[Congressional Record (Bound Edition), Volume 147 (2001), Part 7]
[Extensions of Remarks]
[Page 10252]
[From the U.S. Government Publishing Office, www.gpo.gov]



                    ENERGY PRICE CAPS NOT THE ANSWER

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                           HON. DOUG BEREUTER

                              of nebraska

                    in the house of representatives

                         Thursday, June 7, 2001

  Mr. BEREUTER. Mr. Speaker, this Member commends to his colleagues the 
following editorial from the June 6, 2001, Omaha World-Herald. The 
editorial emphasizes that there is a role for the Federal Government in 
addressing concerns, but it highlights the problems which could result 
from improper government involvement.

                        Price Caps Make It Worse

       With the Democrats back in administrative control of the 
     U.S. Senate, a move is in the works to push for federal price 
     caps on admittedly burdensome electricity costs in California 
     and some other Western states. If that happens, it will be a 
     quick and nifty short-term solution. It will also, we're 
     convinced, be a calamity in the long run. It shouldn't be 
     done.
       When President Bush met with California Gov. Gray Davis 
     last week, he made it plain that he wasn't going to mandate 
     any such solution through the Federal Energy Regulatory 
     Commission, which has such authority under some 
     circumstances. Now, Davis' state is crafting a lawsuit to 
     compel such caps--if Congress doesn't get to it first and 
     legislatively require the FERC to impose controls. (Of 
     course, such efforts might die in the GOP-controlled House.)
       Nobody wants to make light of the agony of California or 
     some of its neighbors, where electricity prices in some 
     locales are 10 times what they were a year and a half ago. 
     But California, which made its own mess by shunning in-state 
     electrical generation and neglecting its power grid, is 
     finding its way out of the difficulties with due speed.
       Four new plants are being built now and four more are 
     scheduled to come on line next year. The state has enacted an 
     $800 million conservation program and within a couple more 
     years hopes to have 15 new power plants in place. President 
     Bush has pledged $150 million in emergency aid to help low-
     income consumers in California keep the lights on.
       And both Congress and the FERC still have perfectly 
     legitimate and possibly useful roles to play in this energy 
     drama. There are questions about how well the agency has 
     exercised its existing authority. That's because while 
     private power companies may under some circumstances charge 
     market-based wholesale rates for electricity (far higher than 
     cost-based rates), they're required to apply to the FERC for 
     authority to do so. But the agency is supposed to deny 
     reauthorization if it determines that companies have raised 
     prices above competitive levels for a significant period of 
     time. The commission may well have been asleep, figuratively 
     and almost literally, at the switch. Congress would do well 
     to inquire into this.
       In addition, Congress may have some sharp questions to ask 
     about whether Texas natural gas sellers have manipulated the 
     market in California. Davis said Bush agreed with him that it 
     seems suspicious for Texas-originated gas to cost nearly 
     three times in California what it does in New York. Both 
     states are about the same distance from Texas. There may be 
     some difference in transmission costs--but triple? A FERC 
     administrative law judge is already at work on the question, 
     but a Senate inquiry in addition would do no harm.
       Such efforts are within the normal workings of the 
     regulatory matrix. Price caps are not. Historically, over 
     time they have dried up supply and either halted plant 
     construction or slowed it to a crawl. If caps are to be 
     tried, they should at least be brief in duration, with a 
     defined beginning and end. But it would be best not to head 
     that direction at all.

     

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