In California, the Tunnel at the End of the Light

Well, the lights finally went out in the Golden State. Wednesday afternoon, the California Independent System Operator (Cal-ISO for short, unofficial slogan "We keep the lights on") ordered rolling blackouts that began in northern and central California and could even extend to the southern part of the state — Please! Spare Hollywood! — before long.

Yes, after five years of deregulation, five months of trouble and five weeks of genuine "crisis," the power system of the nation's most populous state (and the world's sixth largest economy) finally had to be given a breather by the folks at Cal-ISO because power reserves were dangerously low.

"We are trying to manage the picture here today, but we've come to the end of the road here as far as supply within California and out-of-state resources go," said Jim Detmers, the ISO's managing director of operations.

The day of selective, temporary blackouts, however — hopefully avoiding hospitals and other critical areas — won't get the system off the brink. Deregulation, instituted with much pomp five years ago under Gov. Pete Wilson, started off strong. But when the Silicon Valley boom hit and demand skyrocketed, all those companies that were supposed to come to the Golden State to build new power plants and join the marketplace didn't come fast enough. Existing power suppliers had rising natural gas prices to worry about, and soon found ways to milk the market (and Cal-ISO) for as much as the traffic would bear.

And California's local utilities had to keep rates level, because deregulation was politically palatable only if it lowered prices, quickly and permanently, and to ensure that the state legislature wrote in price freezes on what the utilities could charge.

Now, guess what — the utilities are running out of money. Southern California Edison, the state's second biggest utility, said in federal securities filings Tuesday that it was skipping debt payments and was on the brink of bankruptcy. Pacific Gas & Electric Co. says it's not far behind, and indeed its credit has been downgraded to junk bond status.

Which has Davis and the State Assembly both working on versions of a longer-term plan that looks a lot like surrender. Under the scheme, California arranges to become a massive purchaser of electricity at fixed, long-term prices, borrowing on its own good credit and expecting repayment from the local utilities one of these days.

A deregulated, market-pricing system may be only few kinks away from serviceable — a raft of new power plants is going up across America, and California won't be far behind. And the Bush years will surely be friendly ones to the gas/oil/power business. A boost in supply, a few more of those refrigerator-sized fuel-cell doohickies in some Silicon Valley basements, and heck, in a few years the crunch is a memory.

But the crisis is now, Intel is rumbling about moving out of state, and the voters will be talking about this for years. And for Davis, rescuing the system now means footing the bill. It's an open-ended plan that has some people thinking that deregulation is not only dead, it's already spinning in its grave.

"It's starting to walk like a municipal duck, and quack like a municipal duck," said Assemblyman Bill Leonard (R-San Bernadino) of the emerging consensus. "And eventually, it becomes a municipal power authority."