California Governor Says Power Price Plunges Only Temporary

The governor of California said Sunday that last week's sudden drop in electricity and natural gas prices would probably be short-lived. 

In a conference call with reporters, Gov. Gray Davis said that political pressure had forced energy suppliers to reduce rates to their lowest levels in more than a year.  But he said state officials couldn't guarantee the rates would stay down.

"We have no power as it relates to pricing other than advocacy, lawsuits, pressure and shame," the governor said.

Along with Sen. Joseph Lieberman, D-Conn., who joined him in the conference call, Davis urged the Federal Energy Regulatory Commission to cap wholesale electricity prices.  The Bush Administration has opposed such a move.

"The president will continue to work with California to address their growing energy needs, but does not want to take action that will make the problem worse, such as price controls," White House spokeswoman Anne Womack said Sunday.

Lieberman, newly installed chairman of the Senate Governmental Affairs Committee, said he doesn't support price caps himself. But, he added, "when a free market is not working ... then you need price relief."

The senator said he hoped the FERC would voluntarily cooperate without having to be compelled to do so by Congress.  Letting California "continue to suffer" an energy crisis could have "a disastrous impact" on the national economy, of which the state consists 15 percent, he reasoned.

Lieberman's committee is holding a June 20 hearing on whether FERC is doing enough to hold down rates. Another hearing scheduled for June 13 will focus on the effects of energy deregulation in California, Lieberman said.

"The president hopes the planned hearings will be constructive and not partisan," Womack said.

The recent decrease in energy costs has been attributed to mild temperatures that have reduced air conditioner use. Wholesale power prices have dropped from more than $500 a megawatt hour to about $50 a megawatt hour.

Natural gas prices at the California-Arizona state line fell to about $3.50 per million British thermal units last week from nearly $12.

The prices also were also lowered by an 11 percent decrease in electricity usage by consumers last month compared to a year ago.

"We won't have conditions like this in a sustained way until 2004 or 2005," said Michael Shames, executive director of the Utility Consumers' Action Network in San Diego. "This is only short-term relief from a broken market."

Experts said a long heat wave, reduced power from dams in the Pacific Northwest and increased usage of air conditioners could again send energy prices soaring.

"Declaring a victory at this point is a real overstepping," said Severin Borenstein, director of the University of California Energy Institute in Berkeley. "We risk consumers easing up on conservation. And if we ease up, this crisis will only get worse."

The Associated Press contributed to this report