Cracks Seen in Resistance to Energy Price Caps

With a California-born electricity crisis spreading like a range fire throughout the West, there were signs of softening Tuesday in opposition to a federal cap on wholesale power prices.

A second member of the Federal Energy Regulatory Commission, which has steadfastly opposed wholesale caps on electricity, said she might be willing to discuss a price ceiling--a significant breakthrough for California officials, who have been pleading for price caps for months. And regional officials from other Western states said they might support some short-term form of price controls.

Up to now, FERC Commissioner William Massey was the lone voice on the panel favoring wholesale price caps on electricity, which could rein in the runaway prices that have sent one California utility to Bankruptcy Court and put another on the brink.

FERC Chairman Curtis Hebert has staunchly opposed any form of price controls. But at a hearing before officials from across the West, Commissioner Linda K. Breathitt, a Democratic appointee to the panel, said she would be open to considering price caps.

“I’m looking at the reports for this summer, and they are pretty scary. And I think we’ve already seen prices shoot up the roof up until now,” she said in an interview after the meeting. “I think we will continue to see them go up this summer. So I do believe that price caps, if implemented effectively . . . is something I would be willing to consider.”

One member of the California delegation attending the Boise hearings, Assemblyman Fred Keeley (D-Boulder Creek), said he also detected a softening of Breathitt’s position. He said Californians went to the hearing asking not for price caps but for “cost-based pricing.”

“In my conversations with Linda [Breathitt],” Keeley said, “she said she was open to the idea but that it would be difficult to move it through the commission because of its historic position on the issue. But it was certainly the most positive response I had detected from FERC.”

It was not immediately clear whether Breathitt’s remarks might translate into action at the federal energy board or whether she could overcome Hebert’s opposition. The five-member panel has two vacancies--the new commissioners recently nominated by President Bush have yet to be confirmed--which means Breathitt and Massey constitute a majority. But Hebert has strong powers as chairman.

Tuesday’s daylong gathering before the federal energy board was called in response to complaints that the agency has been slow to deal with the region’s skyrocketing energy prices. What it revealed were deep fissures among the Western states themselves, in addition to the three FERC commissioners.

Some state representatives spoke in favor of immediate price controls to correct a wildly fluctuating market. Others opposed them and said caps placed on the amount that independent energy suppliers charge would inhibit investment in the energy sector.

And most of the speakers warned of the potential for a power-starved summer.

“The state of California is on the verge of dying economically unless this thing is [dealt with],” said Geoffrey F. Brown of the California Public Utilities Commission.

In 1999, Brown said, electricity procurement cost the state $7.4 billion. Last year, it was $32 billion. This year, he said, it will be $65 billion.

During that time, “we’ve had about a 2% to 4% increase in demand,” Brown said.

Massey, the FERC commissioner, shares the somber state-of-the-region outlook.

“We face a looming disaster,” he said Tuesday. “I fear that the high prices are already damaging the Western economy. There is no solution for this summer, when prices will skyrocket. It seems wrong to me to put the Western economy in harm’s way solely to protect the unfettered price signal that is arising from a severely dysfunctional market.”

Although only a few states are calling for price caps--the Democratic-controlled states of Washington, Oregon and California--more regional representatives were willing to consider a short-term price limit based on real costs.

The states were represented Tuesday by officials from their public utilities commissions. California’s delegation also included two politicians: Bob Hertzberg (D-Sherman Oaks), speaker of the Assembly, and Keeley, speaker pro tem. Hertzberg urged FERC to intervene in the energy crisis by setting temporary, cost-based pricing for natural gas and electricity.

“It’s time for the federal government to do its part,” he said.

Each state commissioner told of the impact of rate hikes on retail and residential users back home. Many said they had raised energy prices more than 100%. Most said the past winter had seen the greatest price hikes in history.

Officials told stories of sacrifice and cited statistics that translated into the collapse of businesses and the loss of jobs. As expected, California’s statistics were among the worst: The state’s natural gas transportation costs rose 3,200% in one year.

(That type of hike, if it occurred in the food industry, would drive the cost of a gallon of milk to $19 and a loaf of bread to $25.)

FERC Chairman Hebert is scheduled to be in San Jose today to testify before a congressional subcommittee probing the energy crisis.

The hearings by the House Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs opened Tuesday in Sacramento and will conclude Thursday in San Diego.

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Times staff writer Mitchell Landsberg in Los Angeles and Sacramento Bureau Chief Rone Tempest contributed to this story.