Senator Feinstein Urges Regional Cap on
Wholesale Electricity Rates
August 23, 2000

San Francisco - U.S. Senator Dianne Feinstein (D-Calif.) today urged the Federal Energy Regulatory Commission (FERC) to place a region-wide cap on wholesale electricity rates for the Western States.

“As is clearly evident, the energy market in San Diego is not functioning, at this time, as a true market. The lack of energy generation has produced a dramatic increase in electricity prices with many families and businesses facing energy bills two or three times higher than normal and has led to the possibility of wholesale price gouging,” Senator Feinstein said in a letter to FERC Chairman James J. Hoecker.

“To address the current market failure and the problem of California’s generation capacity shortage, I am requesting that FERC place a region-wide cap on wholesale electricity rates in the western states.

Without a regional cap, the already low supply of power could be exacerbated by electricity bidding wars among the western states. This could produce rolling black-outs across California.

I would further request that FERC use an evidentiary basis to set an appropriate price cap. As you know, substantial new generation capacity is not anticipated for at least two more years. Thus, FERC’s intervention is critical to ensuring a stable supply of electricity at a reasonable price.

Deregulation in a dysfunctional electricity market has caused a crisis in California that threatens the State’s economic expansion. It is my hope that FERC will act expeditiously to set this regional price cap.”

Senator Feinstein also welcomed President Clinton’s announcement today to make available emergency energy assistance funds for low income households and special credit programs for small businesses.

“This is good news for those most in need of help in coping with the dramatic increase in the cost of electricity in Southern California,” she said.

The President’s announcement today included several steps to help California respond to the high electricity prices:

• Directing the Department of Health and Human Services to release $2.6 million in Low Income Energy Assistance Program (LIHEAP) emergency funds for low-income households in Southern California. This release doubles the funds that the affected region in Southern California currently receives under the LIHEAP program.

• Directing the Small Business Administration to urge its lending partners in Southern California to use SBA credit programs, particularly the 7(a) program, and technical assistance to help small businesses in San Diego and Orange Counties hurt by the high electricity prices.

Also, Secretary of Energy Bill Richardson today requested that FERC expedited its national investigation of the operation of bulk power markets.

“I and other California officials have urged a thorough investigation of this issue and hopefully FERC will follow-through with this request expeditiously,” Senator Feinstein said. “Additionally, I have previously urged the Federal Energy Regulatory Commission to place an emergency order capping the price electricity generators can offer to the California Power Exchange.”