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GOP and Governor of California Blaming Each Other for State's Energy Problems

Aired June 20, 2001 - 17:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: Live from Washington, this is INSIDE POLITICS with Judy Woodruff.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: FERC must order these energy companies to give us back our money.

(END VIDEO CLIP)

ANNOUNCER: In the Senate probe of the energy crunch, California's governor points his finger at the feds and Republicans point back.

(BEGIN VIDEO CLIP)

SEN. FRED THOMPSON (R), TENNESSEE: For Governor Davis, the answer is simple: A bunch of Texas cowboys got down at the coral and decided they were going to take advantage of helpless California.

(END VIDEO CLIP)

ANNOUNCER: In the battle over patients' bill of rights, can the president find a prescription for compromise?

And we'll investigate media coverage of the missing Washington intern, and of the congressman who calls himself her "good friend."

Now Judy Woodruff takes you INSIDE POLITICS.

JUDY WOODRUFF, CNN ANCHOR: Thank you for joining us.

Today's Senate hearing on California's energy problems may have shed as much light on political strategies as on the problem itself. In the witness chair, Democratic Governor Gray Davis once again urged Washington to do more even as some Republicans suggested it is Davis who has not done enough. Our Congressional correspondent Kate Snow has been following the sparks on the Hill.

(BEGIN VIDEOTAPE)

THOMPSON: I want to ask you, how it was that you seem to let things get totally out of hand? KATE SNOW, CNN CORRESPONDENT (voice-over): It wasn't a shouting match, but Republicans didn't go easy on Governor Gray Davis either, asking whether he should have done more to prevent price spikes and shortages.

THOMPSON: Did you see these developments as they were occurring? Did they cause you concern? If not, why not? And if you did, why didn't you act sooner?

GOV. GRAY DAVIS (D), CALIFORNIA: We have been working on this for a very long time, and to suggest otherwise is simply not accurate.

SNOW: Davis said California is building 16 new power plants and conserving energy at record rates. He welcomed Monday's action by the Federal Energy Regulatory Commission, or FERC, meant to lower prices on Western electricity.

That action has quieted calls from Senate Democrats who had been demanding price caps. But Davis brought a demand to Washington, too: rebates for consumers who've been overcharged, by his estimate, $9 billion.

DAVIS: I believe it is unconscionable if generators are allowed to keep these egregious overcharges. Mr. Chairman, FERC must move quickly to enforce the law. FERC must order these energy companies to give us back our money.

SNOW: Later in the day, the chairman of that commission responded.

CURT HEBERT, FERC CHAIRMAN: There should be no doubt that this commission is actively pursuing refunds and other appropriate remedies for past behavior. The commission is not ducking these issues.

SNOW: Republicans questioned the wisdom of demanding rebates, saying that kind of talk could drive potential investors away from California, but Davis, under increasing political pressure at home, told Congress he'd continue to make noise.

DAVIS: I suggest to you, if it weren't for a good deal of what you might consider political hyperbole, we might not have got the attention of Federal Energy Regulatory Commission that stiffed us for almost a year.

(END VIDEOTAPE)

SNOW: Governor Davis coordinated his message with the two state senators, the two Democratic senators from California, but there is also pressure coming now from outside of California, on the subject of rebate, Senator Maria Cantwell sending a letter today to the chairman of the FERC, the Federal Energy Regulatory Commission, asking that they look into allowing people outside the state of California -- for example, from the state of Washington, her state -- to also seek refund.

This afternoon, the chairman of the commission indicated that the table was open to those states as well, that the talks that are aimed at settling the issue with California, Judy, would also be open he said to the other states in the West -- Judy.

WOODRUFF: Kate, we heard some of the questions from Republican Senator Fred Thompson. We also know now that the Senate is controlled by the Democrats. That may have had some affect on this hearing. Did it?

SNOW: It did. There is a tone from Democrats, including Chairman Joe Lieberman, that was set which was cordial and courteous, and Joe Lieberman went to great pains to say we understand that you Mr. Governor did not cause this problem, that of these issues were here well before you took office.

They did not by the way go after the administration as some thought they might. But they did sort of ask Governor Davis to simply explain, how did you get to this point and where do we go from here? -- Judy.

WOODRUFF: All right, Kate Snow reporting from the Capitol. Thanks.

And now we are joined by the senior energy adviser to Governor Gray Davis, David Freeman.

Thank you very much Mr. Freeman for being with us.

DAVID FREEMAN, CALIFORNIA SENIOR ENERGY ADVISER: Delighted to be here.

WOODRUFF: What is your reaction when you hear Senator Fred Thompson saying, you know, here's the theory: you thought a bunch of Texas cowboys sat around in the corral, and decided to pick on poor old California. Is that what Governor Davis' theory is of what happened?

FREEMAN: You know, I'm from Tennessee and I have a hard time saying anything but good of Senator Thompson, a protege of Howard Baker, a good friend of mine.

But the senator just doesn't understand that the floodgates were opened by FERC's sitdown strike. What happened is that the price of electricity which has been regulated for 40, 50 years didn't cause any problems, they just deregulated it, and the wholesale prices went up 700 percent. Now, you know the Federal Power Act is a consumer protection act. This is not political.

This is a statute that Sam Rayburn, another Texan, put on the books in 1935, and it's been uniformly enforced to give consumers reasonable price electricity. This thing is taking bread off the table, is depriving people of the money to buy clothing to send their kids through college. This is a serious matter.

WOODRUFF: When Governor Davis, David Freeman, says he's looking for $9 billion worth of rebates to Californians, some people are saying that has to be an exaggerated and inflated figure. FREEMAN: Well, it's not. Look at what we're paying. We paid 7 billion as a state two years ago, 25 billion this year -- last year -- and it's going to be almost 50 billion.

What we're asking back is less than 20 percent of the price and the price is enormous. That kilowatt number hadn't gotten better and it hadn't gotten bigger and we're not buying anymore than we did two years ago, somebody is making outrageous profits and they need to give some of the money back.

This was on the basis of a careful study that the independent system operator did.

WOODRUFF: Now we have the chairman of FERC, the Federal Energy Regulatory Commission, saying, if there are rebates, they ought to perhaps go to people in the other Western states, that it shouldn't just go to California?

FREEMAN: Well, we agree with that. Their order is deficient in that they've only ordered the rebate settlement to deal with California. We agree. They have been overcharged elsewhere also. But that's hardly a defense for his point of view. He's the same fellow that six months ago said, let grandma die.

WOODRUFF: You are referring to whom?

FREEMAN: Mr. Hebert.

WOODRUFF: Oh.

FREEMAN: When he was asked about this problem, he says the marketplace reigns and let grandma die. You know, I think Pat Wood and the new commissioners brought a little bit of humanity to that commission and consumer protection, which is their job.

WOODRUFF: What do you say, David Freeman -- there are these new ads as you know, television ads running in the state of California, paid for by the American Taxpayer Alliance. This is a Republican- funded group.

Among other things, they are saying Governor Davis is responsible: when he was the one who appointed people to the state Public Utilities Commission, who should not have made the decision they did with regard to wholesale prices.

FREEMAN: First of all, folks that come from Tennessee think that people ought to identify themselves when they start calling people names, and the idea that folks can put ads up and not even know who is paying for the ads is just horrible. The ads paint a false picture. Gray Davis' appointees were not a majority on that PUC until January...

WOODRUFF: This is the Public Utilities Commission.

