• Playing the "No Blame" Game
• Playing the "Blame the Guy Who Has the Job You Want" Game

• Class Action Lawsuits Become Lynch Specialty
• Political Insider for Democrat Candidates
• Plays Hardball for the Left – Whitewater Damage Control
• Conflicted Judgement & Compromised Integrity
• Onward and Upward: Lynch Earns Trust of Davis

• Flip Flopping on Rate Rollbacks
• Lynch Scares Wall Street Regarding Utility Health
• Flip Flopping Again – Is Preventing Utility Bankruptcy a Priority or Not?
• Poor Decisions – Lynch Further Bumbles the Utility Solvency Issue
• Resisting Investigation
• The Tempest
• Letting Politics Outweigh Economics
• Ignorance of Economics & the Marketplace – Again!

As Californians confront the crippling power crisis and attempt to craft both short and long-term solutions, it is important to understand how this situation deteriorated so rapidly. There are a multitude of factors that have converged, resulting in what Governor Gray Davis called "this mess." Among them are a partially deregulated market, a serious supply shortage, the inability to meet a constantly growing demand for energy, and most importantly, the determination of California’s Governor to address the political aspects of this problem before giving thought to a policy solution.

One key individual responsible for providing oversight is the President of the state’s Public Utilities Commission, Loretta Lynch. Appointed by Governor Gray Davis in March of last year, Ms. Lynch’s tenure as PUC President has produced a record of repeated missteps and failed leadership that has contributed significantly to the nightmare now facing the state.

It has become quite clear that Loretta Lynch was not selected by Gray Davis to serve because she had experience and knowledge of the complex world of deregulation, energy markets and utility operations. If Governor Davis wanted someone who was an expert in these areas, then Ms. Lynch, who has no prior experience in the realm of utility oversight or energy matters, would not have made the cut.

The Los Angeles Times reported that, Lynch "was a San Francisco trial lawyer with no energy background when Davis tapped her for the job." ("Widely Criticized in Crisis, Davis Defends His Caution," Los Angeles Times, January 21, 2001).

But if Governor Davis had wanted someone who was a master at damage control, a hard-nosed political warrior experienced in scapegoat politics, and a loyal lieutenant who would advance his political career, then he could have found no better person than Loretta Lynch. Unfortunately, abandoning responsible public policy for political warfare has been a decision that has devastated California’s fragile energy market.

Ms. Lynch’s failures are as much the result of Governor Davis’ flawed priority of politics first, as they are her own misunderstanding and mishandling of utility and energy issues.

To appreciate why Loretta Lynch still holds her position after such a miserable tenure requires the understanding of how she is being evaluated by Governor Gray Davis: as a fiercely loyal, partisan, political warrior whose job is to provide cover for the governor to make his presidential aspirations a reality. At this point, Governor Davis could not be more pleased with her service. For the sake of taxpayers and ratepayers, however, it is time for Loretta Lynch to vacate her position as PUC President.

"Widely Criticized in Crisis, Davis Defends His Caution"

Los Angeles Times, January 21, 2001

As the California energy crisis has grown in magnitude, Governor Gray Davis has increasingly found himself cornered in a position where almost any decisions he makes will jeopardize his popularity with the public. Recent moves by the Governor and his aides reveal a Bill Clinton-like obsession with the political consequences of every action he takes – and where his poll numbers stand. This has led him to wage an all out effort to assign blame to others, in order to save his own political fate.

Widely acknowledged as the leading contender to challenge President George W. Bush in 2004, Governor Davis and his political team have already begun to wage a strategic public relations and political war of blame against the Bush Administration. As this crisis continues to generate national news headlines, the Davis Administration has realized that if they do not shift blame for this nightmare to someone else, they will face it themselves.

There is only one logical target for Davis: President George W. Bush. Already vulnerable in California, the Davis team knows that shifting the blame to Bush is their only way out. Whether it is today, this week or next month, you can expect an unrelenting attack on Bush for causing the most damage to California in the energy crisis. Bet your last dollar that Whitewater-experienced Loretta Lynch will be leading the charge.

