[Congressional Record (Bound Edition), Volume 147 (2001), Part 7]
[House]
[Pages 9369-9375]
[From the U.S. Government Publishing Office, www.gpo.gov]



                        CALIFORNIA ENERGY CRISIS

  The SPEAKER pro tempore (Mr. Osborne). Under the Speaker's announced 
policy of January 3, 2001, the gentleman from California (Mr. Sherman) 
is recognized for 60 minutes as the designee of the minority leader.
  Mr. SHERMAN. Mr. Speaker, I thank the Democratic leader for assigning 
me this hour of time. I hope very much that several of my colleagues 
from California and other western States will come and join me on this 
floor so that we can discuss together the energy crisis, the electric 
crisis, the natural gas crisis affecting California and the adjoining 
States.
  In the event that some of my colleagues do not come down and join me, 
I do not know whether I will spend a

[[Page 9370]]

full hour speaking about our electric crisis, I will go off and do 
several other subjects involving foreign policy and my service on the 
Committee on International Relations; but it is my hope, my expectation 
that this full hour will be devoted to the electric and natural gas 
crisis in the West and that several of my colleagues from western 
States will join me as it proceeds.
  I have come to this floor every evening this week to try to eliminate 
and dispel some of the misinformation about what is going on in 
California and the West and how we got into this situation. I want to 
take some time to describe the situation and to describe that some of 
the insults hurled at the State of California are manifestly not only 
malicious but false.
  What is the situation in California? In 1999, in the year 2000, and 
again this year, California will use virtually the exact same amount of 
electricity. In fact, in the year 2000, during the key peak hours, we 
used less electricity than we did in the prior year. Yet while we are 
getting the same amount of electricity, we are paying exorbitant 
prices. In 1999, for this amount of electricity, California paid $7 
billion; last year, for the same amount, $32.5 billion; and this year, 
as things are shaping up, it will be $70 billion, ten times as much 
money for the same number of electrons.
  We have had blackouts in California that we are told are a result of 
insufficient electric generation capacity; and, in fact, this summer 
our capacity may run a little bit below demand. But this last winter we 
used roughly 33,000 megawatts of electricity, the prior summer, the 
summer of 1999, we used 45,000 megawatts. None of the plants that 
existed, when we produced 45,000 megawatts at reasonable prices, was 
closed down; and yet in the winter we face blackouts, shutdowns. Why?
  The answer is that certain plants have been closed for maintenance. I 
finally found out what ``closed for maintenance'' means. It means the 
plant has been closed to maintain a sky-high price for every megawatt. 
The number of plants closed for maintenance month after month after 
month over the last 9 months has been double, triple, sometimes 
quadruple the number of plants shut down in that same month 12 months 
earlier, or the prior year. Somehow, plants are closed for maintenance.
  Keep in mind that one would expect during an energy crisis that the 
whole world is aware of plants would be closed for maintenance less 
because they would bring in crews to bring those plants back online. 
Folks would work overtime to get the electricity that the State needs. 
I have seen how quickly things can be repaired or maintained after our 
1994 earthquake in my region of California. Yet now, when we need to 
maintain the most, we need the maintenance to take place the quickest, 
plants are shut down three times as much and huge chunks of what would 
be the supply of electricity are unavailable. Closed for maintenance.
  As a result, the price is enormous. And that enormous and outrageous 
price is not for all the electricity we buy. Sixty percent of the 
electricity, roughly, in California, is still subject to rate 
regulation and fair prices are being paid. So that enormous, huge, 
unjustified transfer, the $63 billion extra we will pay for what a 
couple of years ago we called $7 billion of electricity, that all goes 
to roughly 40 percent of the producers. Those are the producers who 
came into our State and bought our electric plants from our local 
utilities as part of the wildly touted deregulation plan over the last 
several years. So we are paying 10 times the price, and almost all of 
the extra profits are going to 40 percent of the producers.
