States Want Power Prices Policed Updated 9:05 PM ET April 10, 2001

full image Idaho Public Utilities Commissioner Marsha H. Smith, Right,... (AP) By H. JOSEF HEBERT, Associated Press Writer BOISE, Idaho (AP) - High electricity prices pose a "looming disaster" for many states in the West, a federal regulator warned Tuesday, as pressure grew on the government to consider temporary price controls on wholesale power.

Officials from 11 Western states, including energy-ravaged California, engaged in sometimes passionate exchanges with three members of the Federal Energy Regulatory Commission over how to contain soaring power prices that are expected to go only higher this summer.

"Something has to be done to tame this market," Geoffrey Brown, a member of the California Public Utilities Commission, told the three FERC commissioners. California anticipates paying $65 billion for electricity this year, almost 10 times its power bill in 1999.

But after the daylong session, the FERC seemed to be not much closer to imposing price caps than before, although one commissioner, Linda Breathitt, said she now wants to look the issue more carefully and might be swayed.

FERC Chairman Curtis Hebert, a strong free-market advocate, reiterated his fear that price regulation would drive off investors for new power generation. Under FERC rules, it would be Hebert's discretion when or if to propose a price cap for deliberation.

Commissioner William Massey, who has been in the minority on the commission in recommending price controls, said the "passion for markets must be tempered with common sense."

"We face a looming disaster," he declared, if wholesale electricity markets are allowed to continue on a path that has wholesale power in many parts of the West selling for 10 times what it cost just a year ago.

Hebert insisted that the FERC "is doing everything it can" to ensure just and reasonable prices and cited the commission's action to seek $124 million in refunds on California power sales. He also said the commission plans soon to approve a new system of tracking market abuses.

The chairman noted that state officials at the meeting were sharply divided over whether the government should regulate electricity prices. Keeping tabs as each participant gave a presentation, he said three states were for them, five against and three uncertain.

Hebert's anti-controls position drew support from Vice President Dick Cheney in a telephone interview with Associated Press reporter David Ammons in Olympia, Wash.

"The problem with price caps," Cheney said, "is that they don't solve the problem. Just look at California, where they had caps applied at the retail level that, coupled with the requirement to buy power on the spot market, has driven PG&E into bankruptcy."

Pacific Gas & Electric, California's largest utility, said last week it had debts of $9 billion and filed for protection from its creditors under chapter 11 of federal bankruptcy laws.

California, whose electricity problems have unleashed soaring power prices throughout the West, urged FERC to immediately impose an 18-month cost-based price cap in the Western markets.

"We have done our part. We cannot do it alone," said Bob Hertzberg, speaker of the California Assembly. He cited state actions to boost conservation, increase retail rates and speed up power plant construction and said there is "no earthly reason" why energy prices should be 10 times what they were a year ago.

Still, California officials expressed little optimism after the hearing.

"It would take a dramatic, unprecedented change of direction" for the FERC to adopt price controls, said Fred Keeley, speaker pro tem in the California Assembly, who was in the audience during the six-hour meeting.

Breathitt, the FERC's third commissioner, who has not come out in favor of price caps, nevertheless indicated she might be inching toward some controls. She said she wants the commission to "seriously discuss a price implementation plan."

The issue may end up, however, being decided by two new commissioners recently nominated by President Bush - Pat Wood, now head of the Texas utility commission, and Nora Brownell, a Pennsylvania regulator.

Both are viewed as free market advocates, but pro-controls commissioner Massey said he believes they might be swayed to accept temporary price restraints if the electricity market reels further out of control. Neither nominee has yet been confirmed by the Senate.

While divided on price controls, most of the state officials at the unusual FERC meeting expressed worries that the federal agency was doing too little to address problems in the power markets.

The chairman of Montana's utility commission, Gary Feland, who opposes price controls, criticized FERC for lack of aggressiveness in challenging unreasonable prices. FERC is legally mandated to ensure "just and reasonable" wholesale power prices.

"Montana is taking a hell of a hit" from electricity prices, Feland said. "Politically we're getting beat up."

Steve Ellenbecker, a utility commissioner from Wyoming, urged the federal regulators to come up with a "reasonable measure" short of a price cap to deal with the troubled electricity market.

Many of the state officials said the full impact of the high wholesale power prices have yet to hit consumers. In many cases state officials must still give permission for utilities to pass them on to retail customers.

http://news.excite.com/news/ap/010410/21/news-ferc-western-power?printstory=1

-- Martin Thompson (mthom1927@aol.com), April 10, 2001