‘Soft cap’ a win for Davis, cover for GOP

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Sacramento Bee

It was more than Gov. Gray Davis might have expected from a regulatory agency in a Republican administration that has repeatedly and flatly denounced wholesale energy price controls as counterproductive.

A decision by the Federal Energy Regulatory Commission to impose a 24-hour-a-day “soft cap” on prices across California and 10 other Western states was a move toward acknowledging what Davis had been arguing for months: Some controls on prices are called for to calm a dysfunctional electricity market, if only temporarily and at higher levels than the Democrats would have preferred.

Republicans in California acknowledged that Davis appeared to have won a short-term political war in which price caps seemed a reasonable solution to many voters.

But they stressed that they remain opposed to more stringent price caps, which they argue would discourage what California needs most – more energy generation.

“Price caps poll positively, because to the voter it sounds like price caps mean they pay less,” said Rob Stutzman, who is monitoring Davis’ energy actions for the state Republican Party. “But solutions to this crisis aren’t that simple. Gray talks about it as some type of panacea, and it’s deceiving.”

Several congressional Republicans, looking ahead to next year’s elections, have called in recent weeks for some form of price controls.

Rep. Doug Ose, R-Sacramento, chairman of the House Government Reform Committee’s energy panel, who was targeted by congressional Democrats with ads suggesting Republicans are to blame for escalating electricity and gas prices, first suggested the idea of broadening an earlier FERC order to apply throughout the West and around the clock.

Before Monday’s meeting, President Bush spoke more favorably about federal action on prices than he has to date, suggesting that he might support a “mechanism … to mitigate any severe price spike that may occur.”

But he stressed that he remains opposed to “firm price controls.”

“They know full well my administration’s belief that price controls will not solve the problem,” the president told reporters at the White House.

Davis political adviser Garry South said Republicans “are panicked about this issue.” Their ideological commitment to a free market and their political support from energy generators, he argued, puts them in the difficult political position of defending unlimited wholesale prices.

“They’ve gotten on the wrong side of an issue, and they don’t know how to get out of it while being true to their own financial base and their own ideology,” he said.

In California, price controls could be most helpful to state government, which continues to purchase electricity on behalf of the major investor-owned utilities. Such caps might have done more this spring, however, before the state began signing long-term contracts for electricity and spot market prices began to fall.

Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights said he doubts that the FERC action, which caps prices through September 2002 at the cost of running the least-efficient power plant on the day the electricity is sold, will have much effect on the market.

“But it’s a gesture that shows you how terrified they are of a meltdown in California,” he said. “The danger of doing nothing was that California would slip into the economic abyss and take Bush’s political viability along with it.”

He argued that Bush and energy generators would rather take steps to “save deregulation in the long term, even if it means reversing their position in the short term.”

Davis, meanwhile, is enjoying the political benefit of a campaign for price caps he has been waging for nearly a year. He said the FERC action was a “step in the right direction,” but continued to argue that the commission needs to do more, including ordering energy generators to make massive refunds.

Rosenfield, who would prefer that Davis take action to seize power plants himself, said the Democratic governor “has managed to transfer responsibility for this debacle onto the federal government.”

“It’s not entirely false, but it’s also clear that the federal government’s never really going to do what California needs, and only the governor can do that,” he said. “He’s managed to obfuscate that fact in a blizzard of anti-Washington, anti-Bush media attacks.”

There are some substantive differences between the FERC action and the tougher price caps Democrats are seeking, said GOP political analyst Dan Schnur. But he said it’s in both parties’ political interest to pretend the differences are bigger than they are.

“Republicans don’t want to admit that they bought into a Democratic solution,” he said. “And no FERC action will ever be enough for Gray Davis, because he needs a scapegoat a lot more than he needs price caps.”

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