inconsistent rules made possible significant market manipulation as delineated in final investigation report. Without underlying market dysfunction, attempts to manipulate the market would not be successful.""...many trading strategies employed by Enron and other companies violated the anti-gaming provisions...""Electricity prices in California’s spot markets were affected by economic withholding and inflated price bidding, in violation of tariff anti-gaming provisions."

The major flaw of the deregulation scheme was that it was an incomplete deregulation—that is, "middleman" utility distributors continued to be regulated and forced to charge fixed prices, and continued to have limited choice in terms of electricity providers. Other, less catastrophic energy deregulation schemes, such as Pennsylvania's, have generally deregulated utilities but kept the providers regulated, or deregulated both.

New regulations

In the mid-90's, under Republican Governor Pete Wilson, California began changing the electricity industry. Democratic State Senator Steve Peace, was the Chairman of the Senate Committee on Energy at the time and is often credited as "the father of deregulation" [2]. The author of the bill was Senator Jim Brulte, a Republican from Rancho Cucamonga [3]. Wilson admitted publicly that defects in the deregulation system would need fixing by "the next governor".

While the selling of power plants to private companies was labeled "deregulation", in fact Steve Peace and the California legislature expected that there would be regulation by the FERC which would prevent manipulation. The FERC's job, in theory, is to regulate and enforce federal law, preventing market manipulation and price manipulation of energy markets. When called upon to regulate the out-of-state privateers which were clearly manipulating the California energy market, the FERC hardly reacted at all and did not take serious action against Enron, Reliant, or any other privateers. FERC's resources are in fact quite sparse in comparison to their entrusted task of policing the energy market. Lobbying by private companies may also have slowed down regulation and enforcement.^{[citation needed]}The new rules called for the Investor Owned Utilities, or IOUs, (primarily Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric) to sell off a significant part of their electricity generation to wholly private, unregulated companies such as AES, Reliant, and Enron. The buyers of those power plants then became the wholesalers from which the IOUs needed to buy the electricity that they used to own themselves.

Supply and demand

California's population increased by 13% during the 1990s. The state did not build any new major power plants during that time, although existing in-state power plants were expanded and power output was increased nearly 30% from 1990 to 2001.

California's utilities came to depend in part on the import of excess hydroelectricity from the Pacific Northwest states of Oregon andWashington.^{[citation needed]} California's clean air standards favored in-state electricity generation which burned natural gas because of its lower emissions, as opposed to coal whose emissions are more toxic and contain more pollutants^{[citation needed]}.

In the summer of 2001 a drought in the northwest states reduced the amount of hydroelectric power available to California. Though at no point during the crisis was California's sum of actual electric-generating capacity plus out-of-state supply less than demand, California's energy reserves were low enough that during peak hours the private industry which owned power-generating plants could effectively hold the State hostage by shutting down their plants for "maintenance" in order to manipulate supply and demand. These critical shutdowns often occurred for no other reason than to force California's electricity grid managers into a position where they would be forced to purchase electricity on the "spot market", where private generators could charge astronomical rates. Even though these rates were semi-regulated and tied to the price of natural gas, the companies (which included Enron and Reliant Energy) controlled the supply of natural gas as well. Manipulation by the industry of natural gas prices resulted in higher electricity rates that could be charged under the semi-regulations.

In addition, the energy companies took advantage of California's electrical infrastructure weakness. The main line which allowed electricity to travel from the north to the south, Path 15, had not been improved for many^[quantify] years and became a major bottleneck point which limited the amount of power that could be sent south to 3,900 MW. Without the manipulation by energy companies, this bottleneck was not problematic, but the effects of the bottleneck compounded the price manipulation by hamstringing energy grid managers in their ability to transport electricity from one area to another. With a smaller pool of generators available to draw from in each area, managers were forced to work in two markets to buy energy, both of which were being manipulated by the energy companies.^{[citation needed]}

The International Energy Agency estimates^[20] that a 5% lowering of demand would result in a 50% price reduction during the peak hours of the California electricity crisis in 2000/2001. With better demand response the market also becomes more resilient to intentional withdrawal of offers from the supply side.

