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Power price curbs promised for western states
By Nancy Dunne in Washington and Christopher Parkes in Los Angeles
Published: June 18 2001 19:30GMT | Last Updated: June 19 2001 03:48GMT
Federal regulators on Monday promised relief to electricity consumers in the west and put in place a wholesale "price mitigation" plan for California and 10 other states.
With California on alert for rolling blackouts, Curtis Hebert, the Republican chairman of the Federal Energy Regulatory Commission, which met in a special session on Monday, said prices would be brought "under control" but at levels high enough to provide incentives to develop infrastructure.
"It is time to stop blaming and start solving problems," he said. However, he took credit for the recent drop in prices, attributing the fall to a plan Ferc put in place on April 26.
The Democrats on the commission saw the situation differently. William Massey, another commissioner, said the plan "moves in the direction" he has long advocated and that the lower prices in California were due to a confluence of events including reduced demand and more available hydropower.
The Ferc decision came as the first heatwave of the summer swept California and officials warned of the chance of the first blackouts since May.
It was reached less than a month after the commission showed the first signs that Washington was ready to relax its opposition to price controls. That shift, limited to days when emergencies were declared in California, was seen as an attempt at political damage control.
Although other western states covered by the commission's latest decision face less critical shortages, they have warned of economic damage caused by rising prices. Smelting plants and other heavy power users, for example, have been closed for months because it is more profitable for them to sell power than use it themselves.
The plan passed on Monday will bring prices down all over the west, predicted Erie Nye, chairman of Edison Electric Institute. "The ultimate resolution is not to share a shortage. This just stabilises things until more generating capacity comes on line."
Ferc had come under intense political pressure from Democrats to impose price caps.
Democrats have made political gains portraying the administration as unsympathetic to western rate payers. Senator Joseph Lieberman, new chairman of the government affairs committee, has called all five commissioners to testify Wednesday at a hearing, that will also include California governor Gray Davis.
Meanwhile, Republicans are raising up to $25m for an advertising campaign blaming California's energy crisis on Mr Davis.
Barry Abramson, an analyst with UBS Warburg, on Monday said that a "soft price" cap, imposed by Ferc, would have little effect on the earnings of wholesale generating companies.
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