Energy Secretary nominee Spencer Abraham said during his Senateconfirmation hearing last Thursday that the grave power crisisfacing California would be a priority of the Bush White House. Butno sooner had those words been uttered than incoming PresidentGeorge W. Bush essentially wiped his hands clean of the state’sproblems. Key Senate Republicans as well urged Abraham and the BushWhite 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 withthe power-supply problems and potential utility bankruptcies inCalifornia, saying “premature” speculation on his part could”disrupt” ongoing negotiations at the state level. But the matterwill be an “urgent priority” of the Bush administration, he assuredthe Senate Energy and Natural Resources Committee last Thursday.
On Friday, however, Bush told the Associated Press that he hadruled out the possibility of any federal action for California.”These are California utilities,” he told the wire service, meaningit’s up to the state to solve the problem. He further rejected anyprice caps on wholesale power, saying such ceilings would amount toa “short-term delay of a needed solution.”
Top Republicans on the Senate panel shared the new president’sviews. There will be “great expectations that somehow you are goingto solve this dilemma” in California, Sen. Frank Murkowski (R-AK)told Abraham, a former senator from Michigan. “I would encourageyou to keep the pressure on those [who] are responsible for it” —namely California’s governor, legislature, regulators and stateutilities — “and not necessarily encourage Uncle Sam to stepforward and bail out” the state.
The “immediate burden has to fall on California” for the crisis,which he believes “was quite predictable.” The California retailconsumer “has to feel the hit” of these higher costs before therecan be “meaningful corrections” in the market, Murkowski said.
Sen. Pete Domenici (R-NM) agreed the current crisis has been ofCalifornia’s own making. He singled out the state’s long-heldpolicy of not-in-my-backyard for siting new generation facilitiesas the key culprit. “I think it is an immediate crisis” inCalifornia, and the state “has to decide what they want to do”about it, he said.
“I sincerely believe there is a federal responsibility herethrough FERC,” countered Sen. Dianne Feinstein (D-CA). The agency’srole, she said, was to set “just and reasonable” rates on wholesalepower transactions in California, which she pointed out it failedto do.
Feinstein said she plans to introduce legislation on CapitolHill this week, possibly as early as today, that would give theDepartment of Energy (DOE) the authority — whether it wants it ornot — to establish cost-based rates for bulk power transactionsin 12 western states when prices are determined to be “unjust andunreasonable.”
The rates would be temporary until a state can bring more powersources on line, she said, and the proposed fix would be voluntaryin nature, with states having the ability to opt out.
Feinstein, a new member of the committee, contends ifCalifornia’s major utilities go bankrupt, this would have rippleeffects in western, national and international economies. “Anyonewho thinks this is going to stay just with California is deadwrong.” Feinstein believes a concerted effort by state, federal andindustry officials is required to put California’s power marketback on track.
To forestall utility bankruptcies, she called on California Gov.Gray Davis and state lawmakers to quickly move to securitize the $8billion-plus debt load that the utilities have incurred as theresult of not being allowed to pass through the increases inwholesale power costs to their retail customers. She proposed thatthe 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 weretaking place on Capitol Hill last week, members of the SenateEnergy Committee treated their former colleague with kid gloves.Bush picked Abraham to head up the DOE after he lost his bid forre-election to the Senate last November.
The committee wasted little time last Thursday in voting outAbraham’s nomination. It will be forwarded to the full Senate,which is expected to act quickly to approve him.
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