Some key events

Rolling blackouts affecting 97,000 customers hit the San Francisco Bay area on June 14, 2000, and San Diego Gas & Electric Company filed a complaint alleging market manipulation by some energy producers in August 2000. On December 7, 2000, suffering from low supply and idled power plants, the California Independent System Operator (ISO), which manages the California power grid, declared the first statewide Stage 3 power alert, meaning power reserves were below 3 percent. Rolling blackouts were avoided when the state halted two large state and federal water pumps to conserve electricity.

Most notable, the city of Los Angeles was unaffected by the crisis because public utilities in California (including the Los Angeles Department of Water & Power) were exempt from the deregulation legislation and sold its excess power to private utilities in the state (mostly to Southern California Edison) during the crises that enabled much of the greater Los Angeles area to suffer only rolling brown-outs rather than long term black outs suffered in other parts of the state.^[21]

On December 15, 2000, the Federal Energy Regulatory Commission (FERC) rejected California's request for a wholesale rate cap for California, instead approving a "flexible cap" plan of $150 per megawatt-hour. That day, California was paying wholesale prices of over $1400 per megawatt-hour, compared to $45 per megawatt-hour average one year earlier.

On January 17, 2001, the electricity crisis caused Governor Gray Davis to declare a state of emergency. Speculators, led by Enron Corporation, were collectively making large profits while the state teetered on the edge for weeks, and finally suffered rolling blackouts on January 17 & 18. Davis was forced to step in to buy power at highly unfavorable terms on the open market, since the California power companies were technically bankrupt and had no buying power. The resulting massive long term debt obligations added to the state budget crisis and led to widespread grumbling about Davis' administration.

Consequences of wholesale price rises on the retail market

As a result of the actions of electricity wholesalers, Southern California Edison (SCE) and Pacific Gas & Electric (PG&E) were buying from a spot market at very high prices but were unable to raise retail rates. A product that the IOU's used to produce for about three cents per kilowatt hour of electricity, they were paying eleven cents, twenty cents, fifty cents or more; and, yet, they were capped at 6.7 cents per kilowatt hours in terms of what they could charge their retail customers. As a result, PG&E filed bankruptcy, and Southern California Edison worked diligently on a workout plan with the State of California to save their company from the same fate.^[22] PG&E and SCE had racked up US$20 billion in debt by Spring of 2001 and their credit ratings were reduced to junk status. The financial crisis meant that PG&E and SCE were unable to purchase power on behalf of their customers. The state stepped in on January 17, 2001, having the California Department of Water Resources buy power. By February 1, 2001 this stop-gap measure had been extended and would also include SDG&E. It would not be until January 1, 2003 that the utilities would resume procuring power for their customers.

Between 2000 and 2001, the combined California utilities laid off 1,300 workers, from 56,000 to 54,700, in an effort to remain solvent. SDG&E had worked through the stranded asset provision and was in a position to increase prices to reflect the spot market. Small businesses were badly affected.

According to a 2007 study of Department of Energy data by Power in the Public Interest, retail electricity prices rose much more from 1999 to 2007 in states that adopted deregulation than in those that did not.^[23]

Involvement of Enron

Main article: Enron

One of the energy wholesalers that became notorious for "gaming the market" and reaping huge speculative profits was Enron Corporation. Enron CEOKenneth Lay mocked the efforts by the California State government to thwart the practices of the energy wholesalers, saying, "In the final analysis, it doesn't matter what you crazy people in California do, because I got smart guys who can always figure out how to make money." The original statement was made in a phone conversation between David Freeman (Chairman of the California Power Authority) and Kenneth Lay (CEO of Enron) in 2000, according to the statements made by Freeman to the Senate Subcommittee on Consumer Affairs, Foreign Commerce and Tourism in April^[24] and May 2002.^[25]

