Subject: CALL FOR WEST-WIDE MITIGATION PLAN
From: [email-masked]
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Date: Tue, 12 Jun 2001 16:16:44 -0700 (PDT)

I have obtained a copy of a letter from Representative Tauzin and others to FERC Chairman Hebert which appears below.  It could provide some indication of the direction FERC will take with the order it plans to issue next Monday.  Summarizing, the letter calls for a comprehensive plan for price mitigation and monitoring within the entire WSCC, which plan should:

prohibit unnecessary outages and noncompliance with sales agreements; refunds and penalties for charging rates not in compliance with the mitigation plan

adopt market mechanisms (rather than imposing rigid price controls) and allow recovery of all verifiable costs

promote conservation and demand response 

Please see details below.

June 12, 2001
The Honorable Curt H

?bert, Jr.
Chairman
Federal Energy Regulatory Commission
888 First Street, NE
Washington DC, 20426

Dear Chairman H?bert:

Since last summer, the Committee on Energy and Commerce has closely
monitored the electricity situation in California.  Today, the West
continues to suffer from the second worst drought in a century, and
California faces the threat of blackouts and potential price spikes again
this summer.  After extensive review of the energy crisis in the West,
including several hearings in Washington and California, we recommend that
the Commission take further actions to help mitigate wholesale electricity
prices and keep power flowing into California.

We recognize the Commission's efforts in recent months to address the
electricity crisis in the California and western markets, including measures
to investigate and mitigate wholesale electricity prices.  While we are
pleased that current trends show reduced demand and lower prices throughout
the West, we remain concerned about the potential impacts of high wholesale
electricity prices on consumers and economic growth in California and the
entire West in the hot summer months to come.  To ensure that prices are
just and reasonable during the critical months ahead, we believe the
Commission can and should do more to mitigate wholesale electricity prices
in western markets.  We strongly urge the Commission to implement a
comprehensive plan to mitigate wholesale prices and aggressively monitor
wholesale sales of electric energy by public utilities and other market
participants within the entire Western Systems Coordinating Council (WSCC).

Specifically, such a plan should ensure that rates for all wholesale
electricity sales are just and reasonable in all markets throughout the
WSCC.  The plan should also prohibit unnecessary generation outages and
failures to comply with agreements to sell power.  If the Commission finds
that a rate charged does not comply with the price mitigation plan, it
should strictly enforce the plan and require refunds and penalties to the
full extent allowed by law.

Aware of the danger of discouraging supply, the Commission has relied upon
market-oriented methods rather than imposing rigid price controls that would
exacerbate the crisis and increase the likelihood of blackouts.  We share
the Commission's concerns regarding the need to encourage supply.
Accordingly, to prevent blackouts and contribute to a long-term solution,
the Commission's comprehensive plan should adopt market mechanisms as
appropriate and allow recovery of all verifiable costs to avoid discouraging
availability of supply and investment in new generation and transmission.

To mitigate prices and increase available supply, we also urge the
Commission to take every additional step within its authority to promote
conservation and demand response throughout the western market.  In States
where retail rates do not fully reflect wholesale costs, consumers have less
incentive to conserve.  While demand reduction incentives are not a
substitute for accurate price signals, a demand response program can
encourage conservation while retail and wholesale rates are not in parity.
Such a program should provide incentives and opportunities for both
wholesale and retail consumers to sell, at market or other incentive prices,
"foregone" electric load that they would otherwise be expected to consume.
Specifically, the Commission should: (1) establish or certify a wholesale
"clearinghouse" for demand reduction agreements; and (2) enable consumers,
whether individually or through aggregation arrangements, to sell foregone
power to their own local distribution utility or to third-party purchasers.
We recognize that individual States and utilities are implementing demand
reduction programs, but a broader, regional solution is needed to enable
sufficient demand reductions in time for an expected hot summer.  We
understand that such a program can be implemented without preempting State
laws, abrogating existing contracts, or shifting costs to non-participant
consumers.

We look forward to working with you to build upon the Commission's previous
efforts to ensure reliable power supplies at just and reasonable prices for
consumers in California and the West this summer and thereafter.  To ensure
maximum relief to western consumers in the months ahead, we request that you
take appropriate action consistent with our recommendations as soon as
possible.  We request that you respond to our recommendations in writing not
later than the close of business on Friday, June 22.  If you have questions
please contact our staff.  Thank you in advance for your cooperation with
this request.

Sincerely,
W.J. "Billy" Tauzin

Chairman

Committee on Energy and Commerce

Joe Barton
Chairman
Subcommittee on Energy and Air Quality

Heather Wilson

Member

Committee on Energy and Commerce

George Radanovich
Member
Committee on Energy and Commerce

Mary Bono

Member

Committee on Energy and Commerce

Greg Walden
Member
Committee on Energy and Commerce

William M. Thomas
Jerry Lewis

Duncan Hunter
Randy "Duke" Cunningham
Ken Calvert
Stephen Horn

Edward R. Royce
Doug Ose

Darrell E. Issa