Senators Dianne Feinstein and Gordon Smith
Announce Partnership in Response to the Western Energy Crisis
March 15, 2001
Washington, DC - Senators Dianne Feinstein (D-CA) and Gordon Smith (R-OR) today announced an agreement to introduce bipartisan legislation to restore stability and reliability to the Western energy market by directing the Federal Energy Regulatory Commission (FERC) to impose a temporary "just and reasonable" wholesale rate cap or cost-of-service based rates.
The legislation will also require the states involved in this effort to pass on the cost of the electricity to retail customers. However, the states would be able to determine how and when this would be done. In other words, California could choose to use tiered-pricing, real-time pricing or set a baseline rate above which prices would be passed through.
"We now have a piece of legislation that can fix the broken electricity market and provide a period of reliability and stability in wholesale energy costs," Senator Feinstein said.
"FERC has found the wholesale prices being charged in California to be unjust and unreasonable. This legislation essentially will mandate that once FERC makes such a finding, the agency will carry out its regulatory role. This is a $175 million a year agency. It is there to regulate the energy marketplace, and it should. What the Federal government can do is to provide a period of reliability and stability at a time of crisis. Unfortunately FERC has refused to do so."
"California's broken electricity market is a result of a flawed 1996 California law that deregulated wholesale costs, but left in place caps on retail prices. This was coupled with a requirement that the utilities divest themselves of their generating capacity and buy most of their electricity on the spot market, where prices have escalated dramatically. In hindsight all of this came together in a catastrophic scenario, so that today, California buys electricity at astronomical prices. We believe that FERC needs to act to help restore reasonable costs and stability to this marketplace."