[Congressional Record Volume 147, Number 57 (Tuesday, May 1, 2001)]
[Senate]
[Pages S4066-S4069]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE ENERGY CRISIS
Mrs. FEINSTEIN. Mr. President, I rise today to speak once again about
the California energy crisis. Today is the first day of May and in many
parts of California, it is the start of a 5-month summer and the start
of a five-month period of the highest electricity demand. The day also
marks the 12th consecutive month we have been in an energy crisis--I
add to that the Pacific Northwest--meaning for an entire year we have
experienced energy prices that are about 10 times higher than they were
in the previous 12 month period. And it also marks the 12th consecutive
month that the Federal Energy Regulatory Commission has failed to take
decisive action.
It took the Federal Energy Regulatory Commission until November to
declare what people in San Diego, California discovered last May,
electricity rates are ``unjust and unreasonable'' and the market is
broken.
Last week, FERC attempted to modify the broken market with so-called
``price mitigation.'' In its April 26th order, the FERC outlined its
proposal ``to mitigate the dysfunctional market.'' Unfortunately, what
FERC offered as a solution will not do nearly enough to solve the
problems in California and the Northwest.
First, the order for the most part, ignored the Northwest--offering
only a limited investigation of the broken market in Oregon and
Washington without any promise of even the feeble price mitigation
offered to California.
Second, the order will last only one year, not nearly enough to get
enough supply on line to meet our energy needs.
Third, the order only applies to stage 1, 2, and 3 energy
emergencies, practically ensuring that prices for the rest of the time
can remain exorbitantly high.
Fourth, the FERC order decreed that the cost based rate of the price
for the least efficient megawatt of power needed at any given hour
would go to everyone who bid into the market. With natural gas prices
still averaging three times higher in California than elsewhere, it is
almost a guarantee that this would mean at many hours, the average
price of electricity will be $400-$500 per megawatt.
Which brings up the most glaring problem with the FERC order: It does
not address natural gas, which is the major cost in electricity
production and a problem in itself for heating, cooking, food and
manufacturing production, etc. I would like to take this opportunity to
read from some letters I have received about the energy crisis.
Let me speak about a letter from the California Steel Industries, and
I quote:
Our company is a relatively large consumer of both
electricity and natural gas. Our historical gas bill was
about $12 million annually. With the price gouging going on
in California, that bill will rise to $40 million or even $50
million this year. For electricity, we historically paid
about $15 million per year. That number will double this year
due to increased retail rates, which became necessary as a
result of skyrocketing wholesale prices.
Mr. President, I ask unanimous consent that letter be printed in the
Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
California Steel Industries, Inc.,
Fontana, CA, April 16, 2001.
Hon. Dianne Feinstein,
U.S. Senate, Hart Senate Office Building, Washington, DC.
Dear Senator Feinstein: This is to ask for your help in
immediately seeking emergency action by the Federal Energy
Regulatory Commission, to stop the relentless profiteering
and price gouging by energy providers to the state of
California.
The problem in the wholesale price of electricity is well
documented. Power prices have gone from about $30 per
megawatt hour in 1999 winter months to more than $1400 per
megawatt hour at times during the winter of 2000-01. This was
not due to a rise in demand or a supply shortage--the winter
months for both years saw demand at about half of the summer
peak period.
High prices have continued through the moderate spring
weather and could hit astronomical levels this summer.
Natural gas, a key component of electricity generation and
of industrial production in its own right, has followed suit.
While the price of natural gas is up across the nation--about
double the historical average in Chicago, New York and Texas,
for example--in California, it is about six times the
historical average. In recent weeks, natural gas has been a
little over $5 per MMBTU in most areas of the country, and
nearly $15 in South California.
Our company is a relatively large consumer of both
electricity and natural gas. Our historical gas bill was
about $12 million annually. With the price gouging going on
in California, that bill will rise to $40 million or even $50
million this year. For electricity, we historically paid
about $15 million per year. That number will double this year
due to increased retail rates, which became necessary as a
result of skyrocketing wholesale prices.
For California Steel Industries and its 1,000 direct
employees, those numbers are not only mind-boggling, they
spell disaster. No business can absorb that kind of a hit for
long and continue to survive. We are the largest producer of
flat-rolled steel in Southern California, and we serve nearly
400 customers, most of whom are in California. We cannot pass
along these increased costs to our customers because they can
easily purchase competing steel from the Midwest, the East,
and from offshore, produced with far less expensive energy.
