The Federal Energy Regulatory Commission Fails Us Again

By Medea Susan Benjamin

From http://powertothepeople.org - Once again, we've been FERCed. - June 19, 2001

The FERC's "price mitigation" plan announced on June 18th is merely a baby step when we need some long-distance sprinting. Yes, the plan finally pierces the veil of market sanctity that the FERC and the Bush administration have doggedly maintained during the California energy crisis. FERC Chairman Curt Hebert continues to swear by the wonders of the free market. Yet this plan recognizes that California's energy market is so dysfunctional that corrective measures must be taken not only in California, but throughout the western region.

But the measures FERC just implemented are way too little, way too late, and fail to ensure that wholesales rates are just and reasonable.

Setting Rates: FERC decided to base wholesale energy caps on the costs of the least efficient plant during a Power Alert (when reserves are below 7.5 percent) instead of on each generator's cost of producing power. That's like driving a Honda Civic but pegging your gas mileage to a Greyhound bus. It may bring prices out of the stratosphere, but certainly not down to earth.

Refunds: FERC's plan is not retroactive and fails to include rebates for the billions of dollars in overcharges we've suffered over the past year. According to the California Independent Systems Operators, over $6 billion should be returned to the people of California.

Surcharge: Adding insult to injury, the plan allows the energy companies that gouged us so deeply that it impacted our creditworthiness to now include an extra 10 percent surcharge for the risk of doing business in the Golden State.

The new plan is an extension of an April FERC measure that capped rates only during Power Alert shortages. This time the measures are in effect all year round (until September 2002) and cover all the western states. Chairman Hebert stated that FERC's prior mitigation plan had knocked prices during a Power Alert from $300 a megawatt hour to $120, claiming this as a sign of great success. But $120 a megawatt hour is four times the price we were paying during the "bad old days" of regulation.

This plan gives us no hedge against blackouts, no guarantee of reasonable rates, and no freedom from companies intent on gaming the market. We must continue to press forward with plans for a windfall profits tax, for a take-over of the generators and, most importantly, for the creation of a public power system both at the municipal and statewide levels. That's the only way to make sure that we won't be FERCed again.