FREEMAN: The Public Utilities Commission was under the control of the former governor until January of this year. And the criticisms were made about what they did in the past, and perhaps they're valid.

WOODRUFF: There is now finger-pointing going in both directions. We have had some pretty tough comments from you and from Governor Davis, talking about, you know, our pockets being picked out here in California. They're making some tough comments. Has this degenerated into a political fight?

FREEMAN: Well, I think anytime that people are hurting, they have a right to speak up and assert their interests. You know, I go back to when consumer protection was considered a good thing and not just a political thing.

This statute is on the books to protect consumers when there's a shortage, they ought to be putting a ceiling on the prices. And we have been overcharged unbelievably.

Let me tell you this: the governor has not just blaming other people. We have gone to work in California. We are building power plants, and I think the people in the committee were astonished to find out that we're building more power plants any time in the history of California, and they are being completed this year.

And we are conserving power; we are conserving more than anyone else in the country. We have the lowest per capita use of electricity now. We're closing the cap and we're going to pull this wagon out of the mud within the next couple of years. But in the meantime, we're going broke. And all we're saying is while we fix the problem in California, we want somebody else to get into this battle alongside of us: namely, FERC.

And I must say that they took a good step Monday. And since they have concluded...

WOODRUFF: This is by the mitiga -- expanding the mitigation?

FREEMAN: Yes, they have concluded that the rates are unjust and unreasonable. Doesn't it follow as, the night the day, that if the regulatory agency says we've been overcharged, we are not in a blame game anymore, we are simply asserting what they said. And if we have been overcharged, give us our money back.

WOODRUFF: All right. David Freeman, who is senior energy adviser to Governor Gray Davis of California.

FREEMAN: That's because I'm the oldest guy there.

WOODRUFF: David Freeman, thank you very much and it's good to see you again. We talked to you when we were out in California about a month ago. FREEMAN: You are always welcome in California, on the tube or in person.

WOODRUFF: Thank you very much. We appreciate that.

Well, in the House of Representatives, Speaker Dennis Hastert says he is close to unveiling a compromised health care reform bill. It would allow patients a limited right to sue their HMOs in state courts. After an appeal to an outside review panel, if the HMO refused to follow the panel's decision. The measure goes a bit farther than a bill favored by many Senate Republicans but it may fall within the boundaries that President Bush has set for patient rights' legislation.

CNN's Kelly Wallace examines the president's strategy on this issue.

(BEGIN VIDEOTAPE)

KELLY WALLACE, CNN CORRESPONDENT (voice-over): Call it President Bush's opening salvo, as the debate begins over how to protect Americans enrolled in HMO's.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The idea is to serve more patients, not to create more lawsuits in America.

WALLACE: The president's strategy, senior aides say, is to position himself in the middle when it comes to a right to sue an HMO, charging that the bill favored by Democrats and Republican Senator John McCain goes too far, and that ideas pushed by Republicans like Oklahoma Senator Don Nickles don't go far enough, giving a stamp of approval to a tripartisan approach. BUSH: I want to thank Senators John Breaux, Democrat, Senator Bill Frist, Republican, Senator Jim Jeffords, Independent -- (LAUGHTER) -- for working hard to come up with a reasonable solution to this very important problem.

WALLACE: Senior advisers say the president is dead serious about vetoing the Democratic plan. But privately, some Democrats believe he would be forced politically to sign the measure. Publicly though, Democrats will only say...

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: I'm not prepared to say anything, other than I hope we can work this out. I don't want a veto. I want an accomplishment.

WALLACE: But even some Republicans believe the president would not want to risk angering Americans with a veto. In fact, according to a recent poll, a patients bill of rights is one of their top concerns, with almost 80 percent saying it is extremely, or very important for Congress and the president to act.

Republican strategists, though, say if Mr. Bush gets a bill he believes to too many lawsuits, and would jack up health care costs, he could veto it without paying any political price.

ED GILLESPIE, REPUBLICAN STRATEGIST: There are good policies and bad policies when it comes to this issue area and signing a bad bill would not be good politics.

(END VIDEOTAPE)

WALLACE: However, Republican pollsters briefing G.O.P. senators yesterday had two messages: One, that Republicans need to pass a bill before next year's election, and No. 2, that this issue played a pivotal role in the defeats of Senate Republicans last year. So clearly the stakes are high for Congressional Republicans and for Mr. Bush even as he threatens a veto -- Judy.

WOODRUFF: Kelly, is it clear at this point, where the White House is willing to compromise?

WALLACE: No, it is not clear. And White House officials are not really saying where the president will be willing to compromise. They say it is early in the process, and right now, they want to see where the votes are in the Senate, thinking that real negotiation and compromise will come later. Clearly, the areas of compromise will come from where patients can sue, and how much in damages they can recover.

The Democratic plan allows patients to sue in state and federal court and caps federal punitive damages at $5 million. But the plan the president likes would only allow lawsuits in federal court and would cap federal pain and suffering damages at $500,000 -- Judy.

WOODRUFF: And Kelly, is there a lesson for the president in his experience with patients' rights in Texas?

WALLACE: Well White House officials like to point out that the president did veto a patients' bill of rights measure in 1995, when he was governor of Texas. They say that measure did not include a right to sue. He vetoed it, they, say because it exempted two of the states largest HMOs. Well, then aides say the president let some of these patient's protections become regulations and he actually signed some of these patient protections into law in 1997.

However, as for the right to sue your HMO, he allowed that to become law in 1997 without his signature. So White House officials saying this president is not afraid to veto a bill if he does not believe it is good policy.

WOODRUFF: All right, so a bit of a mixed picture there from the state of Texas. All right, Kelly Wallace at the White House, thanks.

What medical topic is more controversial than the right to sue HMO's?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Cloning a human being is immoral. Period.

(END VIDEO CLIP)

WOODRUFF: We'll hear from a Congressional committee on the impending threat of human cloning. Plus...

(BEGIN VIDEO CLIP)

BUSH: We all knew he was a good candidate. We didn't realize how good until the results came in last night. (END VIDEO CLIP)

WOODRUFF: One more seat for the G.O.P. Our Candy Crowley on why some are spinning the win as a major victory for the president.

But first, another round of questioning for a California Congressman. The pressure on Gary Condit and the news media frenzy over a missing woman.

(COMMERCIAL BREAK)

WOODRUFF: Seven weeks since her disappearance and still no sign of Chandra Levy, the missing Washington intern whose story has gained increasing national attention in recent days. Our Bob Franken is here now with the latest on the investigation including the news that Levy's friend and hometown Congressman, Gary Condit, is once again facing questions from police -- Bob.

FRANKEN: And we are told that the last minute arrangements are being made, Judy, between the police and Congressman Gary Condit for a second interview. Early after Chandra Levy was reported missing, Condit cooperated completely, said police, and submitted to an interview.

Now they want to go back a second time. Of course, Condit has been repeatedly accused of having a romantic relationship with the former intern who was just about to leave Washington. She had been an intern at the Bureau of Prisons, but had been romantically linked to the congressman.

The congressman's office continues to deny and repeatedly has that there was any romantic relationship. But the police say they want to talk to him some more about that.

(BEGIN VIDEO CLIP)

TERRY GAINER, ASST. D.C. POLICE CHIEF: It may very well lend something to her state of mind. Clearly, they had some type of a relationship and it keeps shifting a little bit over time. But I do believe he and others know how she lived and what she was thinking about when she was here. Now whether that's going to directly help us find her or not is a different question.