S. David Freeman, who was appointed Chair of the California Power Authority in the midst of the crisis, made the following statements about Enron's involvement in testimony^[25] submitted before the Subcommittee on Consumer Affairs, Foreign Commerce and Tourism of the Senate Committee on Commerce, Science and Transportation on May 15, 2002:

"There is one fundamental lesson we must learn from this experience: electricity is really different from everything else. It cannot be stored, it cannot be seen, and we cannot do without it, which makes opportunities to take advantage of a deregulated market endless. It is a public good that must be protected from private abuse. If Murphy’s Law were written for a market approach to electricity, then the law would state 'any system that can be gamed, will be gamed, and at the worst possible time.' And a market approach for electricity is inherently gameable. Never again can we allow private interests to create artificial or even real shortages and to be in control."Enron stood for secrecy and a lack of responsibility. In electric power, we must have openness and companies that are responsible for keeping the lights on. We need to go back to companies that own power plants with clear responsibilities for selling real power under long-term contracts. There is no place for companies like Enron that own the equivalent of an electronic telephone book and game the system to extract an unnecessary middleman’s profits. Companies with power plants can compete for contracts to provide the bulk of our power at reasonable prices that reflect costs. People say that Governor Davis has been vindicated by the Enron confession."

Enron eventually went bankrupt, and signed a US$1.52 billion settlement with a group of California agencies and private utilities on July 16, 2005. However, due to its other bankruptcy obligations, only US$202 million of this was expected to be paid. Ken Lay was convicted of multiple criminal charges unrelated to the California energy crisis on May 25, 2006, but he died due to a heart attack on July 5 of that year before he could be sentenced. Because Lay died while his case was on federal appeal, his conviction was vacated and his family was allowed to retain all his property.

Enron traded in energy derivatives specifically exempted from regulation by the Commodity Futures Trading Commission. At a Senate hearing in January 2002, Vincent Viola, chairman of the New York Mercantile Exchange—the largest forum for energy contract trading and clearing—urged that Enron-like companies, which don't operate in trading "pits" and don't have the same government regulations, be given the same requirements for "compliance, disclosure, and oversight." He asked the committee to enforce "greater transparency" for the records of companies like Enron. In any case, the U.S. Supreme Court had ruled "that FERC has had the authority to negate bilateral contracts if it finds that the prices, terms or conditions of those contracts are unjust or unreasonable." Nevada was the first state to attempt recovery of such contract losses.^{[citation needed]}

Handling of the crisis

Governor Gray Davis

Perhaps the heaviest point of controversy is the question of blame for the California electricity crisis. Former Governor Gray Davis's critics often charge that he did not respond properly to the crisis, while his defenders attribute the crisis to the power trading fraud and corporate accounting scandals and say that Davis did all he could considering the fact that the federal government, not states, regulate interstate power commerce.

In a speech at UCLA on August 19, 2003, Davis apologized for being slow to act during the energy crisis, but then forcefully attacked the Houston-based energy suppliers: "I inherited the energy deregulation scheme which put us all at the mercy of the big energy producers. We got no help from the Federal government. In fact, when I was fighting Enron and the other energy companies, these same companies were sitting down with Vice President Cheney to draft a national energy strategy."

Signs of trouble first cropped up in the spring of 2000 when electricity bills skyrocketed for customers in San Diego, the first area of the state to deregulate. Experts warned of an impending energy crisis, but Governor Davis did little to respond until the crisis became statewide that summer.Davis began asking the federal regulator FERC to probe possible price manipulation by power suppliers as early as August 2000. Davis would issue a state of emergency on January 17, 2001, when wholesale electricity prices hit new highs and the state began issuing rolling blackouts.

