Governor Gray Davis is a busy man. Not only did he propose to hit beleaguered Californians with another $8.3 billion in proposed taxes this week, he also managed to send the message that companies should think twice before doing business in his state.

California yesterday demanded that the Federal Energy Regulatory Commission revise or void seven energy contracts that it freely signed back in the spring of 2001. Mr. Davis agreed to 52 long-term wholesale electricity deals worth $43 billion and hailed them as one fix to his energy crisis. But now that he's facing a record $38 billion budget deficit, he's decided they are overpriced and wants a do-over.

Telling companies that legal contracts are worth as much in California as they are in Cuba isn't exactly the way to lure new investment and jumpstart an economy. But then again, this isn't about fixing California's budget and energy woes so much as it is about fixing the Governor's poll numbers. With a 24% approval rating and a recall effort under way, Mr. Davis is desperate to wiggle out of an energy mess that was largely of his own making.

Let's recall how we got here in the first place. The Governor now says he was forced into the deals, and that "contracts entered into with a gun at your head are not sacrosanct." But all this started when California botched its energy deregulation by funneling 100% of its wholesale electricity purchases through a short-term "spot" market. This led to skyrocketing wholesale energy prices, rolling blackouts and the functional insolvency of two of the nation's largest utilities.

It was then that the Governor chose to intervene, by moving the state's energy buying out of the volatile spot market and into medium- and long-term contracts. He went on to hail the contracts as "the bedrock of a long-term energy solution."

Within months, spot prices had fallen below the level of the new contracts. Mr. Davis's poll numbers began falling too and he unleashed his lawyers to bully companies into renegotiating deals worth half the original amount. California now wants FERC to force the seven holdouts to do the same, which the state says will save it $5 billion to $7 billion.

We only hope FERC has more sense. California is still in a precarious situation; without new construction, it faces another energy abyss. But capital markets have dried up for many energy firms, and the only way they'll be encouraged to lay out funds is if they can count on a modicum of legal and regulatory stability.

That includes basic things like the sanctity of contracts. As an example, Sempra Energy invested about $1 billion in new power plants for the region after it signed a confidence-building $6.6 billion contract. Mr. Davis now wants FERC to void the very contracts that made such investment possible. That FERC is even considering abrogating legal contracts has caused enough uncertainty in the industry to hamper new construction and generation nationwide.

The worry here is that FERC, which has proven sensitive to criticism that it didn't do enough to help California at the time, will once again carry water for the Governor. It has in the past, imposing price caps on California's wholesale market and releasing a blame-shifting report saying California was "gouged" by power producers.

But FERC should know that if it agrees to this charade it will be signing up for more Californias. Ripping up legal contracts for political considerations sends a message to energy firms that it isn't safe to do business anywhere. That might fly in Governor Davis's Republic of California, but the rest of the nation would like to keep its lights on.