(END VIDEO CLIP)

FRANKEN: And the parents of Chandra Levy have come back to Washington. They had been here once before. They had a brief conversation with the police. There's an expectation they'll again meet with the police to find out exactly what is the progress of the investigation.

They came to Washington last night, avoided reporters here, spent the day in seclusion while their attorney, Billy Martin, who is the reason that they came to town, was out of town, as a matter of fact. Martin, you might remember, was somebody who came to fame as a lawyer in the Monica Lewinsky matter. He represented Monica Lewinsky's mother, Marcia Lewis. Martin was out of town today. He came back and said that he had been retained by the Levy family to try and help in the investigation.

(BEGIN VIDEO CLIP)

BILLY MARTIN, LEVY ATTORNEY: I've been retained along with my firm, Dyer, Ellis, & Joseph to assist the family, Dr. and Mrs. Levy in trying to locate or find information on their daughter. We expect to meet with them later. We hope to have a formal statement and news conference or presentation tomorrow. Until then there is not much more I can say.

(END VIDEO CLIP)

FRANKEN: I spoke today with Billy Martin, even though he was out of town, and he said that the reason he had been retained by the Levys, is not just because of his experience in matters concerning interns, but also because he has an investigative background.

He was assistant U.S. attorney in Washington and he headed the homicide investigation department and is expected, Judy, that that is what is going to be his focus as people continue to wonder what has happened to Chandra Levy. The parents of Chandra Levy say that they are not happy with the investigation that has thus far been going on.

WOODRUFF: Bob, there is an impression that Representative Condit has not been entirely forthcoming. Is that impression based on any information that we have? What is it based on?

FRANKEN: Well, it's based on the fact that oftentimes the answers, many people believe, that have been given by Condit or his representatives have not directly addressed questions. They have been very, very carefully worded. Sometimes there's a feeling that he's been parsing some words, all of which has contributed to an impression, an impression that maybe he's not telling everything -- he's not responding to these charges.

Now the Condit people complain that that's not really fair, that in fact, there is nothing really to substantiate these charges but innuendo, and they're being as open as they can considering just how difficult, legally, this is. And also, they say, the emphasis should be not on that, but on trying to find Chandra Levy.

WOODRUFF: All right. Bob Franken, thank you very much. We appreciate it. We know you will be keeping a close eye on all this.

The mysterious disappearance of Chandra Levy once again presented a dilemma for much of the news media. With many editors and reporters, at first, questioning the news value of the story, when some 98,000 people in the United States are currently listed as missing.

But lately, as new information appears to link Levy more closely to Congressman Condit, the case has become a fixture in he mainstream press. Howard Kurtz of CNN's "RELIABLE SOURCES" takes a look now at Chandra Levy and the issue of media coverage.

(BEGIN VIDEOTAPE)

HOWARD KURTZ, CNN CORRESPONDENT (voice-over): Everyone's seen this picture by now: Chandra Levy posing with her hometown Congressman, Gary Condit. As the media have turned the case of the missing intern into Washington's No. 1 mystery, it has reminded some people of this endlessly replayed picture of another intern from California who got involved with an older man.

(on camera): Unfair? Maybe so. But in early May, the media were treating the strange disappearance of Chandra Levy from this apartment building near Washington's Dupont Circle, like they do most of the 98,000 people reported as missing each year, which is to say it was barely news at all.

(voice-over): Just a few paragraphs inside the Metro section of "The Washington Post" and "The Los Angeles Times." Then an e-mail surfaced in which the young woman spoke of a mystery boyfriend, and Condit put up a $10,000 reward while saying the 24-year-old was a, quote, "good friend."

The speculation exploded just as Levy's parents were hiring a firm that helps draw publicity for missing persons. The next stop for the Levys: CBS's "Early Show."

(BEGIN VIDEO CLIP "THE EARLY SHOW")

BRYANT GUMBLE, HOST: Your daughter told friends that she was secretly dating a politician. Was that anything that you were aware of?

UNIDENTIFIED FEMALE: I don't know anything about it right now.

(END VIDEO CLIP)

KURTZ: The story was becoming irresistible.

STEVE FRIEDMAN, CBS, "THE EARLY SHOW": It's every parent's nightmare: Send your college senior off to their first intern job and they don't come home. This has a lot of mysterious little stuff that makes it a great story for television and for the magazines and for the newspapers.

KURTZ: But there was no proof of a relationship with Condit, and much of the media held back from what had the whiff of a tabloid story. That began to change two weeks ago when "The Washington Post" quoted an unnamed relative of Chandra Levy as saying the two were having an affair and reported that the Congressman had told police that Chandra had spent the night at his Washington apartment.

Condit denied he had told that to police and his lawyer requested a retraction. Suddenly journalists couldn't get enough. The saga had all the elements of a media blockbuster: A missing woman, an alleged romance with a politician, a flurry of phone calls between the two, and plenty of unanswered questions.

Condit isn't answering those questions. He's had nothing to say in public in the seven weeks since Chandra disappeared. He's stayed silent, even after his hometown paper, "The Modesto Bee," urged him to come clean. But his lawyer is talking and while not denying a romantic relationship, he blames the press.

UNIDENTIFIED MALE: This has become a media circus and a tabloid frenzy. The fact of the matter is that what the news media -- some of the news media, not all of it, has taken this frenzied situation and turned it on its head and is looking now only at the relationship between a Congressman and an intern.

KURTZ: The Levys are keeping up the pressure. In interviews on CNN, MSNBC and Fox News Channel, and they're trip to Washington made news even before they got here. They are tentatively growing more critical of their Congressman.

UNIDENTIFIED FEMALE: I think he could come out and share what he does know. We would appreciate his help for having some questions answered.

KURTZ: Some journalists are growing more critical as well.

MARGARET CARLSON, "TIME": There are two persons missing in Washington: Chandra Levy, the intern who vanished May 1, and California Democratic Congressman Gary Condit.

KURTZ: It may well be that Congressman Condit has nothing to do with Chandra's disappearance, that the media are just merchandising the most salacious aspect of the story. But the first rule of politics is not to create suspicion by hiding out from the press. The possible combination of sex, crime and stonewalling is fast turning Chandra Levy, the woman no one can find, into a household name.

This is Howard Kurtz of CNN's "RELIABLE SOURCES."

(END VIDEOTAPE)

WOODRUFF: Risky ride or faulty test? "Consumer Reports" says his SUV is not stable and not acceptable. But the manufacturer is frying foul. The test and the dispute just ahead, when INSIDE POLITICS continues.

(COMMERCIAL BREAK)

WOODRUFF: We'll have more of this day's political news coming up, but now a look at some other top stories.

A mother in Houston, Texas is in police custody following the deaths of her five children. Police say the woman called them to her home. When officers arrived, they say she told them, quote: "I killed my children." Officials believed that the children were drowned in a bathtub. The woman's husband says his wife suffered from postpartum depression. The four boys and a girl were aged six months to seven years old. American Lori Berenson faced a civilian court in the Puru today and again, declare that she is innocent of terrorism charges. A verdict is expected later today. A secret military court sentenced Berenson to life in prison in 1996 on charges of aiding leftist rebels. After years of international pressure, the conviction was overturned and she was granted a new trial on a lesser charge.

Controversy today surrounding a popular model of Japanese sport utility vehicle. Mitsubishi Motors denies claims by Consumers Union, that it's 2001 Montero Limited is prone to tipping. The automaker wasted no time firing back, criticizing Consumers Union's testing methods.

