Anderson School predicts recession

  COURTNEY STEWART/Daily Bruin Former governor Pete
Wilson addressed the state’s energy crisis during his
keynote speech at The Anderson School on June 28.

By Kelly Rayburn
Daily Bruin Senior Staff

Gov. Gray Davis flipped the switch of a new 320-megawatt Kern
County power plant on June 28 and said: “We are taking
control of our energy destiny.”

But one day later and 100 miles to the south at the UCLA
Anderson School, former governor Pete Wilson and others warned of
pending blackouts and recession due in part by the energy
crisis.

UCLA’s top business analysts released their findings June
28, citing the energy crisis as a catalyst for a probable
state-wide recession.

The Anderson School’s California Economic Forecast,
authored by UCLA senior economist Tom Lieser, predicted a decline
in the growth rate of the gross state product and a state-wide rise
in unemployment. The Anderson report has historically been one of
the most accurate economic forecasts in the Western United
States.

Though the entire state is expected to enter into a recession,
the forecast expects Los Angeles won’t be hit as hard as
Northern California, partially because two of L.A.’s largest
industries ““ aerospace and entertainment ““ are expected
to fare relatively well in the next couple years. The number of
jobs in both industries is expected to increase after a brief
decline.

Meanwhile, Bay Area cities economically dependent on dot-com
businesses may be less fortunate, including San Jose, where 14,000
people have lost jobs since 2000.

Following Lieser’s presentation, UCLA senior economist
Christopher Thornberg and Michael Zenker, director of the Cambridge
Energy Research Associates, presented a report offering two ways
California can attack the energy crisis.

One way is to charge consumers more now for energy, and the
other is to have the state take charge and defer energy costs.

Thornberg said the “worst-case scenario” of 112
hours of blackouts this summer could be reduced to 12 hours if the
market is allowed to run its course, because consumers will be
inclined to use less energy if retail prices are kept high.

But others said the state could experience slower growth rates
in the near future with the first option. According to
Lieser’s report, the 2001 rate of growth will be 2 percent if
the state takes charge, but only 1.6 percent if the market is left
to take its own course.

During the day, Wilson appeared as the keynote speaker prior to
the unveiling of the forecast.

Now director of the Pacific Capital Group, Wilson said
California can expect at least 100 hours of blackouts this summer,
because energy supply won’t meet demand.

The former governor defended his signing of the 1996 Assembly
Bill 1890, which deregulated the California energy market, and
cited warmer summers and constraints on natural gas supply as
contributing to the decline in energy surplus that existed in the
mid-1990s. He also criticized the Davis administration’s
policy, charging that they had not moved quickly enough when there
were clear signs of an energy problem.

“The reason we will suffer power blackouts this summer is
because the Davis administration has, by inaction, allowed a
problem to become a crisis,” he said.

With the threat of rolling blackouts, each University of
California campus has established an energy emergency plan.

But according to the UC Office of Strategic Planning, UCLA is
immune from rolling blackouts, because the university is located
within the service territory of the Los Angeles Department of Water
and Power, which has stated that it has enough energy on reserve to
supply its customers’ demands.

Davis, who has criticized the Wilson administration’s
energy policy, focused on the present when making remarks after the
Kern power plant ““ called the Sunrise Power Project ““
began operating.

“It’s clean, it’s efficient, and it was built
in record time,” Davis said of the plant.

Construction of the plant began in December 2000, with crews
working 18-hour days, six days a week. Sunrise is the first major
power plant to come on line in California since 1988, according to
the governor’s office.

The plant, jointly owned by Edison Mission Energy and Texaco
Power and Gasification, will sell energy to California and is
eligible for payments from the state, which has provided financial
incentives for private companies to build power plants.

A few days after the plant opened, Davis commended California
consumers on July 1 for decreasing their energy consumption by 12
percent compared to last June.

“Conservation does make a difference,” the governor
said in a statement. “But we cannot be complacent “”mdash;
every kilowatt saved is money we keep in California and out of the
pockets of the out-of-state consumer.”