The arrogance with which Governor Davis has engaged in this effort is striking. On the evening of January 8, Governor Davis delivered his State of the State address to the people of California with a pledge not to "point fingers or assign blame" for "this mess."

-- Governor Gray Davis

State of the State Address

January 8, 2001

In the very next sentence Governor Davis launched a tirade of blame, attempting to lay the responsibility of his inaction and ignorance at the feet of anyone and everyone else:

• Out-of-state generators who were charging, "several hundred percent more for wholesale electricity than we paid just one year ago."
• The Federal Energy Regulatory Commission had, "shirked its responsibility to protect ratepayers from this legalized highway robbery."
• Private companies, "with only one objective: maximizing unheard-of profits," complaining that these same companies were holding California over a barrel: "Think about it: they're refusing to sell us our own power."
• Power Generators. "There's evidence that some generators may be purposely withholding electricity from the California grid to create artificial scarcity which in turn drives up the price astronomically."
• And in case anyone had not understood his position on out-of-state power suppliers, he made it clear when he called them, "out-of-state profiteers" who were "hold(ing) Californians hostage."

As the Los Angeles Times reported, Davis’ promise not to place blame was intentionally hollow. Each broadside issued by the governor was the result of political calculations predetermined by his team of political advisors.

"Widely Criticized in Crisis, Davis Defends His Caution"

Los Angeles Times, January 21, 2001

Now in the past few days the Governor’s team has launched a multi-faceted war on President Bush and his administration, trying to tie it all together with the motive of money -- in terms of campaign contributions from Texas energy producers.

Davis political advisor Garry South began Davis’ assault against the President in the news media. "He can lollygag around there 3,000 miles away in his new digs and think somehow this isn't his problem, but he's going to learn very quickly it is his problem."

South also stated that Bush may have a "constitutional inability to understand or respond to this kind of situation that involves an industry that he came out of essentially. The guy’s a Texas oilman."

Commenting on Bush’s newly appointed Federal Energy Regulatory Commission head Curt L. Hebert Jr., South went on to add, "Anyone who believes they can equate roses with electricity should not be on the FERC."

Simultaneous to South’s assault on Bush and Hebert, the media was being fed an examination of President Bush’s campaign contributions, documenting contributions from energy providers to the Bush campaign and personal contributions by energy executives. The Copley News Service reports that South is not the only Davis operative assigned to the task of shifting blame.

Following South’s attack, Democrat Party Executive Director Bob Mulholland joined in the fray, prompting the Copley News Service to report that, "Democrats wasted little time putting their own spin on Bush's approach to the problem.

"To summarize, Bush said to California, 'Drop dead,' " said California Democratic strategist Bob Mulholland. "We won't need a long extension cord to connect Bush" to power companies that appear to have profited from the skyrocketing electricity costs that have hit California."

When GOP commentator Dan Schnur suggested that Democrats would use the issue to weaken Bush, Mulholland excitedly agreed. "Indeed, said Democrat Mulholland, "we've got the ad ready to go." (Copley News Service, January 27, 2001)

Clearly this is part of an effort to steer the blame and focus away from the Governor and place it on the shoulders of the Bush Administration. In the event that the President does not give in to every Davis demand made via the national media, Garry South had the nerve to issue a political threat against President Bush.

"It’s not politically tenable to disregard or do deliberate damage to the largest state (by population in America) just to take a few bites out of the rear end of a sitting governor."

("Dim Prospects for More Help: Power Industry Leaders are Bush Allies" Sacramento Bee, January 24, 2001).

Apparently the Governor thought it was politically tenable, however, to select as President of the PUC a Democratic campaign operative whose previous experience was as a trial lawyer filing class action lawsuits on behalf of the homeless and orchestrating damage control for the 1992 Clinton presidential campaign.

When Governor Gray Davis needed a loyal aide to carry out his public policy on utility matters, he surprised many observers by picking Loretta Lynch, who had at that time been his director of the Office of Planning and Research (OPR). What made the selection odd was that Lynch’s work at OPR was one of the few public policy positions that she had ever held.

