Morass.

19 January 2003—I am going to apologize from the outset, because I already know I’m probably not informed enough to tell this story correctly, with all the depth it deserves and yet reasonably easy to follow. But at least you may take comfort in reading the pledge I am about to make:

I will not exaggerate this story.

I will not heighten it to make it somehow more compelling, nor will I fudge facts or timelines to make it easier to comprehend. The facts are bad enough, and rhetoric only cheapens the argument. This, right here, is the failure of the left.

The pundits have lately laid the failure of the left elsewhere, at the feet of a nonexistent message. This too is a problem. But it almost doesn’t matter; even if the left arrives at a coherent message, I’m afraid no one will really believe it. In other words, you can’t put the blame at the feet of the message, because the message just doesn’t have any legs.

They were simpler times, difficult to remember now amidst the burgeoning war on terrorism, but approximately two years ago California was so beset by energy shortages that the state resorted to rolling blackouts.

It began in 1996. Then-Governor Pete Wilson, riding a growing wave of nationwide deregulation mania, signed into law a bill that would supposedly cap energy rates for consumers and even lower them 20 percent by 2003. The complex deregulation plan called for privately held utilities like San Francisco-based Pacific Gas & Electric Company to sell some of their power plants so that once the energy market in California became fully deregulated, companies like PG&E wouldn’t have an unfair advantage over companies that would eventually sprout up to compete with PG&E. The deal also allowed PG&E to make some money off what they called “stranded costs,” returning money to investors in the process. PG&E still kept ownership of its power grid and transmission lines.

But PG&E, rather than selling half its California plants as suggested by the deregulation law, decided to sell all of them. They fetched twice their market value, sold to energy producers based out of state. The money went to PG&E’s newly created parent company, PG&E Corporation, based out of state.

(To be fair, Southern California Edison [SCE] and San Diego Gas & Electric [SDG&E] were doing the same thing as PG&E, and they’re culpable, too. For the purposes of this essay, however, I’m going to focus mostly on PG&E. The reason will be clear soon enough.)

To make a long story short, PG&E got a lot of money for its plants, returned some of the profits to its shareholders and the rest to its parent company, and then the energy market in California turned sour. There are a lot of competing theories that try to explain why that happened: price-gouging by unregulated out-of-state producers; record temperatures; lack of forethought by the drafters of the original deregulation plan, who had assumed continued power surpluses in the state; lack of new, efficient power plants in the state; not enough transmission lines coming into the state. They’re probably all right on some level.

Here’s how deregulation was supposed to work in California: Energy producers would sell energy to a state-run entity called the Power Exchange (PX), which would shop around for the best prices nationwide. The PX would then set a rate at which energy distributors in California could buy the power and pass it on to consumers. However, the rates that consumers could ultimately pay had been capped at 1996 levels and were scheduled to remain at those levels until 2002 or when the utilities had recovered their stranded costs, whichever came first. As a result, utilities were paying more for power than they could legally charge their customers.

Another state-run entity, the Independent System Operator (ISO), eventually took over 70% of the transmission lines in the state. In the event that additional energy was needed due to unusually high demand, the ISO was empowered to purchase energy on the spot market, meaning that as it was paying for energy it needed immediately, it would be forced to pay premium prices.

This, of course, was meant only to be a last resort. But as luck would have it, dramatically increased demand (due in part to the Internet boom of the late 90’s and in part to record temperatures) and relatively smaller supply (due to energy producers’ becoming more and more skittish about selling to utilities with increasingly questionable credit ratings) led to a drain on the reserves and astronomic prices on the spot market.

Both the PX and the ISO were under the jurisdiction of the Federal Energy Regulatory Commission. Finally FERC decided that making utilities buy and sell through the PX wasn’t necessarily the best way to ensure stable, reasonable prices, so it lifted the requirement that mandated their doing so, allowing companies like PG&E to enter into longer-term contracts with energy suppliers. In some cases that meant PG&E actually contracting with other (unregulated) companies that were owned by PG&E’s parent company. In a sense, PG&E was essentially gouging itself, sending itself toward bankruptcy.

In the end, PG&E, claiming to be $8.9 billion in debt, filed for bankruptcy protection. Though its parent company, PG&E Corporation, had assets of some $22 billion, it said it wasn’t allowed under the California deregulation law to bail out its own subsidiary. Money, apparently, was allowed to flow only one way — out of the state. PG&E’s restructuring plan is still being worked out.

That may have been somewhat dry. Sorry about that. I can’t tell you the hoops I jumped through, trying to learn all about this in a way that made at least some sense to me. Here’s the payoff:

PG&E should have never been as big as it was to begin with.

The San Francisco Bay Guardian discovered back in the late 1960s that PG&E had been operating illegally in San Francisco for some 40 years, in violation of a federal law, known as the Raker Act, which in 1913 established that San Francisco had the sole responsibility of supplying power to itself, as a compromise for the city’s having dammed a reservoir inside Yosemite National Park. In 1923, the city had turned over responsibility to PG&E as a temporary measure while the city’s own distribution system was being set up. A federal judge found that San Francisco was in violation of the Raker Act, but allowed the deal with PG&E as a temporary measure. But San Francisco never took power back from PG&E.

