Monday, March 31, 2003 | 9:10 a.m.
Last week the Federal Energy Regulatory Commission found that energy companies had manipulated the electricity and natural gas markets in the West during the 2000 energy crisis. The commission ruled that California should receive $3 billion in refunds from the energy companies, considerably less than the $9 billion that was sought. One way the companies took advantage of California's deregulated electricity market was by withholding power, a tactic that drove up the price of electricity. The manipulation also affected the energy market throughout the West, contributing to higher electricity prices in Las Vegas.
California, citing the market manipulation, also had asked federal regulators to let the state reopen and renegotiate $20 billion in long-term contracts it entered into with the energy producers at the height of the energy crisis. Nevada Power, too, has asked the federal regulators to reopen its contracts with energy producers that total about $300 million. The Federal Energy Regulatory Commission didn't act on the request to undo the contracts, but a majority of the commissioners indicated during a hearing last week that it was unlikely they would reopen them, noting their concern about setting a precedent. As the San Francisco Chronicle reported, two of the commissioners appointed by President Bush said reopening the contracts would violate the sanctity of the agreements. What nonsense. If the energy producers were abusing the system to create a panic as a way to push prices higher and higher, how can a contract they enter into with utilities have any sanctity to begin with?! A far worse precedent would be for federal regulators to fail to do their job, which is to protect customers from unjust and unreasonable rates.
This is the same Federal Energy Regulatory Commission that resisted setting a cap on electricity prices even after it became clear that energy producers were taking advantage of California's deregulated electricity market. It wasn't until June 2001 that the commission put in price controls -- a year after the market was out of control. The commission's belated admission last week that there was market manipulation actually is an indictment of their inability -- or unwillingness -- to police rogue energy companies. Congress should hold hearings and investigate just why these federal regulators have failed so miserably and determine what steps should be taken so that such a lapse doesn't happen again.
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