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Date: Wed, 13 Sep 2000 07:56:09 -0500
From: "Tracey Bradley" <tbradley@bracepatt.com>
To: "Deanna King" <dking@bracepatt.com>, "Jeffrey Watkiss" 
<dwatkiss@bracepatt.com>, "Paul Fox" <pfox@bracepatt.com>, "Ronald Carroll" 
<rcarroll@bracepatt.com>
Cc: "Carol Bashara" <cbashara@bracepatt.com>
Subject: One More News Story on Tuesday's CA Meeting From Calif. Newpaper
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FYI - Lots of rhetoric from the politicians about price gouging.  However, 
the article gives the impression that the FERC commissioners are leaning 
toward market structure reforms.

Lawmakers, Advocates Call for Repair of California'S Electricity Deregulation
Kate Berry , The Orange County Register, Calif.

( September 13, 2000 )



Sep. 13--Outraged politicians and consumer advocates demanded at a public 
hearing Tuesday that federal energy regulators fix California's flawed 
experiment with deregulation by cutting electricity prices and refunding 
consumers in San Diego and south Orange County for the high cost of power 
this summer.

Federal authorities on a day-long fact-finding mission said they plan to act 
quickly without backing away from the long-term goal of a competitive 
free-market for electricity.

"There are flaws in the existing power structure that I think must be 
repaired," said Linda K. Braithitt, one of four commissioners at the Federal 
Energy Regulatory Commission, which launched a formal investigation last 
month into the politically disastrous rise in electricity prices in 
California.

More than 30 major players in California's electricity market, from utilities 
to power producers to state-run agencies that manage the electric grid and 
market exchange, offered various solutions to the crisis. The only consensus: 
Customers are paying exorbitant prices.

"We must roll back wholesale prices retroactively and refund consumers," said 
Rep. Bob Filner, D-San Diego, who accused power producers of manipulating the 
power market and pushing retail prices higher.

He also called power producers "criminals," reiterating a statement he made 
Sunday at a House commerce subcommittee hearing in San Diego.

"We know these prices are unlawful. I believe these prices are criminal." 
Under the Federal Powers Act, regulators can intervene to limit the prices 
power generators charge if they determine the market is not workably 
competitive. FERC also has the authority to retroactively declare that 
market-based rates this summer were not "just and reasonable." If it does so, 
the PUC can act to require utilities to refund customers. The utilities then 
would likely go to the courts on the matter, Wood said.

The FERC investigation comes as electric bills for 1.2 million customers of 
San Diego Gas & Electric have more than doubled or quadrupled in some cases 
leading to hardship particularly for low-income residents and the elderly. 
Currently, the two biggest utilities, Pacific Gas & Electric and Southern 
California Edison, have absorbed $2 billion in costs that they want to pass 
on to their consumers when a rate freeze ends in April 2002.

State regulators, which gave up control of wholesale prices when the market 
was deregulated in 1998, told their federal equivalents that the system is 
broken.

"It's time to reset the starting point back to protecting consumers until we 
can get it right," said Loretta Lynch, president of the California Public 
Utilities Commission. "We have not collectively, on the state and federal 
level, demonstrated a path that works." Carl Wood, a commissioner at the 
California Public Utilities Commission, implored FERC to return, in the 
short-term, to a cost-based rate structure known to consumers before the 
utilities sold their power plants and had to purchase electricity on the 
power exchange. "No competitive market exists," he said. "The market isn't 
functioning in California right now." William Massey, a FERC commissioner, 
admitted that California's market is flawed. He also said a return to a 
cost-based rate structure remained "on the table." But Curtis R. Hebert, 
another FERC commissioner, said the agency had to be cautious about further 
regulation. He advocates lifting price caps, changing rules on how suppliers 
buy and sell into the Power Exchange and adopting market-based approaches, 
such as having the utilities hedge with long-term contracts.

"You can't just say go back to cost-based," he said. "It's not that simple." 
The most heated discussion came when Michael Shames, executive director of 
UCAN, Utility Consumers Action Network, said FERC was "on trial" and could 
lose its case for deregulation.

FERC Chairman James J. Hoecker, said it was natural to look for blame on the 
part of power generators. But he added that "making a lot of money gets a bad 
rap when individual electricity consumers are hurting." He also asked a panel 
of power producers directly to ask why they were "gaming the system." "We 
feel we've conducted business not only legally, but ethically," said Bill 
Hall, managing director of commercial affairs at Duke Energy, which owns 4 
percent of power generation in the state. "We don't anticipate to make 
profits like this as soon as supply keeps up with demand." John Stout, vice 
president of the Southwest region for Reliant Energy, said he was certainly 
in business "to make a profit." "The fact that we had a good year in 
California, in terms of revenue, is a fact, I don't deny that at all," he 
said.

Across the street from the government building where the hearing was held, 
San Diego residents at a hair salon talked about the electricity crisis, with 
some residents in a retirement home paying $100 a month for electricity.

Pat Benites, manager of the C Street Salon, said the high-rise building she 
works in has seen its rates rise $116,000 a month this summer. "They're just 
bilking us," she said.

"They told the whole building to turn computers off at night and turn 
electricity off," she said. It's dark in the lobby but we have to leave some 
lights on for protection, just so no one breaks in."

-----

To see more of The Orange County Register, or to subscribe to the newspaper, 
go to http://www.ocregister.com

(c) 2000, The Orange County Register, Calif. Distributed by Knight 
Ridder/Tribune Business News.