  This is a deregulation experiment that has not worked. We might ask, 
how did California get into this? There are a few things: first, we did 
not expect that these private companies would close certain plants for 
maintenance in order to charge 10 times the going price for the 
electricity they did produce in other plants. We did not expect the 
gougers to prevail. And, second, we expected that if this deregulation 
did not work, we would reverse it.
  Every experiment carries with it the possibility of a mistake; and 
time and time again when we try something out, we may have to reverse 
the situation. What we found, instead, was a power in the White House 
capable of using Federal law to prohibit California from going back to 
the regulated market that had served us relatively well for over 80 
years. So we have a situation not where California does not have the 
generation capacity it needs. Frankly, we ought to have more. We ought 
to have a margin for safety, a surplus of available electricity. But no 
one thought that just because supplies were a bit tight that we would 
be paying 10 times, 20 times the fair price for the kilowatts provided 
to us by these independent companies, many of which are based in Texas. 
And we certainly did not believe that if this system did not work that 
we would be prohibited by Federal law from going back.
  Now, what is the effect that this has had on California? Business 
bankruptcy, layoffs, and blackouts. And I do want to point out that up 
until recently, and I think even this summer, the blackouts are 
relatively modest compared to the news reports. A blackout is reported 
often when only one out of 100 or maybe one out of 30 of our homes 
loses power for 1 or 2 or 3 hours. But we expect that this summer there 
will be 30 to 50 days when one out of 30 or one out of 100 of our homes 
loses power; one out of 30 or one out of 100 of our businesses loses 
power.
  It is not just the physical effect of the blackouts; it is also the 
psychological and business effect. How is our State supposed to attract 
business? How are we supposed to inspire our current businesses to 
expand? How are we supposed to be the driving force in this national 
economy when people see and talk about or are preoccupied with the 
blackouts in electricity? And even if there was not a single minute of 
blackout for a single consumer, the prices are enormous and the price 
effect would, by itself, cause a steep economic problem for the State 
of California.
  Now, when a State is suffering not one but three disasters, a 
disaster because of blackouts, a disaster because of a decline in 
investment in our State, and, most significantly, enormous bills, three 
disasters, one would think that a representative from that State would 
be here before the Federal Government pleading for Federal money, money 
from all of my colleagues' districts to help the people in my district. 
I am not here to do that. That is not what California needs most. And, 
in fact, with a little bit of change in law, we would not need it at 
all.
  I am not asking for electricity from my colleagues' districts. Except 
for the western States, it is impossible to send electricity into 
California. Do not mail us your batteries. Even in the western States, 
we are not asking for any other State to experience blackouts or 
shortages in order to supply California. I am not even here to ask for 
sympathy. It would not hurt; but, yet again, that is not what 
California needs. What California needs is to have our hands untied. Do 
not take the right to regulate these prices away from us, bring that 
right to the Federal level and then refuse to allow the regulation.
  Yet that is what Federal law does. Federal law says that these 
independent generators, because they do not have retail customers, are 
not subject to our regulation. But that is okay, because the Federal 
Energy Regulatory Commission is supposed to do the job. The law says 
that they are supposed to assure fair and reasonable rates. And they 
have determined that California is being gouged. Yet they have decided 
to do absolutely nothing about it but sit back and smile and watch as 
billions of dollars, perhaps this year as much as $63 billion, are 
transferred from California consumers into the treasuries of a dozen 
very wealthy corporations, most of them based in the home State of the 
person who happens to control this administration and the Federal 
Energy Regulatory Commission.
  We have a dereliction of duty in this administration. What do we do 
about it? First, we expose it, and we urge that the President get on 
the phone