Even more ironic is that while at OPR Lynch was responsible for "fulfilling statutory land use and environmental requirements" where she coordinated "California’s environmental justice efforts." (Source: Official Biography of Loretta Lynch posted at PUC website). It doesn’t sound like she was thinking very much about new energy supplies for California.

Obviously the infinitesimally small amount of public policy experience of Ms. Lynch was centered on the enforcement of environmental regulations. That alone would be quite a controversial background for someone who would become one of the Governor’s principal energy advisors.

It is quite evident that it was not Lynch’s expertise on utility matters or how energy markets operated that Davis sought when he tapped Lynch for the post. Indeed, competent oversight of the state’s utility system and navigation through the deregulatory process was the furthest thing from Lynch’s area of expertise.

After receiving a bachelor’s degree in political science from the University of Southern California, Lynch went on to study law and earned her degree from Yale University Law School in 1987. While at Yale, Lynch was a member of the Yale Homelessness Legal Clinic. Later, as special counsel to the Legal Aid Foundation of Los Angeles, Lynch litigated class action lawsuits on behalf of the homeless and also worked on welfare policy cases.

The foundation gained media scrutiny when it joined the ACLU in a lawsuit on behalf of homeless people who live in parts of downtown Los Angeles. Security guards attempted to provide protection to businesses that were subject to burglaries, break-ins and trespassing. Some of the homeless took offense at the tactics employed by the security patrols, and the ACLU and Lynch’s Los Angeles Legal Aid Foundation took action to right the purported "wrong."

While the litigious Lynch left her class action lawsuits on behalf of the homeless for the better-paying arena of politics, she would one day resume her work as a trial lawyer. In the 1990’s Lynch returned to her original calling and joined the San Francisco-based law firm of Keker & Van Nest as a partner. There, Ms. Lynch once again represented clients involved in class action lawsuits and white-collar criminal cases. Keker & Van Nest gained considerable notoriety in 1999 when the firm joined with the ACLU to file a lawsuit against the California Highway Patrol for federal civil rights violations.

Forged with a liberal background as a trial lawyer and advocate for the Left, Lynch moved on in 1990 to become a political warrior for the Democratic Party. Described by the San Francisco Examiner as "a tenacious fighter," Lynch served as assistant campaign manager for Democrat Attorney General John Van de Kamp’s unsuccessful campaign for Governor in 1990. Lynch also helped to elect two well-known leading women of the California Democratic Party, including service as campaign manager for Delaine Eastin’s 1994 victory as Superintendent of Public Instruction and as deputy campaign manager for Dianne Feinstein’s U.S. Senate campaign in 1992. But Lynch will likely remember 1992 more for her actions with Bill Clinton’s presidential campaign – a role that brought her national notoriety.

Americans are quite familiar with the many scandals and controversies that plagued the Clinton years. One of the early scandals to rock the Clinton camp would later spawn an Independent Counsel to investigate a broad range of possible misdeeds involving a failed savings and loan. While the Whitewater scandal would end up being too complex for the American people to digest and evaluate, it proved to be of great legal concern to the Clinton camp.

On March 8, 1992 the New York Times reported on questionable income tax deductions taken by the Clintons in 1984 and 1985. Reporter Jeff Gerth suggested in the story that Whitewater may have been used as a conduit to funnel money to the Clintons or perhaps to Bill Clinton’s campaign efforts.

Determined to kill any media momentum to investigate the Whitewater dealings, the Clinton campaign assembled a cadre of intensely loyal senior advisors to form a rapid response team. That team consisted of Loretta Lynch, Webster Hubbell and Vince Foster of the Rose Law Firm, and Hillary Clinton friend and New York lawyer Susan Thomases. The Independent Counsel Report indicates that Lynch and the other Clinton aides "reconstructed Whitewater-related records and coordinated the response effort."

An important component of the response team was to silence Jim McDougal, who had been responding to press inquiries about the Whitewater dealings. According to the Independent Counsel’s investigation, Ms. Lynch and Tyson Foods lawyer (and close Clinton friend) James Blair initiated a meeting with Jim McDougal and his lawyer, Sam Heuer. At the meeting they asked McDougal why he was talking to the media.

