SENATORS drop effort to control electricity prices

WASHINGTON (AP) _ Senate Democrats said Tuesday they would no longer try to impose stringent price controls on Western electricity sales, opting to give federal regulators' price-dampening plan time

Tuesday, June 19th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ Senate Democrats said Tuesday they would no longer try to impose stringent price controls on Western electricity sales, opting to give federal regulators' price-dampening plan time to work.

The Federal Energy Regulatory Commission plan, unveiled Monday and set to go into effect Wednesday, establishes price ceilings on wholesale electricity sales on spot markets in California and 10 other Western states over the next 15 months.

``Let's watch and wait and see how this order works,'' said Sen. Dianne Feinstein, D-Calif., whose bill for tougher cost-based price caps had been expected to be considered in the Senate within days if the five-member energy commission had not acted.

Sen. Gordon Smith, R-Ore., who was a co-sponsor of the legislation, agreed it should be taken off the table, although he said he was convinced ``it would have won large majorities in both the Senate and House'' if additional steps were not taken to curtail electricity prices in the West.

The five FERC commissioners outlined details of their plan at a hearing by the Senate Energy and Natural Resources Committee. They said the price ceilings, which will be in effect through September 2002, are hoped to protect consumers against price gouging until California increases its electricity supplies.

The FERC price ceilings were applauded by both Republicans and Democrats on the committee, although several Democratic lawmakers questioned why they were not imposed months ago.

Commissioner Pat Wood, newly named to the commission by President Bush, said he was not ``personally allergic'' to the type of cost-based price caps proposed by Feinstein and Smith, but sought to demonstrate by a series of graphs that the FERC price ceiling would provide a similar outcome in prices and consumer protection.

Bush strongly opposes stringent price caps, but has indicated some support for the approach taken by the FERC. There has been no reaction from the White House on the commission's order.

The order, which mirrored proposals made to the commission last week by a group of House Republicans, was under scrutiny by a Senate panel hearing from the FERC commissioners.

There were indications the FERC move may have blunted not only Senate attempts to push for price-cap legislation but also plans by Sen. Joe Lieberman, D-Conn., to investigate the commission's handling of the Western power crisis.

Sen. Jeff Bingaman, D-N.M., chairman of the Energy and Natural Resources Committee, had threatened to start moving price-cap legislation if the commission _ three Republicans and two Democrats _ did not take additional steps.

In the House, Rep. Dick Gephardt, D-Mo., the minority leader, had threatened to try to stick a price-cap provision on a supplemental spending measure expected to be debated this week.

Feinstein called the commission's new price restraints ``a giant step forward,'' although she still expressed some concern about potential market manipulation.

``They may not call it cost-based rates, but it is very similar to what Senator Gordon Smith and I ask for in our bill,'' said Feinstein.

Sen. Barbara Boxer, D-Calif., who has accused FERC of inaction, called the new steps ``a stunning turnaround'' that _ if properly enforced _ ``could bring stability to California's energy supply and ... stop the worst of the gouging.''

With the new order for broad price ceilings on all sales in the 11 Western states ``the blame game should end,'' said Nora Mead Brownell, one of two new members recently named to the commission by Bush.

FERC Chairman Curtis Hebert, a Republican and strong free-market advocate, said the price mitigation plan will protect consumers while providing continued incentives for power production.

``It's time to stop blaming and start problem solving,'' said Hebert, alluding to Democrats _ especially California Gov. Gray Davis _ who have sharply criticized Hebert's refusal to agree with price controls although Californians this year are expected to pay nearly 10 times what they paid for electricity in 1999.

Davis called the FERC decision ``a step in the right direction.''

Under the FERC order, a market clearing price, or ceiling, will be established for all wholesale electricity sold in the California spot market and apply to markets in 10 other Western states.

The cap will be based on the highest-cost gas-fired generating unit's bid when reserves in California fall below 7 percent, triggering a power emergency. The bid will drop to 85 percent of the original cap when the power reserves again exceed 7 percent.