Unfortunately, our story is just one of many in California
these days.
The President of the California Public Utilities
Commission, Ms. Loretta Lynch, has requested the help of the
FERC in this crisis. Thus far, she has been rebuked by the
regulators, on the basis that this is simply a supply and
demand issue that will straighten our as soon as more power
plants are built and more gas pipelines constructed.
Unfortunately, we fear the problem will go away even sooner--
by a huge drop-off in demand as businesses shut down and lay
people off. This is not the solution the FERC wants, we are
sure. However, we cannot wait for the FERC's theoretical
approach to solve everything 50 months from now. We cannot
even wait 50 days.
It is our belief that there is no fair market for gas or
electricity in California, and there will not be fair pricing
without federal intervention at the wholesale price level. We
are committed to doing our part for conservation. We would
also welcome the chance to talk with you personally about
this subject.
[[Page S4067]]
In the meantime, on behalf of all Californians who value a
good job with a secure future, and who helped create the
world's 6th largest economy through hard work and
perseverance, we urge you to get directly involved in this
matter and demand that the FERC do its job. We must ensure
that electricity and natural gas--two unique commodities,
which in most cases have no short-term substitute--are priced
fairly. Otherwise, you can turn out the lights in California,
because the party will be over.
Very truly yours,
C. Lourenco Goncalves,
President and CEO.
Mrs. FEINSTEIN. Mr. President, California is the largest dairy State
in the Union.
Let me read a brief quote from the Dairy Coalition of Concerned
Energy Consumers.
As the number one-ranking dairy producing state in the
nation, the California dairy industry uses substantial
quantities of natural gas to run its processing plants.
Between December 1999 and December 2000 the cost of gas to
dairy plants in California increased 4,000%. Our paramount
concern is the dramatic increase in the non-commodity portion
of the price of gas.
Mr. President, I ask unanimous consent that letter be printed in the
Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
California Dairy Coalition of Concerned Energy Consumers,
Sacramento, CA, February 16, 2001.
Hon. Dianne Feinstein,
U.S. Senate, Hart Senate Office Building, Washington, DC.
Dear Senator Feinstein: On behalf of the California Dairy
Coalition of Concerned Energy Consumers, I would like to
thank you for all of your activities to date directed to
resolving the energy crisis in California.
The Dairy Coalition was formed recently due to the supply
problems and dramatic price increases seen for both
electricity and natural gas in California in late 2000. The
Coalition represents all of the major dairy producer co-
operatives in California, as well as the major proprietary
processing companies.
As the number one-ranking dairy producing state in the
nation, the California dairy industry uses substantial
quantities of natural gas to run its processing plants.
Between December 1999 and December 2000 the cost of gas to
dairy plants in California increased 4,000%. Our paramount
concern is the dramatic increase in the non-commodity portion
of the price of gas.
Again, the Dairy Coalition greatly appreciates your
attention to this critical issue.
Sincerely,
Jim Gomes,
Executive Vice President,
California Dairies, Inc.
Mrs. FEINSTEIN. Mr. President, let me read briefly from a letter from
Bayer. Bayer uses tremendous quantities of energy, and it relies
extensively on natural gas and oil as both fuel and feed stock. It has
had a 300-percent surge in the open market cost of natural gas since
early in 2000.
The letter goes on to say:
Volatile crude oil prices have increased the cost of
feedstock by as much as 100 percent.
Mr. President, I ask unanimous consent that letter be printed in the
Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
Bayer Corporation,
Pittsburgh, PA, April 2, 2001.
Hon. Dianne Feinstein,
U.S. Senate, Hart Office Building, Washington, DC.
Dear Senator Feinstein: I write on behalf of Bayer, the
world's largest producer of both synthetic rubber and
polyurethane systems and a major U.S. exporter with more than
23,000 employees in the United States.
Please act promptly to advance a comprehensive national
energy policy and strategy that promotes high environmental
standards and a diverse, flexible energy supply at globally
competitive prices.
