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GOVERNOR DAVIS PRESSES FERC FOR ACTION ON WHOLESALE POWER RATES: Calls on
Federal Regulators to Reduce Prices, Issue Refunds GOVERNOR DAVIS NAMES KAHN CHAIR OF THE GOVERNOR'S CLEAN ENERGY GREEN TEAM OFFICE OF THE GOVERNOR ---------------------------------------------------------------------------- ---- PR00:238 FOR IMMEDIATE RELEASE September 12, 2000 GOVERNOR DAVIS PRESSES FERC FOR ACTION ON WHOLESALE POWER RATES Calls on Federal Regulators to Reduce Prices, Issue Refunds SAN DIEGO - At a Federal Energy Regulatory Commission (FERC) hearing today in San Diego, Governor Gray Davis reiterated his call to federal regulators to intervene "to the fullest extent possible" to lower electricity prices in California. "FERC bears responsibility to ensure that a workably competitive market exists before California consumers and California's economy are subjected to unconstrained, market-based electricity prices," said Governor Davis in a statement read by Energy Oversight Board Chairman Michael Kahn. "Consequently, I renew my prior request that the Commission act with utmost speed to intervene to the fullest extent possible to restore wholesale prices to fair levels and to remedy harms that have resulted from the exercise of market power." Governor Davis noted that he and state lawmakers have taken dramatic action in recent weeks to provide rate relief. "While these actions should provide short-term rate predictability and longer-term benefits to customers in terms of improved supplies, the fundamental problem of exorbitant wholesale prices still exists and remains the responsibility of FERC to address," said the governor. "No combination of state actions can substitute for federal action to ameliorate the problems of California's wholesale markets." Governor Davis has taken the following actions in reaction to rising electricity prices in San Diego: On June 14, he called for emergency reduction of electricity use by all state facilities in the San Francisco Bay area in response to electricity emergency and rolling blackouts. On June 15, he called on chairpersons of the Public Utilities Commission (PUC) to analyze the conditions that led to electricity shortages in the San Francisco Bay area the previous day, including a statewide perspective on the price and delivery of electricity. Report was completed, submitted to the governor and released on August 2. On July 27, 2000, Governor Davis called on federal and state regulators to take swift action to extend the caps on wholesale electric rates in California and provide San Diego ratepayers with million of dollars in refunds. In letters written by the governor to two state regulatory agencies and two California-based panels charged with overseeing California's power market, he called for a coordinated state effort to urge federal regulators to take strong measures to reduce power rates in both the short- and long-term. On August 2, 2000, Governor Davis issued three Executive Orders designed to reduce energy consumption by state government and speed up the time it takes new power generating facilities to win approval from state agencies. On August 9, 2000, Governor Davis called on the Public Utilities Commission (PUC) to establish a two-year plan that would cut electricity rates by nearly half for residential and business customers of San Diego Gas & Electric. The governor also reached an agreement with the California Grocers Association that will save enough electricity to provide power to between 50,000 and 60,000 homes during periods of peak demand, as grocers agreed to reduce power consumption by 10 percent during Stage One emergencies. On August 10, 2000, Governor Davis wrote a letter to President Clinton urging him to expedite FERC's investigation to determine whether current electric rates in San Diego were unjust. On August 22, 2000, Governor Davis called on President Clinton to release emergency funds from the Low-Income Home Energy Assistance Program (LIHEAP) to the state to help low-income Californians pay their rapidly-rising electricity bills. On August 23, 2000, President Clinton responded to Governor Davis' request by releasing $2.6 million in emergency funds to help low-income Southern Californians cope with the surge in their electricity bills. The President also asked federal regulators to speed up their investigation into the operation of U.S. power markets and urged the Small Business Administration to use its credit programs to help small firms hurt by the price increases. On August 23, 2000, Governor Davis reached agreement with legislators on legislation to provide relief to San Diego ratepayers. The governor signed two bills into law on September 6, 2000. Please see attached letter (below). # # # SEPTEMBER 12, 2000 STATEMENT OF GOVERNOR GRAY DAVIS TO THE FEDERAL ENERGY REGULATORY COMMISSION CONCERNING ITS INVESTIGATION OF WHOLESALE PRICE ESCALATION IN CALIFORNIA The Summer of 2000 has confronted California with an electricity crisis that seriously threatens the safety, health and well being of citizens and businesses throughout the state. At the heart of the crisis is the extraordinary run up in prices for wholesale electric energy and ancillary services, accompanied by deteriorating service and reliability. In San Diego, electric customers' bills have more than doubled this summer, threatening permanent harm to businesses and the health and