Title: Message
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Tuesday, 16 July, 2002
WASHINGTON (AP) - Deregulation of electricity in California "created
almost textbook conditions" for energy companies to keep power prices unfairly
high in 2000 and 2001, a congressional investigation found.
"Wholesale electricity suppliers exercised market power by raising
prices above competitive levels," the General Accounting Office concluded in a
report released Tuesday.
The
GAO report is the latest of several studies that found that serious structural
problems in California's deregulation paved the way for the soaring electricity
prices and rolling power blackouts in 2000 and 2001.
It was
made by public by Democratic Reps. Peter DeFazio of Oregon and Jay Inslee of
Washington the day before the Federal Energy Regulatory Commission is expected
to adopt new rules aimed at preventing a repeat of the energy crisis, which
reverberated across the West in the form of energy price spikes.
The
report blamed several flawed rules for allowing prices to rise even during hours
of light demand.
State
lawmakers froze retail prices for consumers, reducing, if not eliminating, the
incentive to conserve power as prices rose, the GAO said.
Until
the height of the crisis, California regulators discouraged utilities from
entering into long-term contracts for power. The reliance on spot sales enabled
power wholesalers to withhold electricity from the market "until it was
critically needed," making it possible to charge exorbitant prices.
Utilities flirted with financial ruin struggling to meet demand amid
wholesale power costs that reached $300 per megawatt hour. One megawatt is
enough to power about 750 homes.
Even
when price caps first were imposed in late 2000, they were ineffective, the GAO
said, but did not analyze why. The report also did not analyze certain pricing
and trading strategies that Western politicians have said allowed Enron Corp.
and other companies to manipulate the energy market.
Western lawmakers sharply criticized FERC for failing to intervene
aggressively as wholesale electricity prices soared in 2000 and early 2001.
Until last summer, FERC refused to impose any significant price controls,
contending price caps would impede energy production, worsening the supply
problem.
Wholesale cost receded after FERC imposed a price cap last summer,
utilities and state agencies signed long-term contracts and the price of natural
gas, the fuel for many power plants, fell.
(In
accordance with Title 17 U.S.C. Section 107, this material is distributed
without profit to those who have expressed a prior interest in receiving the
included information for research and educational purposes.)
THE END
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