Electricity Pricing Plan Agreed On as Sparks Flew

Hard bargaining, fraying tempers and mood swings characterized closed-door deliberations among members of the Federal Energy Regulatory Commission as they tried to engineer a plan to limit electricity price spikes in California this summer.

“It was very contentious,” said Commissioner Linda Breathitt, who cast the swing vote in the 2-1 decision Wednesday night. Minutes before the commission formally convened, Breathitt said, she put her “head in my hands and said, ‘I don’t know if we have two votes for anything.’ ”

Wednesday’s behind-the-scenes machinations at FERC were unusual for an agency that maintains a clubby atmosphere. The three sitting commissioners could not all get together in private to debate their differences without violating open meeting laws, so they consulted one-on-one and sent messages via aides and e-mail.

“It’s a little bit like shuttle diplomacy,” Breathitt said. “Our offices are all in a line and we were communicating heavily into the evening.”

Breathitt, a Democrat and a former Kentucky power regulator, joined with Chairman Curt Hebert--a Republican free-market advocate from Mississippi--in the final compromise. Commissioner William Massey, a Democrat who has consistently pressed for a more activist stance, said the deal did not go far enough and voted against it.

Hebert was not available for comment Thursday, but Breathitt said he showed the most flexibility of any of the commissioners. “It was very hard for Curt,” Breathitt said.

“He’s working in an administration that thinks price caps are part of the witches’ brew,” she added. “Look at what he voted for: He voted for price caps all the way down to Stage 1 [emergencies]. I’m sure he didn’t like doing that.”

Hebert said Wednesday that he supported the plan because it strikes a balance between the need to protect consumers from price gouging and allowing private producers to earn profits that encourage them to build power plants, thereby increasing supply.

The price controls that have traditionally been used in the utility industry are pegged to the cost of producing power, plus an allowance for profits.

But the price limits called for in the commission order would be set according to the cost of production for the least efficient generating plant called on to provide power during a shortage. That is intended to reward newer, more efficient plants and provide an economic incentive for producers to keep building them.

“It has a market-oriented approach, but it really does cap prices,” Breathitt said. “This is not something to be taken lightly by the governor of California, who at first blush might be disappointed. It does cap prices, but it does so in a different way.”

Breathitt said Hebert also gave ground by agreeing to an investigation of abusive pricing in all the Western states.

Critics have questioned FERC’s plan to limit California power prices only during Stage 1 or higher emergencies. They argue that price gouging is taking place at all times. A Stage 1 alert is declared when statewide electricity reserves fall below 7%. But Breathitt predicted that because the state has been under a Stage 1 emergency more than half the days this year, the order would provide close to round-the-clock coverage during the summer months.

Breathitt said she made a concerted effort to win Massey over. But, she said, “I finally realized we had all gone as far as we could go individually, and it was time for a vote.”