[[Page 9371]]

and demand that the Federal Energy Regulatory Commission finally do its 
job. Second, we turn to Congress, and we ask what about a piece of 
legislation requiring the Federal Government to do its job. Either of 
those would accomplish the task. A third possibility is that Federal 
law would simply be modified and say as long as we are going to sit 
here and say California has a problem, California ought to solve it. If 
the Federal Government is going to do nothing to help us, the least 
that could be done is to transfer the authority to regulate these 
generators back to California State government and then we will do the 
job.
  Why are none of these things being done? Well, I have alluded to it. 
There is tremendous support in this administration for the rape of 
California. Some have said that is because California did not vote for 
this administration. I think, instead, it is because the beneficiaries 
of this rape have such close ties to the administration. Some have 
pointed out that not only is there a huge flow of money from California 
to these dozen or so corporations, but then there is a huge flow of 
money from those corporations to the party of the present 
administration and that these companies were instrumental in funding 
the Presidential campaign of this administration.

                              {time}  1745

  There is perhaps a third reason, or at least a pretext. What does 
this administration do for California with regard to regulating these 
energy rates? They lecture us. The lecture goes something like this:
  You are suffering. There is nothing we are going to do to help you. 
We are going to continue to tie your hands, and you are going to like 
it because we are going to tell you the economic theory that tells you 
why you should be happy why there is no regulation. We will make the 
decision for you, but we will not suffer any of the consequences of 
this decision.
  How does this lecture go? It goes something like this:
  It is based on economics 101 at every college in this country. It 
says if you want more electricity, you have the price unregulated. You 
have the price go up. And if the price goes up, people will use less 
and the producers will produce more.
  Let us examine that. It makes perfect sense unless there is monopoly 
power. But in our market there is that monopoly power, and that is why 
economics 101 is not enough and lectures and condescending comments to 
California are not enough.
  First, as far as using electricity, California is second on the list, 
second only to Rhode Island in terms of conserving electricity, and 
those statistics were before we began our Statewide conservation plan. 
Californians today are conserving, and we are going to conserve more. 
We do not have to bankrupt our businesses to inspire conservation.
  But what about the main part of the argument? The argument is if you 
allow the price to go up and up and up, producers will produce more. 
Now that is certainly true where there is no monopoly power. If the 
price of iceberg lettuce went to up $2, more farmers would find more 
land on which they could plant iceberg lettuce and there would be more 
production. But that is because there are tens of thousands of small 
producers or farms that could be producing iceberg lettuce, or any 
other farm commodity. That is what 101 economics is all about, those 
markets where you have thousands of small producers.
  That is not our market for electricity. Keep in mind the electric 
grid for California extends only to the adjacent States, all of which 
are smaller in population and economy than we are, even when combined. 
So we cannot import electricity from the other States. The market is 
only the western States.
  Second, electricity gets used up as you transmit it. You lose about 
10 percent of the electricity for every 300-400 miles that you transmit 
it; so even if we did have electric grids connected, you would lose 
well over half the power in trying to move it that far. So the market 
is limited to those who can produce electricity in the western States.
  There you have a few producers who have seen that they have market 
power. They have seen that even if all of the electricity is produced 
from the plants that are owned by our local utilities, and all of the 
electricity is produced from the Pacific Northwest hydroelectric 
plants, which cannot produce very much this year because of a drought, 
and all of the electricity is produced that can be produced from our 
municipal electric companies, there is still a need for virtually all 
of their plants to be on-line.
  If they can shut down 10 or 20 percent of their plants, the price 
skyrockets. So let us bring it down to numbers. If we had regulation of 
these private producers, then let us say a plant that could produce 
electricity for $30 a megawatt could sell it for $50, the company that 
owned that plant would say, we make $20 for every megawatt, the more 
megawatts we make, the more profit we make. Lets maximize production. 
Regulated price would lead to maximized production.
  But let us say it still costs $30 a megawatt to produce electricity, 
but the owners of these plants realize if they shut down a couple of 
turbines, and a couple of their buddies shut down a couple of their 
turbines, that the price will go not to $50 a megawatt but to $500 a 
megawatt.
  Then they realize by producing a little bit less, they make a whole 
lot more. By creating a situation where we have to blackout 1 or 2 
percent of the State, they are getting the maximum price for every 
megawatt they produce.
  So that is why lectures based on the most simplistic models of a free 
market economy do nothing but a disservice. I do not know if this is a 
mere pretext at the White House and they know full well that their 
reasoning is suspect, or whether the White House is dominated by those 
who only took the basic course in economics and they feel passionately 
that somehow their imprisoning of California, them taking the decision-
making power away from California, they may believe that it is somehow 
in our interest. Certainly facts have proven them wrong.
  We have the same demand in California that we had a couple of years 
ago. Pretty much the same demand as a couple years before that. We know 
that price regulation works, gives us reasonable bills, gives us 
reliable power. The current situation is obviously a failure.
  So only if you close your eyes to any advanced division courses in 
economics, and close your eyes to everything actually happening in the 
West, can you reach the conclusion that the absence of rate regulation 
on these private utilities is helping California. Yet that is what we 
are told.
  In an effort to distract us from how abysmal Federal policy is in 
this circumstance, they have come up with another argument. That 
argument is that there is something evil about California and 
California deserves to be punished, it is all their fault. Every bit of 
suffering by every Californian is somehow the fault of some divinely 
ordained morality play, and has nothing to do with the economic 
regulation or lack therefore that comes from Washington.
  This is, of course, a distraction. It makes no sense. Even if you 
think that California made tragic mistakes in its decision-making 
process, that is no reason not to regulate the price at which 
electricity is sold by these independent generators. Even if you say 
these wounds are self-inflicted, that is no reason to let the patient 
die when you know how to cure him. But the fact of the matter is that 
all of the attacks on California are not only insulting, they are also 
false.
  The biggest attack against California is that our environmentalists 
prevented private industry from building plants in California when 
private industry knew that those plants were needed.
  Mr. Speaker, there are five reasons why it is absolutely provable why 
California environmentalists and California decision-making is not in 
any way at fault, did not prevent the building of plants in California. 
I can prove that with five different independent reasons.

