In a surprising turnaround, the chairman of a major player in the California electricity markets Wednesday said the company will support short-term regional price controls “as the right thing to do” to help California and other western states cope with the effect of high electricity prices.
While Williams will support short-term controls, Chairman Keith Bailey said the company continues to believe long-term controls are counterproductive to creating adequate energy supply and efficient pricing. The Tulsa, Okla.-based company markets 4,000 Mw of power in California, the majority of which was sold in long-term, forward contracts both this year and last.
Most energy firms and the Bush Administration have adamantly opposed price controls as ineffective and a deterrent to investment. But gas and power companies operating in California have come under increasing pressure to modify their opposition. Some California legislators have proposed seizing power plants.
Wednesday the California Assembly passed Assembly Joint Resolution 1X calling for the Federal Energy Regulatory Commission to cap prices on natural gas entering the state for an 18-month period.
In supporting short-term electricity price caps, Bailey said, “We also recognize this is an extraordinary situation. We need to help create some breathing room over the next year or so to allow the current emergency supply initiatives to have a meaningful impact.”
Bailey said any imposition of price caps should be accompanied by public policy that “ensures confidence that services provided in the past and future will be paid in full.” Williams and other wholesalers are still owed millions of dollars for power they have delivered to California.
Bailey said Williams has net accounts receivable at Mar. 31 for power sales to the California Independent System Operator and the California Power Exchange of about $252 million, a net increase of $140 million from year-end 2000. He said Williams started power sales to the Department of Water Resources Apr. 1 under a long-term agreement signed earlier this year.
The company’s position is consistent with a commitment to continue to serve California markets while working toward equitable solutions to the energy crisis, Bailey said. He said a combination of short-term, regional price controls during emergency periods that expire at a fixed date, along with the elimination of credit risk, should provide the market a respite while creating incentive for the private sector to invest with confidence.