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Bid for Power-Price Cap Likely by Katherine Long, Seattle Times staff Seattle Times, December 20, 2000

A "soft cap" on electricity prices in California is failing to stop runaway rates across the West and may underscore the point Western governors are expected to make when they gather today in Denver.

Govs. Gary Locke of Washington, John Kitzhaber of Oregon and others are to meet with U.S. Energy Secretary Bill Richardson to discuss power prices that in recent days have jumped as high as $5,000 a megawatt hour from $40 last year.

The governors are likely to press for stronger federal intervention.

"In the short term - 30 to 60 days - we need a regionwide price cap," said Dave Warren, director of energy policy in Washington state's Trade and Economic Development office.

Last week, the Federal Energy Regulatory Commission (FERC) ordered a "soft cap" of $150 per megawatt hour on wholesale electricity prices in California.

Under the terms of the soft cap, power companies can still charge the higher rates if they file paperwork with the FERC showing that the higher rates were justified.

"I don't think it's going to be a real deterrent," said David Danner, a policy analyst for Gov. Gary Locke.

In fact, yesterday, one crucial indicator of California power prices averaged $450 a megawatt hour on the wholesale market, up from about $350 to $400 last week.

So far, FERC officials have balked at a request for a regionwide cap, although Richardson favors such a cap to encourage more companies to provide power to California.

But even if one were imposed, some officials say, it would do nothing to boost the dwindling supply of electricity and could even make it scarcer by creating a disincentive for power companies.

Power shortage or price manipulation?

While allowing that the region needs to add more sources of power during the next five to 10 years, Warren questioned the existence of an immediate power shortage.

He said wholesale prices started jumping in May and June - the months before Californians turned on the air conditioners and after Northwesterners turned down the thermostats. "In my opinion, people began to manipulate the market," he said.

California experienced a higher peaking load in July 1999 compared with this summer but did not issue emergency alerts. "There is no conclusive evidence of a power shortage," Warren said.

Too much focus on California?

Marilyn Showalter, chairwoman of the Washington State Utilities and Transportation Commission, said western energy experts fear the federal government is focusing too hard on the threats of rolling brownouts and staged power alerts in California, and not paying enough attention to how its actions are affecting the rest of the West.

Also last week, Richardson ordered about 70 western power suppliers to sell surplus power to California. In effect, it was like giving California the fruits of power-conservation efforts reaped in the Northwest, said Seattle City Light spokesman Bob Royer.

Locke and other western officials - including California Gov. Gray Davis - want to see a hard cap placed on energy prices, "at least through the winter," Danner said.

The five-hour meeting in Denver today is not expected to result in any action. "It's really more of an information-gathering, a sharing of concerns," Danner said.