The crisis brought on by California's energy deregulation is showing no signs of letting up. On March 28, state regulators increased electricity rates by 46 percent, the second rate hike in three months. Two weeks later, Pacific Gas and Electric (PG&E)--the state's largest utility--filed for bankruptcy. The second-largest utility, Southern California Edison, says it could be next. California is now expecting at least 34 days of rolling blackouts this summer.

Meanwhile, executive orders from Democratic Gov. Gray Davis have gutted the state's legendary environmental laws to allow the construction of at least 25 new natural gas power plants--most of which will be built in low-income and minority communities. To keep the lights on, the state government has bought billions of dollars in electricity on the expensive spot market. Because the state hasn't passed the entire cost of the power on to consumers, the spending spree is likely to jeopardize health care and education programs when the legislature approves the state budget in June.

At corporate headquarters, however, times have never been better. Quarterly reports

Poor neighborhoods will house most new power plants. SUSAN RAGAN/REUTERS

issued in late April show gigantic profit increases for every company that owns power plants in California. Houston-based Enron (George W. Bush's largest lifetime campaign contributor) posted a 281 percent increase in revenues over the first quarter of 2001. Reliant Energy, which is headquartered across the street from Enron, doubled its profits for the same time period.

Meanwhile, both companies are refusing to cooperate with an antitrust investigation launched by California Attorney General Bill Lockyer, who contends the generating companies are "gaming the market" by strategically taking their plants off-line for unnecessary "unscheduled maintenance" to keep prices high. The companies say they won't hand over internal documents the attorney general subpoenaed until he agrees to keep them private--a move Lockyer is not willing to consider.

The parent companies of California's utilities also are turning handsome profits. After the state deregulated its energy market in 1996, PG&E and Southern California Edison transferred a combined $9 billion out of their utility companies to their corporate parents. Those funds were used to buy power plants in New England, New Zealand, Great Britain and South Africa--ventures that are reaping hefty returns. Even the managers of the failed utility companies are making out quite well. PG&E executives Gordon Smith and Bob Glynn gave themselves bonuses immediately before filing for Chapter 11. According to the Securities and Exchange Commission, PG&E filed for bankruptcy with nearly $3 billion in the bank. "Even a blind pig can figure out that there's price gouging in that kind of market," says Loretta Lynch, chief of the California Public Utilities Commission.

As In These Times went to press, the Federal Energy Regulatory Commission (FERC) agreed to impose temporary price controls on electricity during energy emergencies, but the ruling falls far short of the price caps many Democrats are advocating. In the absence of substantial federal price controls, progressive legislators are advocating a combination of plant seizures, punitive taxes and conservation measures, a plan Davis has only partially endorsed. Although the governor recently signed two bills allocating $850 million for energy conservation programs this year--the most ever by any government entity in America--he used the line-item veto to nix nearly $350 million for energy-efficiency programs targeted at working- and middle-class families.

Davis is even more timid when it comes to the idea of taxing the generating companies into lowering their rates. While he has said he would be open to tax increases for companies that make more than 100 percent profit, he hasn't said he would sign such a bill. Because of that, the tax measures are moving slowly through the legislature.

Davis has been even less willing to take on utility companies directly through plant seizures, a proposal he talked about in his State of the State address in January but has since abandoned. Because he declared a state of emergency, the governor can order an immediate takeover of any facility while leaving the price to be negotiated over time. Consumer advocates see plant seizures as the only way out in the near future. "We've got to rein in these power gougers," insists Nettie Hoge of the Utility Reform Network. "Until we show them who's boss, the prices will just go up and up."

"If they seize one of our power plants, we will turn California into Indonesia," threatens Jan Smutty-Jones, president of the Independent Energy Producers Association, the power plant lobby. Smutty-Jones says private companies would leave California immediately if the state cracks down on price gougers, causing a massive shortage of electricity and rolling regular blackouts. He says member companies would have a similar response if the state enacts the profits tax.

Left-leaning California lawmakers have an answer to that: "If they don't want to do business here that's fine with me," says state Treasurer Phil Angelides. "That's where we step in with a California Power Authority. If they don't want to build plants here, we will--and the California Power Authority won't gouge California consumers."

Angelides adds that cities relying on municipally owned power grids are doing fine. Consumers in Sacramento, Los Angeles and a host of smaller Northern California and Central Valley cities own their own utilities. Consequently, they have not been affected by the power crisis. Says Angelides, "There's a lesson in that."