Kathleen Koch reports.

(BEGIN VIDEOTAPE)

KATHLEEN KOCH, CNN CORRESPONDENT (voice-over): It is frightening video, "Consumer Reports" says it's tests show that the 2001 Mitsubishi Montero Limited demonstrated unsafe performance when steered sharply to avoid an obstacle.

R. DAVID PITTLE, CONSUMERS UNION: Both we believe would have rolled over if not for the safety of the outrigger. That vehicle right there is clearly in our view, performing in a dangerous manner and we would consider not acceptable.

KOCH: So far, there have been no reported rollover crashes involving the SUV. Mitsubishi says its vehicle is safe and paid for this independent road test of the Montero Limited that did not find a propensity to tip up on two wheels.

Mitsubishi produced animation it says shows how driving just outside the courts, as it contends "Consumer Reports" did, can cause an SUV to tip.

CHRISTOPHER SPENCER, MITSUBISHI COUNSEL: Consumer Union's drivers drove this vehicle way wide, way late and way off course, and they did it in such a way that caused rubber to actually be ripped off the tires and melted into the asphalt.

KOCH: "Consumer Reports" denies it forced the tipover. It points out six other similarly-sized SUVs were tested at the same time and passed, but one industry expert agrees that the test doesn't duplicate how most drivers react when faced with an obstacle.

CSARA CSERES, "CAR AND DRIVER MAGAZINE": The fact is the average driver is not a highly trained race driver or test driver, and is never going to whip the wheel hard enough this way and then that way in order to produce this kind of result. It's extremely unlikely.

KOCH: Mitsubishi says it's not sure whether it will take legal action against "Consumer Reports" over the failing grade. "Consumer Reports," meanwhile, is warning against purchasing the 2001 Montero Limited. (on camera): The magazine is advising Montero Limited owners to drive carefully, wear their seat belts and avoid carrying cargo on top of the vehicle. It also wants to see the SUV recalled, a step Mitsubishi says is unnecessary.

Kathleen Koch, for CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: The GOP's newest celebrity. Why a Virginia House win has the administration cheering and has Democrats downplaying the implications. INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: In Virginia, a new poll shows the state's governor's race remains very close with the election four months away. Democrat Mark Warner leads Republican Mark Early by five points in the Mason- Dixon survey of registered voters.

New Jersey is the other state holding a gubernatorial election this year. In the GOP primary, a new Quinnipiac poll shows Jersey City Mayor Bret Schundler has taken a 15-point lead over former Congressman Bob Franks among likely voters.

Woodbridge Mayor Jim McGreevey is unopposed for the Democratic nomination.

Virginia's closely watched House race turned out in the GOP's favor last night, making Republican Randy Forbes the newest House member. The former state senator defeated Democrat Louise Lucas, 52 percent to 48 percent. As Candy Crowley reports, for the Bush administration, the race was about more than a single seat in the House.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The Republican Party is alive and well, thank you.

CANDY CROWLEY, CNN CORRESPONDENT (voice-over): Roll out the red carpet, Republicans are having their first post-Jeffords celebration.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It is my honor to welcome the newest member of the United States Congress to the Oval Office.

CROWLEY: Randy Forbes won Tuesday's special election for U.S. Congress in Virginia's Fourth District, and boy were Republicans glad to see him.

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The president did take note in that race, that the Democrat candidate accused the Republican candidate of being a Bush Republican, and the voters of that previously Democrat district chose the Republican to win. CROWLEY: Though the district itself has a mixed voting record at state and federal levels, the seat Forbes won had been held for almost two decades by the late Congressman Norm Sisisky, a Democrat.

Having spent the past several weeks listening to how Jim Jeffords decision to leave the Republican Party shows that Republicans have gone too far to the right, Republicans were pleased to spin back this victory.

REP. TOM DAVIS (R-VA), CHAIRMAN, NATIONAL REPUBLICAN CONGRESSIONAL COMMITTEE: This is more significant. Jeffords, you had an idiosyncratic senator switching parties but there was no electoral mandate to do that. Here you have an electoral mandate to switch Congressional representation.

CROWLEY: The campaign was brief but intense. The ads were ubiquitous and ferocious. Both Republican and Democratic parties poured money and manpower into their candidates. But in the aftermath, Democrats see only local implications.

REP. CHARLES RANGEL (D), NEW YORK: The truth of the matter is that, in that most congressional elections, there is not that much influence by the White House and certainly not in special elections. No, I don't think this is a vote that has anything to do with George W. Bush. If it did, we would have done better.

CROWLEY: Republicans don't exactly say the race was a referendum on George Bush and his policies, but they do note repeatedly that two major issues in the race were the Bush tax cuts -- Forbes was for it, his opponent Louise Lucas against it.

And Social Security -- Forbes and President Bush favor allowing workers to invest part of their Social Security payments. Lucas opposed it, loudly and often.

(BEGIN VIDEO CLIP, STATE PARTY AD)

ANNOUNCER: When other politicians proposed deep cuts in Medicare and Social Security, Louise Lucas says, no.

(END VIDEO CLIP)

RANDY FORBES (R-VA), REPRESENTATIVE-ELECT: Seniors want us to be honest and talk about facts. They're not buying into all these scare tactics anymore. They've seen too many of those and I think they're just not listening.

CROWLEY: In the end, at least for now, to the victor go the bragging rights.

DAVIS: If there were any headwind at all against the administration, we would not have been able to win this, clearly there wasn't.

CROWLEY: The truth is that finding national implications in a local election is tricky and iffy business and bragging rights are temporary things, because there's always another election around the corner. In this case, governors of Virginia and New Jersey this November.

Candy Crowley, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: Joining me now: the chairwoman of the Democratic Congressional Campaign Committee, Representative Nita Lowey of New York. And the chairman of the National Republican Congressional Committee, Representative Tom Davis of Virginia.

Congressman Davis, why did your man win?

DAVIS: Well, he was a great candidate. The Democrats had a good candidate. What we see here is what I said earlier, there is really no head of steam for change in the way that the administration is moving on right now. Unlike the governor's races this year, this is a national election with implications.

Democrats spent a lot of money, put out all the stops to beat him and we were able to return a very swing district back into the Republican column. So I think we had a good candidate, and we had a good issue matrix.

WOODRUFF: Is that how you see it, Congresswoman Lowey?

LOWEY: I think it's amazing that before the election, Chairman Gilmore, Stuart Rothenberg, Charlie Cook all agreed that this was not a bellwether. In fact, it was interesting, if you listen to the debates and you talk to the candidates, Randy Forbes sounded like a Democrat. George Bush wasn't any part of this election.

Randy Forbes talked about Social Security and he ran far away from his privatization scheme. He talked about the Democrat prescription drug benefit, he talked about preserving Medicare and Social Security. He talked about reforming HMOs, so he sounded like a Democrat. I do want to the say that Louise Lucas ran a great campaign. If she had won it would have been historic, the first African-American to win a seat in the Virginia, and the first African- American to win a seat that was not a majority minority district. Unfortunately, with a great get-out-the-vote effort, we came up short.

WOODRUFF: Congressman Davis, let me ask you with regard to, just pick an issue, Social Security.

DAVIS: Right.

WOODRUFF: Was this a case of, as the congresswoman just said, Randy Forbes running away from the president on Social Security, or was it a referendum on the president's plan, which is what Ari Fleischer at the White House is saying?

