San Diego Union-Tribune

June 7, 2001

A-1

Energy relief bill mired in dispute over price caps

By FINLAY LEWIS
COPLEY NEWS SERVICE 

WASHINGTON -- Prospects for prompt action in the House to ease
California's energy crisis virtually vanished yesterday, as Republicans scuttled a short-term relief bill when Democrats refused to drop demands for wholesale electricity price caps.

At the same time, Sen. Tom Daschle, D-S.D., used the occasion of his first day as Senate majority leader to set the stage for a two-house, partisan howdown by throwing his weight behind price caps.

"I will support all necessary efforts to meet that goal," Daschle said in a letter to Sen. Dianne Feinstein, D-Calif., who is sponsoring price-cap legislation.

President Bush is adamantly opposed to price caps, a position backed by most leading Republicans.

Rep. Billy Tauzin, chairman of the House Energy and Commerce Committee, said a potential agreement on the energy relief measure collapsed in the lower house because Democrats insisted on including price caps. Republicans blamed House Minority Leader Richard Gephardt, D-Mo., for scuttling the deal.

"Gephardt . . . apparently has made a decision to kowtow to the more radical elements of the Democratic caucus in the House, and the centerpiece of their policy is price caps," said Rep. Joe Barton, R-Texas, an energy subcommittee chairman who prepared the Republican version of the bill.

California Democrats on the energy committee immediately fired back,
claiming Tauzin, R-La., had reneged on a pledge to involve them in
negotiations over the bill during the Memorial Day recess.

"We never heard from them," said Rep. Henry Waxman of Los Angeles, who is carrying the Democratic House bill. He denied Gephardt was calling the Democratic shots on the negotiations and contended that a partisan deal on the bill was never close at hand.

Rep. Jane Harman, D-Redondo Beach, blamed an "ideological group" within the White House and the House GOP caucus with opposing the imposition of "temporary, short-term, cost-plus rates . . . that will end the gaming in the system."

Some California Republicans seemed uneasy by the impasse.

"It's going to be a long, hot, difficult summer," said Rep. Mary Bono, R-Palm Springs, referring to anticipated blackouts across the state as air conditioners crank up.

The Democratic measure in the House would pressure the Federal Energy Regulatory Commission to roll back soaring wholesale electricity rates, which have forced California utilities to the brink or into bankruptcy. The state has been buying power for California's major utilities, spending some $8 billion since January.

Power generators in some cases charge more than $3,000 per
megawatt-hour in California, though the average cost has been estimated about $300 -- still 10 times higher than it was a year ago. Recently, costs have dropped dramatically.

A megawatt-hour can power between 750 and 1,000 homes.

Specifically, the bill carried by Waxman seeks to force federal regulators to impose a rate-setting formula on electricity generators allowing them to recover only their production costs plus a reasonable rate of return.

The Bush administration opposes price controls, contending it would
discourage the investments needed to develop new energy sources.

The Waxman bill now in limbo attempts to do a number of things: improve the electricity transmission system to get rid of a bottleneck in the Central Valley; provide assistance to help the poor pay their energy bills; and grant Gov. Gray Davis the authority to temporarily waive some air-pollution limits to increase power production when blackouts are imminent.

Some of the provisions have been advanced on a separate track by the Bush administration.

Tauzin told reporters that while the House bill is going nowhere, he
acknowledged the Democratic takeover in the Senate means there's "no
avoiding" an eventual House vote on price caps.

He suggested that the GOP strategy may be to play for time. Consumer
conservation efforts, among other things, have resulted in decreased
wholesale prices in California, at least temporarily. He also cited prospects that new sources of energy may be coming on line.

But Daschle made clear in his letter to Feinstein that he is ready to move
ahead with price caps. He noted a recent media report wrongly stated he was opposed to price controls.

"Unless FERC acts soon, your legislation should be taken up and passed to direct FERC to take action," Daschle wrote.

In another energy-related matter, Interior Secretary Gale Norton told a
House committee the administration did not rule out resumption of oil and gas exploration off the California coast, particularly near Santa Barbara where offshore areas are not covered by a leasing moratorium.

"This is very bad news for the north Santa Barbara Channel," California Rep. George Miller, a senior Democrat on the House Resources Committee, told Scripps-McClatchy Western Service.

Norton appeared before the committee to discuss the administration's energy policy, one provision of which calls upon the Interior Department to review legal and policy issues concerning offshore development.

Norton said the Bush administration will abide by moratoriums in effect until 2012 on leasing off of much of the West Coast, Florida and the Carolinas, according to Scripps-McClatchy.

But when asked by Miller about existing lease areas off Santa Barbara and the Florida coast that are not covered by the moratoriums, Norton indicated there is nothing to prevent additional leasing activity now, and that, in the case of Florida, a departmental review already is under way.