[[Page 9372]]

  Mr. Speaker, I yield to the gentlewoman from California (Ms. 
Sanchez).
  Ms. SANCHEZ. Mr. Speaker, while many are trying to make this out as a 
California problem, it is my belief as an American that this is a 
problem for America, and we must not only address the California 
situation, but we also should be addressing this as a long-term policy 
and energy policy really for the United States.
  Mr. Speaker, I think there are a lot of great States. All 50 States 
are great. Hawaii is beautiful. I was just down in Florida, it has 
great beaches. Who would not be envious of the New York Stock Exchange 
or the Blue Ridge Mountains or Aspen in Colorado? There are a lot of 
great things around our Nation.
  Sometimes I think that people think because California is a wonderful 
place and we have had a great and strong economy for the past 8 years, 
we should be punished because something is happening in our State. The 
reality is that California is the sixth largest economy if it were a 
stand-alone Nation in the world. In a sense, we are even a larger part 
of what happens in the United States.
  One of the reasons that we have been very successful with respect to 
our economy is that we are a part of America. We have this ability to 
trade across all of the State lines. We have an ability for people to 
move between the 50 States. We share ideas. We get people who come to 
our universities from other States. We are connected as a country.
  Mr. SHERMAN. Absolutely.
  Mr. Speaker, there are 50 great States. Some listening to my earlier 
remarks maybe thought that I thought there were only 49 great States, 
and I was somehow criticizing Texas. Texas is also a great State. I 
talk to my colleagues from Texas, and they are almost as upset as you 
and I are, that a dozen companies or half a dozen companies, many based 
in their State, are jacking up the prices. That does not reflect on the 
ethics of the average Texan; and it is of no benefit to the people of 
Texas.
  We have 50 great States with great people in every one of those 
States.
  Ms. SANCHEZ. Mr. Speaker, where goes California, so goes the rest of 
the Nation. Other States should take notice of these problems because 
other States will face these problems also.
  What has happened, our economy has expanded so greatly, we never 
imaged that this type of energy draw would be required in California. 
Many say Californians are environmentalists and did not build plants. 
We can take a look and know it was not because of environmental 
regulations we have in California that we were not getting some of 
these plants on-line, part of it is a wider problem that happens with a 
lot of infrastructure, and that is the not-in-my-backyard problem that 
happens with so many things, whether it is a jail or an airport or a 
utility plant.
  I think the rest of the States need to understand we need to fix this 
in California and in the western States because when it is your turn, 
you want to learn from us about how not to head into this problem.
  Mr. SHERMAN. Mr. Speaker, I would point out that I think we have 
saved quite a number of States from disaster. How many of our Members 
have said to me, my State was thinking of deregulation. Boy, we stopped 
that one in a hurry.
  I would point out that yes, there are situations where people say 
build it somewhere else, not in my backyard; but if you look at 
generating facilities, that was not really the case in California. 
There are other important facilities where you and I are aware that it 
ought to be done somewhere, and we cannot quite agree where.
  But in the case of generation facilities, it was not either local 
communities saying not in my backyard nor environmentalists saying do 
not do it anywhere in the State, it was the absence of any private 
company that really wanted to build a plant.
  I cannot find a single Member from anywhere in California that said 
that a company wanted to build a plant in my community, and they were 
prevented for this or that reason. They made this try, they worked with 
local people, and then they had to go away. We can all mention other 
facilities or things that they thought of doing in our districts 
because people did not want it.

                              {time}  1800

  Electric facilities are not on that list.
  Ms. SANCHEZ. These facilities, as the gentleman knows, of course we 
have a couple coming online, one even as soon as the end of this 
summer.
  Another problem that we have had is the transmission or the grid 
process by which we are able to transmit this energy. In fact, if one 
does not see it, one probably does not think about it. Think about all 
the people who were just used to flipping on the switch at home and 
never thought that electricity really came from somewhere. It was never 
given a second thought. There are many cases like this.
  I think of the water problems that our country will face in the near 
future or sewage problems, for example, that we see many of our cities 
now where their underground piping has worn out, and there is not the 
money to replace that unless we do it at a Federal level or with some 
grant process or with a real thought to what is happening underground.
  So I think a lot of times we get calls about fix the transportation 
system, or I am stuck in traffic or my plane was left on the tarmac for 
too long; but these other issues of will the electricity come on, will 
the water flow, are things that if one does not see it, we are not 
asked to fix it. We are not necessarily working or putting the 
political clout or the monies behind that.
  I think as a Nation we need to understand that these problems are all 
of our problems, and we need to come together with good policies to fix 
this.
  Mr. SHERMAN. Mr. Speaker, I thank the gentlewoman from California 
(Ms. Sanchez) for her comments.
  Mr. Speaker, I will share the five proofs that there were no bars 
toward building plants in California.
  The first is it is simply not true. We are elected officials, some 
would say politicians. When a private company wants to build something 
big and they run into problems, that becomes an issue; and we all 
become aware of it. One of the first things they do is seek a meeting 
with whatever Members of Congress are in that area, with our friends in 
local government and State government; and sometimes we might support a 
project, sometimes we might think it is a bad project, but there is 
never a situation where there is a huge controversy over whether 
government will allow a big plant to be built and no politician knows 
about it.
  One cannot have a governmental controversy without having elected 
officials know about it. We know that there was not a situation where 
people wanted to build power plants and were not allowed to.
  The second proof is that for the 8 years of the prior Republican 
Governor, who, after all, served until just a couple of years ago, 8 
years of a man who was often compared to then-Governor, now-President 
George Bush, not one plant was even applied for, not one, in a serious 
way. Not one application was approved by that Republican Governor for 8 
years. That is not because Governor Pete Wilson was an environmental 
crackpot, because he was not. That was because nobody wanted to build 
plants in California.
  How do I know nobody wanted to build plants in California? During the 
last several years, our local utilities had been selling off their 
existing plants, and they tried to get a good price for them. They 
really did not get a very good price for them. Why would anybody say I 
am desperate to build a new plant, but the California environmentalists 
will not let me if they will not pay a decent price for a plant that 
already exists?
  We know that when something cannot be created because of 
environmental regulations, the old ones sell for more.
  I am proud to represent Malibu. It is beautiful. A lot of people 
would like to live on the beach in Malibu. Now there you have 
environmentalists who will not let you build a beach house in Malibu 
and will not let you build a big

