Thursday April 26 5:07 AM ET
Calif. Energy Prices Limited 
By H. JOSEF HEBERT, Associated Press Writer 

WASHINGTON (AP) - Responding to growing political pressure, federal 
regulators are ordering limited price caps during California electricity 
emergencies in an attempt to head off severe price spikes this summer when 
the state is expected to face critical power shortages. 

The Federal Energy Regulatory Commission voted 2-1 late Wednesday to regulate 
prices whenever California's electricity reserves fall below 7 percent, 
triggering a Stage 1 power alert. 
FERC chairman Curtis Hebert, a Republican, said the order seeks to 
``balance'' the need to encourage investment in power plants and boost badly 
needed supply, but also protect against unreasonable prices when supplies 
tighten. 

California has a three-stage power alert system with Stage 1 warning of 
potential supply problems and Stage 3 signaling a requirement to curtail 
demand and prepare for likely rolling blackouts. California this summer is 
expected to be short at least 3,000 megawatts of power even if temperatures 
are normal. State officials have warned of likely frequent power disruptions. 

FERC's order is aimed at preventing the most severe price spikes during those 
emergency periods, the commissioners said. 

Wholesale electricity prices this winter frequently have been 10 or more 
times what they were a year ago with prices regularly exceeding $200 per 
megawatt hour. Some futures prices for this summer delivery in the West have 
been more than $400 per megawatt hour. 

A megawatt is enough electricity to serve nearly 1 million homes. 

In pushing through the order after a day of intense negotiation among the 
three commissioners, Hebert reiterated his strong opposition to broader price 
controls based solely on producers' cost of generation. Echoing the White 
House, he said he continues to believe ``the best solution to California 
problems are market-based solutions.'' 

He was joined in support of the order by commissioner Linda Breathitt, a 
Democrat. She said the decision marked a breakthrough because for the first 
time ``we have reached a consensus that price mitigation should occur'' in 
the California market. 

But another commissioner, Democrat William Massey, called the commission's 
action ``paltry'' and a ``half a loaf solution'' because it is too 
restrictive. He said price limits should be imposed all the time and not just 
during emergency declarations. 

``The evidence is persuasive that the problem (of unfair prices) exists 24 
hours a day, seven days a week,'' said Massey, who for months has criticized 
Hebert and Breathitt for rejecting more sweeping price controls. 

He has argued the commission has failed in upholding provision of the Federal 
Power Act to ensure fair and reasonable prices in wholesale electricity 
markets. 

The three commissioners grappled with the price cap issue all day Wednesday, 
postponing a public hearing on the matter three times. Finally they emerged 
Wednesday evening and approves the measure 2-1 with Massey objecting. 

The commission, operating with two of its five seats vacant awaiting Senate 
approve for two of President Bush's nominees, has come under intense pressure 
to do something about soaring wholesale power prices throughout the West. 
Earlier in the week, a group of Senate Democrats and one Republican 
introduced legislation to require FERC to impose broader price caps on 
electricity markets in the West and peg them to the cost of power production. 

The FERC order falls short of that, focusing on California with no price 
mitigation program for the Northwest where wholesale electricity costs have 
been just as high as in California. 
The FERC order ``ignores the Northwest, like we floated out to sea,'' 
complained Rep. Jay Inslee, D-Wash., who sat in the audience during the 
proceedings. 

Rep. Peter DeFazio, D-Wash., said he had hoped Breathitt might join Massey in 
voting for broader price caps, but she did not. ``We'll still have price 
gouging and blackouts,'' he said. 

However, FERC did direct that an agency investigation into potential refunds 
should be extended from California to other parts of the West including 
Washington and Oregon. Massey maintained that investigation is far too narrow 
and will be ineffective. 

And even the price restrictions for California could be short lived. The 
price mitigation requirements are contingent on California agreeing to submit 
by July 1 a Western regional transmission organization plan, something the 
state has opposed. 

``The order turns into a pumpkin and will have no effect'' if California does 
not join in a regional transmission organization, said Massey.