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	From:  "Pergher, Gunther" <Gunther.Pergher@dowjones.com>                      
     11/03/2000 11:12 AM
	

To: undisclosed-recipients:;
cc:  
Subject: DJ POWER POINTS: Say Goodbye To Price Caps If Bush Wins



19:00 GMT 3 November 2000 =DJ POWER POINTS: Say Goodbye To Price Caps If
Bush Wins

   By Mark Golden
   A Dow Jones Newswires Column

NEW YORK (Dow Jones)--Commissioner Curt L. Hebert's remarks on the
California power market this week offer a glimpse of how the Federal Energy
Regulatory Commission may rule in the event George W. Bush is elected
president: more aggressive pursuit of deregulation, an end to electricity
price caps, less concern for the environment, and an end to protecting
utilities from their own bad business decisions.
Immediately and without Congressional approval, the new president gets to
appoint a new chairman of the FERC. Bush hasn't said whom he would choose as
FERC chairman, and that, of course, won't be one of the first decisions he
makes if elected.
But Hebert has consulted with the Republican nominee on electricity
deregulation and FERC insiders say it is likely Hebert will be asked.
Also, if voters elect Bush on Tuesday, the majority of FERC commissioners
could be Republicans by the end of 2001 at the latest. The spot vacated by
Commissioner Vicky Bailey earlier this year still needs to be filled. That
position will go to a Republican regardless of whether Bush or Vice
President Al Gore triumphs Tuesday because neither party can have more than
three members on the five-member commission. There are already three
Democrats: Chairman James J. Hoecker and commissioners William Massey and
Linda Breathitt.
Hoecker's term expired June 30 this year, but he was appointed to continue
serving on an interim basis until the current Congress adjourns. President
Clinton is expected to make a recess appointment of Hoecker after the
Congress finalizes the budget and adjourns sometime after the election. The
recess appointment - and thus a Democratic majority at the FERC - would run
through the end of the 2001 congressional session.
If Bush wins and Clinton doesn't make a recess appointment, Bush would be
able to appoint two commissioners immediately, though all appointments must
be approved by Congress, and the Republicans would have a majority at the
FERC.
In the meantime, Hebert as chairman could still set the tone of the
commission's rulings even as a member of the minority party on the
commission. Regular commissioners have just a few staffers each, while the
rest of the FERC reports to the chairman. The staff initiates proposed
orders, and the other commissioners vote in response. Hoecker, for example,
initiated last year's aggressive order for the establishment of independent
regional transmission organizations, and then got other commissioners to
support it.
In addition, the chairman controls the FERC budget. It's one thing to issue
an order and another to get the money necessary to enforce it.
So, how would the FERC rule under Hebert? He's been clear in his frequent
dissents from rulings the past three years.
"If it were up to me, today's order would be much, much different," Hebert
said Wednesday on California, even though he voted in favor of the order.
"Now is not the time for timidity."
Hebert is against the $150 a megawatt-hour "soft" price cap for California,
and he's voted against every price cap previously. "I find the concept of
'price mitigation' an offensive one," he wrote Wednesday. "There is a direct
correlation between lower price caps and higher consumer prices."
In his oral comments, Hebert noted that "price controls didn't work for the
Nixon administration, or the Carter administration, and they aren't working
for the Clinton-Gore administration."
Existing price caps, if Hebert got his way, would be escalated by $250 or
$500 every six months or so until they became irrelevant. A rapidly
escalating cap would propel market participants to take the necessary
actions to increase supplies and reduce peak demand.
The FERC didn't order independent generators to pay refunds for high-priced
summer power to California's consumers and utilities because they didn't
find evidence of collusion by generators. They left open the possibility of
ordering refunds if such evidence comes to light.
Hebert, on the other hand, said the FERC had no legal authority to order
refunds from this summer, and that the possibility of refunds in the future
introduces more damaging uncertainty into California's power industry.
He said he regretted that he couldn't order refunds and thus become the most
popular person in San Diego, but if you read between the lines, he clearly
thinks that PG&E Corp. (PCG) and Edison International (EIX) should have to
pay the multi-billion dollar bill for their own "inattentiveness," as he
calls it.
Hebert applauded letting California's utilities out from under the state-run
markets and eliminating the single-price auction - or market-clearing price
mechanism.
He also scolded California environmentalists in his spoken comments
Wednesday, though not in his written brief. When he told California
regulators that new power plants were being approved in Illinois six months
after applications were made, Hebert said he was told: "Well, this isn't
Illinois."
"I understand the environmental concerns, but to say you're not Illinois,
and that's not how we do things here because of the environment, isn't going
to get the job done," Hebert said.
"If the people of California don't understand that something needs to be
done yesterday about getting new power plants built, somebody's not telling
them the truth."
In the end, however, Hebert conceded that the FERC has little authority to
dictate to states how to run their procedures for permitting new power
plants, and the FERC has little influence on environmental policy.
Little has been said on whom Bush might appoint as head of the Environmental
Protection Administration, but the word in Houston - for what that's worth -
is that Enron Corp. (ENE) Chairman Kenneth Lay could well become secretary
of the Energy Department if Bush is elected.
While Bush and Gore both advocate deregulation of the electric utility
industry, the Democrats on the FERC have, in fact, been very reluctant to
trust free markets and force utilities to open up the grid. In general,
Bush's response to the country's energy crisis is to increase supply, while
Gore would cut demand through new energy technologies and resist increased
use of fossil fuels.
The FERC, EPA and DOE under a Bush administration would be a very different
world for the electricity industry. Tune in Tuesday.
-By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com

(END) Dow Jones Newswires 03-11-00
1900GMT Copyright (c) 2000, Dow Jones & Company Inc


G_nther A. Pergher
Senior Analyst
Dow Jones & Company Inc.
Tel.  609.520.7067
Fax. 609.452.3531

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