Editorial: Time for price caps on energy

Friday, April 27, 2001 | 4:15 a.m.

On Wednesday federal regulators had an opportunity to stop the price gouging that has occurred during the energy crisis in the West -- but they botched it.

The Federal Energy Regulatory Commission did place a limited cap on the wholesale price of electricity in California, but it doesn't even qualify as a half-hearted effort. The rate caps can only go into effect when the state's energy supplies get so low that it is in danger of experiencing blackouts. The commission tacitly is saying that it's OK for energy companies to manipulate the market, and make obscene profits, as long as California isn't on the verge of going dark. How ludicrous.

The commission's order also was feeble since it applied to just California. This ignores the fact that other Western states, such as Nevada, have been hit by outrageous prices, too. Sure, the energy crisis in California has received the lion's share of media attention, but these federal regulators have a responsibility to protect consumers throughout the nation -- not just the Golden State.

The underlying problem with this federal regulatory agency has been that its answer to the skyrocketing energy prices in the West has been to do nothing, to let the market fix itself. Unfortunately the market is broken, and can't right itself without some help. A few big energy companies have taken advantage of the federal regulators' arrogant indifference and are charging outrageous prices for their energy supplies to the electric utilities. The electric companies are forced to pass on these higher costs, which means that in the end it is the residential customers and businesses who get hammered.

To get a glimpse into the mind of the nation's top energy regulator, consider the out-of-touch comments he made a couple of weeks ago during a House committee field hearing in San Jose, Calif. Curt Hebert, chairman of the Federal Energy Regulatory Commission, had an interesting remedy, to say the least, for California's energy crisis -- "start putting shovels in the ground." Of course, Hebert's market-based suggestion -- that the building of more power plants will increase the supply to meet the demand -- realistically won't have much immediate impact since it is years away before enough generating facilities can be built to ease the power crunch. So unless the federal government intervenes decisively, consumers will continue to be held hostage to these outrageous prices.

While President Bush and the Federal Energy Regulatory Commission keep preaching that the federal government shouldn't get too involved, many Democratic members of Congress from the West want action now. Legislation was introduced in the Senate last week that would impose price ceilings on energy rates throughout the West until 2003, giving these states the time to weather the crisis as the new power plants are being built. It's not just Democrats who have grown impatient with the Federal Energy Regulatory Commission, though. Along with Democratic Sen. Dianne Feinstein of California, the other author of the price cap bill is a conservative Republican, Sen. Gordon Smith of Oregon, whose state also has been on the receiving end of skyrocketing electricity prices.

Plain and simple, federal regulators have abdicated their responsibility to ensure just and reasonable energy rates. Congress should step into the vacuum and set reasonable price ceilings to stem the hardship that ballooning energy costs have placed on residential customers and businesses, which in turn has threatened the West's economy. Price caps are the only way to curb the unquenchable greed of these energy conglomerates.