Sen. Gordon Smith (R-OR) announced last week that he and Sen.Dianne Feinstein (D-CA) have reached “consensual agreement” onlegislation that would levy price caps or cost-based rates onwholesale power transactions in western markets for as long as twoyears. The measure also would seek to reimpose price caps onshort-term gas transportation to the California market, and wouldrequire gas sellers to declare separately the transportation andcommodity components associated with their bundled “gray market”transactions.

The initiative, which the senators plan to formally introduce inthe “near future,” would offer the power price-control relief tostates in the Western Systems Coordinating Council (WSCC) -Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico,Oregon, Washington, Utah and Wyoming. The power price caps orcost-based rates would remain in effect until either the westernpower markets achieve “just and reasonable” rates or until March 1,2003, whichever comes first.

Unlike previously proposed measures, the power price controlsadvocated in the Smith-Feinstein proposal would not apply inwestern states that refuse to allow regulated utilities to passtheir wholesale power costs through to customers at the retaillevel.

“…..I believe that this approach, while temporary, will helpus to avert an economic and environmental catastrophe” in the West,said Smith during a hearing before the Senate Energy and NaturalResources Committee last Thursday. “I hope that [we will] pass thison a bipartisan basis, and I hope the Bush administration will be aparty to it.”

Although this marks the first bipartisan support for pricecontrols in Congress, Senate Republicans on the committee, and Bushadministration officials indicated that a Smith-Feinstein billprobably would be a tough sell on Capitol Hill and at the WhiteHouse.

Under the proposed measure, state regulators still would retainauthority over how and when to pass through utility wholesale powercosts to retail customers, Smith said. The Bonneville PowerAdministration (BPA), over which FERC lacks direct jurisdiction,would be encouraged to reduce rate increases to “economicallydistressed communities,” while ensuring that its costs arerecovered 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 theregion to ensure that utilities meet local demand for electricitybefore making sales outside of their service territories.

Another provision in the bill would absolve companies from theobligation to sell electricity or natural gas into a state withoutfirst receiving a determination from FERC that the suppliers willbe paid, Smith said.

Susan Parker

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