Pressure grows for price caps on power Feds, officials from Western states debate energy costs

Wednesday, April 11, 2001

By H. JOSEF HEBERT THE ASSOCIATED PRESS

High electricity prices pose a "looming disaster" for many states in the West, a federal regulator warned yesterday, as pressure grew on the government to consider temporary price controls on wholesale power.

Officials from 11 Western states, including energy-ravaged California, engaged in sometimes passionate exchanges with three members of the Federal Energy Regulatory Commission over how to contain soaring power prices that are expected to go only higher this summer.

"Something has to be done to tame this market," Geoffrey Brown, a member of the California Public Utilities Commission, told the three FERC commissioners. California anticipates paying $65 billion for electricity this year, almost 10 times its power bill in 1999.

But after the daylong session, the commission seemed to be not much closer to imposing price caps than before, although one commissioner, Linda Breathitt, said she now wants to look the issue more carefully and might be swayed.

Commission Chairman Curtis Hebert, a strong free-market advocate, reiterated his fear that price regulation would drive off investors for new power generation. Under commission rules, it would be Hebert's discretion when or if to propose a price cap for deliberation.

Commissioner William Massey, who has been in the minority on the commission in recommending price controls, said the "passion for markets must be tempered with common sense."

"We face a looming disaster," he declared, if wholesale electricity markets are allowed to continue on a path that has wholesale power in many parts of the West selling for 10 times what it cost just a year ago.

Hebert insisted that the commission "is doing everything it can" to ensure just and reasonable prices and cited the commission's action to seek $124 million in refunds on California power sales. He also said the commission plans soon to approve a new system of tracking market abuses.

The chairman noted that state officials at the meeting were sharply divided over whether the government should regulate electricity prices. Keeping tabs as each participant gave a presentation, he said three states were for them, five against and three uncertain.

California, whose electricity problems have unleashed soaring power prices throughout the West, urged the commission to immediately impose an 18-month cost-based price cap in the Western markets.

"We have done our part. We cannot do it alone," the California commission's Brown declared, citing state actions to boost conservation, increase retails rates and speed up power plant construction. "California is dying on the vine."

Still, California officials expressed little hope that the commission would enact press controls.

"It would take a dramatic, unprecedented change of direction," said Fred Keeley, speaker pro tem in the California Assembly, who was in the audience during the six-hour meeting.

The issue may end up being decided by two new commissioners recently nominated by President Bush -- Pat Wood, now head of the Texas utility commission, and Nora Brownell, a Pennsylvania regulator.

Vice President Dick Cheney, interviewed yesterday by the Seattle Post-Intelligencer, called price caps a "singularly bad idea."

"They have nothing to do with increasing supply or reducing demand," he said.

"If you want to see the consequence of price caps, look at the disaster California is facing.

"http://seattlep-i.nwsource.com/business/18158_caps11.shtml

-- Carl Jenkins (somewherepress@aol.com), April 11, 2001