[[Page 9373]]

beach house in Malibu, and will not let you build a tall beach house in 
Malibu.
  One can be sure that they cannot buy an existing tall, big beach 
house in Malibu at a bargain price. One cannot buy it at a bargain 
because they cannot make any more. There is a shortage of beach houses 
in Malibu compared to the people who want them. There was not a 
shortage of power plants compared to those who wanted to buy them or 
build them.
  In addition, and I have talked to some of the top scientists about 
this, an electron does not know when it crosses a State boundary. So if 
one is going to build a power plant, they are not building it to serve 
California. They are building it to serve everything within about 400 
or 500 miles of that power plant, maybe a bit further. They are 
connecting it to the western grid, which includes every State from New 
Mexico to the State of Washington. That is the grid electricity can be 
sent on, and one can build anywhere in those States in order to supply 
those States.
  So for us to believe that there were these companies that desperately 
wanted to build power plants and the evil California environmentalists 
would not let them, one has to believe that the evil environmentalists 
of Nevada would not let them build. I mean, when was the last time we 
were told that Nevada State government was in the hands of 
environmental crackpots? That is not what we hear.
  So, in fact, there was no major effort to build plants anywhere in 
the West, both where environmentalists are strong and where 
environmentalists are not particularly strong, and there was no 
tremendous desire to own a power plant that already existed because 
even today if it had not been for a drought, an unexpected drought in 
the Pacific Northwest, there would not be a shortage. In fact, up until 
today I am not sure that there was a single day that the existing power 
plants were not capable of generating all the electricity that was 
demanded.
  The reason for the shortage is not that plants were not built. The 
reason plants were not built was because there was not considered to be 
the likelihood of a shortage. Instead, the reason there is a shortage 
is that by creating an artificial shortage, they are able to drive the 
prices higher.
  So I do not know if my colleague from Orange County has additional 
comments.
  Ms. SANCHEZ. One of the other myths that we have heard is somehow 
that Californians are just these consumption hogs with respect to 
electricity. I think we were looking at some statistics the other day 
that showed that of the 50 States, we are behind Rhode Island, number 
two in the least amount consumed per person in any State as far as the 
electricity that we use.
  So when people say we all are just consuming too much and leave all 
the lights on and we are just not paying attention to what is going on, 
we are actually one of the best States with respect to consumption of 
electricity per person in the entire United States. So I would like to 
dispel that myth where people are saying we just use too much energy, 
or we use more than the energy we should use.
  Also going back to the fact that this is a concern for America, there 
are plenty of times, and we have seen these numbers over and over, 
where we send a lot of tax dollars to Washington and we are what one 
calls a donor State. We never get as much money as we send to 
Washington back into California. It is usually put in the pot out here; 
and when relief is going on for floods in areas or droughts in areas or 
tornadoes in areas, our money usually goes to help other States who are 
in need.
  I would just say again that from a California perspective we are a 
team player. We want to be a part of the overall economy in the United 
States; and what has, I think, really angered some Members who are from 
California and the Pacific Northwest, and also many Californians, is 
that we have had an administration here in Washington who has basically 
said you all fix it; it is nobody else's problem. I think that is a 
very short view of what is really happening out in California.
  Mr. SHERMAN. I do want to point out that those who say it is your 
problem, you go fix it, are the same ones who have tied our hands 
behind our backs, because it is Federal law that says we are not 
allowed to impose rate regulation on these independent utilities. So 
they sit there. We can almost hear the muffled laughter as they say it 
is your problem, go fix it, and, oh, let me strengthen those ropes just 
to make sure they are tight. Let me gag you as well so you cannot 
complain about those ropes.
  I would give you an analogy here. Imagine that your home is burning 
down. Now, you might have one neighbor on one side of you that does not 
help you. Okay. But then you have the most malevolent neighbor who goes 
in, grabs your hose, impounds it, and then gives you a lecture about 
how it is your fault your house is burning, you should have read the 12 
points about fire safety while your house is becoming a cinder.
  California is burning. The hose is the right to regulate the 
wholesale price of electricity. That hose is being impounded by 
Washington, D.C.; and those who impound it are lecturing us. They are 
saying you do not need a hose to put out a fire. You need a lecture 
about how this fire is your fault.
  Needless to say, this summer Californians will be getting those 
electric bills. Now, with other products, when I want to know where 
something was made, I pick it up and look for the tag on the back. 
Well, Californians are going to grab their electric bill, they are 
going to look for the tag on the back, and it is going to say, made in 
the corporate suites of Houston, under license from Washington, D.C. 
That is not the way this should happen.
  That is why the bill that I am down here to speak for, a bill that 
many of us, I believe the gentlewoman has, have cosponsored was put 
forward by our colleague, the gentleman from California (Mr. Hunter), 
one of the most conservative Members of the House, cosponsored by the 
gentleman from California (Mr. Cunningham). I cannot even characterize 
how conservative the gentleman from California (Mr. Cunningham) is. 
When was the last time you cosponsored a bill from the gentleman from 
California (Mr. Cunningham)?
  Ms. SANCHEZ. I am from conservative Orange County.
  Mr. SHERMAN. Excuse me. Excuse me.
  My colleague, the gentleman from California (Mr. Gallegly), with whom 
I represent Ventura County, why are conservative Republicans sponsoring 
this bill? Because it is the right thing to do.
  In the Senate, the bill is Feinstein-Smith. So there is bipartisan 
legislation, bicameral legislation blocked by the White House, while 
the problem continues.
  Ms. SANCHEZ. One of the things that we have really asked for is sort 
of a time-out, a time to set some prices where we can take a look at 
were supplies really artificially taken off the markets in order to 
increase the price that we have had to pay in California. What is the 
real demand that we are facing now and the demand that we will face in 
the near future, and what suppliers do we really have, and will that be 
enough and what will be a time line? Really a time-out to make a plan 
of what happened, what is currently happening and what we must do for 
the future.
  One of the things that we have asked for is maybe about a year's 
worth of some caps so that we can take the time to really understand 
the problem, rather than to try to legislate off the cuff, without 
enough information, which might make us have the situation worsen for 
California and for others. We are not asking for price caps for the 
next 10 years. We are just asking for some time in which we can 
understand the situation and with some bright minds sit down and think 
of the solution for this problem.
  Mr. SHERMAN. I might add, in describing the bill that we both 
support, it is indeed temporary; just a couple of years. It is being 
called price caps. It is actually something that is less opposed than 
price caps by those that oppose it.

