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American Morning

Federal Government Takes Steps to Control California Energy Prices

Aired June 19, 2001 - 10:04   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.
DARYN KAGAN, CNN ANCHOR: On Capitol Hill this morning, Senate lawmakers will take a closer look at federal attempts to rein in California's power crisis. Members of the Federal Energy Regulatory Commission voted yesterday to implement price controls on wholesale electricity in California and 10 other Western states.

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GOV. GRAY DAVIS (D), CALIFORNIA: I'm pleased that the federal government is finally, some nine months after making a determination that our market is dysfunctional, doing something in the right direction.

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KAGAN: The California governor, however, echoed the concerns of many lawmakers who say the measure does not go far enough.

Let's check in on Capitol Hill and see how this federal action is being received there -- our Kate Snow covering that story for us.

Kate, good morning, again.

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: Good morning, Daryn.

Congress watching very closely when the Federal Energy Regulatory Commission, also known as FERC, made that decision yesterday. At that meeting, all five of the commissioners of FERC voted in favor of this new plan. Those five commissioners are now on Capitol Hill this morning at a hearing before the Senate Energy Committee -- that hearing going on right now. The lawmakers want to know: How did they come to this decision and what exactly will it mean to people in California?

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SEN. JEFF BINGAMAN (D), NEW MEXICO: The Federal Energy Regulatory Commission came out with an order yesterday which substantially expands the previous orders they had in place and does limit price mounts that can be charged in California and the 11 other Western states.

Now, what we're saying is, we want them to explain how they believe this will work...

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SNOW: Now, FERC's new rule will set prices based on market forces. They're basically going to base the price of electricity out West on how much it costs the least efficient power plant to produce that energy.

Let me show you what that means in real terms. Today, the new price of energy will be $107.95 for a megawatt hour of electricity. That compares to around $115 as it was being sold just yesterday. And in past weeks -- in recent weeks, that same megawatt hour has sold for, at times, peaking out over $1,500 per megawatt hour -- so FERC's chairman telling the Senate committee this morning that this is clearly going to make a difference, that Californians and people on the West Coast are going to notice this. They will be better of with this change. He says it's better because it's market driven. It's not a price cap.

But, Daryn, as you mentioned, there are those in the Congress who still think that caps are the way to go, in particular, House Democrats still pursuing action right now this week to try to impose or legislate a price cap on energy prices -- Daryn.

KAGAN: Kate Snow on Capitol Hill -- Kate, thank you.

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