Controlling California’s Power
Manipulation, corruption, and scandals in the 2003 gubernatorial recall election echo in 2021.
On September 14th, 2021, at least 50% of Californians must vote ‘no’ in the recall election to keep Governor Gavin Newsom in office. If Newsom gains 49% or less, one of the 46 candidates running for governor of California wins — even if they receive fewer votes.
Within Newsom’s first year and a half in office, six notice-of-intent-to-recall-petitions have been filed, three in 2019 and three in 2020, but this isn’t uncommon. Since 1913, there have been seventeen Californian governors and fifty-five attempts to remove a governor from office, but only two made it to the ballot — and both during a crisis.
The plot to recall Governor Gray Davis began in the second year of his first term in 2001, but the plan started almost a decade earlier. A close friend of the Bush’s, Enron CEO, Kenneth Lay (Kenny Boy), claimed increasing competition decreases prices and lobbied to deregulate the nation’s electricity network. During Bush Senior’s presidency in 1992, the Energy Policy Act passed. The states’ relinquished the heavily regulated electricity network to independent companies, and California became the first state to participate in the free market experiment.
“The California market is the largest in the nation and California is the sixth-largest country [sic] in the world. If Enron doesn’t do well in California, Enron will have a difficult time convincing anyone outside California that they are capable of and committed to providing power services.” — October 1996, Enron
Price and supply remained stable for the first few years, but rates inflated when the state lifted more protections, and rolling blackouts descended upon Californians. Governor Davis requested a price cap and reported market manipulation to the Federal Energy Regulations Commission (FERC), but they ignored him for several months. When the FERC finally approved a $150 per megawatt-hour “flexible price” cap, California already paid as much as $2500 per hour. The state spent $45 per hour the previous year, and California neared bankruptcy while Enron profited $330 billion.
State officials were powerless without support from the federal government, and the Enron CEO knew it. Lay brazenly responded to the state’s threats with, “it doesn’t matter what you crazy people in California do because I got smart guys who can always figure out how to make money.” The company didn’t worry about repercussions because it didn’t have to. Enron’s ally, Vice President Dick Cheney, chaired the National Energy Development Task Force. Bush W. appointed Enron nominees to the FERC, and politicians worked for Enron.
California Senators and Legislators repeatedly asked the FERC, Vice President Cheney, and President Bush for assistance and continuously encountered defiance. During the 2002 Senate hearing examining Enron and the Bush administration’s response to the crisis, former California Congressman Leon Panetta commented, “they were going to hang California out there. It would be an example to the rest of the country what not to do. It would show the liberals that they better build new power plants or suffer the consequences.”
California’s power shortage mysteriously ended two months before Enron filed for bankruptcy in 2001. The Securities Exchange Commission uncovered Enron’s accounting fraud, but investigators struggled to retrieve financial statements because employees shredded documents. Eventually, an executive confessed to rigging California’s market, but substantial evidence didn’t emerge until a 2005 Washington state case. The discovery of audiotapes proved Enron artificially created California’s crisis and deliberately instigated Davis’ recall election.
“Why did I do it? I did it because I was trying to maximize profit for Enron.” — Enron Executive, Timothy Belden
Davis won reelection, but the public opted for a recall when he announced raising taxes to pay for the deficit. A few days before the 2003 election, an investigative journalist uncovered a 34-page report exposing Enron swindled $9 billion from Californians and emails Lay sent to Davis’ opponent, Arnold Schwarzenegger, but it was too late. The mainstream media and the public were too consumed with Arnold’s “Governator” act to notice, and on October 7th, 2003, California and Davis lost.
The State of California filed private lawsuits against Enron, and Lay’s memos indicated he wanted to make them go away. The report revealed emails explicitly disclosing meetings with key stakeholders to discuss the energy situation, and an email confirmed Lay met with Schwarzenegger at a hotel in Los Angeles in May 2001. Despite Enron not being charged with conspiring to overthrow the government, presumably, Lay planned to recall and replace Davis with a “business-friendly” politician who would serve Enron’s interests.
The Foundation for Taxpayer and Consumer Rights (FTCR) accused Schwarzenegger of promoting Enron’s failed energy plan as his policy and believed he helped Enron evade repaying the $9 billion it owed to the state. California recovered $3 billion, but bankruptcy protection laws prohibited filing more lawsuits, and a judge ordered the state to drop the charges. The FTCR threatened to investigate Schwarzenegger for assisting with “megawatt laundering,” but he never responded, and the email exchange didn’t attract the public’s attention nor hinder him from becoming governor.
In his first year, Governor Schwarzenegger happily exclaimed taxes wouldn’t rise and endorsed selling state bonds. Voters overwhelming approved the budget solution but unknowingly paid $1 million in interest every day for eleven years, and the state drowned in debt until 2019. Schwarzenegger eliminated or significantly reduced funding for public programs to counteract the deficit. While taxes didn’t increase, Californians paid heavily for the loss. Cuts devasted universities, K-12, forestry fire protection, children’s health, public transportation, the elderly, state parks, and the most vulnerable families.
The problems California faces today didn’t appear overnight, and they aren’t going to disappear tomorrow. Regulations protect the public, and taxes reinvested in the state provide for California’s welfare, but the state hasn’t had the opportunity to progress because it’s been paying for its past.
Before Davis’ removal, he restructured the electricity market, issued 38 licenses for new power plants, and ended the energy crisis, but in 2019, California’s power outage returned. While some business associations blamed renewables, the 2000 to 2002 president of the Public Utilities Commission (PUC) Loretta Lynch said, “deregulation is the problem” and added, “the grid’s greatest vulnerability today remains market manipulation — even with Enron long gone.”
California’s abundant natural resources, the fifth-largest economy globally, and population size with the power to influence car manufacturers’ emission standards throughout the US attracts significant interest from corporate investment. Corporations like PG&E want to reverse environmental regulations, reduce the tax rate, lower wages, and evade costly upgrades to increase revenue. Allowing private ownership of essential services guarantees profits and wields dominance over the people, government, and environment.
Corporations funded the circulation of the recall petition and their preferred candidate. They aren’t investing in Californians — they’re investing in their future profits, and recall elections enable an unlikely candidate with less than the majority of votes to win. Corporate wealth will continuously mislead Californian voters for its own best interests.
Ex-Sheriff Orrin Heatlie’s Recall Governor Newsom Petition Statement:
“Laws he endorsed favor foreign nationals, in our country illegally, over that of our own citizens. People in this state suffer the highest taxes in the nation, the highest homelessness rates, and the lowest quality of life as a result. He has imposed sanctuary state status and fails to enforce immigration laws. He unilaterally over-ruled the will of the people regarding the death penalty. He seeks to impose additional burdens on our state by the following; removing the protections of Proposition 13, rationing our water use, increasing taxes and restricting parental rights.”