Bush Gives Flat No to Price Caps
Gov. Davis had urged relief for California
CAROLYN LOCHHEAD / San Francisco Chronicle 19jan2001
President-elect Bush bluntly rejected yesterday the electricity price caps desperately sought by Gov. Gray Davis, calling them "a short-term delay of a needed solution."
Bush, in his first direct comments on California's rolling blackouts, whose repercussions are beginning to cascade beyond the state's borders, blamed the problem on California's "flawed" deregulation legislation, which he said the state has to fix.
"I have read where some propose price controls," Bush told the Associated Press. "I'm against price controls."
Bush added that the federal government "can help to some extent" but said that help would be directed at easing environmental regulations that are preventing power plants from running at full capacity.
Bush's comments — combined with bipartisan blasts from the Senate yesterday — made clear that Washington has little sympathy for California's thirst for power and distaste for power plants.
Senators from Washington and Oregon turned the confirmation hearing for Bush's Energy Secretary nominee, Spencer Abraham, into a tribunal on California, blaming the state's policy fiasco for electricity price increases and environmental damage in the Northwest.
Even as Sen. Dianne Feinstein, D-Calif., pleaded for wholesale price caps, Sen. Ron Wyden, D-Ore., asked Abraham to reexamine the Clinton administration's string of emergency orders requiring Northwestern states to ship scarce hydroelectric power to California.
"The people of my state have been more than a good neighbor," Wyden said.
Washington Democrat Maria Cantwell agreed, expressing her "grave concern" about the consequences of California's power drain on the Northwest.
With Northwestern water reservoirs low after a dry summer, California's energy demands are straining hydroelectric facilities there and threatening salmon runs.
"My state is being set up to be an energy farm for California," charged Sen. Gordon Smith, R-Ore., adding that while California consumers have seen 9 to 15 percent rate increases, Oregon businesses "are being put on notice that their rates are going up 30 to 40 percent. Whatever hope they had for a profit this year is gone."
Smith accused California of refusing to build new power plants, saying, "We don't create light by hitting a light switch. We have to reconnect the reality dots."
Acknowledging that she was finding little sympathy on the Senate Energy and Resources panel that she just joined, Feinstein replied, "It's very easy to say, 'Oh, California is hoisted on its own petard — let them work it out.' That's a very dangerous philosophy."
But Bush made clear that he sees the source of the problem as defective deregulation — and that the answer is more deregulation, not re-regulation.
"I understand the deregulation law of California is flawed, and therefore California must change the law," Bush said. "It's their law, for example, that didn't allow forward contracting of gas (and) forced wholesalers to purchase at the spot market. That's fine so long as the price of gas is dropping. The failure of an energy policy, however, has made the price of gas go up."
Bush said the state's deregulation "created structural problems, and now they're paying for it."
He also said he had spoken recently with Davis by telephone and was "pleased to hear they're beginning to bring plants online."
But, he said, "California must be aggressive about increasing the amount of supply of power. We cannot conserve our way to independence. . . . We can have incentives for conservation, but the solution — short- and long-term — is going to be more supply into the marketplace."
In response, Davis insisted that regulatory action — if only temporary — was needed to restrain wholesale prices.
Davis said he had talked to Western governors who had generally agreed that it would be possible to achieve the objectives of a price cap without calling it one.
"We're trying to speak with one voice as a region," Davis said. "We need an adjustment on wholesale prices. All states are absorbing the burden."
Davis reiterated his call for federal regulators to order lower wholesale prices, saying such an order could be temporary.
Bush, however, said he found it "interesting" that "a lot of the harshest critics of a balanced environmental policy are beginning to have rolling blackouts in their states."
At the Abraham hearing earlier in the day, Feinstein made public a letter she just received from Craig R. Barrett, chief executive officer of Santa Clara chipmaking giant Intel Corp., who warned that the electricity crisis poses "an extraordinary threat to California's economic and social stability."
Intel has said it no longer will expand in the state pending a long-term resolution of the state's energy shortages. Silicon Valley manufacturers, who not only consume large amounts of power but require extraordinary levels of reliability, are warning that they could start leaving the state, ending California's high-tech gold rush.
"How many others will follow?" Feinstein asked. "I think others will follow. "
Feinstein said recent rate hikes to California consumers will have to be extended, and she denounced opposition to a utility bailout.
"Now what I decry is this thing, 'Oh, God forbid you bail out the utilities, ' " Feinstein said. "I don't agree with that at all. I think we have to keep the utilities functioning because not to do so is to bring on further chaos."
The House also jumped into the fray yesterday as the Energy and Commerce Committee promised a "top-to-bottom review of America's strategic energy policies, beginning with a fact-finding visit next month to troubled California utilities."
"It's imperative that we get to the bottom of the mess in California," said committee chairman Billy Tauzin, R-La. "If this problem spreads, it could send shock waves throughout the economy."
Tauzin called for a Federal Trade Commission investigation into retail electricity competition, and Energy and Air Quality subcommittee chairman Joe Barton, R-Tex., blamed California's legislature for botching electricity deregulation.
California's crisis "was created through the state's refusal to build new power plants," Barton said, "and the specific way they chose to partially deregulate."