Bush Says FERC Plan Is Not Price Controls

From Times Wire Services

President Bush said today he did not consider an electricity price-relief plan for the Western region that the Federal Energy Regulatory Commission was expected to approve to be a form of price controls.

Bush said he remained opposed to electricity price controls. But he said the plan that FERC was expected to approve for limited wholesale price curbs in the West was different.

"I'm interested to see what FERC comes up with. They're not talking about firm price controls, they're talking about a mechanism to mitigate any severe price spike that may occur, which is completely different from price controls," Bush told reporters.

Amid mounting congressional pressure for action, FERC was to hold a special meeting to address the chronic electricity problems affecting California and the rest of the West.

FERC, which oversees interstate power sales, was widely expected to vote for a compromise approach to limit prices on wholesale electricity sold in the West, according to congressional sources.

That approach would mean expanding a monitoring plan rolled out last month that only applied to California after state officials declared a power emergency.

Under the agency's existing "price mitigation" plan, the California price limits are based on the amount that generators can charge to produce power at the least efficient plant. Generators may charge higher prices if they can justify them to the agency.

Expanding the plan to the entire Western region would fall short of the strict price caps sought by California Gov. Gray Davis and many Democrats but would still amount to a significant change in policy for FERC.

The stricter price caps sought by Democrats would allow a generator to sell wholesale power based on a formula covering actual production costs, plus a moderate profit. That approach would be similar to the way U.S. utilities were regulated for decades.

FERC's Republican chairman, Curtis Hebert, has repeatedly rejected the idea of price caps, saying market forces should set power prices.

However, Republican lawmakers fear they may take a political hit for the Bush administration's decision to oppose strict price caps and therefore pushed for the compromise that calls on FERC to expand its limited price curbs.

The White House says it is worried that price caps would discourage investment in new power plants and fail to encourage consumers to cut home energy use.

Today's meeting, due to begin at 1 p.m. EDT, would also mark the first time that FERC has been fully staffed with five commissioners since the California energy crisis began last year.

Republican commissioners Pat Wood of Texas and Nora Brownell of Pennsylvania were nominated to the agency by President Bush. Wood is viewed as a Bush confidant, having led the Texas Public Utilities Commission while Bush was governor of the state.

FERC has been under growing pressure from Democrats and Republicans to help find a solution to California's power deregulation fiasco.

Agency officials say that their measures are working. Since the FERC plan for California price relief went into effect on May 29, wholesale power prices in the state have dropped under $100 a megawatt from more than $300 earlier in May.

-- PHO (owennos@bigfoot.com), June 18, 2001