DAVIS: Well, I think it's closer to where Ari comes in, and the reason for that is the Democrats spent about a half million dollars tying him to Bush's plan. And Randy didn't run away from that. He said what all Republicans are saying, and that is we want to protect Social Security. And the best way to do that is by following some of the suggestions that are president said. Those are not incongruous statements at all. The Democrats don't own the Social Security issue, we just have different approaches, and recognize that the Social Security trust fund runs out of money, and that we have to change the way we're doing things.

WOODRUFF: Congresswoman Lowey, you said that this is a race with just purely local implications, and yet the national party put a lot of money into it, the national Democratic Party. Democrats ended up spending almost as much as Republicans did. What went wrong?

LOWEY: Two points. First of all, in response to Tom, I remember somehow an article in "The Wall Street Journal" and Paul Gigot was talking about Tom Davis, who was running far away from the president and the Republican and the House's privatization plan. And when you're saying: "What went wrong?" I think we did an extraordinary job of grassroots politics over a thousand people on the street. It was a tough race, the polls were way down just a week before. We lost 52 for 48, and it was a tough district. As I said before, it would have been historic if Louise Lucas had won in that district.

WOODRUFF: Congressman Davis, we heard from Louise Lucas herself. Among other things, she said she lost in part because she had to spend so much of her time responding to the negative ads, negative comments by Mr. Forbes. Is that a good deal of what was going on here?

DAVIS: Well, no, I think actually, both ran a pretty high-end campaign. There were some contrasts on issues. Randy Forbes favored the president's tax proposal, Louise Lucas opposed it. Randy Forbes did favor looking at Social Security a little differently than she did, and I think the ads caught that, and they were able to both respond.

Look, I'm not saying this is a national bellwether. Each district has its unique characteristics. But there is no question that a Republican would not have taken away a seat that's been Democrat for almost two decades -- a seat that John Warner lost in his reelection in 1996, George Allen lost in his Senate election last year -- if there were any kind of head of steam building up for the Democrats. And the point is, Democrats can't take the House back without some kind of trend at their back, and there is no trend in their favor at this point.

WOODRUFF: Congresswoman Lowey, I want to sneak in a question here about redistricting, because just today, or yesterday, Republican leaders in the states of Michigan and Pennsylvania, in the state legislatures, are talking about drafting Congressional redistricting plans that would cost the Democrats a total of at least six seats in both of these states. How do the Democrats counter that, or can you?

LOWEY: Judy, first of all, if the Republicans craft a plan that is so extreme, it will end up in the courts, so I'm not sure that will be the final result. In some states, such as Michigan, clearly, the Republicans are going to do well, because they're in charge of the whole state. Other states like California and Georgia, we will do well.

In Nevada, Shelley Berkley's seat was just protected, and she is delighted. She has a more Democratic district. So we expect, in the end the Republicans will win some, we will win some, and then we're going to fight it out and work as hard as we can. And the Democrats will win the House in 2002.

WOODRUFF: Representative Davis, that six seats in Michigan and Pennsylvania, is that wishful thinking or is that really going to happen?

DAVIS: It's tip of the iceberg. I think we will gain a net of eight to 10 seats at the end of the redistricting process. We're going to lose some seats in some states the Democrats control redistricting, but the demographic trends put the seats more in the Republican areas. And we will control more seats at the redistricting table as Republicans, than at any time since 1920. We'll look for an eight to 10 seat Republican gain on redistricting, coupled with our six-seat majority. And it makes it much more difficult for the Democrats to take back the House, something they've been boasting about doing now for eight years, and have come up short every time.

WOODRUFF: Well, you can bet that this is one we're going to come back to time and again, and I hope to be seeing a great deal of the two of you between now and election 2002.

Tom Davis, who's chairman of the National Republican Congressional Committee, Representative Nita Lowey, who is the chairwoman of the Democratic Congressional Campaign Committee. Great to see both of you. Thanks very much.

LOWEY: Thanks, Judy.

DAVIS: Thank you.

WOODRUFF: The law is trying to catch up with science on the issue of human cloning. But one group says the first human clone could already be on the way. The story, when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

WOODRUFF: The possibility that a woman may give birth to a human clone in a few months had nervous lawmakers meeting on Capitol Hill today. CNN medical correspondent Elizabeth Cohen reports that they are discussing two bills that would ban human cloning.

(BEGIN VIDEOTAPE)

ELIZABETH COHEN, CNN CORRESPONDENT (voice-over): The woman on the right, Marina Cocolios, could at this moment be two months pregnant with the world's first human clone. She belongs to a group called the Raelians. Three months ago, they told Congress they could have a pregnancy as early as April, although they won't reveal their progress until a healthy clone is born. It's a group best known for its belief that human beings were created by aliens, so it's hard to gauge how serious their science is. Cloning works by making an embryo in the lab that's an exact genetic replica of an existing human being, and then implanting that embryo into a woman to start a pregnancy. Brigitte Boisselier, a biochemist, is spearheading the cloning project for the Raelians.

BRIGITTE BOISSELIER, BIOCHEMIST: I think we have everything we need to proceed now with humans.

COHEN: And they're not the only ones. Panayiotis Zavos, a former professor at the University of Kentucky, has teamed up with Italian researchers to produce a human clone.

(on camera): Most scientists and bioethicists say that Zavos and the Raelians are being completely irresponsible. They say animal experiments have shown time and time again that clones turn out to be deformed and defective, and ethically speaking, making a defective animal is one thing. Making a defective human being is quite another.

(voice-over): So legislators Wednesday said the law needs to catch up with the science.

REP. GREG GANSKE (R), IOWA: I say we rise up in moral outrage and that we pass laws, both in this country and internationally, to prevent the cloning of a human being.

COHEN: Others, however, say, wait a minute -- the same technology used to clone a human being can also lead to advances in medical science.

REP. HENRY WAXMAN (D), CALIFORNIA: We should not shut down beneficial work, clinical trials, organ transplants or genetic cell replication because of a risk of wrongdoing.

COHEN: But legislators seem to agree on one thing: A recent poll shows nine out of 10 Americans are against cloning a human being, and the lawmakers say they're against it too. But the question is, can the law catch up with science in time to stop the first human clone?

Elizabeth Cohen, CNN, Atlanta.

(END VIDEOTAPE)

WOODRUFF: A losing battle or a political draw? The California governor versus the administration on the energy crisis. We'll hear from Margaret Carlson and Tucker Carlson on that and more when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

WOODRUFF: Joining us now, Margaret Carlson of "TIME" magazine and Tucker Carlson of CNN's "CROSSFIRE."

Hello. There's so much to talk about. Let's start with energy.

California Governor Gray Davis on the Hill today. We had earlier on the program his chief adviser, David Freeman, saying it's not all about politic, but one might get that idea, mightn't one, Margaret?

MARGARET CARLSON, "TIME": Well, because the blame game has started, and somebody has to be responsible, even though the problem started a long time ago on Gray Davis' watch. So he gets most of the blame, and he has to fix it. And the Bush administration, which has identified with the energy industry, doesn't want price caps. And Gray Davis says when there's price gouging you can't let the market go, and he does. If he gets something effective, he will win that intermediate battle.

But the long battle may be lost, because Gray Davis is up for re- election while this is very fresh in everyone's mind.

WOODRUFF: Tucker, does either side have the upper hand in this argument right now?

TUCKER CARLSON, HOST, CNN'S "CROSSFIRE": Well, Gray Davis is getting a better hand. I mean, it's interesting: Gray Davis is probably treated better in Washington than anywhere else in the country. He gets to go up and bask in, you know, questions from sympathetic Democrats. I don't think it's percolated down to the degree to which he's getting a rough time in California.

