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Crossfire

Are California's Electricity Woes Today the Country's Misery Tomorrow?

Aired February 9, 2001 - 7:30 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ROBERT NOVAK, CO-HOST: Tonight: California's energy crisis. What can the federal government do to keep it from happening in your state? Is drilling in the Arctic National Wildlife Refuge the answer?

ANNOUNCER: Live, from Washington, CROSSFIRE. On the left, Bill Press; on the right, Robert Novak. In the crossfire: Republican Senator Frank Murkowski of Alaska, chairman of the Energy and Natural Resources Committee, and in San Diego, California, Democratic Congressman Bob Filner.

NOVAK: Good evening. Welcome to CROSSFIRE.

California's power shortage is not ending. The fourth-straight week of a power alert there remained in effect through today. Here, in the nation's capital, senators held hearings on the Korean War vintage Defense Production Act, which is being used to force natural gas sales to California utilities that cannot pay their bills.

Is California's woe today the country's misery tomorrow?

To prevent that from happening, Senate Energy Committee Chairman Murkowski wants to start drilling for oil up in the wildlife refuge in his home state of Alaska. But Congressman Filner, who's been fighting the utilities in his home town of San Diego, wants Uncle Sam to regulate utilities.

Bill Richardson is sorry that he is no longer secretary of energy, so that he could deal with the problem first-hand. But at least, he's sitting in on the left tonight.

BILL RICHARDSON, GUEST CO-HOST: Senator Murkowski, it's good to be asking you questions now for a change.

SEN. FRANK MURKOWSKI (R-AK), CHAIRMAN, ENERGY COMMITTEE: Well, that's fair enough. I'm glad you're here.

RICHARDSON: Senator, you and President Bush have been seizing on this electricity crisis in California to press your case for more drilling in Alaska's wildlife refuge even though there doesn't appear to be a connection. Here's my question: Besides damaging the ecology, the wildlife of ANWR, besides the fact that it's going to take seven to 10 years to get some of that oil moving into the country, minimal energy impact on the needs that we have in the country for energy, why do we to have drill in ANWR?

MURKOWSKI: Well, you've been secretary. You know that opening up ANWR isn't going to solve the California energy crisis. And we never said it was nor did the president nor did the vice president. This is kind of something that's been generated by the media and others by trying to connect the two together.

Obviously, what you've got in California is an energy shortage, and you've got another problem out there is they can't pay for it. Now as for as opening ANWR is concerned, realistically, you and I both know, you've been up there, there's no scientific evidence to suggest that we can't do it.

We've had 30 years of experience in Prudhoe Bay. We've taken care of the caribou. We've got technology now, 3D, seismic. And if you're going to look for oil, you'd better look for it where you're most likely to find it. And remember, if California doesn't get oil from Alaska, where it's getting it now, it's going to get it overseas, because it has to have it. And that means that it's going to come from foreign vessels, from Colombia or Venezuela or areas where they don't have the environmental concern. We know we can do it right in Alaska, and you helped make us do it right.

RICHARDSON: Well, senator, let me show you a poll on ANWR of the American people. By 53 to 33 percent they oppose it. We do have to take the views of the American people into account.

You had a bill today boosting domestic oil and gas production. That's good, and we tried to do that too. We've got to reduce our dependence on foreign oil. But isn't the answer, isn't the key here more energy efficiency programs, renewable energy, more fuel-efficient vehicles?

If we increase the average efficiency of a vehicle by 3 miles per gallon, that's 1 million barrels per day less that we have to consume. Isn't that the way to go?

MURKOWSKI: We've got to conserve more, and what we've got in our bill is more attention to alternatives and renewables. But you cannot simply conserve your way out of this pickle.

Now, you know -- and you made this statement when you were secretary -- that your administration got napping -- it got caught napping, if you will, because the energy crisis occurred on your watch.

Now, I'm not going the argue the merits, because, you know, we've got a problem in this country, and we both admit it. Now, we've got to solve that problem.

