“Electricity is too essential to be left to the market…. It is a critical, life-giving resource, not a commodity.” So says Medea Benjamin of Global Exchange, a San fransisco-based group best known for opposing globalisation. Now it is turning its fury on electricity deregulation. Ms Benjamin, a Green Party Senate candidate last year, is leading a grass-roots movement to put the whole country’s electricity industry under municipal control. With ballot initiatives in San Francisco, San Diego and other cities the “public power” movement is the one clear winner from this year’s power cuts and price rises.

The idea that California, home of Reaganomics and Silicon Valley, should now embrace socialism is not as far-fetched as it sounds. Anti-market forces have been fuelled by a botched deregulation five years ago of the state’s power sector that has led to soaring prices, near-bankrupt utilities, and black-outs.

In a striking display of “public power”, the state government has stepped in to buy wholesale power on behalf of its utilities. Now it is trying to buy the power grid. Gray Davis, California’s governor, has even created a state Power Authority and anointed David Freeman, a wily veteran of government-run power agencies, as his “energy tsar”.

Faced with this astonishing expansion of public power, some in the California legislature have been trying to rein in Mr. Davis’s ambitions. Legislators this week debated whether to approve his plan to keep Southern California Edison (SCE), a big utility, from bankruptcy by buying its grid assets for the inflated price of $2.76 billion. Separately, the governor is also buying the grid assets of another utility, San Diego Gas & Electric (SDG & E), which remains healthy. One assemblyman from his own party put it this way: “If we’ve demonstrated anything in the past few months, it’s that the state of California has no business being in the power business”.

Yet the state looks likely to remain in the power business for years, especially if things get worse. The Independent System Operator (ISO), which runs the grid, has forecast some 260 hours of black-outs this year. Economists at the University of California at Los Angeles worry that the power crunch will drag the state’s economy, the world’s fifth biggest, into recession. Even the energy tsar is cautious: “We’ve just landed at Normandy, but it’s a long way to Berlin – and we may yet have to fight a Battle of the Bulge.”

The State has a bad record to live down. Mr. Davis’s early handling of the power crisis was disastrous. He ignored the first warning signs, which came a year ago with price spikes in San Diego, and struggled for months to work out what to do. By reacting so slowly, Mr. Davis may have cost tax payers some $20 billion. This year, the state expects power costs to top $50 billion, up from $7 billion in 1999.

Still the governor can no longer be accused of doing nothing. On the supply side, he has just helped hustle into service three power plants, the first big plants to open in the state in a decade. The demand picture is better, too: thanks to conservation, demand is a tenth or so below last year’s level. More encouragingly, the peak price of power on the wholesale market has dropped considerably since March. Mr. Davis, naturally, claims credit for that.

The Californian answer

His longer-term plan has three parts. First, the state is pushing public power, as is seen in the new power authority and in Mr. Davis’s attempts to buy the grid. Second, it is purchasing long-term contracts: Mr. Freeman negotiated a clutch of these a few months ago, at the height of the crisis. Third, it is pummeling producers (“price gougers” and “bloodsuckers”, as Mr Davis prefers to call them) through price caps and rebates. After months of resisting his calls, the Federal Energy Regulatory Commission (FERC), America’s top electricity regulator, agreed in June to impose “soft” caps on wholesale prices. The FERC is also considering Mr Davis’s claim that generating firms should pay a $9 billion refund.

Do these three things add up to a coherent policy? Take public power first. Even market-minded experts accept that some state intervention was necessary to resolve the crisis, but most of them argue that the stat should withdraw once the botched deregulation is set right.

It may not. The governor has sweeping powers to build and seize plants, and he has, in effect, taken power authority answers to him directly, not to regulators, and the new energy tsar insists that the authority is not temporary. He also promises to seize plants only as “ a last resort”, but may find it hard to restrain himself: in early July, a committee of the state Senate passed a resolution encouraging him to “commandeer” plants. Loretta Lynch, the head of the Public Utilities Commission, the State’s top regulatory body, wants deregulation to be scrapped altogether and the state to return to “cost-based pricing” regulation.