Our polymers and chemicals businesses use tremendous
quantities of energy and rely extensively on natural gas and
oil as both fuel and feedstock. In this way, our $10 billion
U.S. company is representative of a major segment of the
economy. The $460 billion business of chemistry is the
largest exporting sector in the country, accounting for ten
cents out of every dollar in U.S. exports. At Bayer
Corporation, one out of every five jobs depends on our $2
billion export business. We cannot fight with both hands tied
behind our back, one already tied by the strong dollar, now
the other by high energy costs.
The 300-percent surge in the open-market cost of natural
gas since early in 2000 has dramatically affected business.
Volatile crude oil prices have increased the cost of
feedstock by as much as 100 percent.
Passing these costs along to our customers in the
appliance, automotive, construction and other markets is not
a viable, long-term solution. Rather it is a bleak, zero-sum
game for the U.S. economy.
We are doing our part by aggressively pursuing policies to
conserve energy and otherwise raise efficiency through
measures such as co-generation. Even so, we need your help in
bringing about a rational approach to the energy needs of the
world's largest, single-nation economy.
I urge you to please speak out on this matter and act
immediately.
Please do not hesitate to contact me if you would like
additional information about Bayer's perspective on energy
policy.
Sincerely,
Helge H. Wehmeier,
President and Chief Executive Officer.
Mrs. FEINSTEIN. California is a very large floral producer. I would
like to read a brief quote from the California State Floral
Association.
While our state decision makers have devoted most of their
attention to the supply and cost of electrical energy, it is
the high cost of natural gas that is of the greatest concern
to our grower members. They have seen their natural gas bills
increase by five to six fold. For example, one of our
nurseries reports having their monthly gas bills increase
from $26,000 in December of 1999 to $145,000 in January of
2001. This is fairly typical of the industry.
I have a letter from the H.K. Canning company which states that they
are going to be forced out of business because of the high costs of
energy today in California.
I ask unanimous consent that both of those letters be printed in the
Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
California State
Floral Association,
Sacramento, CA, February 5, 2001.
Hon. Dianne Feinstein,
U.S. Senator, Senate Office Building,
Washington, DC.
Dear Senator Feinstein: The California State Floral
Association represents retail florists, wholesale florists
and cut flower growers in California. We are very concerned
about the impacts the current energy crisis is having on our
members. Of particular concern is the skyrocketing natural
gas price as well as recent concern over natural gas
availability and the possibility that gas customers including
nurseries will have their gas service curtailed.
The energy crisis in California will have major economic
ramifications on the state. We know you understand the
seriousness of this situation. The unstable supply of all
energy resources and the escalating costs of natural gas,
diesel, propane and electricity have placed enormous new
economic burdens on our industry. Our product is highly
perishable and power outages can cause significant losses in
a very short period of time. We have a very real concern that
many of our members may be forced out of business. We face
economic losses from the grower through the marketing chain
to the retail florist.
While our state decision makers have devoted most of their
attention to the supply and cost of electrical energy, it is
the high cost of natural gas that is of the greatest concern
to our grower members. They have seen their natural gas bills
increase by five to six fold. For example, one of our
nurseries reports having their monthly gas bills increase
from $26,000 in December of 1999 to $145,000 in January of
2001. Other nurseries report similar increases in the cost of
natural gas. Since farmers are price takers not price makers,
these costs cannot be passed on. Some growers have reduced
production, laid off employees and had to reduce employee
benefits just to stay in business.
The flower industry is an important contributor to the
agricultural revenues of this state. Cut flowers account for
over $300 million dollars in farm gate revenues and all
ornamentals total over $700 million statewide. California is
also the number one flower producing state in the country.
Yet the future of the cut flower industry is not bright.
We know that many in our nation's Capitol believe our
energy crisis to be a ``California Problem'' and that it
should be remedied through state action. While there may be
some validity to this view with regard to the shortage of
electrical energy, we believe this to be a grossly inaccurate
perspective relative to the natural gas crisis in our state.
The problem of natural gas availability and manipulative
pricing needs to be dealt with at the federal level.
In light of the above, we urge you to do everything in your
power to get the Federal Regulatory Energy Commission (FERC)
to act immediately to stop the predatory gas pricing
practices being perpetrated against California consumers.
