FERC Imposes Limited Price Cap, But Sparks Could Still Fly.(Federal Energy Regulatory Commission)(Brief Article)

WASHINGTON--The Federal Energy Regulatory Commission (FERC), under pressure to play a more active role, imposed price controls on electricity sales in California. Commissioner Linda Breathitt described the negotiations as "contentious."

The cap goes into effect when supplies fall below 7.5% of demand, and the order extends until May 2002.

Buried in the 39-page order was a request for comment on a proposal to impose a fee on electricity sales to cover generators' past unpaid bills. Comments were due in 30 days from the order's date, after which FERC could decide whether or not to implement the fee.

Many Californians had hoped for more sweeping controls and were harshly critical. They had also hoped that the cap would apply to the 11-state Western region and not just California. Still, the plan adopted by FERC apparently represents a compromise and is less restrictive than the formula originally proposed. The initial proposal would have limited caps to Stage 3 emergencies, when supply falls to within 1.5% of demand. The two Democratic commissioners, Linda Breathitt and William Massey, argued for a plan that would require controls even if shortages were not critical, according to a report in the New York Times.

The Bush administration and FERC Chairman Curt Hebert have remained adamant in their opposition to "price caps," which is why the plan they announced studiously avoids that terminology and refers instead to "price mitigation." Nevertheless, Hebert voted for the price-control plan.

Just one day before the FERC price-mitigation announcement, U.S. Senators Dianne Feinstein (D-CA) and Gordon Smith (R-OR) announced that they would introduce legislation that would direct FERC to impose a temporary wholesale rate cap or cost-based rates on energy sold in the Western region.

"We are bringing in this legislation because ...