Some critics, such as Arianna Huffington, alleged that Davis was lulled to inaction by campaign contributions from energy producers.^[26] In addition, the California State Legislature would sometimes push Davis to act decisively by taking over power plants which were known to have been gamed and place them back under control of the utilities, ensuring a more steady supply and slapping the nose of the worst manipulators . Meanwhile, conservatives argued that Davis signed overpriced energy contracts, employed incompetent negotiators, and refused to allow prices to rise for residences statewide much like they did in San Diego, which they argue could have given Davis more leverage against the energy traders and encouraged more conservation.^[27] More criticism is given in the book Conspiracy of Fools,

http://www.randomhouse.com/crown/features/conspiracyoffools/cast.html   wendy gramm, murdoch

which gives the details of a meeting between the governor and his officials; Clinton Administration Treasury officials; and energy executives, including market manipulators such as Enron, where Gray Davis disagreed with the treasury officials and energy executives. They advised suspending environmental studies to build power plants and a small rate hike to prepare for long-term power contracts (Davis eventually signed overpriced ones, as noted above), while Davis supported price caps, denounced the other solutions as too politically risky, and allegedly acted rudely.^[28] The contracts Davis signed locked Californians into artificially high electric costs for the next decade.^[29] As of October 2011 electric rates in California had yet to return to pre-contract levels.

The crisis, and the subsequent government intervention, have had political ramifications, and is regarded as one of the major contributing factors to the 2003 recall election of Governor Davis.

On November 13, 2003, shortly before leaving office, Davis officially brought the energy crisis to an end by issuing a proclamation ending the state of emergency he declared on January 17, 2001. The state of emergency allowed the state to buy electricity for the financially strapped utility companies. The emergency authority allowed Davis to order the California Energy Commission to streamline the application process for new power plants. During that time, California issued licenses to 38 new power plants, amounting to 14,365 megawatts of electricity production when completed.

Arnold Schwarzenegger

On May 17, 2001, future Republican governor Arnold Schwarzenegger and former Los Angeles Mayor Republican Richard Riordan met with Enron CEOKenneth Lay at the Peninsula Beverly Hills Hotel in Beverly Hills. The meeting was convened for Enron to present its "Comprehensive Solution for California," which called for an end to federal and state investigations into Enron's role in the California energy crisis.^[30][31][32]

On October 7, 2003, Schwarzenegger was elected Governor of California to replace Davis.

Over a year later, he attended the commissioning ceremony^[33] of a new Western Area Power Administration (WAPA) 500 kV line remedying the aforementioned power bottleneck on Path 15.

There were no power shortages or outages while Schwarzenegger was governor, and the Enron corporate officers were swiftly arrested and tried. Those arrested and tried included Treasurer Ben Glisan, Jr., Andrew Fastow, Lea Fastow, Richard Causey, Jeffrey Skilling, Kenneth Lay, Dan Boyle of Enron andMerrill Lynch bankers Daniel Bayly, Robert Furst, William Fuhs and James Brown.

National Energy Development Task Force

Vice President Dick Cheney was appointed in January 2001 to head the National Energy Development Task Force. In the spring of that year, officials of theLos Angeles Department of Water and Power met with the Task Force, asking for price controls to protect consumers. The Task Force refused, and insisted that deregulation must remain in place.^{[citation needed]}

Federal Energy Regulatory Commission

The Federal Energy Regulatory Commission (FERC) was intimately involved with the handling of the crisis from the summer of 2000. There were in fact at least four separate FERC investigations.^[34]

• The Gaming Case, investigating general allegations of manipulation of the Western energy markets.
• The Enron Investigation, specifically investigating the involvement of Enron.
• The Refund Case, involving wide-ranging recovery of illegal profits made by some companies during the crisis.
• The Economic Withholding and Anomalous Bidding Case.^[35]

In January 2006, the refund case was ongoing.

