As an oilman, George W. Bush never had much luck looking for black gold in the fields of Midland, Texas. But as a politician, he struck a gusher when he tapped the energy business, drawing serious dinero from Texas giants Enron (ENE), Dynegy (DYN) and Reliant. No other industry worked harder to elect Bush president, and none expects more in return.
As those companies rake in profits supplying electricity to power-strained California, their cozy connections to the president-elect are turning the West Coast's energy crisis into a political showdown between the Lone Star and Golden states. More than local pride is at stake: If the lights go out in California, the state could drag the whole economy into recession. California Gov. Gray Davis, a Democrat and potential Bush rival in 2004, is talking tough, accusing "out-of-state" power companies of exploiting deregulation's failure to conduct "legalized highway robbery." Davis is threatening to seize control of power plants if what he sees as profiteering doesn't stop. Even if he's bluffing, a brewing consumer revolt could restore regulation of electricity via a ballot initiative in 2002.
Meanwhile, the energy feud has Senators Dianne Feinstein (D-Calif.) and Phil Gramm (R-Texas) squaring off over Feinstein's proposed bill that would force the federal government to impose a wholesale price cap on electricity out West. Powerful Texas pols like Rep. Tom DeLay, the Republican House whip, and House Majority Leader Dick Armey are expected to join Gramm in fighting Feinstein's bill.
The Bush administration also may find other loyalties tested. California is the center of the new economy, and Silicon Valley executives who supported Bush are anxious to avoid problems like the blackout last June that cost companies tens of millions of dollars in lost productivity.
It all has Dubya and company on a longhorn of a dilemma. How to save California while protecting his favorite industry's beloved - and highly profitable - movement toward an ever-freer marketplace?
Bush's ties to the industry run deeper than an offshore rig's anchor. His father was in the oil business and so were his vice president and commerce secretary nominee. Campaign finance reports show that during the 2000 campaign oil and gas companies gave $1.7 million in direct contributions to Bush - 15 times what they gave to VP Al Gore. This did not include millions more in unregulated "soft money" donations to the GOP or the sponsorship of the Republican National Convention.
Enron, the huge Houston energy broker and Bush's chief corporate patron, provided $820,000 in soft money to the GOP and more recently donated $100,000 toward the Bush inaugural. Its top execs, Kenneth Lay and Jeffrey Skilling, also chipped in $100,000 apiece. Enron CEO Lay was rumored to be on the shortlist for the post of energy secretary. That appointment went to former Michigan Sen. Spencer Abraham, a Republican who was defeated in his bid for re-election in November. (In 2000, the only politicians who received more energy money than Abraham were Bush and New York senate candidate Rick Lazio.)
What galls Californians is that the Texas power companies have made billions in revenues thanks to the Golden State's runaway markets, pushing investor-owned utilities Pacific Gas & Electric and Southern California Edison to the brink of bankruptcy and prompting blackout warnings. Meanwhile, Enron's revenues nearly tripled to $30 billion between October 1999 and October 2000.
But there is no hard proof that the companies have functioned as a cartel to create artificial shortages and keep prices sky-high. Energy company executives say they're just charging what California's screwed-up market will bear. The chief problem, they add, is that no new power plants have been built in California for more than a decade, despite a booming economy that has spiked demand for electricity.
Davis' harsh words let his own constituents know who was wearing the white hat as he led a posse of California leaders to a
