Energy chief seeks support for cap on electricity prices
Published 9:00 pm Wednesday, December 20, 2000
Associated Press
DENVER – With an electricity market meltdown flickering on California’s horizon, U.S. Energy Secretary Bill Richardson on Wednesday extended for an additional week an order requiring Western electricity producers to supply power to the state.
Richardson also asked Western governors to support a regionwide cap on wholesale electricity prices and to work together to solve problems that have created power shortages in California and tripled prices for some consumers.
Jim Hoecker, chairman of the Federal Energy Regulatory Commission, speculated that a regional price cap would not be much help. “Nationally, we have not improved our infrastructure enough to meet demands,” Hoecker said.
Richardson and Hoecker were addressing an emergency informational meeting of the Western Governors Association. California Gov. Gray Davis did not attend, staying home to address the crisis.
Washington Gov. Gary Locke supported the proposed cap, as did Oregon Gov. John Kitzhaber.
“Naively, perhaps, those of us in the Northwest thought ourselves immune to power shortages, but the energy emergency that started this summer continues and threatens to engulf the entire West,” Kitzhaber said.
Last week, Richardson issued an emergency order forcing 75 Western power generators to supply electricity to California. The producers had been reluctant to supply power because they were concerned about receiving payment from California’s two largest utilities, both of which are in financial trouble.
FERC approved a flexible rate cap of $150 per megawatt hour that allows suppliers to charge more if they can prove a higher price is warranted. Davis and California’s major power utilities ridiculed the flexible cap as ineffective.
Davis wants a firm regional price cap of $100 per megawatt hour, a concept that appears to be winning favor among some Western states worried that California’s energy problems could spread.
Wholesale electricity prices peaked at $1,400 per megawatt hour this month in California after a $250 per megawatt hour price cap was dropped.
The California-only price cap exacerbated the state’s energy shortage because suppliers stepped up their sales to other Western states willing to pay higher rates.
Energy suppliers, who have been raking in record profits, fiercely oppose price caps. They warn that restrictions could hurt California in the long run by discouraging construction of new power plants.
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