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player ready...Political pressure coming from the U.S. Congress and politicians from Western states seems to have influenced the approach to the power crisis, despite opposition to price caps in the Bush administration.
The Federal Energy Regulatory Commission in June expanded price mitigation measures on wholesale electricity sales in California during periods when blackouts are possible.
The measures encourage generators to sell power into the state to prevent emergency alerts from being declared, which trigger price caps. The move came with support growing in Congress, especially among representatives of Western states on both sides of the aisle, for legislation that would have capped wholesale prices in the region.
The macroeconomic force may have been the difference between the $7 billion cost of power for California in 1999 and its rise to approximately $27 billion in 2000. The cost is estimated to reach between $50 billion and $70 billion in 2001.
With that kind of money at stake, suddenly the concern becomes less a question of who is responsible for the problem, but rather, how it can be solved quickly to prevent harsh political consequences.
California Atty. Gen. Bill Lockyer has conducted an investigation into the actions of power generators and offered multimillion dollar rewards to whistleblowers to provide evidence of price manipulation by independent power generators. The state is seeking refunds of $8.9 billion, the amount it estimates independent power generators overcharged California’s troubled utilities.
The U.S. General Accounting Office has released a report criticizing the FERC for not finding evidence of power generators using plant outages to drive up prices in California.
“FERC’s [February] study was not thorough enough to support its overall conclusion that audited companies were not physically withholding electricity supply to influence prices,” the GAO found.
Of the major independent power generators and marketers, like Reliant Energy, Dynegy, Duke Energy and Enron, only Williams and its CEO Keith Bailey came out in April in favor of some sort of short-term price relief for California.
“The political dynamic out there is much more Draconian than what we’re proposing,” Bailey told analysts in April, defending Williams’ position supporting some limited, short-term price mitigation.
What he was worried about was California Gov. Gray Davis using eminent domain powers to take over power plants and the state setting up a public power authority to build state-owned plants.