Since then, aside from some false starts and languishing actions at the local, state, and federal levels, PG&E’s domination has been allowed to continue. PG&E, through its influence-peddling, kept both the city council and the San Francisco Chronicle and the Examiner from raising the issue. Over the years, there were several ballot initiatives seeking to establish a municipal utility. All had failed.

But then, in 2002, the issue got on the ballot again, and this time, public opinion had turned against PG&E. Even the Chronicle published a story about the Raker Act scandal, and in another article gave the Bay Guardian its due as having broken the story first. (The Bay Guardian, for its part, voiced its appreciation for the Chronicle’s story.)

And then somehow Prop D failed, 54% to 46%, a margin of roughly 15,000 votes.

OK, it’s not somehow; there’s a definite reason Prop D failed. PG&E spent approximately $2.7 million (the article claims $2.1 million, but late contributions to the No on D campaign weren’t part of that total). The Bay Guardian cites other reasons, including: a late start; poor backing by both its author and the progressive activist community, which felt that the initiative had been watered down too much; lack of funds for the pro-D campaign; and reliable figures from City Hall to counterbalance the inflated figures with which PG&E was scaring the public.

As the Bay Guardian reported, Ross Mirkarimi, the Yes on D campaign director, said, “Public power will always have the support of 45 to 47 percent of the electorate.” The other four-to-six percent needed for even the slimmest victory would have to be won over. The Bay Guardian found lots of people to blame—except itself.

Two months before the election, the Bay Guardian ran a cover story with the shocking headline “The $620 Million Shakedown.” I’ve been reading the paper long enough to know that Bruce Brugmann, the publisher, has a gigantic grudge against PG&E. Not that I’m for them, mind you, but it seems like that in order to get an endorsement from the Bay Guardian for almost any public office in San Francisco, maybe even dog catcher, you pretty much have to swear that you curse PG&E every time you flip on a light switch. Consequently, I’ve become inured to Bruce’s rantings about PG&E; he’s probably right, but he’s like the guy at the party everyone avoids because you know once he gets his hooks into you, he’s just not the catch-and-release sort of egomaniac, and he’s not altogether interested in what you think, if you happen to disagree with him.

Even so, I thought, Man, $620 million, that’s an awful lot of money. Plus, Tim Redmond co-wrote the story (with Savannah Blackwell), and he seems like a smart, decent guy. I’d better see what they’re talking about this time. So I did.

The article began, “SOARING RATE HIKES by Pacific Gas and Electric Co. have taken as much as $620 million a year out of the San Francisco economy...” I knew my rates had gone up quite a lot, thanks to the kowtowing of the California Public Utilities Commission, but I don’t even live in San Francisco. Somehow all those rate hikes accounted for a $620 million drain on the local economy across the bay. How did that happen?

It didn’t. Actually, rate hikes in San Francisco added up to approximately $124 million. So where in the world did that $620-million figure come from?

Long Island, NY, apparently. Four years earlier, Long Island had made the switch from private to public power. An economist named Irwin Kellner had proclaimed that the $2 billion that Long Island residents and businesses had saved over that period actually amounted to a $10 billion boost to the economy, based on what he called the multiplier effect. Under this concept, an extra dollar in someone’s pocket gets spent somewhere; that’s now an extra dollar in someone else’s pocket that can be spent somewhere else; and so, on average, five people have spent that dollar before it goes into the bank or somewhere else that it doesn’t leave. Presto: one dollar becomes five.

Redmond and Blackwell, while freely acknowledging that Kellner hadn’t reviewed their analysis, brazenly adopted Kellner’s multiplier and applied it to San Francisco.

I was astounded. I’m not an economist, but even so, it seemed like an extremely dubious claim. So I wrote to Tim Redmond and told him that though I was on his side, I thought the claim was irresponsible and more likely to turn off undecided voters rather than sway them to his side. Wasn’t the actual figure of $124 million bad enough?

I actually wrote him quite a considered letter; he responded with a terse, “Thanks for your comments. Actually, the ‘multiplier effect’ has been a standard of economics since the 1940s, at least. THere's [sic] no doubt that it exists, although reasonable economists will argue about how large it is. By any standard, though, the impact is way bigtger [sic] than just the rate increase.”

He conveniently ignored another of my comments, which noted that his article had quoted a Long Island Power Authority executive saying how much businesses with $10,000 monthly bills were now saving. But in a related article in the same issue, Blackwell had interviewed typical businesses in San Francisco—with bills of roughly $500. Not that $500 isn’t something to be outraged about, but where were those businesses with $10,000 bills? Oh, those must be the huge corporations and box stores that the Bay Guardian would rather not see in San Francisco anyway.

