[Congressional Record (Bound Edition), Volume 147 (2001), Part 5]
[Senate]
[Pages 6523-6527]
[From the U.S. 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

[[Page 6524]]

     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.
       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.

[[Page 6525]]

       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 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

[[Page 6526]]

     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 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.''

[[Page 6527]]

  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.

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