(AP) - Power blackouts "appear inevitable" in California
this summer and could spill into neighboring Western states, the
Bush administration says, even as stocks of a gasoline additive
raise concerns of another summer of price spikes at the pump.
Energy Secretary Spence Abraham told a Senate hearing that the
administration is trying to find ways to increase power supplies
in the West, where prices have soared because of shortages. The
administration strongly opposes price controls, he said.
"The problem will get worse, and blackouts this summer
appear inevitable," Abraham said. The administration's hope
is that "California doesn't start a wave of blackouts that go
beyond its borders," he said.
Abraham announced no specific actions to ease the Western
electricity crunch, although he said he has discussed the
possibility of a small amount of additional power being obtained
He said the administration opposes price controls on wholesale
power sales in the West, despite pleas from California and the
Northwest that federal intervention in "a broken market"
"Let me be clear on this," he told a hearing on price
control legislation, "Any action we take must either help
increase supply or reduce demand. ... Price caps will not increase
supply or reduce demand."
He said that California tried price controls and prices soared.
He said the debate over wholesale prices is diverting attention
from the need to find ways to increase supplies and prevent
"I believe in the free market," responded Sen. Gordon
Smith, R-Ore., but in California and the rest of the West
"what we now have is a broken market and a duty to do
"All we're asking for is help to prevent price
gouging," added Sen. Dianne Feinstein, D-Calif. She said her
state faces a likely shortage of 5,000 megawatts of power during
peak demand periods this summer.
One megawatt supplies about 1,000 homes.
Smith and Feinstein have proposed legislation to require the
Federal Energy Regulatory Commission to limit prices charged by
power generators across 11 states in the West. Wholesale
electricity in California averaged $228 a megawatt in February,
eight times what it cost a year earlier.
At the White House, spokesman Ari Fleischer indicated Bush's
opposition to the Smith-Feinstein legislation. "The president
does not support price controls," Fleischer said.
Meanwhile, there was growing concern that this summer may bring
another series of price spikes for gasoline, although many energy
experts said it was too early to tell if it will be another season
of $2-a-gallon fill-ups.
The Energy Information Administration forecast average gasoline
prices this summer of $1.49 a gallon, about a dime higher than in
recent weeks. But those numbers could change if gasoline supplies
lag, or there emerges a shortage of additives to meet air
pollution requirements in major cities.
"Gasoline inventories are below the average expected
range. It's something we've got to keep an eye on," said
Jonathan Cogan, a spokesman for the EIA.
Refiners traditionally step up gasoline production in late
March and April to build up stocks. But refiners reportedly are
behind schedule in producing MTBE, the clean air additive, because
of this winter's high natural gas demand. MTBE is derived from
Such a shortage could cause havoc in gas supplies for major
cities that must use the additive because of pollution. Last
summer shortages of reformulated gasoline in Chicago and Milwaukee
were blamed for gasoline price spikes beyond $2.
House Speaker Dennis Hastert, R-Ill., has become so concerned
that he called in Abraham and Environmental Protection Agency head
Christie Whitman for a meeting Thursday to discuss the issue.
In New York, meanwhile, a report from the state's Independent
System Operator said the state could avoid the power problems that
have hit California by speeding up the process under which new
power plants are built. New York is nowhere near the crisis stage
reached in California this year, "but we are going in the
wrong direction," said William J. Museler, ISO president.
At the Capitol in Washington, Western electricity problems
dominated the Senate Energy and Natural Resources Committee
Washington Gov. Gary Locke, whose state has been hammered by
soaring power costs, said rates could jump as much as 200 percent
this summer as supplies dwindle. The region, which relies heavily
on hydroelectric power, is in the midst of a drought and may face
California-like rolling blackouts this summer.
The high prices and shortages "will cripple the
agriculture economy of our state," he told the senators,
pleading for federal intervention to control wholesale power
prices. "We simply need a timeout."
But Sen. Larry Craig, R-Idaho, said, "We cannot continue
to send false signals to the market" by holding back prices.
He said his state is facing 35 percent higher power costs, more
than consumers in California who are protected by retail price
Indeed, Sen. Frank Murkowski, R-Alaska, said people in 37
states have higher electricity bills than California.
Southern California Edison and Pacific Gas & Electric, the
two utilities that have come close to bankruptcy, have accumulated
nearly $13 billion in losses because the state's 1996 deregulation
law prevented them from passing most of the higher costs of
wholesale energy on to customers.