Senator Feinstein Urges FERC to Reconsider
Expected Decision to Lift West-Wide Price Cap
July 17, 2002

Washington, DC - U.S. Senator Dianne Feinstein (D-Calif.) today urged the Federal Energy Regulatory Commission (FERC) to reconsider a decision that is expected to be issued today to lift the price cap on energy prices in the West, effective October 1, 2002. The price cap has been in place since June 2001.

"I believe that FERC is making a major mistake, and I urge the commission to reconsider this decision and extend the cap for at least one year," Senator Feinstein said. "I am very concerned that if there is no cap on energy prices, we will have a repeat of the 2000 energy crisis."

Additionally, in a letter to FERC Chairman Pat Wood, Senator Feinstein wrote: "Word has reached me that the Commission is planning to announce today that it will be lifting the west-wide energy price caps as of October 1, 2002. I am very fearful of such action and its impact. Day after day new allegations come to light that demonstrate a willful manipulation of the energy market. Such practices have deeply permeated the marketplace.

Just today, I read allegations that Duke added $126 million to its revenues by round trip or wash trades. Previously Duke had admitted to executing $650 million in wash trades on the Intercontinental Exchange (ICE), an electronic energy exchange exempted from oversight by the 2000 Commodity Futures Modernization Act. Not only does ICE have no responsibility for trades or wash trades executed on its exchange, but ICE does not even have any responsibility for checking that a transaction has been executed. Thus, a company that wanted to manipulate prices or game the market would not have to even execute a single trade.

I am very concerned that if there is no cap on energy prices, we could well have a repeat of the 2000 energy crisis. I am also troubled to learn that 20,451 Megawatts of new energy planned to be built for California have been canceled or tabled since 2000. Additionally, in much of California our warmest weather months often occur in the early Fall. All these factors together create a very unpredictable future and thus an inopportune time to lift the reins on the energy market. I strongly urge FERC to reconsider this decision.

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