EXCLUSIVE INTERVIEW Abraham Is Pumped Up Over President's Plan.(SERIES: ENERGY'S NEW WORLD)(IBD SPECIAL REPORT)

Byline: Douglas Austin

President Bush has offered a long-term national review to address America's growing appetite for energy.

Investor's Business Daily spoke recently with Energy Secretary Spencer Abraham about the administration's plans to meet U.S. energy needs.

IBD: The Federal Energy Regulatory Commission imposed price mitigation limiting the price of power in 11 Western states. Bush is firmly against price caps. How exactly do price caps and price mitigation differ? Don't both keep power from the market?

Abraham: I'm concerned that any price caps that actually reduce the price below the market rate will make blackouts occur more frequently and send a signal to markets that will be a disincentive for new generation to be built in the West. It's my impression that the goal of FERC was to not accomplish that objective, but rather to prevent unjust and unreasonable rates from being charged, which in fact are illegal.

Right now, FERC has already ordered refunds and is considering additional refunds for charges that constituted unjust and excessive amounts in previous months.

My impression is that was the goal of this price approach. And that it wasn't to try and artificially suppress prices.

But to the extent it does drive price below what would be market rates, it has the very serious risk of accomplishing the undesirable outcomes of more blackouts and discouragement of more …