Editorial: Regulators finally get on board

Wednesday, June 20, 2001 | 9:06 a.m.

Well, what do you know. Federal regulators -- after ignoring more than a year's worth of public outrage -- finally have taken some steps to stop energy producers from continuing the price gouging of electricity customers. Previously the Federal Energy Regulatory Commission had imposed limited controls on California alone, but they didn't have much impact there. For that matter, they only applied to the Golden State, so the rest of the West was left helpless. So responding to the public pressure, the commission agreed Monday to toughen the limits on how much an energy producer can charge for wholesale prices, including all the states hooked to the Western power grid, which includes Nevada.

Until Monday the Federal Energy Regulatory Commission has behaved abysmally, allowing energy producers to set wholesale prices for utilities that have bordered on the criminal. Of the Western states, California has suffered the most. For instance, as Sen. Dianne Feinsten, D-Calif., has noted, the cost of all power in California this year is estimated to be between $50-65 billion. This astronomical sum significantly exceeds what had been paid in 2000, when it was $28-30 billion, and dwarfs the amount from 1999, when it was just $7 billion.

Nevada itself hasn't been a stranger to higher costs. The state consumer advocate says that in the past year electricity rates have increased by about 25 percent in Nevada, and by early next year they could be 80 percent more than what they were in September 2000. Other Western states also have been battered by energy producers that are looking more and more like latter-day robber barons.

Wholesale costs of power recently have dampened, but that doesn't mean the new regulation isn't needed. Curtis Hebert, chairman of the Federal Energy Regulatory Commission, has said that a recent lowering of prices was a sign that the limited price controls that the commission had previously put in place were working. But the previous limits were riddled with loopholes. So Hebert's argument that the earlier limits played a role strains common sense. More likely what was happening is that public pressure and Congress' jawboning, which included the prospect of a federal law imposing tough price caps, prompted the energy producers to back off.

When power prices started escalating last year, many utilities entered into long-term contracts, so their rates may not be substantially impacted by the federal regulators' action since the new restraints apply to just the spot market. Still, the new regulations should bring about more stability to the energy market, and Feinstein and Sen. Robert Smith, R-Ore., are so encouraged that they have postponed legislation that would establish tough price caps. But even Feinstein acknowledges that the new rules alone won't solve the energy woes facing the West.

A fascinating sideshow during the energy crisis has been the sea change in the attitude of the White House. When President Bush first entered the White House, his administration was adamant that the market should correct itself and that there was no need for price caps, a view shared by the Federal Energy Regulatory Commission. Many observers at the time thought that because Bush lost California so badly during the general election, he saw no reason to help the state. But the pleas to adopt some mitigating measures, which came from California Republicans and those Republicans from other Western states that were hurting too, finally resonated with the administration and the Federal Energy Regulatory Commission.

What is a shame is that it took political pressure to finally get regulators off the dime and do the right thing. Their dawdling in the interim cost the West's businesses and consumers billions of dollars, hard-earned money that instead wound up in the pockets of greedy energy producers.