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Federal Regulators Adjust Energy Pricing to Help Northwest by Associated Press Capital Press - December 28, 2001

WASHINGTON, (AP) -- Federal regulators have changed Western energy price controls to ensure a steady flow of power to regions with high winter demands, particularly the Northwest.

The Federal Energy Regulatory commission order came after public comments and a meeting to alter a formula developed over the summer to control soaring energy prices in the West.

FERC said Dec. 19 the modified price controls are designed to "bring continued price stability and balance to the Western markets . . . especially the Northwest."

Earlier this year, the West faced an energy crunch caused by a botched deregulation effort in California and a drought that limited water to the Northwest's vast hydropower system.

In June, the commission established price ceilings on wholesale electricity sales in spot markets in California and 10 other Western states to help control the high prices. The ceilings are tied to price is California.

Right now, prices in the Northwest are low. But the June price plan could have proven detimental to the region during winter months, when energy demand goes up.

Some were concerned that companies that sell power in the Northwest might not have been able to charge prices high enough to make money under the June price ceilings. The potential result: power providers would stop selling energy in the Northwest.

Following an initial read of the FERC order, staff for Sen. Maria Cantwell, D-Wash., said the decision provided a good technical corrction.

"It recognizes that there is a real difference between the Northwest power structure and California's," said Cantwell's spokesman Jed Lewison. And "it is important to recognize that difference."

Cantwell, a member of the Energy and Natural Resources Committee, has been pushing the commission and Congress to make sure that the Northwest isn't disadvantaged in policies to help deal with the West's power issues.

The new winter price controls, which went into effect Dec. 19, will last until April 30. They set a new formula by slightly boosting the price ceiling for the winter and allowing for more increases if natural gas prices rise significantly.

Natural gas is a fast-growing energy source in the West, and its high price earlier this year appeared to contribute to the region's energy woes.

Greg Fishman, spokesman for the California Independent System Operator in Sacramento, said there is no way to predict what will happen to gas prices.

A year ago, he said prices spiked to $60 per million BTUs of natural gas. Today, prices are $2.75 to $3 per million BTUs. "And we're almost in January with prices that low and with (natural gas) storage levels fairly high," Fishman said.