FERC has the ability to mitigate the anti-competitive
conditions that exist in the marketing and delivery of
natural gas. As we understand it, they have the opportunity
to do this through two cases pending before them brought by
two of our utilities. They have the responsibility to take
such action under their charge as an oversight commission and
the statutory authority under which they operate. And they
need to take such action soon or many flower growers will not
survive this crisis.
We desperately need your assistance in this time of great
need. Please make this issue your highest priority. We thank
you in
[[Page S4068]]
advance for any help you can provide and are awaiting your
response. Please do not hesitate to call on us for specific
information and assistance.
Very respectfully yours,
Jim Relles,
President.
____
H.K. Canning, Inc.,
Ventura, CA, February 1, 2001.
Senator Dianne Feinstein,
U.S. Senate, Hart Senate Office Building,
Washington, DC.
Dear Senator Feinstein: My wife and I are owners of a small
food processing cannery plant in Southern California called
H. K. Canning, Inc. We have 81 employees with families that
in total represent approximately 350 people. We all need your
help desperately.
We purchase Natural Gas to power our steam boiler for
processing soups and vegetables. The attached cost summary
shows that for the last five years our volume of BTUs has
remained constant along with the cost for these BTUs.
However, until recently, our Natural Gas bill has risen seven
(7) times over previous months without using any additional
BTUs.
This is going to force us out of business! Profit margins
in the food processing business are very tight, as we are all
aware of what happened to Tri-Valley Growers in Stockton, CA.
We have also seen our Worker's Compensation costs triple
since 1999 with no cost control implementation. California is
in trouble. We are in trouble and the government is moving to
slow!!!
We, and our employees, need your help now.
Sincerely,
Henry Knaust,
President.
Enclosure.
H.K. CANNING, INC.: NATURAL GAS BILLING ANALYSIS
----------------------------------------------------------------------------------------------------------------
Quantity Price
Fuel vendor Month and MMBtu MMBtu Monthly
year used therms therms cost
----------------------------------------------------------------------------------------------------------------
Amoco.............................................................. 6-1996 2,289 1.40 3,204.60
Do............................................................... 7-1996 2,310 1.72 3,973.20
Do............................................................... 8-1996 2,043 2.19 4,474.17
Do............................................................... 9-1996 2,003 1.75 3,505.25
Do............................................................... 10-1996 2,757 1.76 4,852.32
Do............................................................... 11-1996 2,513 2.65 6,659.45
Do............................................................... 12-1996 2,135 3.73 7,963.55
Do............................................................... 1-1997 2,551 4.30 10,969.30
Do............................................................... 2-1997 1,932 2.68 5,177.76
Do............................................................... 3-1997 1,984 1.64 3,253.76
Do............................................................... 4-1997 2,673 1.77 4,731.21
Do............................................................... 5-1997 2,103 2.08 4,374.24
Do............................................................... 6-1997 2,133 2.23 4,756.59
Do............................................................... 7-1997 2,588 2.25 5,823.00
Do............................................................... 9-1997 2,744 2.53 6,942.32
Do............................................................... 10-1997 3,236 3.11 10,063.96
Do............................................................... 11-1997 2,532 3.37 8,532.84
Do............................................................... 12-1997 2,975 2.39 7,110.25
Do............................................................... 1-1998 2,273 2.31 5,250.63
Do............................................................... 2-1998 2,703 2.11 5,703.33
Do............................................................... 3-1998 2,781 2.34 6,507.54
Do............................................................... 4-1998 2,616 2.40 6,278.40
Do............................................................... 5-1998 2,669 2.37 6,325.53
Do............................................................... 6-1998 2,610 2.10 5,481.00
Do............................................................... 7-1998 2,920 2.25 6,570.00
Do............................................................... 8-1998 2,885 2.33 6,722.05
Do............................................................... 9-1998 2,981 2.05 6,111.05
Do............................................................... 10-1998 3,006 2.06 6,192.36
Do............................................................... 11-1998 2,905 2.36 6,855.80
Do............................................................... 12-1998 3,599 2.32 8,349.68
Sempra............................................................. 1-1999 2,774 2.04 5,658.96
Do............................................................... 2-1999 2,814 1.83 5,149.62
Do............................................................... 3-1999 3,316 2.20 7,295.20
Do............................................................... 4-1999 2,941 2.20 6,470.20
Do............................................................... 5-1999 2,748 2.20 6,045.60