He's being hit from the right. Republicans have this big ad campaign. A $1.3 million campaign against him on the air. And he's also getting hit from the left, from consumer advocates over, you know, this deal he signed that will, according to them anyway, artificially raise energy prices for the next 10 years, supposedly. So he's getting hit from both sides.

And this is -- this is really the best thing that could happen to him, to come to Washington, spin these conspiracy theories about Texas oil men being at fault. I mean, it's wonderful for Gray Davis.

WOODRUFF: And saying he needs -- his state wants at least $9 billion in rebates from the federal government.

M. CARLSON: You know, well, what would you say? I mean, you have to ask -- you have to ask for help. People are getting $1,000-a- month utility bills, and there is a lot of evidence that the prices went up unrelated to what it cost the suppliers. And he's got to get out of this fix and fast.

T. CARLSON: The great line the other day in Washington, where he said, basically, you know, Governor Bush and I -- President Bush and I are really in the same position, because both of us inherited this problem.

So Gray Davis has been governor for 2 1/2 years, Bush has been president for, you know, six months. I mean, he -- he gets to achieve parity.

M. CARLSON: Both are going to be -- both are going to be hurt by this, however. There is equal opportunity to take a hit on this.

WOODRUFF: Patients' bill of rights, the Democrats want to bring it up. Tom Daschle says it's a priority. He wants to do it now. The Republicans are saying, not yet -- in the Senate.

Margaret, where we are going with this?

M. CARLSON: Well, they'd like -- they'd like to get ahead on this before its brought up, because they're in the hole right now, because the patients' bill of rights as having the ability to sue is -- is the one that has the head of steam right now. And it's not such a big deal, this bill. It's like it is a middle-class bill of rights. It's not a real patients' bill of rights. It doesn't give anybody who doesn't have insurance, insurance. It just tells those who have insurance to have what everyone else has, which is a right to sue when something goes terribly wrong...

WOODRUFF: In state -- in state court.

M. CARLSON: ... in state court.

T. CARLSON: That's right. Of course, both versions contain the right to sue, and they're actually pretty close. One allows personal...

(CROSSTALK)

T. CARLSON: Yes, they are! Except on this issue and except in the ability to enrich personal injury lawyers. And the Democrats -- I mean, it's interesting. Daschle has basically said I'm going to wreck everybody's summer vacation and keep us here past Independence Day...

M. CARLSON: Aw...

T. CARLSON: Well, I don't know. This is not -- this is -- clearly they feel they have the upper hand in this, and I think they do. And I think...

WOODRUFF: They being?

T. CARLSON: The Democrats. And I think Bush feels a lot of pressure to sign something called a patients' bill of rights.

M. CARLSON: First of all, there's a big difference between being able to go to state court and federal court. Federal court is much harder. It's harder for people to get to. There's a bigger...

WOODRUFF: Awards are lower.

M. CARLSON: And -- awards are lower. And the Republican bill puts a cap. And you know, the thing is what people have found out is in states that have this there's not an excess of lawsuits. It doesn't open the floodgates. People don't sue unless they have somebody who's really been injured. And part of having the right is that having the right keeps lawsuits from happening, because the HMO will know that you have it.

T. CARLSON: It's -- it's hard to know if you're being serious or not, but people won't sue unless they have a valid reason? You know, talk to people who used to manufacture civil aircraft in this country or manufactured playgrounds.

M. CARLSON: No, it was the urban myth, some of that, really. It never -- it was never as bad as people complained, and it now, with regard to medical lawsuits, it just hasn't happened in the states that have provided this right.

WOODRUFF: We're going to break in to this wonderful debate here with one topic that I don't want to leave without bringing up, and that is this story of the missing intern, Chandra Levy. Increasing focus on California Congressman Gary Condit. Her parents are in the city. They've hired a lawyer.

Margaret, what are we to think at this point?

M. CARLSON: Well, given that a public figure is involved, the public figure should, you know, publicly try to help, especially the parents who are desperate and who want to know when -- "What was my daughter like that last week? When did you last speak to her? What can you tell us?" because every piece of information is crucial. And he hasn't done that for them, and he's only been interviewed by the police once. They've now hired a lawyer to press the police, and the police suddenly now, today, are going to interview the congressman a second time.

Should have been done weeks ago.

T. CARLSON: Riddick Bowe's lawyer, and I think that -- they've hired the boxer, Riddick Bowe's lawyer -- and I think Condit's (UNINTELLIGIBLE) this to his own detriment.

Everyone is willing to believe that a congressman has an affair with an intern. Nobody -- or virtually nobody is likely to believe that he would have anything to do with her disappearance. But of course, his silence only makes that more believable.

Margaret had the most interesting detail of all, I think, in her "TIME" magazine piece this week where Mrs. Levy, the mother, is the one who finally put the phone records together and found out that her daughter had been dialing Condit's peeper. The D.C. police didn't figure this out.

This is one of the worst police departments in the country.

WOODRUFF: The police didn't figure that out?

T. CARLSON: Well, that is one of the saddest parts. I mean, these people, they're from Modesto, California. How do they know that we have an inept police department here? They didn't know that.

M. CARLSON: And they were told, leave it in our hands, don't interfere with our investigation. They did. It's been seven weeks, and so now they are taking matters into their own hands, to a certain extent.

WOODRUFF: A very tough story. All right, Margaret Carlson, Tucker Carlson, thank you both. Every Friday, our Bill Schneider awards, as you know, a "Political Play of the Week." Well, now we want your nominations for the weekly play. You can e-mail your ideas to insidepolitics@cnn.com. The guy in the hat, that's Bill. And tune in on Fridays to see if you picked "The Play of the Week."

Finding ways to keep the peace in the Middle East. The White House tries to keep Israelis and Palestinians talking in the face of new violence, coming up later on INSIDE POLITICS.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GOV. GRAY DAVIS (D), CALIFORNIA: I didn't deserve the wonderful economy I inherited the first two years. I don't deserve this mess either, but I'm going to work our way through it.

(END VIDEO CLIP)

WOODRUFF: Even as he faces attacks from Republicans, California Governor Gray Davis talks energetically about his political future. Also ahead: In the drive against high gas prices, is variety part of the problem? And find out who would even think of giving golfing tips to Tiger Woods.

ANNOUNCER: From Washington, this is INSIDE POLITICS with Judy Woodruff.

WOODRUFF: Welcome back to INSIDE POLITICS. California Governor Gray Davis may have something to show constituents after his testimony before the Senate today. The chairman of the Federal Energy Regulatory Commission says FERC is actively pursuing refunds to consumers who have been overcharged by power companies. Davis had urged such a rebate during his appearance on Capitol Hill. He also defended his handling of the state's power crunch under tough questioning by Republicans.

(BEGIN VIDEO CLIP)

SEN. FRED THOMPSON (R), TENNESSEE: Do you not claim -- or do you not accept any responsibility for not having addressed the structural problems that were inherent in your system that obviously had to be changed when so many of the circumstances were changing, especially in light of your emergency powers? If you needed to exercise them?

DAVIS: First of all, it -- you know, it's nice for us to sit back here and talking about passing on the true price of electricity. But let me assure you, if I passed down a 700 percent increase to the citizens of California, there would be an outrage the likes of which you have never seen.

