Power Politics: Strategist for Gov. Davis Toughens Energy Policy

John Harwood and Mitchell Benson

June 19, 2001

The Wall Street Journal

Garry South is no expert on energy policy. But he understands voters, and a few weeks ago he dropped off a piece of intelligence at Gov. Gray Davis’s condominium that helped change California’s response to the crisis over electricity.

Mr. South, the governor’s top political strategist, gave Mr. Davis an 80-minute videotape of focus-group discussions with residents of San Jose and Torrance. Its conclusion: Though Californians were miffed at the governor over energy, they responded to arguments that blamed Republicans for enacting utility deregulation and out-of-state power generators for profiteering. And “you didn’t have to tell ‘em twice” that some of those generators were Texas companies with ties to President Bush, Mr. South recalls.

After that, Mr. Davis’s public approach changed. The first-term governor escalated his attacks on energy “cowboys” for engineering “a massive transfer of wealth” from California to Texas and elsewhere. He ramped up pressure on the Bush administration to cap electricity prices; by pushing price caps, analysts from both parties agree, Mr. Davis scored public relations points at the president’s expense when the two met in Los Angeles late last month.

Yesterday, as Mr. Davis prepared to testify in favor of price caps at Senate hearings this week, the Federal Energy Regulatory Commission moved in his direction by broadening California’s wholesale price controls to apply around the clock there in 10 other Western states and Mr. Bush ended up acquiescing in the move.

Whether any of Mr. South’s input will speed the end of California’s energy woes isn’t clear. Critics have blamed Mr. Davis for being longer on spin than solutions, saying he delayed necessary steps such as long-term electricity contracts and higher rates for consumers for fear of damaging his standing with the public. But the change in tone represents another victory for Mr. South as a top political gunslinger in the nations largest state — and a sign of his influence in a crisis of national significance.

“Garry South may be giving the best political advice in California, but the last thing Gray Davis need now is political advice,” says San Schnur, a former aide to Mr. Davis’s Republican predecessor, Peter Wilson. Even former White House Chief of Staff Leon Panetta, who now runs a public-policy institute at California State University, faults Mr. Davis along with the White House for “playing politics” on the issue.

Officially, Mr. South isn’t a part of the Davis administration. After piloting Mr. Davis’s 1998 gubernatorial victory, he eschewed the governor’s office in Sacramento to become a private consultant to Mr. Davis and business clients. But the lanky, quick-tongued strategist retains more influence with the governor than anyone else — not only on energy, but all other issues with the potential to shape Mr. Davis’s political future.

At a party to celebrate the strategist’s 50th birthday recently, Davis aides poked fun at Mr. South as the “puppet master” manipulating the governor. Joking aside, “everybody on the governor’s staff views him as the most trusted advisor,” says Phil Trounstine, until recently Mr. Davis’s communications director.

That is a remarkable amount of influence for Mr. South, who was a political vagabond in search of a job when he moved to the state 10 years ago. After directly Jimmy Carter’s 1976 presidential campaign in Mr. South’s native Montana, Mr. South jumped between jobs at the Democratic National Committee, Mr. Carter’s Agriculture Department, The National Association of Realtors and the office of Ohio Gov. Richard Celeste.

In the early 1990s, he struck out for California, landing jobs with unsuccessful candidates for Los Angeles mayor and county supervisor. But in the process he met Mr. Davis, then the state comptroller, who himself was looking for a fresh team to guide him to higher rungs on California’s political ladder. Since then, the two men have forged an unusually close partnership.

First, Mr. South helped Mr. Davis capture the lieutenant governorship in 1994, not withstanding that year’s national Republican sweep. Four years later, he steered Mr. Davis to an upset victory for the Democratic gubernatorial nomination and a landslide 58% to 38% general election win over Attorney General Dan Lungren, working through a bout with bleeding ulcers that sent him into intensive care for four days.

Colleagues and rivals say Mr. South’s distinctive feature as a strategist is his ability to frame a broad campaign message — and to zero in mercilessly on the vulnerabilities of rivals. When wealthy business executive Al Checchi dwarfed Mr. Davis’s spending in the 1998 Democratic primary, Mr. South derided Mr. Checchi as “Gordon Gekko” — the ruthless corporate raider of the film “Wall Street” — and stalked Mr. Checchi’s campaign events as a form of “psychological warfare” against an inexperienced rival.

“He’s like the fire ants showing up at the picnic,” says Bill Carrick, whose client, Jane Harman, also lost in that 1998 Democratic primary. When actor Arnold Schwarzenegger flirted with a 2002 GOP gubernatorial bid, Mr. South promptly disseminated copies of unflattering articles of Mr. Schwarzenegger. He delighted at subsequently receiving a letter from a lawyer representing Mr. Schwarzenegger, which he viewed as confirmation that he had unsettled the “Terminator” of movie fame. Mr. Schwarzenegger later announced that he would make another movie instead of challenging Mr. Davis.

Outsiders “look at what I’m saying and say, ‘What a lout,’” Mr. South acknowledges. But he boasts that his tactics often make Mr. Davis’s rivals “take the bait” and veer from their own campaign plans. More-over, he says “over-the-top” rhetoric is sometimes necessary to cut through the fog of political ennui that shrouds much of California’s vast electorate.

Some Republicans think they can turn Mr. South’s tactics and his influence into ammunition against Mr. Davis’s re-election bid. GOP operatives, with financing from Texas-based Reliant Energy Inc. and other energy companies, have launched a $2 million ad campaign blaming the governor for “pointing fingers” and causing power “Gray-outs” by failing to lead. Republican legislators have targeted the governor’s decision, orchestrated by Mr. South, to hire two senior aides to Al Gore’s 2000 presidential campaign, Mark Fabiani and Chris Lehane, as taxpayer-funded communications consultants. Secretary of State Bill Jones, who is seeking the 2002 GOP gubernatorial nomination, has called on Mr. South to reveal his sources of income.

Mr. South has declined to do so. He allows in an interview that he has done “communications consulting” for Sony’s Corp.’s Sony Pictures and for a group that is seeking a new National Football League franchise for California. He said, “I’d rather not say” beyond that. “I don’t lobby the governor” for anyone, he adds.

Though the energy crisis has taken a toll on Mr. Davis’s poll ratings, Mr. South shrugs off predictions that it will derail the governor’s bid for a second term. “Come around in November of 2002 and talk to me,” he says confidently.

The same focus groups that showcased GOP vulnerabilities on energy, Mr. South notes, showed Californians are “close to being astonished” when they are told what Mr. Davis has done to solve the problem, such as speeding approval of new power plants to buttress supply. Mr. Davis had banked some $26 million toward his re-election bid in which he can get that point across.

Nor does Mr. South accept that Mr. Davis’ potential as a 2004 presidential candidate has been dashed. After matching wits with White House political ace Karl Rove at the Bush-Davis summit, he muses, “I wonder whether this team is really as good as we thought they were.”