San Diego Union-Tribune

March 20, 2001 

California chided on power-plant stand

By Toby Eckert 
COPLEY NEWS SERVICE 

WASHINGTON -- Energy Secretary Spencer Abraham yesterday dismissed as "myth" claims that energy producers are "engaged in a massive conspiracy" to drive up prices in California and elsewhere.

Instead, Abraham, in a wide-ranging analysis of the nation's energy challenges, chided Californians for continuing to resist efforts to expand power generation in the state.

"Some people still don't get it," he said, citing local opposition to power plant projects near San Jose and Los Angeles and waving a full-page newspaper ad by a San Francisco-based group. The ad was headlined, "The last thing California needs is more power plants."

As blackouts rolled across California, President Bush warned that "there are no short-term fixes" to the nation's energy woes. Abraham said the country was facing "the most serious energy shortages" since the 1970s and that California-style power crunches could spread to New York this summer and then to other states. The secretary said the soaring cost of energy could push the nation into an economic recession.

Still, some critics of the administration accused it of using California's problems for its own ends -- in particular to expand domestic oil and natural gas drilling -- and downplaying evidence of price gouging.

"It's really unfortunate that the Bush administration is using the California crisis as an excuse to roll back environmental standards," said Eric Heitz, executive vice president of The Energy Foundation, which had placed the ad cited by Abraham in The New York Times.

Abraham "got the facts entirely wrong," Heitz said. The group supports the construction of more power plants but is advocating more investment in energy efficiency measures and renewable energy sources as a faster way to avert blackouts this summer, he said.

Abraham's speech, delivered at a U.S. Chamber of Commerce conference sponsored by some major energy firms, appeared to mark the start of a new public relations offensive to push the administration's energy policy. Abraham previewed his remarks on television news shows and later met with Bush and other administration officials drafting the policy.

"The energy crunch we're in is a supply-and-demand issue. And we need to reduce demand and increase supply," Bush said after the meeting.

Abraham repeated the administration's call for more domestic drilling of oil and natural gas -- including in Alaska's Arctic National Wildlife Refuge -- and
expanded use of coal, nuclear energy and hydropower.

OPEC's recent decision to cut oil production "demonstrates the importance of increasing America's production of oil," Abraham said.

Throughout his speech, Abraham cited California as an example of what has gone wrong.

"California and other power-strapped states will never, never solve the power crises they confront until they resolve the conflict between demand and supply," he said.

Critics of the power industry, including Gov. Gray Davis, have accused the industry of manipulating the power market to inflate prices in California's partially deregulated system, which has been widely castigated as a failure. Those critics have called on the federal government to impose price controls, but the Bush administration opposes that move.

Sen. Dianne Feinstein, D-Calif., who is pushing legislation to rein in wholesale power prices, said energy costs had skyrocketed in California in the past year and a half even though supply and demand have remained fairly stable.

"If that is not price gouging, I don't know what is," Feinstein said.

Charges of price gouging "miss the point," Abraham said.

He added that "action will be taken when it is merited," citing the Federal Energy Regulatory Commission's recent warnings that electricity suppliers may have to refund $124 million in excessive charges in California.

"My point is this: There is not a secret source of supply somewhere that if we just simply give the right administrative move would suddenly cause us to meet all of our demand that we confront today," Abraham told reporters after the speech. "California would not suddenly make up the ground it currently is trying to make up."

The state has taken several steps to encourage power plant construction. Davis has said he anticipates 5,000 additional megawatts of power to come on line this summer. (A megawatt can provide power for about 1,000 homes.)

The FERC has been facing pressure to be more aggressive in addressing the California crisis, but Abraham emphasized yesterday that the White House was not directing FERC's recent actions.

"I think under Chairman (Curtis) Hebert, they've taken appropriate action, and we support their decisions to identify cases where unjust and excessive charges have taken place," Abraham said.

Bush reportedly may soon name a top Texas utility regulator as FERC chairman, replacing Hebert.

California officials and consumer advocates have not been satisfied by FERC's moves, saying the recommended refunds are far too low.