As he prepares to take the reins of the Senate Energy and Natural Resources Committee, Sen. Jeff Bingaman (D-NM) last week said that he does not believe that writing price caps into law should be the first response of Congress to out-of-control wholesale electricity prices seen in California in recent months. Instead, the New Mexico senator argued that Congress should be calling on the Federal Energy Regulatory Commission to fulfill its responsibilities to ensure just and reasonable wholesale power rates.

Bingaman has been thrust into the position of incoming chairman of the Senate Energy and Natural Resources Committee after the recent decision by Sen. James Jeffords (VT) to leave the Republican party and become an independent. The move by Jeffords shifts the balance of power — and committee chairmanships — from the Republicans to the Democrats. Bingaman replaces Sen. Frank Murkowski (R-AK) as chairman of the key Senate energy panel.

All eyes are now on Bingaman and how much of an impact his new role as chairman of the Senate Energy and Natural Resources Committee will have on the wide range of energy policy matters that sit before the panel. Bingaman took the first steps in shedding light on where he stands on a number of important energy issues during a Deutsche Banc Alex. Brown energy policy conference call last week.

During the call, the New Mexico senator was asked to clarify whether he is in favor of price caps and whether this is something that he is comfortable leaving up to FERC to act upon, as opposed to including in legislation. Bingaman noted that the only legislation pending in the Senate relevant to price caps is legislation sponsored by Sens. Dianne Feinstein (D-CA) and Gordon Smith (R-OR). Bingaman noted that the Feinstein-Smith bill directs FERC to “go ahead and take action to ensure that prices are just and reasonable, and talks not in terms of price caps, but in terms of cost-based rates that permit a reasonable rate of return for any company involved.”

“We should not be writing into law any kind of a price cap,” Bingaman went on to say. “I do think we should be calling on FERC, though, to carry out its responsibilities under the law, and FERC is much better able to step in and take action on a temporary basis, and then change that action when circumstances require, and I hope that’s what will happen.” Bingaman mentioned the (then) pending appointments of Texas regulator Pat H. Wood III and Pennsylvania regulator Nora M. Brownell to FERC. The Senate on Friday approved the nominations of Wood and Brownell to the two vacant spots at FERC (see related story). “I’m very optimistic that they will step up to this responsibility and that we will not wind up having to pass any additional legislation,” Bingaman said.

The New Mexico senator also addressed the question of whether price caps could serve as a deterrent to new generation being built. “If any kind of involvement by the Federal Energy Regulatory Commission is done responsibly, I don’t think it should be a problem at all,” Bingaman said. He noted that the Federal Power Act requires FERC to ensure that rates for wholesale power are just and reasonable. “It’s clear to me that they have not been just and reasonable in California in recent weeks and months and the Federal Energy Regulatory Commission has responsibility to step in and deal with that situation,” he said. “Now, they can do so, to the extent that they impose caps or limits on what can be charged, they certainly can impose those at a high enough level that anyone who is investing in a power plant, or anyone who owns a power plant, is ensured a very good rate of return,” Bingaman said. “We’re not suggesting that the caps be unreasonably low and we’re not suggesting that they be at such a level that they would discourage investment in additional capacity,” he added.

Bingaman also addressed what energy issues he thinks are likely to get top priority in the Senate in the short term. “I think the list of items that really we can do a lot of good on quickly here — the list of legislative items — is pretty short,” the senator said. Specifically, Bingaman said that the Senate needs to authorize a higher level of funding for the low-income home energy assistance program. “We do perhaps need to look at this legislation Senator Feinstein and Senator Smith have put forward and see if that’s going to be required in order to get FERC to do its job on wholesale prices of electricity in California,” he went on to say. “Those are the two areas which are clear to me that we should look at,” Bingaman said.

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