Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: CYBERKEN who wrote (152376)	6/12/2001 3:08:32 AM
From: asenna1	Read Replies (1) \| Respond to of 769670

Bush can't limit damage to California The Bush administration's reasoning in ignoring California's electricity woes is simple: Bush won the presidency without California's electoral votes, but could not have won it without sweeping the South. The South exports energy, California imports it. Conclusion: Look after energy exporters. Bush's reasoning has both a premise and a consequence: The premise is that California's troubles not spread to other states, and that other states remain indifferent to California's plight. The consequence is that California is written off for the Republicans. The consequence has been achieved, but the premise is getting dicey. The latest ABC-Washington Post poll shows that national disapproval of Bush's handling of energy policy has increased by 15 points in a month, from 43 percent to 58 percent, a huge shift. The poll evoked this response from the White House: "The president doesn't govern based on polls. He governs on what is right for the country." What Bush thinks is right for the country and what the people think is rapidly diverging. Why? Bush is being hurt badly by his close personal ties to the energy industry. He wants voters to accept his argument that price caps are bad economics. Trouble is, voters see that the people whispering the argument into his ear are the same ones who benefit from soaring electricity prices. Last week's news stories documented the personal and financial ties between White House officials and the energy industry. Those stories followed revelations of the ties between Bush and the Enron Corp., the nation's largest electricity trader; and of ties between Enron and the Federal Energy Regulatory Commission. Taken together, these stories make Bush's arguments look more like cronyism than good economics. Two other developments are undermining Bush's energy credibility, one going directly to his economic argument. Several weeks ago, I explained that price caps are not always bad. If electricity is being withheld to drive up price, as mounting evidence (and mounting lawsuits) suggests, then price caps will bring lower prices by removing the incentive to withhold. Last week, in an open letter to Bush and the Congress, 10 eminent economists led by Alfred Kahn of Cornell made that same argument. The classic arguments against price controls depend on competitive markets which are not present in California, they said. Kahn, who deregulated the airline industry during the Carter administration, and his colleagues urged FERC "to fulfill its responsibilities and take the actions necessary to alleviate the market-performance problems that have led to unreasonable prices." In plain English, that translates as price caps. Bush's other enemy comes from within. Spencer Abraham, his energy secretary, is killing him. Abraham is a partisan pol, a Republican fund-raiser who became a one-term Michigan senator, was defeated in November and rewarded by Bush for his fund-raising skills. Abraham is particularly adroit in raising money from the energy industry, Bush's No. 1 supporter. California has had a bone to pick with Abraham from the day he took office and began to politicize our electricity problem. Abraham has never sought solutions. His interest is scoring political points. From the first, Abraham made clear that his department, which oversees FERC, would do nothing to help California. One of his first statements was that California should raise its prices to consumers to meet wholesale prices -- in other words pay the ransom FERC had already said was unjust and unreasonable, hence illegal. Last week, Abraham went on National Public Radio. Told by the interviewer that generators were recording profit increases "as high as 500 percent, 600 percent and 800 percent," Abraham blamed California, not the generators. "FERC only controls about half the market out there," he said. "The other half are municipal and cooperative power generators. The federal government can't cap their prices. And yet the California Legislature and the California governor have not even sought to put a price cap on these entities." Is Abraham dishonest or merely ignorant? He states that FERC controls only half California's power market, when the correct figure is 75 percent to 80 percent. He states that California could cap the remaining non-FERC power (mostly municipal generators such as the Los Angeles Department of Water and Power) when the fact is that under FERC's own rules, it can't. FERC's latest pricing order (April 26) states that all generators operating in California and selling into the main grid system (ISO), including the municipal generators not under its jurisdiction, must conform to FERC prices. It states: "The Commission cannot ensure just and reasonable rates in the current circumstances in California unless all entities that sell energy through the markets operated by the ISO abide by the same conditions. The Commission, therefore, concludes it is necessary to impose this condition." Bush's energy program is a mess. If he thinks the damage will be confined to California, he is wrong. signonsandiego.com