welfare of residential customers in the warm southern climate. All remaining California electric consumers are faced with similar prospects as their legislated rate freeze periods come to an end. In San Francisco we saw rolling blackouts for the first time in our history. As soon as the dimensions of the crisis became evident, I directed California regulators, including the Public Utilities Commission and the Electricity Oversight Board, and the Independent System Operator, to take immediate steps to identify and implement specific measures to mitigate the damage, including restoring price caps at Summer 1999 levels. I am happy to report that those measures have been adopted, although not without considerable resistance from self-interested parties. In recent weeks, I have worked with the California Legislature to enact further relief within the existing framework of options now available to the state. These include provisions to stabilize retail rates, expedite generation licensing where possible, implement targeted demand reduction and demand response and remove constraints in transmission and distribution systems. I have also established a task force comprised of key state officials which is developing measures to increase energy efficiency and alternative supplies and to expedite permitting by state agencies. While these actions should provide short-term rate predictability and longer-term benefits to customers in terms of improved supplies, the fundamental problem of exorbitant wholesale prices still exists and remains the responsibility of the Federal Energy Regulatory Commission to address. No combination of state actions can substitute for federal action to ameliorate the problems in California's wholesale markets. A joint report submitted to me on August 2nd by the Chairman of the California Electricity Oversight Board and the President of the California Public Utilities Commission concluded that exorbitant wholesale prices in California result from wholesale market dysfunction and the exercise of market power by sellers. Subsequent reports by the Market Analysis Department and the Market Surveillance Committee of the California Independent System Operator reach the same conclusions. Subsequent behavior of wholesale electric prices during August confirms their conclusions, and subjects California to further economic damage. While I remain hopeful that California wholesale markets may ultimately become competitive and become capable of serving the interests of consumers and the public, I cannot and will not accept the liabilities to California that result from the current situation for even a short period. I intend to take any and all steps necessary to restore economic stability to the electric service infrastructure of California. FERC bears the responsibility under its organic act to assure just and reasonable wholesale electric rates. FERC bears responsibility to ensure that a workably competitive market exists before California consumers and California's economy are subjected to unconstrained, market-based electricity prices. Consequently, I renew my prior request that the Commission act with utmost speed to intervene to the fullest extent possible to restore wholesale prices to fair levels and to remedy harms that have resulted from the exercise of market power. ### OFFICE OF THE GOVERNOR ---------------------------------------------------------------------------- ---- A00:245 FOR IMMEDIATE RELEASE September 12, 2000 GOVERNOR DAVIS NAMES KAHN CHAIR OF THE GOVERNOR'S CLEAN ENERGY GREEN TEAM SACRAMENTO - Governor Gray Davis today announced the appointment of Michael A. Kahn as chairman of the newly-created Governor's Clean Energy Green Team. The Team was created by Governor Davis' signing of AB 970 by Assemblywoman Denise Moreno Ducheny (D-San Diego) on Wednesday. Mr. Kahn, 51, of San Francisco, is the chairman of the California Electricity Oversight Board, and he also serves as vice-chair of the California Commission on Judicial Performance. He has been senior partner and head of litigation at Folger Levin & Kahn LLP since 1979. Mr. Kahn has held numerous state and federal government appointments and assignments over the last 15 years. Mr. Kahn is the author of several articles and reports on litigation practice and Supreme Court history. He is a magna cum laude, Phi Beta Kappa graduate of the University of California, Los Angeles. Mr. Kahn also earned master of arts and juris doctorate degrees from Stanford University, where he was an editor of the Law Review. After graduation, he served for a year as a law clerk to Judge Ben C. Duniway of the Ninth Circuit Court of Appeals in San Francisco. The signing of AB 970 established the Governor's Clean Energy Green Team, which works to streamline the process of creating new power plants to ensure that an adequate supply of power will exist to make a deregulated marketplace work. The Team does this by working with local governments, identifying environmental impacts, developing recommendations for low interest financing programs for renewable energy and obtaining input on natural gas supply, emission offsets and water supply. Members do not receive a salary. This position does not require Senate confirmation. # # # Julee Malinowski-Ball Edson + Modisette Associate 925 L Street Suite 1490 Sacramento CA 95814 916-552-7070 FAX-552-7075 jmball@ns.net
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