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Davis says California will go to court for energy rate relief

LOS ANGELES, California -- After a disappointing meeting with President Bush, California Gov. Gray Davis said Tuesday the state will seek relief in court from soaring wholesale electricity rates.

Davis said his 35-minute meeting with the president was "cordial" and "businesslike," but Bush rebuffed his arguments for temporary price controls to ease the state's chronic electric shortages.

"On the big enchilada, the thing that really matters above all others, I'm disappointed that we still have a fundamental disagreement," Davis said.

Davis said California will sue the Federal Energy Regulatory Commission in hopes of spurring it to enforce rulings that electricity rates in California were unjust and unreasonable.

"We are entitled as a matter of law to some form of price relief," Davis said.

He also held out the prospect that the U.S. Senate, soon to be Democrat-controlled, would hold hearings into the soaring prices and chronic shortages that have plagued California since the beginning of the year.

California Gov. Gray Davis calls energy price relief a 'matter of law' (May 29)

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CNN's Rusty Dornin examines all the finger-pointing in the California power struggle (May 29)

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U.S. energy crunch

Under California's 1996 electricity deregulation law, utilities bought power on the open market but rates for consumers increases were capped. When wholesale rose last year, the state's large investor-owned utilities reported billions in losses. The largest -- Pacific Gas and Electric -- filed for bankruptcy protection in April.

Californians have gone from paying $7 billion for electricity in 1999 to an estimated $50 billion this year despite conservation efforts, Davis said.

Earlier this month, the state Public Utilities Commission approved a $5 billion rate hike plan that protects more than 60 percent of the state's residential customers from higher power bills.

Davis said he wants the FERC to move to enforce its findings that he said show California consumers are being treated unfairly.

In December, the FERC concluded that "there was clear evidence that the California market structure and rules provide the opportunity for sellers to exercise market power when supply is tight, and can result in unjust and unreasonable rates." As a result, "unjust and unreasonable rates were charged and could continue to be charged unless remedies are implemented."

FERC reaffirmed that finding in April.

Davis has repeatedly called for caps on the price of wholesale electricity to get Californians through hot summer months.

Bush did agree to investigate whether California is being overcharged for natural gas, which runs many of its power plants, Davis said. And he said the White House has helped California authorities clear the way for construction of more power plants.

But the president has spoken forcefully against price controls. He and Vice President Dick Cheney, both former oil executives, have argued that the free market, not price controls, should be trusted to lower energy prices. Bush reaffirmed that position Tuesday afternoon during a speech in Los Angeles that Davis attended.

"We will not take any action that makes California's problems worse," Bush said. "Price caps do nothing to reduce demand and they do nothing to increase supply."

A protester calls for
A protester calls for "Rate Caps Now" during Bush's remarks Tuesday in Los Angeles  

The Bush administration has cited California's troubles to support their plans to boost long-term energy supplies, but critics -- including Davis -- say the administration blueprint ignores immediate problems.

Earlier, at the Camp Pendleton Marine Corps base in California, Bush announced the federal government would ask Congress for $150 million to help low-income earners pay for higher energy bills this summer.

"For some Americans and some Californians, high energy costs are more than a challenge, they are an emergency," Bush said. "Our government must respond."

The new money would be allocated in addition to $300 million already budgeted for part of the Low Income Home Energy Assistance Program.

The president spoke at the Marine base to stress his recent order that the military and other federal agencies in California reduce peak-hour power usage by 10 percent.

Bush said the federal conservation efforts would save the state 76 megawatts per hour during peak-use periods. That's enough electricity, he said, for 140,000 people during peak demand periods.



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