See also

• Energy crisis
• List of power outages

Footnotes

1. ^ "Federal Energy Regulatory Commission Chronology" (PDF). Retrieved 2008-08-17.
2. ^ "ERisk.com's The California Energy Crisis 2063-20100". Archived fromthe original on 2006-01-18.
3. ^ "FrontLine's California Crisis Timeline". Retrieved 2008-08-17.
4. ^ "PROVISIONS OF AB 1890". U.S. Energy Information Administration (EIA). "Adopted from: California Energy Commission, "New Options For Agricultural Customers: California's Electric Industry Restructuring" (Sacramento, June 1998), pp. 10-13.".
5. ^ Roberts, Joel. "Enron Traders Caught On Tape". CBS News. CBS News. Retrieved 10 May 2013.
6. ^ Sweeney, James L. (Summer). "The California Electricity Crisis: Lessons for the Future". National Academy of Engineering of the Nation Academies. Retrieved 9 Jan. 2012. "... volatile commodity market, but it had fixed sales prices for the investor-owned utilities at the retail level, a potentially untenable combination"
7. ^ Sweeney (2002), p. 109
8. ^ Weare (2003), p. 1
9. ^ http://www.cnn.com/2005/US/02/03/enron.tapes/ Tapes: Enron plotted to shut down power plant.
10. ^ Egan, Timothy (February 4, 2005). "Tapes Show Enron Arranged Plant Shutdown". The New York Times. Retrieved 2009-06-26.
11. ^ Weare (2003), p. 2–3
12. ^ "FERC Summary of findings" (PDF). Retrieved 2010-03-17.
13. ^ Weare (2003), p. 3–4
14. ^ Congestion Manipulation "DeathStar", McCullough Research (June 5, 2002)
15. ^ Letter from David Fabian to Senator Boxer, February 13, 2002, p.1, quoted in Congestion Manipulation "DeathStar", McCullough Research (June 5, 2002) at p.4.
16. ^ "Energy Crisis Overview: How we got here". The San Francisco Chronicle. Retrieved 2008-08-17.^{[dead link]}
17. ^ ^a(http://en.wikipedia.org/wiki/California_electricity_crisis#cite_ref-sfgate1_17-0) ^b(http://en.wikipedia.org/wiki/California_electricity_crisis#cite_ref-sfgate1_17-1) ^c(http://en.wikipedia.org/wiki/California_electricity_crisis#cite_ref-sfgate1_17-2) Carolyn Said (December 24, 2001). "THE ENERGY CRUNCH / A YEAR LATER / State's deregulation folly is no laughing matter / Consumers face inflated bills for years for failed electricity plan". The San Francisco Chronicle. Retrieved 2008-08-17.
18. ^ Energy crisis cited as turning point for Davis, San Diego Union-Tribune, September 2, 2003
19. ^ "FERC Summary of findings" (PDF). Retrieved 2008-08-17.
20. ^ The Power to Choose - Enhancing Demand Response in Liberalised Electricity Markets Findings of IEA Demand Response Project, Presentation 2003
21. ^ Seema Mehta; Nancy Vogel (29 June 2002). "Hahn Orders DWP to Probe Power Deals". Los Angeles Times. Retrieved 3 April 2013.
22. ^ Fred Keeley (March 8, 2001). "The Energy Crisis: Keeping The Lights On". Retrieved 2008-08-17.
23. ^ Johnston, David (2007-11-06). "Competitively Priced Electricity Costs More, Studies Show". The New York Times. Retrieved 2008-08-17.
24. ^ "Testimony of S. David Freeman" (PDF). April 11, 2002. Archived fromthe original on 2004-08-07. Retrieved 2008-08-17.
25. ^ ^a(http://en.wikipedia.org/wiki/California_electricity_crisis#cite_ref-FreemanMay2002_25-0) ^b(http://en.wikipedia.org/wiki/California_electricity_crisis#cite_ref-FreemanMay2002_25-1) "Testimony of S. David Freeman" (PDF). May 15, 2002. Archived from the original on 2003-05-03. Retrieved 2008-08-17.
26. ^ Arianna Huffington (January 27, 2001). "Gov. Davis and the failure of power". Salon. Retrieved 2008-08-17.
27. ^ "Ten good reasons to recall Gray Davis". Human Events. August 18, 2003. Retrieved 2008-08-17.^{[dead link]}
28. ^ Eichenwald, Kurt (2005). "15". Conspiracy of Fools (1st edition ed.). New York: Broadway Books. pp. 408–412. ISBN 0-7679-1178-4.
29. ^ "Governor Davis and the Energy Crisis". Retrieved 2011-10-10.
30. ^ [1]^{[dead link]}
31. ^ "Schwarzenegger Accused of Involvement in $9B California Swindle with Enron's Ken Lay". Democracynow.org. Retrieved 2010-08-14.
32. ^ "Jason Leopold: Schwarzenegger, Michael Milken and Ken Lay". Counterpunch.org. Retrieved 2010-08-14.
33. ^ Carolyn Hinkley (January 14, 2005). "Western Area Power Administration". Closed Circuit newsletter. Archived from the original on 2006-09-24. Retrieved 2008-08-17.
34. ^ "Summary of FERC documentation relating to the Western Energy Crisis 2000-2001". Retrieved 2008-08-17.
35. ^ Investigation of Anomalous Bidding Behavior and Practices in the Western Markets, 103 FERC ¶ 61,347 at 62,360 (2003).