But to suggest that your poll is right -- I'll show you a poll from "The Christian Science Monitor" that came out 58 to 34 in favor of opening it up as long as you can do it safely. I'll show you a poll in "The Chicago Tribune"; it'll say the same thing. So...

RICHARDSON: That quote I made was on the home heating oil summit in Boston. It had nothing to do with...

(CROSSTALK)

NOVAK: You were just sleeping some of the time.

MURKOWSKI: Well, I think it was -- I think it was communicated that you were napping. Now, I don't know what it takes to keep you awake, but you're awake now.

NOVAK: Let's bring Bob Filner in. Bob Filner, you've still got the lights on in San Diego? Good, you're ahead of the game.

Congressman Filner, let me see if I get this straight. The misbegotten government of California does a miserable job of deregulating by keeping one set of prices high and another set of prices regulated. They have -- but their environmental restrictions, they do not permit the sufficient building of powerplants as they have elsewhere. And now you want the federal government to put price controls on wholesale electricity. Did I did summarize it correctly?

REP. BOB FILNER (D), CALIFORNIA: Well, as usual, you got a few things wrong, Bob. San Diego, in fact was the first place to fully deregulate. We deregulated fully. And what happened? Within a month, the prices doubled. Within 2 months, the prices tripled. That's when a temporary retail rate was imposed.

What has caused this crisis since last June was not a lack of supply, it was not environmental regulations. It was a manipulation of the wholesale market by a cartel of energy wholesalers and marketers, about seven of them. They drove up the prices. They created panic in San Diego. And they've created, the utilities, and $12 billion worth of debt.

NOVAK: Well, congressman -- Congressman Filner, I know that people on the left always want to have these terrible capitalists doing all these terrible things. Of course, I thought capitalism had won the Cold War. I guess they didn't in San Diego necessarily.

But isn't it -- every other place I've read, and by objective, scientific observers, they say this is a supply-and-demand problem, that not enough electric power has been produced in California for the needs because of the environmental excesses of your state government.

FILNER: There is certainly a critical need for supply. We have tight supplies. And in fact, the governor and the legislature have put -- a dozen plants are online that will come in production in the next two or three years. We are trying do to that while we're not -- without hindering the environment.

But Bob, the key issue here is the wholesale price, which has been boosted up without any relationship to the cost, without any relationship to the supply. They charge whatever they please at whatever time they wanted to do it. It has bankrupted the utilities. It has thrown small businesses out of work. And only the federal government, as the secretary will tell you, can regulate the wholesale price. We need a 2- to 3- to 4-year interim period where we lower those wholesale prices so can get a market in place. There is no free market at work here, Bob.

RICHARDSON: Chairman Murkowski, let me ask you this. You guys blame a lack of energy policy, environmental regulations. The fact is the California crisis was caused by a flawed deregulation plan in 1996 of Governor Wilson's.

Now, putting that aside, you also know that if you guys had passed our energy efficiency programs, our fuel-efficient vehicle programs, our conservation programs, our renewable energy budgets, we would have been better off.

But here's my...

MURKOWSKI: You guys...

RICHARDSON: No, no...

MURKOWSKI: Now just a minute. You had the White House, though.

RICHARDSON: Well, but you guys had the Congress.

MURKOWSKI: Make sure we understand who you guys are.

RICHARDSON: You guys -- let me just ask a question about California, senator. The Bush administration has adopted a hands-off approach to California's problems. Now we agree...

MURKOWSKI: Just a minute now...

RICHARDSON: We agree that we have to resolve -- that California has to resolve its problem on its own. But look what's happening today. There could be a natural gas shortage. We put in an emergency order, the Clinton administration, renewed by the Bush administration, my predecessor -- my successor, Senator Abraham...

MURKOWSKI: On gas as well as on...

RICHARDSON: On gas, on electricity.

MURKOWSKI: Right.

RICHARDSON: And you continued that. But the problem is you have said, publicly the Bush administration, you're not going to renew it again.

MURKOWSKI: Now, just a minute. Just a minute.