Do............................................................... 6-1999 2,912 2.20 6,406.40
Do............................................................... 7-1999 2,750 2.20 6,050.00
Do............................................................... 8-1999 3,110 2.20 6,842.00
Do............................................................... 9-1999 3,332 2.20 7,330.40
Do............................................................... 10-1999 3,173 2.20 6,980.60
Do............................................................... 11-1999 3,025 2.20 6,655.00
Do............................................................... 12-1999 3,275 2.20 7,205.00
Do............................................................... 1-2000 3,153 2.20 6,936.60
Do............................................................... 2-2000 3,437 2.20 7,561.40
Do............................................................... 3-2000 2,778 2.60 7,222.80
Do............................................................... 4-2000 2,478 3.03 7,508.34
Do............................................................... 5-2000 2,958 3.04 8,992.32
Do............................................................... 6-2000 2,319 3.04 7,049.76
Do............................................................... 7-2000 2,638 4.92 12,978.96
Do............................................................... 8-2000 2,798 4.50 12,591.00
Do............................................................... 9-2000 2,787 6.32 17,613.84
Do............................................................... 10-2000 3,211 5.58 17,917.38
Do............................................................... 11-2000 2,905 5.19 15,076.95
Do............................................................... 12-2000 2,854 14.09 40,212.86
Do............................................................... 1-2001 \1\ 3,000 16.32 48,960.00
----------------------------------------------------------------------------------------------------------------
\1\ Estimate.
Mrs. FEINSTEIN. Mr. President, I have a letter from California State
Senator K. Maurice Johannessen. This letter points out that the Shasta
Paper Company is now closing its doors because of rising natural gas
prices and the suspension that has resulted on pulp production. I ask
unanimous consent that the letter be printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
California State Senate,
Sacramento, CA, December 15, 2000.
Re: Request for Immediate Intervention
Hon. Gray Davis,
State Capitol,
Sacramento, CA.
Dear Governor Davis: The State of California currently
teeters on the brink of a major energy crisis that threatens
the well-being of citizens, communities, and the economy. The
significant increase in natural gas prices and looming energy
shortages have caused distress among many Californians.
Couple that with the decision by the United States Forest
Service to halt operations in National Forests, including
forest thinning, fire hazard reduction, and ground disturbing
activities, and we have a formula for disaster brewing in our
state.
In my district alone, the Shasta Paper Company (the only
remaining paper pulp mill in the state) had to close its
doors last week because of rising natural gas prices and the
suspension on pulp production. Although they were able to
reopen this week, they have been forced to do so on a limited
basis, with a substantial reduction in their workforce. They
have taken an enormous financial hit and are in danger of
being priced out of their ability to operate in the future.
The Shasta Paper Company employs nearly 450 people with a
payroll of approximately $1 million per week and revenues of
$144 million yearly. The closing of this plant will not only
devastate the area but deprive the entire state of the
benefits from this valuable enterprise. They are currently
considering alternatives to natural gas but will require a
temporary waiver of emission standards to remain viable. In
the meantime, many once productive members of the workforce
are left to wonder about their personal financial situations.
Burney Forest Power is a 31 megawatt biomass fueled co-
generation plant located in Shasta County that is capable of
supplying power to about 25,000 homes. At a time when every
megawatt produced in the state is precious, the USFS decides
to suspend all timber-related activities to the detriment of
biomass power plants throughout California. While industries
are laying off workers due to the cost of natural gas, these
same workers are being asked to pay higher fuel and energy
costs. The financial impacts to individuals, communities,
social service agencies, and industries may cause irreparable
damage statewide.
I understand that the actions of the USFS were the result
of lawsuits filed by the Earth Island Institute and other
environmental groups as an interim settlement. The agreement
was for suspension by the USFS ``not to offer, advertise,
auction or award any timber sales within the Sierra Nevada
Framework planning area'' from December 11, 2000 to March 1,
2001, or 30 days after the Record of Decision is issued for
the Sierra Nevada Framework Final Environmental Impact
Statement.
Earth Island Institute asserts in their suit that the area
not only has suitable habitat for the California Spotted Owl
but also that the Sierra Nevada province may contain
potentially suitable habitat for the Pacific Fisher. The USFS
agreed to expand the area of consideration from suitable
habitat for the California Spotted Owl and suitable or
potentially suitable habitat for Fisher to include the entire
Sierra Nevada planning area!