References

• Weare, Christopher (2003). *The California Electricity Crisis: Causes and Policy Options*. San Francisco: Public Policy Institute of California.ISBN 1-58213-064-7.
• Sweeney, James L. (2002). The California Electricity Crisis. Stanford: Hoover Institution. ISBN 0-8179-2911-8.

External links

• Summary of 1996 Deregulation Bill by the Department of Energy
• Federal Energy Regulatory Commission (FERC) Final Report on Price Manipulation in Western Markets (March 23, 2003)
  • Findings at a glance
  • Chronology in detail
  • Further documents, including detailed report
• Reports on Enron and the California Energy Crisis by McCullough Research — page includes a large number of downloadable reports, some of which were presented as evidence during investigations into the causes of the crisis. The McCollough research generally supports the position that the energy markets were manipulated unethically.
  • Congestion Manipulation "DeathStar" (June 5, 2002)
  • Senate Fact Sheet on the California Energy Crisis (June 26, 2002)
  • Three Crisis Days At The California ISO (Sept 17, 2002)
  • C66 and the Artificial Congestion of California Transmission in January 2001 (Nov 29, 2002)
  • California Electricity Price Spikes: The Factual Evidence (Jan 16, 2003)
  • Testimony of Behalf of City of Tacoma and Port of Seattle (March 2, 2003)
  • Prepared Rebuttal Testimony of Robert McCullough on Behalf of The City of Seattle, Washington (March 20, 2003)
  • Fat Boy Report (Regional Economic Losses from Enron's Fat Boy Scheme) (May 28, 2003)
  • Reading Enron's Scheme Accounting Materials (June 28, 2004)
• Susan L. Pope, "California Electricity Price Spikes: An Update on the Facts" (Dec 9, 2002) (Opposes the McCullough research and supports the view that the crisis was an outcome of genuine problems with supply and demand)
• Manifesto on The Californian Electricity Crisis
• Enron Traders Caught On Tape - Gloating about manipulating California's energy market. (CBS Evening News)
• Enron Tapes Hint Chiefs Knew About Power Ploys - (Los Angeles Times)
• Papers Show That Enron Manipulated Calif. Crisis - (The Washington Post)
• "Defying Corporations, Defining Democracy": As Internal Memos Reveal That Enron Drove Up Power Prices in California - A talk to Author Richard Grossman (Democracy Now!)
• Schwarzenegger Accused of Involvement in $9B California Swindle with Enron’s Ken Lay - (Democracy Now!)
• "The Trouble with Electricity Markets: Understanding California's Restructuring Disaster" (PDF). Archived from the original on 2006-09-05.
• "California Department of Water Resources 50th Anniversary Article on the 2001 Energy Crisis". Archived from the original on 2007-04-03.

Categories: 

• 2000s energy crisis
• Enron
• Market failure
• Scandals in the United States
• George W. Bush administration controversies
• Economic history of California
• Electric power in the United States
• Electric power blackouts of the United States
• 2000 disasters in the United States
• 2001 disasters in the United States
• 2000 in California
• 2001 in California
• Electricity economics