Senators Agree to Price-Control Bill for Western Power, Gas
Sen. Gordon Smith (R-OR) announced last week that he and Sen.
Dianne Feinstein (D-CA) have reached "consensual agreement" on
legislation that would levy price caps or cost-based rates on
wholesale power transactions in western markets for as long as two
years. The measure also would seek to reimpose price caps on
short-term gas transportation to the California market, and would
require gas sellers to declare separately the transportation and
commodity components associated with their bundled "gray market"
The initiative, which the senators plan to formally introduce in
the "near future," would offer the power price-control relief to
states in the Western Systems Coordinating Council (WSCC) -
Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico,
Oregon, Washington, Utah and Wyoming. The power price caps or
cost-based rates would remain in effect until either the western
power markets achieve "just and reasonable" rates or until March 1,
2003, whichever comes first.
Unlike previously proposed measures, the power price controls
advocated in the Smith-Feinstein proposal would not apply in
western states that refuse to allow regulated utilities to pass
their wholesale power costs through to customers at the retail
".....I believe that this approach, while temporary, will help
us to avert an economic and environmental catastrophe" in the West,
said Smith during a hearing before the Senate Energy and Natural
Resources Committee last Thursday. "I hope that [we will] pass this
on a bipartisan basis, and I hope the Bush administration will be a
party to it."
Although this marks the first bipartisan support for price
controls in Congress, Senate Republicans on the committee, and Bush
administration officials indicated that a Smith-Feinstein bill
probably would be a tough sell on Capitol Hill and at the White
Under the proposed measure, state regulators still would retain
authority over how and when to pass through utility wholesale power
costs to retail customers, Smith said. The Bonneville Power
Administration (BPA), over which FERC lacks direct jurisdiction,
would be encouraged to reduce rate increases to "economically
distressed communities," while ensuring that its costs are
recovered by the end of the next contract period in 2006, he noted.
For western states that don't qualify for wholesale price caps,
the Smith-Feinstein initiative would require regulators in the
region to ensure that utilities meet local demand for electricity
before making sales outside of their service territories.
Another provision in the bill would absolve companies from the
obligation to sell electricity or natural gas into a state without
first receiving a determination from FERC that the suppliers will
be paid, Smith said.