|San Diego Union-Tribune
April 25, 2001
FERC to weigh limited curbs on electricity prices
Caps would apply in Stage 3 shortages
By TOBY ECKERT
COPLEY NEWS SERVICE
WASHINGTON -- Federal regulators are expected to consider limited wholesale price curbs for California's chaotic electricity market today, but the
approach falls far short of the controls sought by many state officials.
Federal Energy Regulatory Commission staffers have proposed limiting the price that power sellers can charge for wholesale electricity in California only
during the most severe shortages, known as Stage 3 emergencies. The "price
mitigation" would be pegged to "the marginal cost of the highest-priced (generating) unit called upon to run," according to a staff report.
Producers also would be required to sell their excess power to the state's grid
The price controls would last one year and would not apply to other Western states suffering from gyrations in power costs and electricity shortages.
FERC Chairman Curtis Hebert has been an implacable foe of price controls, but is under considerable political pressure to do more to help California as
the peak power-consuming summer months approach. Commissioner William Massey has advocated far-reaching price limits, while Commissioner Linda
Breathitt has wavered on the issue.
Gov. Gray Davis and other California officials have called for broad price controls that also would include 10 other Western states. Yesterday, Sen.
Dianne Feinstein, D-Calif., formally introduced legislation that would require
FERC to impose regional price limits through March 1, 2003.
Feinstein said the FERC staff proposal was inadequate.
"Once you put the cap just on Stage 3, you force the heavier pricing on stages 1 and 2," she said.
Other critics have noted that wholesale power prices in California are abnormally high during periods other than Stage 3 emergencies.
Feinstein's legislation, first outlined in March, would require FERC to set price
caps or impose "cost-based" rates that would limit prices to the cost of
producing the power, plus a set profit margin. New generating plants and
power bought through long-term contracts would be exempt.
However, any state covered by the price controls would have to allow utilities to recover their wholesale power costs from consumers. The clause helped
draw a Republican co-sponsor to the bill, Sen. Gordon Smith of Oregon.
Smith and other Western lawmakers have complained about the reluctance of California officials to raise retail rates while consumers in neighboring states
have seen their power bills soar. In recent months, the California Public
Utilities Commission twice has increased rates for customers of Southern
California Edison and Pacific Gas and Electric, the utilities hit hardest by
skyrocketing wholesale power prices.
The FERC staff proposal rejected price caps or cost-based rates.
It would be hard to devise price caps that are low enough to provide price relief, but high enough to adequately compensate generators, the proposal
The Bush administration and top congressional Republicans are opposed to price controls, so it is uncertain how far Feinstein's legislation will get.