Former governor defends California utility deregulation

Lower prices was the goal

So the utility industry was deregulated in 1996, he said, to bring more competition and lower prices to the state with the highest electrical bills in the nation.

But the opposite happened as an unanticipated increase in electricity demand was spurred by the technology-driven economic boom.

Analysts say that making power producers and utilities separate gave the producers market power, which drove prices sharply higher.

Davis, who took office in 1998 after a term as lieutenant governor, said recently that "it's going to be a good two years before we can have enough additional supply to balance out demand. When we have that, deregulation may work.

"But it's clearly not working now," he said. "It's an experiment that, at best, was prematurely launched."

So what went wrong?

"Probably no one could foresee the true dimensions and speed with which the growth in demand would occur," Wilson said. "We foresaw there would be considerable growth in demand, that there would be a need for a new generating capacity, and one of the things we thought would add to supply was creating a competitive marketplace. It did, it did."

But while the California economy boomed, Wilson, said, the construction of large power plants lagged behind.

He blames that on stringent state laws that created "a hellish, nightmarish process for anybody trying to build a new power plant of greater than 50 megawatt capacity."

Davis threatens to seize plants

Davis has proposed an overhaul of California's electricity system, and threatened to seize the power plants of wholesalers who gouge consumers or utilities.

"California's deregulation scheme is a colossal and dangerous failure," he said this month in his annual address to the state legislature.

But Wilson disagrees. "The people who are trying to blame deregulation should not be listened to," he said flatly.

For the 25 other states considering deregulation, Wilson admits the California crisis is generating a great deal of caution.

But he says deregulation is where the country is heading, and he is confident he will be remembered as a visionary, if Davis accelerates the construction of power plants.