Those wimpy Californians, with all their fuzzy talk about conservation and
their hostility to Big Energy, were supposed to spend this summer sweltering
in the dark. But events are not following the script. Summer has begun, yet
so far power supplies have been adequate -- and prices have been fairly
reasonable. In fact, in the last few days wholesale electricity, which often
sold for $750 per megawatt hour this time last year, has been going for less
than $100, sometimes less than $50.

Everyone seems reluctant to talk about this good news, out of fear that
saying anything optimistic would be a self-defeating prophecy. And it is
still possible for things to go very wrong. Still, the contrast between dire
expectations and the relatively benign picture so far demands an explanation.

One big reason for California's improved energy situation is conservation.
Taking temperature into account, California consumers are using between 5
and 10 percent less electricity this summer than expected.

Another reason is a sharp drop in the price of natural gas, an important
part of the cost of generating electricity. More on that in a minute.

The most important factor in the turnaround, however, is that the state's
power plants are back on line. In March, with air-conditioners turned off,
there should have been plenty of spare generating capacity. But around
15,000 megawatts, a third of the state's capacity, was mysteriously
unavailable. Now the offline capacity is less than 4,000 megawatts.

Why are the state's power plants operating again? More to the point, why
weren't they operating back when the state was desperately short of power,
and prices were much higher than they are now?

Many economists now accept the uncomfortable answer: Generators deliberately
withheld electricity from the market in order to drive high prices even
higher. Until recently the evidence for this market manipulation was purely
circumstantial; but it has now been reinforced by direct testimony by former
employees of one generator.

So why did the market manipulation stop? Generators now sell much of their
output under long-term contracts with the state, which reduces the incentive
to drive up prices in the spot market. But the main answer is probably that
intense public scrutiny, culminating in the recent decision by federal
regulators to impose price caps, has convinced generators that they had
better behave themselves. (The details of the price caps, it turns out, may
be less important than the signal that the regulators are, finally, prepared
to do some regulating.)

The natural gas story may be similar. Last year El Paso Natural Gas, which
controls one of the crucial pipelines serving California, leased a big chunk
of that pipeline's capacity to its own marketing subsidiary. That subsidiary
has been widely accused of using its control of the pipeline to withhold gas
from the California market, and thereby drive up prices. The company denies
the accusation, and says that an internal document that talks about "ability
to influence the physical market to the benefit of any financial/hedge
position" wasn't saying what it seemed to be saying. But when the lease
expired at the beginning of this month, gas prices in California promptly
plunged 50 percent.

And so, sooner than anyone expected, it seems that the worst may be over. A
drought or a heat wave could still cause rolling blackouts. But time is on
California's side; some new power plants will come on line in a few weeks,
and many more over the course of the next 18 months.

The big loser from all this -- for somebody always gets hurt even by good
news -- is, of course, Dick Cheney, the architect of the Bush
administration's drill-and-burn energy plan. Remember that Mr. Cheney
sneeringly dismissed conservation as a mere "sign of personal virtue," and
was scathing about people who thought price controls would help. Now things
are suddenly looking up -- partly because of conservation, and partly because
price controls and the threat of further government intervention have
deterred energy producers from manipulating the market.

It turns out, in other words, that Mr. Cheney -- who prides himself on his
tough-mindedness -- was naively out of touch with reality. And the real
realists were those silly people who thought that California could solve its
crisis by saving energy and suing energy producers.