Mr. McDougal replied that it had been his experience as an assistant to former Senator J. William Fulbright that, "when the press had something it was better to talk and simply give it all to them." Mr. McDougal was then instructed by the pair not to talk to the news media any longer.

The Independent Counsel’s investigation unearths this attempt by Ms. Lynch and the Clinton team to silence McDougal, yet no major California newspaper reported on Ms. Lynch’s intimidation efforts in the Whitewater matter when her appointment was announced by Gray Davis to serve as President of the PUC. Ms. Lynch’s involvement in Whitewater was the classic case of "damage control" that became expected from the Clinton’s political team.

The Independent Counsel’s office learned that on March 18, 1992 a highly sensitive account of the Clinton’s Whitewater dealings (which came to be known as the "Lyons report" as it was compiled by Clinton lawyer and friend James Lyons) was secretly prepared and then distributed to the Clinton inner circle.

Only three recipients received the 55-page roadmap for damage control: Hillary Clinton, Loretta Lynch and James Hamilton (who was another lawyer involved in the matter). Mr. Lyons told investigators that there were two versions of his report. One "only addressed specific questions raised by the press" and another, which was a complete version that dealt with matters that the media had yet to uncover.

Among the efforts taken to reduce the damage the Clinton’s faced – both on a legal and public relations front – was to have James McDougal buy out the Clinton’s investment in Whitewater for $1,000. It ended up requiring a Clinton lawyer sending the $1,000 themselves to McDougal who then bought out the Clinton investment. The attempt by Ms. Lynch and the Clinton team to cover the trail of Whitewater for $1,000 was obviously not a total success as media inquiries and the Independent Counsel’s investigation would hound the Clinton’s for years.

Due to efforts to obstruct the investigation of the Independent Counsel by Susan McDougal and Webster Hubbell (for which Ms. McDougal was pardoned by President Clinton on his last day in office) there are serious questions that remain unanswered about how the reconstruction of the Whitewater scandal took place. We know from the testimony of Hillary Clinton given on March 16, 1999 that Ms. Lynch worked with Mr. Hubbell to reconstruct the events of various Whitewater transactions in order to limit the harm caused to the Clinton’s politically – and possibly legally. As part of that effort Ms. Lynch and Mr. Hubbell poured over billing records involving Madison Guaranty and other well-known components of the Whitewater scandal. (Source: Transcript of deposition of Hillary Rodham Clinton taken by Independent Counsel prosecutor W. Hickman Ewing on March 16, 1999).

Lynch’s involvement in the Whitewater "damage control" team is yet another example of Loretta Lynch’s specialty in war-room politics and her desire to win at all costs. As an accomplished damage control expert, she is a loyal confidant of Governor Davis and ready to help bail him out of his problems so his political career can march on uninhibited. That’s all well and good for all of the Democratic campaigns Ms. Lynch has worked on, but it is hardly a qualification to be a top energy policy official in the administration of the Governor of California.

Inappropriate conduct while in office seems to be a hallmark for Lynch. In August of 1999 Lynch, then head of the Governor’s Office of Research and Planning, was appointed as the Governor’s point person on the Administration’s HMO liability reform and negotiations with legislators. However, consumer and taxpayer protection leaders objected.

In a letter to Governor Davis and Lynch, the Foundation for Taxpayer and Consumer Rights asked Lynch to recuse herself as the Administration’s point person, noting "it would be inappropriate for an attorney affiliated with an insurance defense law firm (Lynch’s firm since 1991, Keker and Van Nest) that represents defendants at the nations largest HMO."

Despite her previous claims of acting in the interests of consumers, Lynch ignored the consumer groups’ requests and refused to recuse herself.

Just what exactly was it that compelled Governor Davis then to pick an ideological activist with almost no public policy experience – particularly in the area of energy matters – to be the President of the PUC? Lynch had served a very brief stint in 1999 as a temporary PUC commissioner, which was a job she landed when Davis had run out of politically loyal aides whom he trusted to fulfill his agenda.

