Power Politics: Environmental Activism in South Los Angeles

Epilogue

207 Epilogue Between March and November 2001, when Sunlaw officially withdrew its application, California’s political climate was beginning to change. The rolling blackouts continued during the summer of 2001, as did the state’s efforts to stave off increasingly severe statewide energy shortages, including efforts to bail out the failing and ultimately bankrupt utilities with taxpayer money. But, with the election of President Bush, a Democratic governor and legislature were up against a conservative Republican administration.The latter refused to force suppliers to sell to California or to impose rate caps on wholesale prices. As the situation worsened and the options continued to shrink, arguments about the true cause of the energy crisis began to become a much larger part of the political process and public discourse. In May 2001, the Bush administration’s Federal Energy Regulatory Commission (FERC) began to hold hearings on price fixing against big electricity suppliers and El Paso Natural Gas, owner of Southern California’s largest natural gas pipeline. There was also a high-profile public discourse—including a June 2001 PBS Frontline special on California’s energy crisis—that continued through and beyond 2001 (Frontline 2001). The discussion publicized different perspectives on the causes of California’s crisis. Some argued the problem was that deregulation was only partial and did not go far enough, while others argued that big wholesale energy producers like Duke, El Paso Natural Gas, Reliant, and Dynegy were bilking California of billions. The flawed system argument is consistent with the big-energybilking -the-taxpayers argument, which has come to prevail since P o w e r P o l i t i c s 208 that time. The requirement that the big three suppliers had to sell a contracted amount of energy to consumers at a fixed price created a statewide demand-at-any price for wholesale energy. Wholesale suppliers, who provided most of California’s energy once the big three sold off much of their productive capacity, had a situation in which great demand existed regardless of the price they charged.These factors operated pincerlike to create conditions ripe for what we now know was “gaming the system” by the new,“independent” wholesale suppliers that had good, fast computers and programs that allowed them to spot and profit from minute (or greater) local differences in the prices of electricity in different markets. It also allowed these power producers, which, unlike the big three, had no obligation to sell power to California—or even to produce power in the plants they owned in California—to manipulate the overall supply of electricity (and hence the spot price) in California. In contrast, California’s big three buyers could no longer produce all the electricity they were obligated to deliver (having sold off almost half their capacity to do so) and had to buy it from suppliers that could manipulate the price. The result was the engineered shortages , artificially high prices, and obscene profits to a few companies, of which Enron was only the most flamboyant, which have been called the California energy crisis. As early as December 2000, in the midst of these charges, the AQMD imposed the largest fine in its history, $17 million, on AES Corporation for illegally releasing more smog-causing emissions than allowed at its Long Beach plant (Martin 2000). Then in November 2002, FERC made public a report that accused the AES Corporation and the Williams Companies of Tulsa, both of which had power plants in Southern Los Angeles County and Orange County, of conspiring to create power shortages and drive up the price of electricity. The big-power-friendly Bush administration’s FERC had to be forced, by a court order sought by the Wall Street Journal, to release the report. The smoking gun in that report was a tape-recorded phone conversation between employees of the two companies about deliberately prolonging a power outage at one plant because the state was paying higher prices during the outage. In another incident, AES shut down a power plant unit in Huntington Beach because the cost of nitrous oxide emissions credits for the plant was too high, and the company was not making enough at existing rates to Epilogue 209 cover its costs. Like the plant in Alamitos, that plant was under a “must-run” contract with the ISO [independent system operator]. Under such a contract, the ISO was paying...