San Diego Union-Tribune

Page A-14

01-Feb-2001 Thursday

  Western states urge federal price cap
    Competing energy views heard by Senate panel 


WASHINGTON -- Utility officials from California and other Western states told a Senate panel yesterday that a temporary federal cap on wholesale electricity prices in the region is urgently needed to tame a power crisis that is likely to get worse this summer.

"We're not a company that historically has liked any kind of price cap. But you reach a point where enough is enough," said Fred John, a senior vice president at Sempra Energy, which owns San Diego Gas & Electric.

Power generators and marketers countered that a price cap would aggravate power shortages and urged the federal government to cut a web of regulations they said is delaying or discouraging the construction of new power plants in California.

The Bush administration has opposed price controls while offering to loosen environmental restrictions for power plant construction and operation.

"The bottom line is to get every generating facility available, of any type, operating," said Keith Bailey, president and chief executive officer of The Williams Cos., an Oklahoma-based electricity supplier.

The competing views were aired at a five-hour hearing of the Senate Energy and Natural Resources Committee that dissected California's power crisis and explored possible solutions.

The hearing also highlighted the extent to which the crisis has crossed California's borders and the economic impact it is having on neighboring states. Utility executives from Oregon, Washington and Idaho said they, too, were experiencing soaring wholesale electricity prices and are passing them on to consumers.

"Thirty to 60 percent rate increases are not uncommon," said Tom Karier, a member of the Northwest Power Planning Council based in Spokane, Wash.

The region has been hit by a one-two punch: federal orders requiring excess power to be sold to California and below-average precipitation that has hampered hydropower production.

In some cases, utilities in neighboring states have been left holding the bag for the financial troubles of California utilities.

When Southern California Edison defaulted on a payment to the California Power Exchange two weeks ago, the exchange passed on the cost to other participating utilities, said Judi Johansen, an executive vice president at PacifiCorp, a Portland-based utility with customers in six Western states. PacifiCorp was billed $2 million.

Northwestern utility officials joined their counterparts from California in calling for wholesale price controls.

"Our problems in Tacoma and, I think, in the region can only be remedied in the short term by a return to cost-based power prices or more precipitation in the Northwest. But not even Congress can make it rain," said Mark Crisson, director of utilities for that Washington city.

The Federal Energy Regulatory Commission, which has the authority to regulate wholesale power prices, has refused to impose caps or set rates based on the cost of producing the power.

Sen. Dianne Feinstein, D-Calif., has introduced legislation to shift the authority to the energy secretary, despite President Bush's dim view of price controls.

Feinstein said temporary price limits would give California's chaotic power market a chance to stabilize as the state tries to lower prices during the long term by entering into multiyear contracts with power suppliers.

Clearly exasperated, Feinstein accused out-of-state power generators and marketers of "gouging" California utilities.

"This is really the first industry I've seen . . . that really is willing not to care what happens, not to care about the people that are being thrown out of jobs now, about the small businesses whose rates are going up dramatically," she said as the power company executives sat before the Senate committee.

The power executives denied the charges of gouging and said price controls would make it harder for the Western states to buy electricity or encourage the construction of more power plants. They urged the federal government tocut regulations instead.