I do not believe that the USFS took into account the
impacts on biomass power producers and other industries when
they entered into this agreement. It is not difficult to see
the effect that the loss of these power producers can and
will have on northern Californians as we enter into the
coldest months of the year. What impact can we reasonably
project on the cost of doing business in northern California
when many enterprises rely on natural gas to operate? If
biomass producers are hindered or shut down, the demand for
natural gas will increase, causing an even greater strain on
the current situation.
Governor Davis, California already suffers from
skyrocketing gas and energy prices and the state is in a near
emergency situation. You have sought to preserve current
supplies and I am confident that you will be anxious to
prevent further hardship to the citizens of California. We
are already facing the threat of rolling blackouts and
government offices within California have been directed to
implement energy conservation strategies and actions in
response to current and expected shortages.
I do not believe that the USFS acted maliciously when they
entered into the agreement, however, I do feel that the
action was shortsighted. To have not consulted with the
Governor of a state where such actions will cause harm is
irresponsible, unconscionable, and unacceptable.
I am requesting that you intervene with the Department of
Justice to provide a temporary waiver for emission standards
and address the United States Forest Service's action to
cease all timber-related operations in the Sierra Nevada
planning area.
Your immediate consideration is greatly appreciated.
Sincerely,
K. Maurice Johannessen,
Assistant Republican Leader.
Mrs. FEINSTEIN. Mr. President, last week I reported that C&H Sugar,
the only sugar refinery on the west coast, that had employed 1,000
people, closed its doors for 5 days. Its cost of steam went from
$450,000 a month to $2 million a month. I would like to update that
report. That company is now looking for a special bridge loan. If it is
unable to find that loan, the only sugar refinery on the west coast
will have to permanently close its doors.
These complaints are all centered on natural gas prices. People have
not yet been hit with the 40-percent increases planned for the average
ratepayer in electricity this month. This does not even address
gasoline prices which some are predicting may reach $3 a gallon in
California this summer. So
[[Page S4069]]
things are going to get a lot worse before they get better.
The California Independent System Operator has said that the State
will be 2,000 to 5,000 megawatts short in meeting its energy needs. In
other words, millions of homes and businesses are at risk of being
blacked out, maybe every day. This affects traffic lights, ATMs,
farmers, assembly lines. It affects vineyards; it affects small
hospitals--and the list goes on and on.
Since January, the State Department of Water Resources has been
purchasing all of California's power needs because of the poor
financial condition of the State's utilities. Last week, I updated my
colleagues in the Senate on the amount the State has spent so far to
keep the lights on. At that time, it was $5.2 billion. In the last
week, that number has gone up by $1 billion, to $6.2 billion. And the
State continues to buy power at the rate of $73 million a day.
The implications of these high power prices are devastating to the
State. In fact, State budget officials are already making deep cuts in
California's $105 billion budget that the Governor will sign into law
in late June. Last week, the California State Senate Budget Committee
chairman called on the Budget Committee to come up with a list of cuts
totaling $2 to $4 billion to compensate for higher energy costs so far.
I would like to put the costs in perspective. California, as I said,
is spending $73 million a day on power. How much is that? It is enough
to fund the annual budget of the Santa Ana Police Department. It is
one-fourth of the cost to run California's entire judicial system for 1
year. It would provide health coverage for almost 300,000 working
families in the State. And it is gone in 1 day.
As I have said before, the major problem was a flawed deregulation
bill passed in 1996 called AB 1890. However, the State is doing today
all it can to increase supply and reduce demand. The State will have an
additional 3,572 megawatts on line by the end of the summer and an
additional 6,923 megawatts on line before the end of 2003, and by 2004
the State expects to add 20,000 more megawatts. That is enough power
for 20 million additional homes.
The problem is in the interim. The problem is the absence of price
stability. The State spent $7 billion in 1999 for energy--total--$32
billion in the year 2000, and it is estimated to spend $65 billion in
2001. Simply stated, this is the result of price gouging. Simply
stated, it is a Federal responsibility to provide a period of
reliability and stability in price before we bankrupt every industry in
the State of California and close businesses from Eureka to San Diego.
The Pacific Northwest is in the same crisis, and the Midwest and other
regions will be as well, unless the FERC takes action.
