California: No Exodus in Sight

David Freeman, California Gov. Gray Davis chief energy adviser, has a message for the states big technology companies: Quit whining.

California may be facing a summer marred by blackouts, and electric rates for large industrial customers have jumped by nearly 50 percent, but, Freeman said, "Our economy is still doing fine." And despite claims by technology industry representatives that higher electric prices could "cripple" many companies or force them to leave the state, "theres no evidence that companies are leaving," he said. "There isnt a chorus of people wanting to move to Iowa."

Although Freemans comments are provocative, they arent nearly as combative as those being made by his boss, Davis, a Democrat who has engaged in a protracted war of words with President George W. Bush. Davis and Bush met briefly in Los Angeles last week without reaching agreement on how to resolve the states energy crunch. Davis and Freeman favor imposing mandatory price caps on power generators; Bush does not.

Freemans belief in the states economy contrasts with statements made by Carl Guardino, CEO of the Silicon Valley Manufacturing Group, after the California Public Utilities Commission raised rates for large industrial users by an average of 49 percent. Guardino told reporters that the agency "has basically strangled the goose that laid the golden egg."

The bird may be squawking, but it doesnt appear to be migrating. Interviews with a half dozen economic development leaders in Western states, as well as officials in San Jose and Silicon Valley, indicate that there has been little if any increase in interest in relocating among companies. "I dont see an increase in inquiries. I think the companies are trying to wait it out," said David Bentler, senior consultant for business development at Arizona Public Service, Arizonas biggest electric utility.

Stephen Levy, director at the Center for Continuing Study of the California Economy, said companies need to stay in the state. "No one is about to move the center of their innovation activity away from the worlds center of innovation," Levy said.

Freeman, 75, brings a wealth of knowledge to his job. He has held top jobs in several utilities, including the New York Power Authority, Tennessee Valley Authority, Lower Colorado River Authority, Sacramento Municipal Utility District and Los Angeles Department of Water and Power.

"Theres never been a better opportunity than this to show that conservation works," said Freeman, a lifelong advocate of efficiency and conservation programs. Freeman also believes that if California can get through this month without many blackouts, the rest of the summer should be relatively calm, because several power plants will be coming online in July and August.

And he predicts that, over the next few years, California will reap the benefits of the many conservation measures now being implemented. "The smart companies are finding they can do business with a lot less electricity — not by doing without, but by using greater efficiency," Freeman said.