Crossed Wires on Capitol Hill

When the lights went out from Detroit to New York, alarm bells went off from Bush campaign headquarters to Capitol Hill. That's because electric-power politics is such a mine field.

Certainly, the President has been ahead of the curve by promoting tax incentives for utility modernization and regulatory changes to ease construction of new transmission lines as part of his comprehensive energy plan. "Now is the time for the Congress to move and get something done," a vacationing Bush told reporters outside a Crawford (Tex.) gas station on Aug. 19.

But what Bush's handpicked head of the Federal Energy Regulatory Commission wants to get done and what powerful senators protecting regional interests will permit are two very different things. The face-off complicates final passage of the energy bill so dearly desired by the President. That has put Bush in the unusual position of officially distancing himself from his own appointee.

Politicians in the Southeast and Northwest, led by Senator Richard C. Shelby (R-Ala.) and a host of GOP governors, have asked the White House to delay or block efforts by Federal Energy Regulatory Commission Chairman Pat Wood III to deregulate electricity and force utilities to join regional grids.

Westerners don't want to give FERC more authority to string transmission lines across private land. Southerners insist the Wood plan would raise rates, usurp state regulation, and subject them to the vagaries of the Northern grid. "Utilities in the Southeast are this year investing billions of dollars in upgrades to the transmission system," says a Shelby aide. "We don't think we should have to sacrifice to benefit the Northeast."

Wood, a Bush utility regulator in Texas, is caught in a political vise. He doesn't want a showdown with his boss, but he strongly favors a national network of regional grids. "Regionwide planning is absolutely necessary," he told BusinessWeek. "But as long as we have this federal/state pissing match over jurisdiction, folks won't invest, because they don't know how they'll get their money back."

Bush is trying to finesse the differences by restating his support for regional transmission authorities while signaling that he may back a Senate bid to delay them for three years -- well after Election '04. Why? Because the political geography of the blackout makes Republicans nervous. Four states that lost power are electoral battlegrounds. Bush narrowly won Ohio in 2000. Michigan, Pennsylvania, and New Jersey, carried by Al Gore, are Bush targets for '04. And the outage is one more jolt to Bush in the economically dim Midwest. "It brings into question federal stewardship of the grid," says Sherry Bebitch Jeffe, a University of Southern California political scientist. "It allows [Dems] to revisit the connection between Bush and the energy patch."

That could be tricky. Demo-crats had accused Bush of holding energy legislation hostage to the interests of oil-biz buddies eager to drill in Alaska. Now they risk being blamed for blocking needed reforms on behalf of green activists.

"This shouldn't be about partisanship," says House Majority Leader Tom DeLay (R-Tex.). "It's about turning the lights on." Still, it's impossible to remove politics from any solution. The White House wants to please key swing states but knows it could get stung if it angers Shelby's coalition. Among states opposed to the FERC plan are Washington and Oregon, Gore country in 2000 and both the focus of Bush attention. Also in the fold are Arkansas, Florida, and Louisiana, where Bush won narrowly.

If the President delays a showdown until after the elections, he can zero in on energy issues with bipartisan support, such as mandatory reliability standards and tax incentives for transmission investments. Then he can look like an energy visionary -- unless the lights go out again. Voters in the dark may think twice about leaving Bush on the power grid.

By Richard S. Dunham, with Mike McNamee, in Washington

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