WASHINGTON -- President Bush and key members of his Cabinet met Monday to chat about California's power woes, but they offered little in the way of promises.
Bush said that the Golden State's electricity problems should be solved by, well, the same state officials who caused them in the first place: "The situation is going to be best remedied in California by Californians."
That's OK with the state's technology firms, which view the free market as the best solution -- albeit a long-term one -- for the two-week crisis that has featured rolling blackouts and a Stage 3 emergency that will continue at least until midnight Monday.
Instead of embracing additional government regulation, Silicon Valley's manufacturing leaders blame the legislature's 1996 price controls for causing the crisis -- barring utilities such as Pacific Gas and Electric and Southern California Edison from raising prices and nudging them to the brink of bankruptcy.
"There's a strong consensus that market forces can help solve this crisis," says John Greenagel, a spokesman for AMD. Greenagel says partial deregulation led to an unfortunate state that he dubs "this extremely stupid, so-called deregulation."
AMD is part of the Silicon Valley Manufacturing Group (SVMG), an organization formed in 1977 by HP's David Packard that now boasts 190 members -- and is anything but pleased about what's happening to their vital electricity supplies.
SVMG takes a largely libertarian approach: It advocates deregulation, and faults the government for forcing utilities to pay for electricity on the open market while capping the rates that utilities could charge their customers. Until recently, regulators also prevented utilities from agreeing to long-term contracts to buy electricity at stable prices.
That, says SVMG, is a formula that invited disaster -- so they're not exactly overjoyed about proposals from Gov. Gray Davis, a Democrat.
Davis envisions moving the state in the opposite direction, through such measures as a long-term state electricity buy and a taxpayer-funded rescue of California's ailing utilities. Last week, Davis said he and legislators agreed that the state would buy part of the state's two largest utilities.
Bush has signed an emergency order forcing suppliers to sell power to California, but it expires Feb. 7.
SVMG spokesman Michelle Montague-Bruno said that while her group doesn't object to the state taking temporary steps, it strongly opposes Davis edging the government toward a "move for the long-term into the energy business."
Such a plan, SVMG frets, would do little to fix what they view as the real problem: a lack of new power plants being built.
In the last decade, California has not added any significant new sources of power generation because of a combination of stringent environmental standards, local opposition to power plants and lack of incentives for power generating companies. Within this time period, the population of California has increased by about five million.
The only way to fix the supply problem and get companies interested in providing power, SVMG says, is to lift retail price controls. "The reason that companies aren't tripping over themselves to put generators into the state," Montague-Bruno said, "is because of the price caps."
In addition to allowing retail electricity prices to rise, the coalition's energy policy guide says that California should offer firms greater latitude in building their own electricity generation facilities on-site -- a process currently thwarted by tremendous regulatory obstacles.
Though larger companies such as Intel and AMD haven't felt an immediate financial pinch in the current crisis -- like Cisco, Hewlett-Packard, National Semiconductor and Sun, they manufacture most of their products elsewhere -- many smaller companies have.
Web-hosting, smaller manufacturing and e-business companies are being placed in a precarious financial position by unreliable power.
Exodus, the largest Web-hosting company in California, has enormous power needs: It eats up approximately 120 to 200 watts per square foot, much of it to run air conditioners that keep the computers cool.
Power failures have already cost some firms money.
Integrated Device Technologies, a semiconductor maker, shut down its factory twice this month, losing almost $50,000. Solectron lost power to six buildings, leaving about 2,000 workers with dead computers.
Corporate gripes and consumer complaints create a volatile mix that Bush likely will consider in light of a possible 2004 reelection bid: If 642,000 Californians had voted for him instead of Al Gore, he would have won the state's 54 electoral votes. Being perceived as indifferent to Americans sitting in darkened homes won't help Republican chances next time.
But California is widely regarded as a tough state for Bush to win, and he may instead be wary of peeved voters in Washington and Oregon, who view their states as becoming power farms for California.
Bush seems eager to use the opportunity to push for additional gas and oil exploration on federal property, an oft-mentioned campaign theme that a spokesman echoed on Monday.
"We need to increase our supply from domestic supplies, which means oil. It means natural gas, it means coal, it means clean-burning coal," spokesman Ari Fleisher said at a press briefing. "That's where the focus will be to a substantial degree.... The president believes there's a supply-demand imbalance and the best way to address it is to increase America's supply."
But during the campaign, Bush promised to reduce government meddling, and some of his aides argue that this is a problem caused by state officials that they'll have to solve on their own.
Janee Briesemeister, an analyst at the pro-regulation Consumers Union, says that California's experience is typical of states that have tried deregulation -- but included price caps in deregulation to ensure its passage in the first place.
While 24 states and the District of Columbia have adopted deregulation plans, about half of them -- New York, Arkansas and Nevada -- have recently discussed reconsidering these plans, or at least slowing them down.
Energy Secretary Spencer Abraham and Curt Hebert, the newly appointed Federal Energy Regulatory Commission head, are scheduled to meet later this week with governors of western states at a summit in Portland, Oregon.