RICHARDSON: What happens if there's a shortage?

MURKOWSKI: Just a minute. Now, there's been some positive action by California. The legislature and the governor basically guaranteed about $10 billion worth of financing to take care of the debt. Now, it isn't going to take care of it all. But remember what this administration has done.

We have guaranteed in effect payment of that debt if the utilities of California won't do it. And you did the same thing. Now, that's pretty significant. Every taxpayer in this country by that order, if PG&E and Southern California Edison can't pay...

RICHARDSON: Now...

MURKOWSKI: Just a minute. Can't pay for that power, those power companies are going to come to the government, and they're going to say, hey, the government directed the power to go in. And so we...

(CROSSTALK)

NOVAK: ... the government gets stuck with the bill.

MURKOWSKI: We're stuck with it if they can't pay for it. Make no mistake.

RICHARDSON: The Bush administration continued that. My point here, senator...

MURKOWSKI: That's right...

RICHARDSON: What if there are rolling blackouts? What if the sixth-largest economy in the world...

MURKOWSKI: Just a minute. California has taken some positive action...

RICHARDSON: Yes...

MURKOWSKI: And we've got to be sympathetic to California, and California is addressing it. But have two problems out there. You have a credit problem. They can't pay for it. And you have a supply problem. The congressman was right when he acknowledged we don't have enough energy in California. But...

(CROSSTALK)

Just a minute. California got into this problem became they became dependent on outside energy coming into their state, 25 percent. That's the same problem that the nation's having with 56 percent imported oil. And you know where it's coming from now? It's coming from Saddam Hussein. We fought a war over there in 1990. We lost 147 men. That happened under your watch, my friend.

RICHARDSON: Mr. Chairman, that's not the case.

MURKOWSKI: All right.

RICHARDSON: But senator, let me ask you this. Why don't we have temporary price caps the way most Western governor are advocating. This is a Western regional problem. We have to find a solution.

Why doesn't the federal government at least help California a little bit?

MURKOWSKI: Let me tell you, they are and they should and they will. But California is also helping itself.

Remember, the key here is to put in more power, and in order to do that, you need an investment. And Wall Street is going to call the shot on whether California is doing enough to attract investments to come in, because nobody's going to come in there unless they can amortize their investment.

Why did California want to break its utilities? That's what I'd like to ask you.

NOVAK: Senator Murkowski is a very kind person. He said we've got to be sympathetic to California. But I want -- I want you to read...

FILNER: You're not that kind.

NOVAK: No, I'm very kind. But I want you to read what another Republican senator, Larry Craig of Idaho, said. And let's put it up on the screen.

He's saying: "I'm suggesting to my consumers in Idaho that they send the bill to California. The brownouts in California could well be the brownouts of Idaho, Oregon and Washington next summer."

Bob Filner, he is putting the blame right on California for infecting the entire West with your bad policies, isn't that right?

FILNER: What he's saying is what we're saying, that he should be putting the blame, by the way, on the wholesalers. That's what caused the increase in prices. And we're all in this together, Bob: the Western states and the country.

If California's utilities fail, if we have blackouts that take out production, the rest of the country is going to suffer immensely. It is only the federal government that can rationalize these prices at a reasonable level, as 100 years of deregulation did.

What the senator said is it's California's fault. I've got news for him: His state is next. The wholesale prices that were driven out without any regard to the cost, without any regard to the supply-and- demand curves that you guys talk about.

They choose whatever they want and we are suffering. We have businesses, you know, gone out of business.

MURKOWSKI: Well, the point I want to make is, when California, you know, went through its deregulation -- it really wasn't deregulation, we all know that, because they put a cap on retail. What they did, though, is they threw out all the long-term contracts for buying energy and went short term. And when the supply was tough, then the price went up. And that's the way it works.

NOVAK: We've got to take a break, and when we come back, we will discuss and we will argue why Texas is doing so well and California is doing so badly on the cost of electricity. In the meantime, don't miss your chance to pose your questions to, yes, the former energy secretary, Bill Richardson. What an opportunity! Right after the show at cnn.com/crossfire.

