No Time for Lectures

When beleaguered California officials appealed to the chairman of the Federal Energy Regulatory Commission to exert some control over the chaotic electric power market, he told them to get shovels and start digging holes for new power plants. Then Chairman Curtis L. Hebert Jr. added injury to insult, lecturing that price controls “do not promote long-term consumer welfare.”

The long term, Mr. Chairman, is not the problem. We just want to survive this summer without the chaos and disaster of rolling blackouts, extortionate power costs, ever-escalating consumer rates and a state budget that has been bled dry.

California has licensed 12 new power plants, has launched an $850-million conservation program, is raising consumer rates by as much as 46% and is spending $50 million a day on power and billions more for long-term contracts. We don’t need lessons from the Potomac on the benefits of the free market.

As Sen. Dianne Feinstein (D-Calif.) says, electricity is not just another consumer product but rather “a basic staple of life.” In fact, California is fighting for its economic life. But the one thing over which the state has no control is the wholesale price of electric power, which is the heart of the problem. That is the responsibility of the Federal Energy Regulatory Commission, which has a mission statement declaring that it will “assure access to reliable service at a reasonable price.” FERC did control rates until three years ago when, as part of the general move to deregulation, it allowed private generators to start charging California whatever the market would bear.

That got us a $9-billion electric power bill in 1999, $27 billion in 2000 and as much as $50 billion to $70 billion this year. Even FERC Commissioner Linda K. Breathitt says the price forecasts for this summer are “pretty scary.”

Republicans and Democrats from throughout the West Coast are seeking a temporary regional cap on wholesale prices that would allow the power companies to recover all their costs plus a more-than-fair profit.

FERC knows that the generators have been using the power shortage to reap huge profits; its own studies show that. But under Hebert, the open market purist, FERC is preparing to renew the generators’ licenses to charge larcenous rates. Does he want California to eat crow for backing away from its disastrous 1996 deregulation law?

That won’t happen.

Angry lawmakers are studying retaliatory tactics such as an excess profits tax on power generators or the seizure of power plants. Those are extreme steps, but this is an extreme situation. The simple and immediate solution is for FERC to fulfill its legal responsibility to maintain order in the wholesale price market by imposing a reasonable regional price cap.