The other temporary Commissioner appointed to the Commission, Tal Finney, had served as Davis’ general counsel during the time Davis was Lieutenant Governor. He had been tapped as a temporary appointee to numerous posts, including to the Agriculture Labor Relations Board – for all of one day. But when public criticism against the Governor mounted for his failure to permanently fill the two vacancies on the Commission, Davis realized he needed to make the appointment.

There must have been something that Davis appreciated about the loyalty, tenacity and political vitriol that defined Lynch’s leadership style while serving as the Director of OPR. Whatever it was, Davis was obviously impressed. Others were not. "It looks like Mr. Toad’s Wild Ride over there," commented Nettie Hoge, executive director of the San Francisco-based "The Utility Reform Network," as she monitored the chaotic sequence of events at the PUC just as the Governor was making his appointment of Lynch.

A new law enacted by the Legislature at Governor Davis’ request had changed the responsibility of appointing the PUC President from selection by the Commission members to appointment by the Governor. This would mark the first move by the Governor to seize full control over the administration of the state’s energy policy. This new power to directly control the PUC gave Governor Davis an increased interest in appointing a political soldier, rather than a policy director. Loretta Lynch, already serving on the commission, was now the right person at the right time.

Many, including PUC Commissioner Henry Duque, opposed Senate Bill 33, the legislation that gave the Governor the appointment power. Duque cautioned that the power grab by the Governor would, "politicize the agency" and "betray the Commission’s legacy as an independent agency and replace experts on markets and law with experts on politics."

Commissioner Duque issued his warnings in June of 1999 and it would take less than a year for his worst fears to come true. Davis and Lynch would steamroll ahead and replace observance of the marketplace and energy expertise with calculated political warfare and grandstanding.

Assembly Republicans seemed to agree and must have realized that Davis was initiating a takeover of the leadership of every state agency, board and commission involved in energy matters. Of the 22 "no" votes SB 33 received on the floor of the Assembly 21 came from Republicans.

"I take my cue from the governor."

"It was my role, as the governor’s advocate, to make sure his goals were met."

- Loretta Lynch quoted in the San Francisco Examiner

"She goes to no end to serve the governor."

"She has open channels of communications with him and an understanding of where he wants the state to go."

- Assemblyman Tom Torlakson on Loretta Lynch in the San Francisco Examiner

"Lynch Ready to Energize PUC Post"

January 30, 2000

"Lynch says she makes her own decisions."

"I don’t consider it appropriate to build a bridge to the governor’s office."

• Loretta Lynch quoted in the Los Angeles Times

"Power Crunch Puts Spotlight on PUC Chief"

December 29, 2000

Loretta Lynch has tried in vain to help provide cover for the Governor. Directly appointed to an $113,287 a year job, Lynch now serves as one of Davis’ top political lieutenants. Despite originally proclaiming her mission was to act as his servant to ensure his agenda was advanced, by the time the power crisis had garnered national headlines, Lynch was trying to spin things quite differently and provide her boss the political cover he needs.

However, because of her concerted efforts to protect the Governor and her inexperience in energy matters, Ms. Lynch has proven to be exceedingly ineffective. Her damage to Davis is comparable to the negative effects on ratepayers.

One of the most obvious failures of the Lynch-Davis record on the power crisis has to be the absence of a concerted plan to avert the power shortage that was looming on the horizon. Instead of acting in a timely manner, they complicated matters with plenty of actions that have been flawed, indecisive or solely politically motivated.

The first concrete sign of problems with the electrical deregulation appeared when energy prices began to skyrocket in the service area of San Diego Gas and Electric. But on Aug. 4, 2000, Lynch and the rest of the PUC refused to issue a rate-rollback for San Diego residents, which prompted numerous San Diego political leaders and consumer advocates to storm out of the meeting. They issued angry warnings that this refusal could push local businesses into bankruptcy. Lynch and the PUC contended they did not have the authority to levy such action, as dictated under the 1996 deregulation law.