(COMMERCIAL BREAK)

RICHARDSON: Welcome back to CROSSFIRE. I'm Bill Richardson, former energy secretary, now taking up temporary residence as a most distinguished professor at the Harvard Kennedy School of Government.

Today, our debate focuses on the Republicans' answer to the energy problem: drill, drill, drill, no matter where. Is this the right way to go? That's what we're asking our guests tonight: Chairman Republican Senator Frank Murkowski of Alaska, chair of the Energy Committee, and Democratic Congressman Bob Filner of California -- Bob.

NOVAK: Congressman Filner, your great state of California, the most populous state in the country, is having brownouts. It appears there's much worse to come. The second-most populous state in the country, Texas, is doing just fine. Could it be because they have built 22 new powerplants in recent years and you haven't?

FILNER: It might be, but I'm not sure what the reason for that. Look, California did -- made a terrible mistake in deregulation. We did not have the -- the competitive situation that would allow the free market to work. There's no question about that. And the -- the wholesalers made matters worse. They took advantage of a system that was set up wrong and they put this whole state into debt.

And we've got to figure out a way out of it, and we need three or four years worth of help from the federal government. We'll figure our way out.

But it is the Texas companies, the Texas oil companies that have put this state in debt. We have -- they have sucked $12 billion out of our economy, Bob, took it to Texas, and gave it over to President Bush's election.

(LAUGHTER)

NOVAK: Congressman -- Congressman Filner, you know, you're a student of history, as I am. And isn't it true...

FILNER: But I learned something from history.

NOVAK: Well, I try to learn something. I'm not as quick as you are. But isn't it true that every cheap crackpot dictator from Hitler to Stalin, the first thing he thinks of is price controls?

FILNER: Well, I don't know about that, Bob, but look, I will tell you -- you don't come -- your ideology is getting in the way of your...

NOVAK: I hope so. FILNER: ... facts here.

The fact of the matter is we did -- Senator Murkowski, we did fully deregulate here in San Diego, and...

MURKOWSKI: You didn't deregulate because you had a cap on retail...

FILNER: No, we didn't.

(CROSSTALK)

You don't understand the situation.

MURKOWSKI: I do understand the situation.

FILNER: No, in San Diego, we completely deregulated, and the prices tripled within three months. We had no retail cap. It was only after that disaster, when businesses were losing -- were just closing up and seniors were panicking, that's when the state put on a temporary cap. We fully deregulated. And Enron and Southern and Dynergy and NRG took complete advantage of us and basically bankrupted the utilities.

MURKOWSKI: The problem now is how you're going to get out of this. The problem -- we know the problem. Now, the situation is let's get out of it and let's...

FILNER: I agree. It's not by drilling oil, senator.

MURKOWSKI: Hey, we're not talking about drilling oil, are we?

FILNER: Well, I haven't heard what you said.

MURKOWSKI: What we're talking about is trying to solve your credit problem and increase your supply of energy. Most of that's gas. It's not coming into California because you can't pay for it.

FILNER: Do you know why we can't pay for it?

MURKOWSKI: Now, the difference between what you're talking about and what this administration is doing is they've got a task force form and it involves the people who can make decisions, unlike the previous administration.

You've got the secretary of energy under the vice president, you've got the secretary...

RICHARDSON: Mr. Chairman, I was about...

MURKOWSKI: Just a minute.

RICHARDSON: ... to compliment you before you said that.

MURKOWSKI: You've got the head of the EPA, the head of the EPA, and you've got the people coming together that are going to set the policy so that you can do something about it. Now, under the previous administration, you know, Bill, everybody went their separate way. The secretary of energy...

RICHARDSON: No, no, no, Mr. Chairman. That's not it, that's not it.

MURKOWSKI: The secretary of the interior. I mean, they're brining them together so they can do something about the problem.

RICHARDSON: Let me ask you a question. I'm about to compliment you.

