CALIFORNIA'S ENERGY CRISIS: what a fantastic muddle. Bits versus atoms. Clicks versus bricks. It's very 2001 -- all about the New Economy getting hauled from its Volvo and curbstomped by the Old Economy. California's problem is that energy is not bits. You can't burn bits to keep warm. A natural gas pipeline is not the Internet Cloud. There are networks, and then there are networks. This is what comes of trustingly treating a rusty gas pipeline like the warm and kindly Internet.

California runs on natural gas pipes, not fiber optics. On the Internet, you can produce all the bits you want and shuffle them around at the speed of light -- sort of. But natural gas isn't bits and it doesn't get "produced." It gets extracted out of big dirty holes in the ground, and then shipped in big glugging rusty pipes. That's the story.

The "free market" doesn't even enter into this discussion.  OPEC is a cartel. OPEC is 105% market friction; market friction is why they exist. The fossil-fuel business is the Old Economy at its most primeval and piratical. It's not run by dot-com guys in moleskin slacks and polo shirts. It's run by genocidal warlords in berets.

Which is not to say that this crisis is lucid, clear, and simple. On the contrary, this is California in one of its bad karma moments: a seriously weird scene. Steve Peace, the state senator who authored California's 1996 deregulation bill, is also the guy who produced the daffy sci-fi parody, Attack of the Killer Tomatoes!  While the governor, Gray Davis, was trying to patch the crisis together, a suicidal lunatic tried to assassinate him.  This maniac drove an eighteen-wheeler milk truck straight up the steps of the State Capitol at seventy miles an hour. So while the State Assembly passes its emergency bailouts, California's Capitol is cracked, patched, and stinking of charred flesh and gasoline.

But those are mere tinsel threads in that glamorous cultural tapestry that once gave us Reagan and Sonny Bono.  For a deeper understanding, a situation this severe requires a list. Here's what has gone wrong in California, in more or less direct order of crisis-hood. Some of these things may be dealt with in a big hurry, given political genius and generous bankers. Others are going to hang on for years.

1. California's utilities are practically bankrupt. The reform required them to sell voltage at fixed prices while they bought fuel at market spot prices. This goofy market worked out kind of okay in '97, '98, and '99, more or less like the NASDAQ; but it went totally nuts in 2000. California's utilities have lost billions and billions. They owe it to people who (a) aren't Californian and (b) aren't kidding about collecting that debt.

2. California's spot market is a botch. If any player refuses to sell gas, even for a little while, then prices explode. In today's tight market conditions, nobody has to sell California any gas. This means that gas suppliers can game the state's gas market like big-oil cats double-clicking a digital mouse.

It's even worse at the moment, because nobody wants to sell to bankrupt utilities. Californians do have fuel now, but only because the feds are forcing people to sell it to them, with emergency orders.

3.  In California's dreamlike utility business, marketers are supposed to be cleanly divorced from generators. Electricity marketers are supposed to compete on price, service, and flashy logos, just like dot-coms, while the electricity generators stay in their obscure, Old Economy coalmines, sort of like mythical tommyknockers.  But clean, sizzly voltage can't be separated from that dirty, stinky fuel.

This naïve practice meant unilateral disarmament. California's generators got bought up by "pirate generators" from out of state. Now these fuel moguls have got the state totally over a barrel, OPEC-style. Nobody knows how to make them give those generators back, either. They ain't gonna. They bought that hardware legally, and at this point, anybody with a generator can turn California on and off at will.

4. There's no clear direction for reform. Since the deregulation bill passed unanimously, no politician gets to be the white knight. California's shattered utilities have nobody to blame but themselves. It's not like angry populist consumers chased them into this mess. Oh, no: Instead, they lavishly greased the palms of the State Assembly, got a friendly bill passed, and now they're getting clobbered by their own script. Normal people hate them and want to see them die.