[[Page 9374]]

It is cost-plus-profit regulation. So it is not like we turn to every 
producer and say you cannot sell for more than $50 a megawatt. If you 
have a wind farm that was expensive to build and it cost you $80 a 
megawatt, 8 cents a kilowatt, we will let you sell for $90 or $100. So 
it is cost plus profit and that cost includes depreciation of your 
equipment. So it is a fair price for each producer, plus a generous 
profit.
  Also the bill does call for investigation. We do need to investigate 
what has happened and how we have been gouged.
  I would point out that the California Public Utilities Commission has 
done an investigation already. Not that we do not need to investigate 
more. They concluded that, yes, supply was withheld in order to move up 
the price.
  There is another element to this bill and another element of the 
crisis that I do want to mention, and that is the natural gas crisis.
  Now, throughout North America the price of natural gas has more than 
doubled, and that doubling is tough on many people around the country; 
and yet it is hard to say that that results from monopoly power.

                              {time}  1815

  There are thousands of producers of natural gas, and natural gas is a 
wonderful fuel. Its prior price had it cheaper than oil; now it is 
equal with oil in terms of the Btus it produces, and it burns clean. 
But in addition to this doubling of the North American price, the cost 
of moving natural gas from Texas and New Mexico and Colorado, where it 
is found, to California, went up by a factor of 12. So we pay more to 
move natural gas 800 or 900 miles than is the value of the natural gas. 
The shipping costs exceed the product cost. 12 cents.
  Why did that happen? Again, the Federal Energy Regulatory Commission 
came up with a bright idea. They punched a giant loophole in their 
regulation of the four big pipeline companies. Talk about market power. 
There are only four of these companies that have major pipelines 
bringing natural gas to all of California. Big loophole. They jacked up 
their price. Amazing. The FERC.
  It is no surprise that many Californians say, we have been FERC'd. 
This bill, and it makes an awful lot of sense, will provide for a 
resumption of what we have had in this country for decades, and it has 
worked well for decades, and that is cost-plus-profit regulation of 
these pipelines, because we can have tens of thousands of producers of 
Iceberg lettuce. We can have thousands of producers of natural gas in 
various wells around the country, but it is simply natural that we are 
only going to have three or four major pipelines going from one 
particular location to another, or three or four pipeline companies. So 
that is why we need regulation. That is why for decades and decades we 
have had it. When we lost that regulation, we end up paying a huge 
amount.
  Now, not only does that hurt us in our natural gas bills. I cook with 
natural gas, heat with natural gas, the bill goes out of sight. But 
also, it is built into the price of electricity, because that is the 
fuel that we burn in those fossil fuel plants that generate electricity 
in our State. So it creates a higher price for electricity and it also 
creates an incentive, as if an extra incentive was needed, for some of 
those companies to withhold production. When they withhold production, 
they burn less natural gas, and they jack the price up. If they operate 
at full tilt, they have to pay for that natural gas at those monopoly 
transportation prices.
  So we do need to regulate natural gas transportation charges. We do 
need to investigate what has happened in the markets. We do need 
temporary cost-plus-profit regulation of those who generate electricity 
in the west.
  Ms. SANCHEZ. Mr. Speaker, again, I would caution the rest of the 
country that if this can happen to California, which is one of the 
largest economies around, imagine that it could happen to someone 
else's State also. We really need to step back. This, I think, is an 
emergency in California, in particular, in the next 4 or 5 months 