But that’s splitting a couple of hairs. Getting back to the multiplier effect: I started looking into it. Seems that indeed it is a standard of Keynesian economics, and indeed reasonable economists will argue about how large it is. But not one economist I could find would comfortably say that the multiplier effect is greater than two. To reach a multiplier of five, however, is nearly impossible, according to an economist (with a Ph.D. from Harvard) whom I consulted. It assumes 1) that each person who has control of that dollar spends the entire dollar, and 2) that the dollar never leaves the particular economy in question. On a large scale, say, statewide, that may statistically be achievable, but it’s likely that each person who receives the dollar saves part of it.

Let’s say, for example, that each San Franciscan reserves 20% of what he or she saves on account of giving PG&E the heave-ho. So the first person has a dollar, but instead of passing on the whole dollar, she passes on only 80 cents. The next person, in turn, only passes on 64 cents, and so on, down the line. The end result is that $3.56 has effectively flowed through the economy. That’s assuming both that each person only saved 20% of what they took in and that the money never left San Francisco. Unless San Francisco is a completely self-supporting, closed economy, that’s not a likely scenario.

As I said, the greatest multiplier I could find, both searching around the net and in correspondence with economists, was just a hair over two. The only other mention of a multiplier of five was from a press release sent out by the office of the governor of New York. Regarding? You guessed it: Long Island’s $10 billion, using Kellner’s multiplier. What right-thinking governor wouldn’t want to claim such a resounding success?

The Bay Guardian, however, should do better by its readers. If you ask me, the mere fact of $124 million in unnecessary rate hikes would have been enough for me to support Prop D. But then, I’m already inclined toward that side. If that’s not enough to make the people who are undecided take notice, then it’s time for a different tack.

How about this: where did PG&E, a bankrupt company, come up with $2.7 million to fund the No on D campaign? PG&E insists that ratepayers don’t shoulder costs of PG&E’s campaigns, that political money comes out of shareholder profits. How does a bankrupt company have profits? Leaving that aside, how can PG&E claim that ratepayers aren’t paying for the campaign? The dubious profits have to come from somewhere, and it’s obvious to me that profits are coming at least from money paid by ratepayers that is somehow greater than PG&E’s costs. Why doesn’t the Bay Guardian, or, for that matter, the Chronicle, investigate this incongruity?

Maybe I’m just being naive. I don’t have a huge storehouse of facts in my brain to counter facts and figures, reliable, specious, or downright spurious, that are thrown at me by pundits who would really rather not be challenged, conservative or progressive. Plus, I’m not entirely sure which side I want to challenge more.

I think it’s the progressives I want to challenge. I’m not all that inclined to think that I can change the minds of die-hard conservatives, which is fine by me; a democracy needs people with contrasting opinions. But the progressives, well, we’re kind of a mess. We’re splintered. But the worst part is, we talk only in sound bites, bumper-sticker slogans, and generalities, and we don’t sway the vast undecided — most of the time.

Take Michael Moore — please. Countless people have told me I must run, not walk, to see Bowling for Columbine. And yet, somehow I just haven’t been able to get myself together to go see it. I mean, gee whiz, the Bay Guardian said it was the best movie of 2002, and they’re never wrong!

I’ll get around to it eventually, and it will probably teach me a couple of things I didn’t already know, but for the most part, I already know what it is: it’s Moore’s quest to discover why gun violence is so rampant in the United States. Along the way, he uses a combination of sobering facts and humorous encounters to drive his points home. And yes, I already know that something actually good has come out of the movie, that Kmart has decided to stop selling ammunition.

Even a broken demagogue is right twice a day, you know.

OK, I’ll allow that Moore is probably right more often than that. I mean, he sure does have a lot of facts and figures at his disposal. Trouble is, it’s not always clear which ones are accurate, which ones are distorted, and which ones are just plum made up. The Spinsanity website has collected a number of questionable items from both Columbine and Moore’s latest book, Stupid White Men. For example, Moore receiving the gun at the bank? Staged. The Lockheed Martin Littleton plant being a site that manufactures weapons of mass destruction? Space-launch vehicles for television satellites, actually, but who’s counting?

I admit I have a prejudice against Moore. Yes, he stands up for the little guy against the faceless, cold corporate Goliath, and that’s nice. But don’t confuse who the show is about — it’s about Moore. It’s difficult to be a perfect progressive — I’m sure not — but when one holds himself up as the scold who takes on the world, he should know it’s open season on him. Look: I want to believe him; I’m sympathetic to his cause. It’s just that I never know when he’s being completely honest.

It comes down to a basic level of trust. Even if everything else in Columbine is accurate, how are we to know? Even if everything else the Bay Guardian writes about PG&E is accurate, how are we to know? As I said at the beginning, I don’t have the breadth of information to be able to evaluate the legitimacy of all of the arguments. I do know, though, that there are distortionists in our ranks, and they’re bogging us down. We have to work together and get our facts in order. Leave the rhetoric; leave the posturing. The facts are bad enough. To me there is no other way we can debunk the distortionists on the right and claim the undecided middle.