But a few days later, on Aug. 9, Governor Davis, sensed the political necessity for intervention and announced, "we are being taken advantage of by out-of-state power companies. I will not let them bring our economy to its knees." In his statement, Davis requested the PUC to meet on August 21 and adopt a "stabilization" plan that would roll back rates for consumers. The San Diego Union-Tribune described the plan submitted by the Governor as "similar" to the proposed plan that Lynch had led the effort to kill just a few days earlier. (Union Tribune: Mendel/Rose; August 10, 2000)

Following her mantra of "I take my cue from the governor," Lynch changed her position that day, saying "she is now convinced the commission has the rate-rollback authority."

In late December, in an attempt to aid the flailing utilities, the Public Utilities Commission voted unanimously to begin an emergency procedure that would allow Southern California Edison and Pacific Gas & Electric to raise rates in order to avoid financial collapse.

"We must avoid continuing conditions that may jeopardize the utilities’ creditworthiness and their ability to continue to procure energy on behalf of customers," the PUC said in a statement. Lynch then said she hoped that the plan to raise rates would prompt Wall Street lenders to "act responsibly" and continue to allow the utilities to borrow money. The plan failed.

Then in early January, as the two giant California utilities inched closer towards bankruptcy, Lynch and the PUC again moved to stave off Wall Street. The five-member Public Utilities Commission approved the increase unanimously, hoping the decision would allow the utilities to get major loans.

Regardless of Lynch’s predictions and hopes, her shortcomings were shown again as Wall Street immediately found the increase to be too small and quickly downgraded the utilities' credit ratings, warning that the utilities' securities could be pushed to junk-bond status unless further action is taken.

At present, despite Lynch’s best efforts to comprehend the complexities of her position, the utilities are surviving only on a near complete government bailout, and "real" financial and market advisors have been retained to advise Davis.

Ms. Lynch continues to demonstrate that she is out of her league as President of the PUC on a regular basis. As mentioned above, Lynch at one point was eschewing the position that ensuring the sound financial position of the utilities was paramount.

However, the Associated Press reports on January 18^th of this year that Lynch led the PUC in blocking a move by Southern California Edison to sell its stake in a Nevada power generating plant that would have provided badly needed capital for the struggling firm.

According to Lynch: "Today is just another demonstration that we can’t let that happen. This commission cannot and will not allow that much power or additional megawatts to be placed in the hands of merchant generators."

The Associated Press reported that the move could make a bankruptcy filing by Edison more likely.

"But SoCal Edison said the decision further hampers its efforts to save itself from bankruptcy. While it can’t sell its power plant, it is forced to sell its electricity at regulated prices that don’t reflect costs." (Source: Associated Press, "PUC Rejects S. Calif Edison’s Plan, January 18, 2001).

Lynch further indicated that she would oppose every divestiture proposal before the commission without any regard for the impact on the financial conditions of the state’s utility companies.

Lynch made matters worse the very next day – January 19^th – when she slapped Southern California Edison and PG&E with an order baring them from cutting power to 25 million people – an order that, according to press reports "didn’t ease the possibility of more rolling blackouts."

Her reasoning for the action was based solely on comments made by representatives of the ISO and Department of Water Resources that had caused "confusion and apprehension." Ms. Lynch’s confusion and apprehension were more likely the result of her naiveté and inexperience on energy matters rather than any knowledge of possible changes in operations planned by the two major utilities.

Despite repeated assurances by Pacific Gas & Electric CEO Gordon R. Smith and John Bryson, chairman of Southern California Edison’s parent company, that they had no intention of voluntarily shutting off any power, Lynch issued the order.

In a statement dissenting from Lynch’s order, PUC Commissioner Henry Duque said, "I fear that the order would simply poison the atmosphere between government and the utilities, thereby making communication even more difficult in times of crisis."

Commissioner Duque though made it clear that it was not simply strained relations that might result – something Lynch would be accused of time and again – but reckless decision making that could cause a financial nightmare.

"In my view, it may even make a bankruptcy filing more likely," Duque warned.

It did. Smith and Bryson called Lynch’s action "an insult to utility employees who have tried to serve customers." Edison noted in a later statement, "There was absolutely no reason for the CPUC to take this action, except for reasons of publicity."