(END VIDEO CLIP)

WOODRUFF: Tomorrow, we plan to speak with the chairman of the Federal Energy Regulatory Commission, or FERC, here on INSIDE POLITICS.

Republican criticism of Davis' handling of the power crunch has been growing on Capitol Hill and on the airwaves in California. That's added to the political headaches of a Democrat who had been touted as a would-be presidential candidate.

CNN's Kate Snow talked with Governor Davis about energy politics and his political future.

(BEGIN VIDEOTAPE)

KATE SNOW, CNN CORRESPONDENT: Governor Davis, thanks for joining us.

DAVIS: My pleasure.

SNOW: There are ads running in your state now that specifically target you by name, put the blame on you and the responsibility on you. Are they unfair?

DAVIS: Well, I think Californians are galled by this, because the very energy companies that bilked us out of $55 billion are not satisfied that the Federal Energy Regulatory Commission has told them they have to make less money, and they're retaliating by attacking me. My job is to stand up and fight for 35 million people. And if they think they're going to shut me up, they've got another thing coming.

SNOW: Republicans also are angry, they accuse you of hiring high-priced political consultant, two consultants on your payroll now. They say it's taxpayer money, it's inappropriate, it was a bad decision on your part. What's your response?

DAVIS: I'll tell you what's taxpayer money, is $8 billion the state has had to pay to buy electricity this year, because these out- of-state greedy energy companies have bankrupted one utility and put another on the verge of bankruptcy. And the consultants I've hired, be they for energy, to help us on Wall Street, to help us get more megawatts or with communications are designed to fight against the bad guys, who are these out-of-state energy companies taking us to the cleaners.

So these guys the Republicans are complaining about are the good guys. They're helping us fight the bad guys to get money back for our citizens, who have been grossly overcharged.

SNOW: So it's appropriate, in your view, to have hired them at a fairly high cost?

DAVIS: I think they're doing a good jobs. Their job is temporary in nature. They're here until we turn the corner. And then presumably we'll go on to other things.

SNOW: Let me ask you about your vision of your political future. You have indicated that you do want to run for governor again in 2002. Does this whole crisis, if you could call it that, hurt your chances? Are you optimistic that the people of California will still have faith in you? What's your vision?

DAVIS: The people hired me as a problem solver, and we made great progress in education, on the healthy families program, on the environment. I think they'll see by election time that this problem, if not solved, is well on the way to being solved. The worst is behind us, and they'll realize that something that I inherited -- and for that matter George Bush inherited -- has actually been improved and we're well on our way to an energy-secure future.

I want a future where California has more power than it needs.

SNOW: Republicans have already been talking about fielding candidates against you. I'm sure you know this: Richard Riordan one of them that they've talked to. They've apparently lobbied him to try to get into the race. He's very well-known, he's got a lot of money. Does that worry you?

DAVIS: You know, it's interesting that all these questions by Republicans have to do with politics. I'm trying to do my job. My job is to solve problems. We are making progress getting this incredible energy crisis behind us. We have the entire year of 2002 to talk politics. I want to get this job done and get it behind us.

Listen, I served in the Vietnam War, and these people aren't shooting at me. I'm trained to get through difficult situations.

This is not easy, but I have to -- I have to play the hands I was dealt. I didn't deserve the wonderful economy I inherited in my first two years. I don't deserve this mess either, but I'm going to work our way through it.

(END VIDEOTAPE)

WOODRUFF: Our Kate Snow spoke with Governor Davis here in Washington last night.

For many Americans outside of California, the high cost of gasoline is their No. 1 energy concern. Our Brooks Jackson recently traveled to the Midwest to find out why a hodgepodge of fuels and local requirements may be driving up prices.

(BEGIN VIDEOTAPE)

BROOKS JACKSON, CNN CORRESPONDENT (voice-over): St. Louis, Missouri, where clean-burning, reformulated gasoline is required. But just across the Mississippi River in East St. Louis, Illinois, another special formula of gasoline is required: a so-called "boutique blend," not quite as clean.

And a few miles out of town, beyond this congestion, yet a third type of gasoline is in use: plain, old conventional gasoline.

One metropolitan area, three different fuels. Station owners say that affects supply and price.

CHRIS KEMPH, CFM CONVENIENT FOOD MART: The price inevitably goes up. There's just times where you have the right product and the wrong location, and the gasoline you have access to you can't put in your tank.

JACKSON: And on the other side of Missouri, Kansas City uses yet another blend of gasoline. One fuel required in Chicago, a different one in Detroit. One fuel in Louisville, another just across the Ohio River in southern Indiana.

Fourteen different gasoline blends in use across the USA. The map of boutique fuels looks almost like the former Yugoslavia. And balkanization of gasoline markets is bad for consumers, according to the American Automobile Association.

GEOFF SUNDSTROM, AMERICAN AUTOMOBILE ASSOCIATION: We think it's had a huge effect. In fact, we think that it's the primary cause of the higher prices.

JACKSON (on camera): It's simple economics: If this ice cream store only had to carry vanilla, they'd always have tubs of the stuff. But having to carry more than a dozen flavors in the same limited freezer space greatly increases the odds of running short of one or two of them.

(voice-over): In fact, this store was out of one flavor. The same applies to gasoline. Wholesale prices of reformulated gas shot up last summer when a pipeline broke, cutting St. Louis's supply.

MARK MARTINOVICH, WALLIS COMPANIES, INC.: We couldn't go over to Kansas City and pick up fuel, or go over east.

JACKSON: The problem is getting attention in Congress where Missouri Congressman Roy Blunt proposed a bill Wednesday to reduce the number of different fuels to three.

REP. ROY BLUNT (R), MISSOURI: You have fewer options and so you create a bigger demand for every one of them. And when you create a bigger demand, you create a lower price.

JACKSON: Clean-burning fuels have removed thousands of tons of pollutants from the air. But the proliferation of boutique fuels is also removing millions of dollars from motorist's pockets.

(END VIDEOTAPE)

WOODRUFF: Well, Brooks, you are joining me now here on the set through the miracle of modern television. Talk about the politics of this issue? Who's for these boutique fuels? Who's against it?

JACKSON: It's really fascinating, Judy. It's really getting attention now on Capitol Hill as you saw. Speaker Hastert is one of the sponsors of this bill, obviously the leading Republican in the House. It also has several Democratic sponsors. The Senate Energy Committee, now headed by a Democrat, Jeff Bingaman, is going to hold hearings tomorrow.

The Bush Administration has ordered a study. So there's growing recognition that they have got to do something. Whether this is the right approach or not is another subject. The oil industry, refiners in particular, have been complaining about boutique fuels forever, but they don't like this particular approach that Congressman Blunt is taking, because if you read it carefully, in addition to squeezing down the number of fuels, he would also practically require the Environmental Protection Administration to mandate the use of ethanol in all reformulated gasoline.

Now it's only in about 25 percent. That would cause big some big problems for the industry, and also push prices up a little.

WOODRUFF: What about overall, Brooks, the allegations that the oil companies have been price gouging, taking advantage of their monopoly, their strangle hold, if you will, on the market?

JACKSON: As you know, the Senate Democrats are also going to hold hearings about that. You know, it's been a no-fail political strategy for 100 years to accuse oil companies of manipulation and conspiracy. Whether you got any proof or not, and so far very little in the way of proof has surfaced.

But as the triple A representative told me, you don't need to have a conspiracy, oil companies don't need to conspire when the government has effectively, through clean air rules, carved up the country into government monopolies.

WOODRUFF: So this in a way take some of the heat off the oil companies, the oil industry.

