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In California, there was mixed reaction to the FERC’s decision to limit energy prices. For months state officials have been pressing the FERC for some relief. Democratic Governor Gray Davis responded with guarded optimism. He welcomed the decision, even as he said that more needed to be done to resolve California’s energy problems. NPR’s Richard Gonzales reports.
RICHARD GONZALES reporting:
Gray Davis has made the FERC his favorite target in an effort to shift blame away from his own handling of California’s energy crisis and he had supported a move by Senator Diane Feinstein to impose a hard cap on prices based on the cost of production, plus a fair profit. So when the FERC came up short of that, the governor offered this lukewarm endorsement.
Governor GRAY DAVIS (Democrat, California): As all of you know, for nearly a year I’ve been pounding on the Federal Energy Regulatory Commission to do its job and enforce reasonable electricity prices. Today the FERC has finally taken a step in the right direction, but there is much more they should do.
GONZALES: For example, Davis said, California has been overcharged billions of dollars for electricity and it has not received one cent in refunds. He added that state officials will have to study the FERC order for potential loopholes. But where Governor Davis sees a FERC taking a step in the right direction, UC-Berkeley economist Severin Borenstein calls it probably the last step the FERC will take. He says the energy regulators’ action will help control prices, but he warns that Californians shouldn’t expect much more help from the commission, especially when it comes to power outages.
Prof. SEVERIN BORENSTEIN (UC-Berkeley): California is definitely not out of the woods in terms of blackouts. This will have very little, if any, affect on risk of blackouts. What California has to do to prevent blackouts is conserve. This summer we are going to be short of power. With some moderate efforts at conservation, we could avoid blackouts, but we’ve got to get more than we’ve gotten so far.
GONZALES: Just as energy regulators announced their decision, state officials were canceling a power-outage alert. Sufficient supply helped the state get through yesterday without incident and despite hot weather, officials are crossing their fingers for today.
Meanwhile, the reaction from power generating companies was also mixed. Some said the price limits would only aggravate California’s power shortages. Others said while it might bring some stability to California’s market, it might also have the unintended consequence of discouraging power plant construction. Gary Ackerman is the executive director of the Western Power Trading Forum, a group of energy providers.
Mr. GARY ACKERMAN (Executive Director, Western Power Trading Forum): For those people who are developing power plants and haven’t yet ordered the major equipment, I think they might want to rethink their position out here until they see how this order plays out. It introduces a new element of uncertainty and you want to know whether or not this order is going to be temporary, like it’s claimed to be–it’s supposed to come off a year from September–or whether it’s gonna be extended.
GONZALES: Consumer groups condemned the commission’s plan, saying it does nothing to assure the just and reasonable rates that FERC is responsible for ensuring. Doug Heller is a spokesman for the Foundation for Taxpayer and Consumer Rights and he said the commission’s formula for setting the price limits is severely flawed.
Mr. DOUG HELLER (Foundation for Taxpayers’ and Consumers’ Rights): It’s quite clear that the Bush administration has no intention of letting this go on for a long period of time. Starting a new power plant today means it would come on line in 2004 or 2005 and this program will be gone by then.
GONZALES: The Federal Energy Regulatory Commission’s new plan will come under review again later this week as Governor Gray Davis and the commissioners are expected to appear before a Senate committee on the energy crisis.
Richard Gonzales, NPR News, San Francisco.