Bush Isn’t Budging, but He Needs to Turn FERC Around

George W. Bush has been greeted at every stop on his California trip by angry protesters who believe he has refused to take any meaningful steps to stop the energy crisis engulfing our state. He has come at a time when consumers have been socked with the heftiest electricity rate increases in state history, rolling blackouts have become routine, our largest utility is bankrupt, and the state’s budget is being drained by $70 million a day as California buys wholesale energy at outrageous prices.

There is a very simple measure Bush could take that would alleviate the crisis overnight. He could tell the Federal Energy Regulatory Commission, or FERC, to do its job. FERC’s legal mandate is to ensure that wholesale electricity prices are “just and reasonable.” But wholesale prices are not just and reasonable, and they are completely divorced from costs.

FERC has been ideologically fixated on the free market while ignoring the reality that a handful of energy suppliers--most of them from Texas--are manipulating the market to make obscene profits at our expense. During the last several months, a flood of media exposes has revealed how the generators are turning power plants on and off as much as several times an hour to take advantage of price fluctuation, taking plants offline for “unscheduled maintenance” and simply refusing to sell power to California. State and federal investigators say these companies have deliberately price-gouged consumers by billions of dollars.

The result is a massive transfer of wealth from California households to a handful of energy companies. In the first three months of 2001, Houston-based Dynegy Inc. posted revenues of $14.2 billion, nearly triple the $5.3 billion reported in the same period a year ago. Revenues at Enron Corp. nearly quadrupled from January through March to $50.1 billion, compared to $13 billion in the first three months of 2000.

The profits of such energy companies went up more than 500% between 1999 and 2000, according to state Senate figures. Compare this to the California Public Utilities Commission’s definition of fair rates when it was regulating utilities: cost plus 10%-12% profit.

Does Bush have the power to influence FERC? Of course. Curtis L. Hebert Jr., who heads the commission, was appointed by Bill Clinton but was elevated to chairman by Bush. FERC is also under the Department of Energy, headed by Spencer Abraham, a Bush appointee. If Bush wanted FERC to place controls on wholesale prices through a system of cost-plus pricing, it would happen overnight.

Bush’s long-term energy policy promotes a continued reliance on polluting fossil fuels and a resurgence of unsafe nuclear energy, while paying only lip service to smart, sustainable solutions like renewable energy and efficiency. Under the president’s plan, technologies proven to be dirty, dangerous and expensive will get the lion’s share of taxpayer subsidies, while the 2002 budget slashes funding for solar research by more than 50%, with major cuts for biomass, geothermal, hydrogen technology and fuel-cell research. If the Bush administration were to make sustainable energy sources a priority, existing technologies--wind, solar and some types of biomass--could solve our long-term energy needs. While such a policy is anathema to oil, coal and utility industry leaders who supported Bush’s presidential campaign, it is central to any forward-looking energy strategy.

The sensible responses to the energy crises are clear--price controls in the immediate future and reliance on renewables in the years to come. If Bush continues his current course of action, we can only conclude that he is more sympathetic to a handful of electricity and gas suppliers than to millions of Californians.

Unless residents of the country’s largest state take the effort to make their voices heard, it’s likely that Bush will continue to follow the hands that feed him, and that doesn’t make for a healthy diet. It is up to us Californians to let the president know he can’t afford to kowtow to special interests. Hopefully, he’ll respond to the demands of the angry Californians he is hearing this week.