Subject: NEWS FLASH ON THIS MORNING'S SENATE HEARING
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Date: Tue, 19 Jun 2001 04:22:00 -0700 (PDT)

This morning, all 5 FERC commissioners testified before the Senate Energy 
Committee on yesterday's order and on the pending Feinstein/Smith legislation 
to impose cost-of-service rates on wholesale power.  Highlights and analysis 
are as follows:

1. Sen. Feinstein, the chief sponsor of Senate price cap legislation, called 
FERC's order "a giant step forward" and said she is "very grateful" for what 
the commission did.  Senators Gordon Smith and Barbara Boxer agreed.  Sen. 
Feinstein said that she and Sen. Smith would now recommend to Chairman 
Bingaman that next week's mark up of their price control bill be postponed 
"for the time being" pending how the order plays out in practice.  Chairman 
Bingaman said he would follow their advice and cancel next week's mark up.  
(Responding to a question, each of the five commissioners said that Congress 
should NOT act to pass Smith/Feinstein, at least at this time -- this 
included Comr. Massey, who has favored legislation in the absence of 
"stronger" action by the commission.)

2. However, it is very important to point out that House Democrats in 
California and elsewhere out West have not been as supportive of FERC's order 
as have the Senators.  House Democrats are still expected to attempt to offer 
a price control amendment to the supplemental appropriations bill when it 
comes before the House later this week.  Of course, the reaction of the 
Senate may undercut the House Democrats's argument, at least at this time.  
Furthermore, should prices go up and the FERC order is seen as not working, 
price control advocates, including Sens. Feinstein, Smith and Boxer, will no 
doubt pick up where they left off.

3. It will be very interesting to see how Senator Lieberman and Gov. Davis 
react to the FERC order at the Senate Governmental Affairs Committee hearing 
tomorrow morning.  While this committee does NOT have legislative 
jurisdiction over the Feinstein/Smith legislation, this hearing will be well 
covered by the news media.  Sen. Lieberman is a cosponsor of the 
Feinstein/Smith legislation.

4. In my view, the political and public pressure will now shift in large part 
-- at least for the time being -- from the legislative price cap proposals to 
the settlement conference process that the FERC order will set motion.  There 
was a clear drum beat at the hearing from the western senators, particularly 
Feinstein, Boxer and Cantwell (WA), for refunds either out of the settlement 
conference or ordered by FERC.  In essence, they are pressing to have the 
price mitigation formula in the new order applied to power sales that took 
place prior to the issuance of the order.

5. Another sense of the poltiical flavor is that Sen. Schumer (D-NY), while 
expressing his continued support for deregulatioin and competition, pressed 
FERC general counsel Kevin Madden (by this point the commissioners left for 
the RTO conference) about why the order applied only to the WSCC and did not 
apply nationwide.  Madden at least tried to distinguish the New York and 
California markets, but then said that Con Ed has filed pleadings with FERC 
to extend price mitigation to New York and he could not say any more about 
the matter.

6. Ranking Republican Frank Murkowski said he had received a letter today 
from four western governors -- those from Arizona, North Dakota, Utah and 
Wyoming -- saying that since FERC has acted, there is no need for Congress to 
pursue price control legislation.

There were a series of questions and comments on details and technical 
aspects of the orders.  I will do an e-mail on these items later today.   
Please advise if you have any questions or comments.