Appeal court ruling on Burton-Hertzberg

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Subject: Appeal court ruling on Burton-Hertzberg

----- Forwarded by Jeff Dasovich/NA/Enron on 05/29/2001 04:35 PM -----

"Costigan, Richard" <Richard.Costigan@asm.ca.gov<
05/29/2001 04:32 PM

To:
cc:
Subject: Appeal court ruling on Burton-Hertzberg

Appeals court declines to order energy price caps

Updated: May 29, 2001 - 12:22 p.m.
SAN FRANCISCO -- A federal appeals court declined Tuesday to order federal
energy regulators to cap wholesale electricity prices.

The decision by a three-judge panel of the 9th U.S. Circuit Court of Appeals
came hours before California Gov. Gray Davis was to urge President Bush in
Century City to cap wholesale power costs, which have been spiraling out of
control.

The panel, in a brief statement, said last week's appeal by state Senate
President John Burton and state Assembly Speaker Robert Hertzberg does not
warrant "intervention of this court."

The lawmakers, both Democrats, were joined by the city of Oakland in their
appeal to the 9th Circuit.

"The citizens of California are suffering immediate irreparable harm as a
result of FERC's abrogation of its duty to establish just and reasonable
rates for electricity," they wrote to the 9th Circuit, which has
jurisdiction over FERC.

The lawmakers said California's looming threat of continued blackouts "are
an imminent threat to the health, welfare and safety of every California
citizen."

The suit came after more than a year of wholesale power prices reaching
historically high levels. In December, prices in California reached $200 per
megawatt hour -- and they have skyrocketed to as much as $1,900 per megawatt
hour during peak times since then.

The Bush administration ardently opposes price caps and President Bush has
declined Davis' requests to urge FERC to impose strict caps.

Vice President Dick Cheney, chief architect of the administration's energy
plan, has said capping prices would not increase energy supplies or reduce
demand.

"We get politicians who want to go out and blame somebody and allege there
is some kind of conspiracy ... instead of dealing with the real issues,"
Cheney has said.

Cheney criticized Davis, a Democrat, for what he called a "harebrained
scheme" to use the state's budget surplus to buy power because California's
two largest utilities face enormous financial problems.

For the short term, the Bush administration has approved Davis' request to
expedite permits for new power plants and has ordered federal facilities in
California to reduce energy consumption 10 percent this summer.

Sacramento and the White House appear locked in a high-voltage war of
rhetoric over energy policies. There is broad bipartisan dissatisfaction in
Sacramento with Washington's response to California's energy crisis -- the
result of its own 1996 deregulation rules.

Last month FERC did order a one-year cap on electricity sold into California
during power emergencies, when power reserves fall below 7 1/2 percent. The
agency did not set a price and also required the state to join a regional
transmission organization, which could limit California's ability to control
its own power grid.

Davis called the plan a "Trojan horse," and state power regulators dismissed
the cap as inadequate, saying it would profit power generators at
ratepayers' expense.

In addition, Davis and state lawmakers sharply criticized FERC for
considering requiring the state's power grid operator to add a surcharge on
power sales to pay generators the money they are owed by the state's two
large financially strapped utilities.

The case is Burton v. Federal Energy Regulatory Commission, 01-70812.

-- Associated Press

Richard Costigan, III
Chief of Staff
Office of the Assembly Republican Leader
California State Assembly
Phone:(916) 319-2005