Lynch later admitted on the PUC website that there was no official report to indicate that Edison or PG&E had given any indication whatsoever that they were going to change operations or cancel service to their customers.

Last November, State Auditor Elaine Howle contacted the PUC by letter to alert the commissioners that, "her staff needed access to records and property for the investigation into the state’s power market and the California Government Code gave her "complete access to all records and property of state agencies." Howle heads the Bureau of State Audits, which conducts independent, non-partisan assessments of the state government’s financial and operational activities." ("State Auditor Threatens to Sue PUC" Sacramento Bee, January 19, 2001).

The Sacramento Bee reported that, "the PUC balked at providing information, and according to the Jan. 11 letter sent to the PUC by the auditor, has questioned the auditor’s authority to investigate the commission." PUC General Counsel Peter Arth, Jr. (who under the new law, SB33, was under the direct supervision of Lynch as PUC President) "told the auditor that the PUC will continue to resist attempts to ‘direct the priorities and time commitments of our key expert staff members."

While Howle has come to at least a temporary arrangement with Lynch’s office to work out a compromise, this recent episode is just another example of the arrogance of power that Lynch holds. Her indignation at any attempt by someone on the outside to have oversight in matters under the jurisdiction of the PUC demonstrates once again a temperament that is not tolerable for a PUC President to hold at any time, let alone now during one of grave crisis. She learned her Whitewater lessons well.

Lynch, a staunch Democrat partisan for years, has developed a particularly abrasive manner of solving problems. In January, the New York Times reported Lynch, looking to remove blame from her own plate, "repeatedly blamed the federal commission (FERC) for doing nothing to admonish the power generators for higher prices." Lynch’s constant attacks deteriorated into a feud where she and James Hoecker, chairman of the federal commission, sat side by side during a meeting, but "barely said a word to each other." And, this was the Clinton Administration. You can only imagine her conduct with the Bush Administration.

The Los Angeles Times reported late last year that Lynch again lost her cool at a public hearing of the PUC. "Loretta Lynch narrowed her eyes, obviously displeased." When informed that utility companies were giving their customers advance notice that higher power prices may soon be coming, Lynch lost control of her actions. There would be too much political damage done to the Davis administration from the public outcry if the utility companies gave the heads up to their customers.

"In the future you will comply with our rules and procedures and get approval before you begin to notify 4 million Californians of whatever the heck you want to say to them." The outburst created a dead silence in the room when Lynch then commanded the utility to "suspend all efforts to willy-nilly mail whatever it is you want to mail."

Lynch, who by ideology opposes deregulation and free-market economics, along with Michael Kahn, Chairman of the Electricity Oversight Board, co-produced a report to Governor Davis in August outlining California’s energy woes. One of the recommendations in the report was the take-over of the ISO and replacing the stakeholder representatives with appointees of the Governor. One economist noted Lynch’s report is "an analysis in which politics outweighs economics."

Desperate for more political control of the state’s power system, Lynch reported that the "operation of California’s vast and valuable electric system is now controlled primarily by the ISO and PX (Pacific Exchange), organizations that have no duty to serve California’s consumers or economy." She claimed that such organizations couldn’t "fairly" govern the state’s power grid.

Shortly thereafter, in what amounts to a hostile take-over, Governor Davis pushed through a measure, Assembly Bill 5X by Democrat Fred Keeley (top deputy to Democratic Speaker Bob Hertzberg) that would replace the 26 stakeholders who comprised the ISO board with a board consisting of five appointees of the Governor. The attack on the ISO gave the ammunition that Davis needed to launch a public relations war against the ISO. The political attack Davis launched, which included a media blitz, disgusted at least one ISO board member who resigned at the time in protest.

Exerting what economist William Kucewicz notes is "the arrogance of power," Davis then used his Attorney General, Bill Lockyer, to complete what was in essence a political coup through a lawsuit that ordered the ISO board members to "vacate their office." The action was filed in Sacramento Superior Court. In a press release issued on January 23 of this year Attorney General Lockyer offered to resist taking further litigation against any board member who voluntarily resigned.