MURKOWSKI: And they're going to try -- they're going to spend...

RICHARDSON: Let me compliment you. Let me -- I'm about to compliment you.

MURKOWSKI: They're going to come up with some answers. And you're going to be held -- hold them responsible.

RICHARDSON: I've got a great question for you.

MURKOWSKI: And they sunset it -- they sunset it, the task force.

RICHARDSON: Mr. Chairman, please.

MURKOWSKI: That's...

(CROSSTALK)

RICHARDSON: You did a good job...

MURKOWSKI: So did you.

RICHARDSON: ... on the Electricity Competition Bill. We all tried to get it passed together.

Don't you agree that despite your best efforts that if the Congress had passed this competition bill, it would have brought more needed investment on transmission and generating facilities around the country? The fact that deregulation in other states is working well, but California had a bad one.

Now, my question to you, as chairman of the Energy Committee, do you think an electricity competition bill, because of the problems in California, is basically dead this session?

MURKOWSKI: Until California restructures itself, I think the credibility is gone out of the wind of deregulation. Unfortunately -- it's working well in many states. Pennsylvania is an example, doing a great job. They have caps on wholesale and retail, but they didn't put them on so tight that there wasn't some flexibility. And...

FILNER: Senator, we need some time -- we need some time to do that restructuring, and I hope you'll support us on our need for a wholesale -- a wholesale... MURKOWSKI: I totally support your commitment to pass $10 billion worth of bonds to take care of your debt, because somebody -- who's going to pay for this?

NOVAK: But you don't want federal price controls?

MURKOWSKI: Oh, no. No, that's...

FILNER: That's the question. That's a good question.

MURKOWSKI: Somebody's got to pay for this. Who's going to pay for it?

FILNER: Why should it be -- why should it be the taxpayers?

MURKOWSKI: Your consumers -- your consumers got consideration for that power. Remember that.

Now...

FILNER: I'm sorry.

MURKOWSKI: Now, who's going -- your consumers got consideration for that. They got the power. Somebody's got to pay for it.

(CROSSTALK)

NOVAK: And I have -- I have the power -- I have the power to end this debate.

MURKOWSKI: Your show.

NOVAK: Thank you very much, Senator Murkowski. Thank you very much, Congressman Filner.

MURKOWSKI: Nice to be with you.

NOVAK: And we'll come back with closing comments to determine whether the real person who's responsible for this mess is Bill Richardson.

(COMMERCIAL BREAK)

NOVAK: CROSSFIRE doesn't end here tonight. Bill Richardson will be in the chatroom to answer your questions right after the show at cnn.com/crossfire.

Bill, you know I have -- I bow to nobody in my admiration for you. But you look like you really handed your successor poor Spence Abraham a bag of worms there. Why didn't you fix this problem before you left the Energy Department?

RICHARDSON: Well, as I said before, we tried on the California issue to warn the Congress about transmission generation problems in California. I had been out there in Sacramento a year ago saying, you may have this. But really, Bob, that really is a state problem. But I think the federal government has to help. What you have -- what you need...

NOVAK: You don't...

RICHARDSON: What we need is good supply and demand (UNINTELLIGIBLE). There's plenty of blame to go around.

NOVAK: But surely, you don't agree with Bob Filner that the federal government should come in and put in price controls all over the state of California.

RICHARDSON: No. What I do think is needed is a temporary price cap in the Western region until the situation gets better.

NOVAK: Do you think it's going to happen?

RICHARDSON: I think it's possible. I think the Bush administration is going to have to be more aggressive.

NOVAK: Well, they better start buying -- building some powerplants, though...

RICHARDSON: Absolutely.

NOVAK: ... and get away from that tree-hugging syndrome and build some powerplants.

RICHARDSON: Well, you can do both. You can have environmental protection and new power generation.

From the left, I'm Bill Richardson. Good night from CROSSFIRE.

NOVAK: From the right, I'm Robert Novak. Join us again next time for another edition of CROSSFIRE.

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