The governors of California, Oregon and Washington Monday sent aletter to the Federal Energy Regulatory Commission renewing earlierrequests for a temporary western wholesale price cap onelectricity, but allowing a $25/MWh profit over the cost of thepower. A similar proposal, they said, has been offered by FERCCommissioner William Massey.

Governors Gray Davis (CA), John Kitzhaber (OR) and Gary Locke(WA) suggested a cost-based cap for spot market wholesale powerduring the continuing shortage of generating capacity in thewestern states.

Under the trio’s proposal, bilateral and long-term contractswould be exempt. Federal power marketing agencies not controlled byFERC, such as Bonneville Power Administration, would be asked tovoluntarily adhere to the cap. The governors asked for “promptaction” from FERC.

“While we fully recognize the benefits of a free market, ourproblem is that we have a shortage of electricity,” the governorssaid in their joint letter. “In spite of our aggressive and urgentefforts, the problem will only get worse throughout the year andparticularly this summer.”

The continuing shortage, they noted, has “enabled generators toreceive unjust and unreasonable charges for their wholesaleenergy.”

Noting that the cap they seek will only be needed “in the eventof a shortage, and only for this year,” the governors conceded thateven with the new-found long-term contracts “a substantial portion”of the needed power will have to come from the more expensive spotand hour-ahead markets.

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