The heavy hand of the law knows no limits when Gray Davis’ political future is at stake, and it took an assist from Loretta Lynch to make the power grab successful. Remember Ms. Lynch’s own words: "It was my role, as the governor’s advocate, to make sure his goals were met." She is forgetting that the PUC is a constitutionally created agency that should be free of political influence.

Ms. Lynch seems determined to top each misstep, surpassing each blunder with increasing drama. At a Federal Energy Regulatory Commission meeting on September 12 of last year in San Diego, FERC Commissioner Curt Hebert Jr. attempted to understand why Lynch was proposing that FERC order a return to cost-based rates (which had existed prior to the first moves towards deregulation).

But Lynch seemed unable to provide an explanation and instead relied on PUC Commissioner (and fellow Democrat) Carl Wood to explain why the state was requesting that the solution be reverting back to the old system of cost-based rate pricing. Hebert was quite perplexed by the fact that the PUC, under Lynch, had no understanding of the ramifications of a return to cost-based rates, yet were so insistent that the FERC order such an action. Unable to offer an economic explanation for her request, Lynch only could continuously reply to Hebert’s probing that she believes California consumers are "entitled" to a return to cost-based rate pricing.

Mr. Hebert, who was recently selected by President Bush to serve as the Chairman of the Federal Energy Regulatory Commission, was quite clearly frustrated with Ms. Lynch’s ignorance of the ramifications on the state’s energy policy if a return to cost-based rates occurred without consideration to how other elements of the state’s energy market would be affected.

[HEBERT: Okay. And I'm assuming if you return to cost-based rates, that you would dissolve your existing Power Exchange? I'm not sure what the function of the PX would be at that point. You would dramatically change the ISO--downsize probably--move at that point to some kind of independent for-profit transmission company. Am I wrong, or do you see it a different way?]

[HEBERT: You can't just say you're going to look at cost-based rates. You do have to assess the PX. You do have to assess how utilities are going to function ...

It's not that simple. It's very complex. It addresses a lot of different functions. And I would like to see how that plays out...]

[HEBERT: I know this is dragging on. I don't mean to be ugly about this. You've asked me to come here ... to help you solve a problem. I can only do that if you give me adequate information...]

(Source: Excerpts from the transcript of the Federal Energy Regulatory Commission hearing on September 12, 2000 as published in Public Utilities Fortnightly.)

The appointment of Loretta Lynch as President of the Public Utilities Commission was clearly for the purpose of protecting the political vulnerabilities of Governor Gray Davis. She had no experience or expertise in energy, but was thoroughly experienced in politics and damage control from the Clinton Whitewater scandal. If the Governor is serious about finding bi-partisan solutions to the current energy crisis, his first step should be to secure the resignation from Ms. Lynch and appoint someone who is competent as PUC President.

True to her experience with Whitewater, her tenure at the PUC has been punctuated with half-truths, mistakes, political motivations and embarrassing ignorance of the basic issues. Not only does she lack the experience, but she also does not have the temperament to be even a staff member on PUC matters, let alone the Commission’s President.

Under the California Constitution, only the State Legislature has the authority to remove a commissioner serving on the PUC. They can remove a commissioner with a two-thirds vote of both houses if they find the commissioner is guilty of "incompetence, neglect of duty, or corruption." Clearly, the "incompetence" test has been met.

If the Governor does not get her voluntary resignation, there can be little doubt that the time has now come for the Legislature to take immediate action and remove Ms. Lynch from any and all duties at the PUC. An individual who has a record of experience in energy and utility matters, who is sensitive to the ultimate protection of the consumer, and who respects the tenets of the free market system, should swiftly replace her.

Last summer, Assembly Republicans asked the Governor for a special session of the legislature to deal with the forseableforeseeable energy crisis. While the Governor had his own political reasons for avoiding this issue just before the 2000 elections, many of the problems may have been dealt with if the PUC had a competent President at the time. While the consumers and taxpayers are being forced to pay the ultimate financial costs, the PUC President cannot be permitted to continue leaving California’s economic future in doubt.