during the hot summer of California. But this is a bill about stepping 
back and taking a look and learning from this so that we can, in an 
overall plan for the United States, make an energy policy that works 
for each State and for all business people and homeowners across the 
Nation.
  Mr. SHERMAN. Mr. Speaker, I want to shift just a little bit, because 
we are so preoccupied, quite naturally, with the short term in our own 
State, and talk a little bit about conservation and how important it 
is.
  Now, the problem we have is that the President's budget and, frankly, 
this Congress, over its last 6 years of Republican control, has 
underfunded research, renewables and conservation; that, in fact, we 
have seen a tremendous savings of energy in this country due to our 
limited success in those areas. Even with that limited success, we have 
saved, I think the figure is a couple hundred billion dollars worth of 
energy, because we use renewables, because we have done the research, 
because we have conservation and greater efficiency.
  So what did the Congress do during the 6 fiscal years it was in 
control while President Clinton was in the White House? Every single 
year, the amount spent on conservation efficiencies, renewables and 
research was cut. The total cuts probably meant that during the 6 
years, we did 4 years' worth of the research, at least the amount 
provided for in President Clinton's budget. But then, starting with 
that lower amount that is in fiscal year 2001, the President submits a 
budget that shows a one-third reduction from that lower amount in the 
amount spent on research, renewables, conservation and efficiency.
  Not good. So then, realizing that the country realizes that we have 
an energy crisis, that we need money spent on renewables and research 
and conservation, the President issues his energy plan. His energy plan 
was a beautiful, slick book put out by his press office, a wonderful 
press document, and in that plan he has $2 billion for clean coal, he 
has tax credits for conservation, he has money for research. It is all 
there in the pamphlet.
  Ms. SANCHEZ. But it is not in the budget.
  Mr. SHERMAN. But the pamphlet is not the law. The budget he submitted 
slashes the money. Then that budget is the basis of the tax cut that 
they are going to have us pass tomorrow, the next day, whenever they 
get it written. So that is going to cut the revenue available. And they 
are going to leave out of that tax cut several other important tax cuts 
that are necessary to make that tax cut work, so they are going to come 
back with a second tax cut bill, and then they are going so say, well, 
fine, we will agree to spend the money on clean coal as long as you 
take the money out of the Social Security Trust Fund.
  Mr. Speaker, that is a nonstarter. There is no money in the budget 
for these conservation, research and renewable programs. The budget 
will be locked in with the tax bill, and there will be no money 
appropriated. That is perhaps why the White House needs to see 
blackouts, because in the light of day, there is an obvious contrast 
between telling people you are in favor of conservation and renewables 
and research and efficiency, and then, in the dark of night, passing 
the budget and tax bills that make it absolutely impossible to 
effectuate what you claim you want to do.
  Ms. SANCHEZ. Mr. Speaker, is the gentleman telling me that this tax 
cut that we are going to see voted on by the end of this week would 
really take away our ability to fund or put into the budget, really 
fund programs in the coming year, as we do our work, the programs that 
his slick booklet talked about? These booklets of energy, of fuel cell, 
these research and development programs for cleaner technologies? We 
know that his original budget coming here to us cut significantly, had 
a very paltry sum, and that when his administration, President Bush's 
administration said, cutting back on consumption is not really the way 
to do this, and people were upset that he did not look at conservation