JACKSON: Well, it could. yes.

WOODRUFF: All right, Brooks Jackson, thank you very much.

The G.O.P. picks up another seat in the House. We'll look at the meaning behind yesterday's election of Republican Randy Forbes in Virginia. That and other items from Bob Novak when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

WOODRUFF: Joining us now with his reporters' notebook, Bob Novak of "The Chicago Sun Times." Bob, first of all, we talked about this a little earlier in the program, but what's your take on the significance of the Republicans winning -- what is it -- 52 to 48 percent, this congressional district in Virginia yesterday?

ROBERT NOVAK, "CHICAGO SUN-TIMES": Well both parties put enormous resources into this race. Somebody compared it to the Spanish Civil War before World War II. And so it would have been a very tough thing if the Democrats had held that district, because it's sort of a preview, but I think the Republicans are ecstatic not only for winning, but because the Democrats used the Social Security issue so hard and it didn't seem to work in this district.

Another factor is that this is the 33rd most African-American district in the country, and it is 39 percent African-American, it is the blackest district to be represented by a Republican. Now the question is: Did the Democrats make a mistake in running an African- American woman for the race? Would they have been better off in running a white candidate? A lot of the Republicans think so.

WOODRUFF: All right, well, let's move up from Virginia to New Jersey. There's a new poll showing Jersey City Mayor Bret Schundler leading in a poll on the Republican side. What is the significance?

NOVAK: That is fantastic. It's a leading former Congressman Franks by 15 points -- 15 points. Franks was considered two weeks ago a shoe-in for the nomination, 15 points among likely...

WOODRUFF: This is for governor.

NOVAK: For Republican nomination for governor. Now Franks' people had been telling insiders in the last week that they thought their candidate was in a tailspin, and therefore he went on the attack, attacking Schundler and it seems to have made matters worse. That's amazing that Schundler looks like he may be winning this primary against the establishment. He is a conservative. There hasn't been a conservative elected to governor or senator in New Jersey since Governor Edison in the 1930s.

And can Schundler win in the general election? Some people think he could be a stronger candidate against the heavily favored Democrat, Jim McGreevy.

WOODRUFF: All right, very quickly, a few little items. Tom Daschle threatening to keep the Senate in session if they don't deal with patients' bill of rights by July.

NOVAK: Unless they pass it -- not just deal with it -- they have to pass it by July 4. Does he mean business? A lot of people think he does and his credibility is at stake. I think they're going to have to have on the 4th of July the Senate in session if they don't pass that bill.

WOODRUFF: A Republican to run for the Senate in the state of North Carolina if Jesse Helms doesn't?

NOVAK: The word is that Jesse Helms is quietly saying he's not going to run and the glamour candidate coming up is a replacement for Jesse Helms, Elizabeth Dole. Democrats tell me that is bad news for them. That is the toughest candidate they think that the Republicans could put up.

WOODRUFF: She's already gotten some high-powered phone calls apparently. Finally, Bob, MAX BAUCUS, the senator from Montana, what was he doing in New York City this week?

NOVAK: What do candidates -- why would candidates go to New York? Because that's where the money is. He had three fund-raisers in one night for his tough reelection fight in Montana. But he also ran into some hot lip from some of the liberals who are giving him money. Very unhappy that Senator Baucus had compromised with the Republicans on the final version of the Bush tax bill.

Baucus, chairman of the Senate Finance Committee, he told them, gee, that's the way we have to do it in Montana. It's a conservative state. It's not like New York, they gave him the money anyway.

WOODRUFF: So he wasn't just there to see a Broadway show?

NOVAK: He sure wasn't. '

WOODRUFF: Bob Novak. Thank you very much. Great to have that peek in the notebook.

Bob Novak will be back tonight with Bill Press on CROSSFIRE. Senators Paul Wellstone of Minnesota and George Allen of Virginia will be debating the increasingly hot topic, patients' rights. That's at 7:30 p.m. Eastern.

Washington makes a move to strengthen the peace process in the Middle East. We'll look at what the White House hopes to accomplish as violence continues to rock the area. And the son of New York City's mayor has found something to smile about. His time with Tiger, ahead on INSIDE POLITICS.

(COMMERCIAL BREAK)

WOODRUFF: The Bush Administration wants to bolster the peace process in the Middle East. The White House says Secretary Of State Colin Powell will head to the region next week as a "confidence building measure." That word came as Israel accused the Palestinian authority of not honoring the fragile U.S.-brokered truce. CNN State Department correspondent Andrea Koppel reports.

(BEGIN VIDEOTAPE)

ANDREA KOPPEL, CNN CORRESPONDENT (voice-over): Deeply concerned the fragile Israeli-Palestinian cease-fire could rapidly unravel, and eager to reinforce the momentum gained thus far, President Bush decided to dispatch his top diplomat to the region early next week.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It will be yet another mission from our government to remain involved in the process.

KOPPEL: Secretary Powell's mission, to use his clout in the region as a hero of the Gulf War and someone seen by both sides as fair and impartial to press both parties to move forward as quickly as possible from the existing cease-fire into a cooling off period, a necessary step before peace talks can resume.

RICHARD BOUCHER, STATE DEPARTMENT SPOKESMAN: Good faith, sustained efforts are going to be necessary to stop the violence completely and to establish the foundation to get on with those Mitchell Committee recommendations.

COLIN POWELL, SECRETARY OF STATE: Shuttle diplomacy is not what we need right now. KOPPEL: But just one month after Secretary Powell made crystal clear he wasn't ready to personally mediate an agreement between the two sides, he'll soon be picking up where CIA director George Tenet's security talks left off earlier this month.

BOUCHER: What's in the works is what we've been telling you about. There's a continuing effort of engagement and involvement of the United States in trying to reduce the violence, get the violence to stop.

KOPPEL: But that level of engagement has recently reached a new high. On Wednesday President Bush spoke with Prime Minister Sharon of Israel, Palestinian Leader Yasser Arafat and Egyptian President Hosni Mubarak who Bush praised for his "indispensable role."

(on camera): And as the parties in the region await Powell's arrival, many hope his role will become indispensable. In the words of one seasoned Arab diplomat, "Powell's trip sends a very positive signal to the Arab world that the Bush Administration is serious about getting more involved."

Andrea Koppel, CNN, the State Department.

(END VIDEOTAPE)

WOODRUFF: There is more INSIDE POLITICS coming up. But first, let's go to Lou Dobbs for a preview of what's ahead at the bottom of the hour on "MONEYLINE.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MAYOR RUDOLPH GIULIANI (R), NEW YORK: I probably never loved it more than watching it today.

(END VIDEO CLIP)

WOODRUFF: Well, if Andrew Giuliani really was so bold as to give Tiger Woods golf tips, at least we're told he's a pretty good player. Andrew shot an 85, which wasn't close to Woods' score of 69, but it was quite a good performance for a teenager playing a tough course in front of hundreds of people in the shadow of Tiger Woods.

Go get them, Andrew. That's all for this edition of INSIDE POLITICS, but of course, you can go on-line all the time at CNN's allpolitics.com, AOL keyword, CNN. our e-mail address is insidepolitics@cnn.com. And these programming notes: Julie Nixon Eisenhower will be the guest tonight on "LARRY KING LIVE." That's at 9:00 p.m. Eastern. And tomorrow night, Larry will have an exclusive interview with Roger Clinton. I'm Judy Woodruff. "LOU DOBBS MONEYLINE" is next.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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