Yesterday, the Commission ordered the Williams Company to refund $8
million for withholding power. This is the first action of its kind.
The Commission found that this generator improperly shut down plants
with the implicit understanding that withholding power from the market
would drive up prices. Even to the most conservative Member in this
body, this is evidence of manipulation of the market in California to
drive up energy prices. The FERC found it, and the agreement was that
Williams will pay $8 million in a refund.
This firm has admitted no wrongdoing in the settlement. However, it
should be clear that what was alleged was that they took key generating
units in Long Beach and Huntington Beach offline in April and May of
last year. Williams said it settled to end the matter and that they
would have been exonerated had FERC pursued the case. Initially, FERC
had sought a refund of about $10.8 million but settled for the $8
million in the compromise agreement.
Today, Pacific Gas and Electric, a very large investor-owned utility,
is in bankruptcy in chapter 11. Southern California Edison, the
distributor of power to 11 million people, is very close to bankruptcy.
Should the agreement forged by the Governor not go through, that
utility will be in bankruptcy.
Yesterday, a divided State senate appropriations committee approved a
bill that would impose a windfall profits tax on electricity sellers
who gouge California consumers. Revenue from the tax would flow back to
Californians in the form of a credit on their State income tax,
starting next April 15. On a 7-3 vote, Democrats on the committee voted
for the bill, Republicans lined up against it. The measure moved to the
Senate floor, where it will require a simple majority of 21 votes and
is expected to pass. The Governor has said he is open to signing a
windfall profits bill, but he has not publicly lobbied for the passage
of the bill.
Yesterday, the Vice President made an energy speech. I would like to
say a few things about it.
In his first extensive remarks about the energy recommendations his
Cabinet-level task force will make to the President by the end of May,
the Vice President blamed current shortages on shortsighted decisions
in the past. The Vice President said that conservation, while perhaps
``a sign of personal virtue,'' does not make for sound or comprehensive
policy. The Vice President promised ``a mix of new legislation, some
executive action as well as private initiatives'' to cope with rising
energy prices and growing demand. He definitely rejected turning to
price controls, tapping the Strategic Petroleum Reserve, or creating
new bureaucracies.
Over the next two decades, it will take between 1,300 and 1,900 new
power plants--or one every week for 20 years--just to meet projected
increases in nationwide demand, Mr. Cheney said. And he said, ``Without
a clear, coherent energy strategy for the nation, all Americans could
one day go through what Californians are experiencing now, or even
worse.''
I have been really disappointed and surprised with this
administration's attention to the energy crisis. I have written to the
President three times now asking to meet with him and explain the
situation. So far, he has not yet agreed to meet with me.
The Vice President and the Energy Secretary through this Presidential
Task Force are talking about how the Federal Government is going to
help. However, adding 1,600 new power plants over the next 20 years is
not the answer we need. Nobody questions that we need more supply in
the long term. But we have a situation where prices have been spiking
for almost a year in California and about 6 months in other parts of
the Northwest, where the Northwest is experiencing the driest hydro
year on record. This is where we need the help.
This is where the Federal Government has a duty to help. California
and the Northwest badly need a period of stability and reliability, and
this is where the Federal Government can help. I argue that this is
where the Federal Government has a duty to step in and protect
consumers from being gouged. As I said, California is adding 20,000 new
megawatts itself which is the equivalent of forty new average-sized
plants, without any Federal prompting.
Lastly, I am also quite surprised that the Vice President, in his
remarks yesterday, essentially said that wind, solar, geothermal and
other renewable energy sources are still too far into the future and
the future is all fossil fuels.
Even if that were true, the truth of the matter is that nuclear
power, for instance, takes years and years to cite and there is nothing
this administration can do to help with the supply we need this summer
and next summer.
I, again, urge my colleagues to support Senator Gordon Smith and I
and force FERC to take action and address the problem. The alternative
may be an economic disaster for the entire country this summer.
The PRESIDING OFFICER. The Senator's time has expired.
Mrs. FEINSTEIN. I thank the Chair.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. SANTORUM. Mr. President, I ask unanimous consent that at 2:15
today Senator Thomas be recognized for up to 1 hour allotted post
cloture and, following that time, Senator Wellstone be recognized for
his hour post cloture.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________