[[Page 9375]]

and new technologies; that he turned around and talked about these, but 
the reality is, his budget and the numbers that are reflected by that 
budget and what we have here is documents and working documents tells a 
different story.
  Mr. SHERMAN. Mr. Speaker, that is exactly what I am saying. We do not 
know what is in that tax bill. As I understand it, there is no Democrat 
in the room where the tax bill is being written, although they call it 
a conference committee. But we do know that when they emerge, one-third 
to one-half the benefits will go to income tax reductions to the 
wealthiest 1 percent of Americans. That is not in return for that group 
or any other group investing in clean coal or conservation; that is 
just a tax cut.
  So while the President's plan calls for tax credits for conservation, 
for renewables, there is nothing in the tax bill that provides the tax 
credits that the President does the press conference about. That is why 
perhaps the real view of this administration, one that they have back-
peddled from when it hit a fire storm, but their view was reflected in 
the comments well-known by the Vice President when he said, 
conservation may be a personal virtue, but it is not the sufficient 
basis for a comprehensive energy policy.
  I think we need to respond. And that is, excessive energy company 
profits and environmental despoliation and destruction is not a 
sufficient basis for a comprehensive energy policy. What we need short-
term for California are those rate regulations, and what we need in 
addition to some of the infrastructure improvements that the President 
talks about is a real dedication to conservation, to research, 
renewables, and ``real'' means you put it in the budget and you 
appropriate money for it. Not a real good pamphlet, but a real good 
law.
  Ms. SANCHEZ. Mr. Speaker, being from California or going to New York 
or these research institutions where they are doing the research, these 
people are so optimistic, the researchers. They are looking at fuel 
cells and alternative fuels and different ways, rather than to use 
fossil fuel for the future. I mean, when we think of our country and 
this whole new technology and new economy that we are going through. I 
think if, in 1960, President Kennedy could say, we need to get a man to 
the moon and we could develop that technology that did that by July of 
1969.
  I am very familiar with that, of course, because it came out of the 
area that we represent, that certainly, with all of the new technology, 
with the research, if we just put money into that and let these people 
go at it, that in 5 or 6 years, we would completely change the type of 
energy that we use to run our cars and run our businesses and our 
homes.
  Mr. SHERMAN. Mr. Speaker, if I can just add some of the statistics to 
back this up. Earlier we were talking about getting plants permitted. 
During the 8 years in which we had a Republican governor, we had zero 
plants permitted. Just in the last 2 years under a Democratic governor, 
14 plants permitted, seven are under construction, four of them are 
going to be on line this summer, another four or five will be on line 
before we hit the problems of next summer. We will have 8,500 megawatts 
on line. That is moving forward.
  But getting back to renewables and research, as I said, the budget 
put forward by the President cuts renewables and research and energy 
efficiency by about a third. We were talking about how successful 
energy conservation has been. Americans have saved 4 times more energy 
through efficiency, conservation and renewables over the last 20 years 
than has been produced from new sources, new finds, of fuel in the 
United States.
  And Americans have saved $180 billion, I might have thought it was 
$200 billion earlier, $180 billion over the last 20 years. That is just 
because we are using less energy than we would have, because we have 
got this technology and that is saving $200 for every dollar that the 
United States has invested in developing these renewables, developing 
conservation systems. If we go up to a wildlife refuge and we drill for 
oil, we get the oil, we destroy the environment, and then the oil is 
gone. If we invest in the technology that allows us to use less oil, we 
use that technology this year and next year, the technology is never 
gone, the technology, if anything, is improved year after year. That is 
why if we are looking for a long-term solution, we cannot get it unless 
we have a real dedication, not just a press office dedication, to 
renewables, to conservation, and to research.
  Ms. SANCHEZ. Mr. Speaker, I want to thank my colleague from 
California for taking this hour to discuss and to dispel some of the 
myths that people around the country have heard about Californians and 
about what we are facing there. I hope that many of them will take the 
time to read the real information and to understand that where 
California goes, so does the rest of the Nation. I want to thank my 
colleague for the time given.

                              {time}  1830

  Mr. SHERMAN. Mr. Speaker, I want to thank my colleague from Orange 
County for participating in this special order. I think we have covered 
the subject well.

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