Bush Policy Toward CA Power Crisis Fluctuates
Energy Secretary nominee Spencer Abraham said during his Senate
confirmation hearing last Thursday that the grave power crisis
facing California would be a priority of the Bush White House. But
no sooner had those words been uttered than incoming President
George W. Bush essentially wiped his hands clean of the state's
problems. Key Senate Republicans as well urged Abraham and the Bush
White House to take a hands-off approach to the continuing crisis.
At his hearing, Abraham sidestepped questions about what action,
if any, the incoming Bush administration would take to deal with
the power-supply problems and potential utility bankruptcies in
California, saying "premature" speculation on his part could
"disrupt" ongoing negotiations at the state level. But the matter
will be an "urgent priority" of the Bush administration, he assured
the Senate Energy and Natural Resources Committee last Thursday.
On Friday, however, Bush told the Associated Press that he had
ruled out the possibility of any federal action for California.
"These are California utilities," he told the wire service, meaning
it's up to the state to solve the problem. He further rejected any
price caps on wholesale power, saying such ceilings would amount to
a "short-term delay of a needed solution."
Top Republicans on the Senate panel shared the new president's
views. There will be "great expectations that somehow you are going
to solve this dilemma" in California, Sen. Frank Murkowski (R-AK)
told Abraham, a former senator from Michigan. "I would encourage
you to keep the pressure on those [who] are responsible for it" ---
namely California's governor, legislature, regulators and state
utilities --- "and not necessarily encourage Uncle Sam to step
forward and bail out" the state.
The "immediate burden has to fall on California" for the crisis,
which he believes "was quite predictable." The California retail
consumer "has to feel the hit" of these higher costs before there
can be "meaningful corrections" in the market, Murkowski said.
Sen. Pete Domenici (R-NM) agreed the current crisis has been of
California's own making. He singled out the state's long-held
policy of not-in-my-backyard for siting new generation facilities
as the key culprit. "I think it is an immediate crisis" in
California, and the state "has to decide what they want to do"
about it, he said.
"I sincerely believe there is a federal responsibility here
through FERC," countered Sen. Dianne Feinstein (D-CA). The agency's
role, she said, was to set "just and reasonable" rates on wholesale
power transactions in California, which she pointed out it failed
Feinstein said she plans to introduce legislation on Capitol
Hill this week, possibly as early as today, that would give the
Department of Energy (DOE) the authority --- whether it wants it or
not --- to establish cost-based rates for bulk power transactions
in 12 western states when prices are determined to be "unjust and
The rates would be temporary until a state can bring more power
sources on line, she said, and the proposed fix would be voluntary
in nature, with states having the ability to opt out.
Feinstein, a new member of the committee, contends if
California's major utilities go bankrupt, this would have ripple
effects in western, national and international economies. "Anyone
who thinks this is going to stay just with California is dead
wrong." Feinstein believes a concerted effort by state, federal and
industry officials is required to put California's power market
back on track.
To forestall utility bankruptcies, she called on California Gov.
Gray Davis and state lawmakers to quickly move to securitize the $8
billion-plus debt load that the utilities have incurred as the
result of not being allowed to pass through the increases in
wholesale power costs to their retail customers. She proposed that
the debt be securitized over a long period, giving the utilities'
customers 15 years or more to pay it off.
Compared to the more contentious confirmation hearings that were
taking place on Capitol Hill last week, members of the Senate
Energy Committee treated their former colleague with kid gloves.
Bush picked Abraham to head up the DOE after he lost his bid for
re-election to the Senate last November.
The committee wasted little time last Thursday in voting out
Abraham's nomination. It will be forwarded to the full Senate,
which is expected to act quickly to approve him.