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House Republicans call for electricity price controls

In an apparent about face, several key Republican House members Tuesday called on federal regulators to institute full time price controls in California and the West.

House Energy and Commerce Committee Chairman Billy Tauzin (R-LA), along with Energy and Air Quality Subcommittee Chairman Joe Barton (R-TX) and other House Republicans, urged the Federal Energy Regulatory Commission to expand its emergency price mitigation order to cover all western states, 24 hr/day this summer.

“We strongly urge the Commission to implement a comprehensive plan to mitigate wholesale prices and aggressively monitor wholesale sales of electric energy by public utilities and other market participants within the entire Western Systems Coordinating Council (WSCC),” the congressmen said in a letter to FERC Chairman Curtis Hebert.

The call for price controls is surprising in that Barton and most Republicans have been strong opponents of price controls, especially price caps. However, Republicans have come under intense pressure from Democrats to institute price caps. Now that they control the Senate, Democrats have promised to press the issue with FERC, and if they do not receive satisfaction to move legislation that would compel FERC to act.

A week ago Barton pulled a California emergency electricity bill just before markup in the House Energy and Commerce Committee. During hearings, Democrats on the House subcommittee demanded a price cap provision be added to the bill.

The letter from Republican House members was written the day before Wednesday hearings Chairman Tauzin has scheduled on President George W. Bush’s national energy plan. Department of Energy Sec. Spencer Abraham will testify as the only witness before the Energy and Air Quality Subcommittee.

In the letter, House members noted “limited efforts” by federal energy regulators to lower prices in California are already working to date, reducing wholesale prices for energy during power emergencies dramatically in recent weeks.

The congressmen cited a Los Angeles Times report, showing FERC’s current order to limit energy prices in California during power emergencies has “significantly reduced rates,” resulting in “a 64% cut in the wholesale price of power,” and dropping prices from $187/Mw-hr to $66.51/Mw-hr.

The FERC order took effect May 29. The members asked FERC to get back to them on a series of recommendations in writing no later than June 22.

The House Republicans recommended the FERC plan include the following provisions:

o The plan should prohibit unnecessary generation outages and failures to comply with agreements to sell power. If the commission finds a rate charged does not comply with the price mitigation plan, it should strictly enforce the plan and require refunds and penalties to the full extent allowed by law.

o The commission has relied upon market-oriented methods rather than imposing rigid price controls that would worsen the crisis and increase the likelihood of blackouts. To prevent blackouts and contribute to a long-term solution, the commission’s plan should adopt market mechanisms as appropriate and allow recovery of all verifiable costs to avoid discouraging availability of supply and investment in new generation and transmission.

o To mitigate prices and increase available supply, the commission should take every additional step within its authority to promote conservation and demand response throughout the West. Specifically, the commission should (1) establish or certify a wholesale “clearinghouse” for demand reduction agreements; and (2) enable consumers, whether individually or through aggregation arrangements, to sell foregone power to their own local distribution utility or to third-party purchasers.