CRISIS FERC'S FAULT? OFFICIALS: 1995 RULING LIMITED ENERGY FUTURE.

Byline: Bill Hillburg Washington Bureau

WASHINGTON - The Federal Energy Regulatory Commission, under fire for failing to cap electricity prices, helped set the stage for California's energy crisis in 1995 by rejecting a plan that could have added enough power to stave off blackouts, state officials and congressional Democrats charge.

U.S. Sen. Barbara Boxer, D-Calif., and officials of the California Public Utilities Commission said FERC commissioners on Feb. 23, 1995, sided with Southern California Edison Co. and San Diego Gas and Electric Co. in a dispute with the PUC over a state plan to support the private development of new geothermal, wind and other power plants.

``Edison and SG&E didn't want to enter into contracts with the new providers and argued we didn't need the added electricity,'' said Robert Kinosian, adviser to PUC President Loretta Lynch.

``FERC sided with them, and the plants didn't get built. If we had that extra power, there would have been no rolling blackouts this spring.''

FERC will be back in the spotlight today when its five-member commission will consider requests to place short-term caps on energy prices in California. The agency is expected to approve a modified plan that would cap prices at levels that are considered still too high by Gov. Gray Davis and other state officials.

Both FERC and Edison officials declined comment on the 1995 case. ``We prefer to let our written decisions speak for themselves,'' said a FERC spokeswoman.

A year later, the state plunged into a flawed deregulation scheme and did too little about the supply problem, which reached a climax this year with shortages and blackouts.

Vice President Dick Cheney and FERC officials have defended the agency's recent actions, arguing that they have already eased California's energy crisis.

But state officials say the 1995 decision helped to set the stage for this year's blackouts.

The new facilities, which would have been operating by 1999, would have added 1,400 megawatt-hours of electricity to the state's supply. CPUC officials stress that recent rolling blackouts were triggered when the supply was 1,000 megawatt-hours short of demand. A megawatt-hour can supply power to 1,000 homes for one hour.

``In FERC, we seem to be dealing with an agency that doesn't take its role seriously,'' said Boxer, who last week complained about FERC's 1995 decision when California lawmakers met behind closed doors with the vice president. ``First, they kill California's plan to build more power plants, and then they refuse to do their job and stop price gouging.''

``FERC has been protecting the major energy producers while they gouge Californians,'' said Rep. Brad Sherman, D-Woodland Hills. Sherman, one of FERC's most vocal critics in the House, has turned the agency's acronym into a verb, charging that ``Californians are getting FERCed on energy prices.''

``FERC sided with generators who did not want to build, and now it drags its feet on price caps because that's what the Bush administration wants,'' said Rep. Adam Schiff, D-Pasadena. ``Vice President Cheney says that FERC is an independent agency, but it has been merely carrying out the administration's anti-price cap orders.''

Under the PUC's 1995 plan, Edison and SDG&E would have been required to enter into 20-year electricity purchase contracts with the new energy plants' owners, thereby financially supporting the ventures. When the proposal was rejected by FERC, which is empowered to decide disputes between state regulators and utilities, plans for the new power plants were dropped.

In the case, Edison and SDG&E argued that, under the contracts set up by the state, the cost of the electricity was far above prevailing market rates and that the added power was not needed to meet the current demand. CPUC officials argued that they were following federal law by encouraging the development of new and clean energy sources.

Boxer argued that FERC's 1995 action belies arguments by President George W. Bush and other Republicans that California's power shortage is the result of environmental overregulation and not-in-my-back-yard attitudes by the public.

``This is the untold story of FERC,'' she said. ``We tried to add capacity and new plants. It was the federal government that got in the way.''

``This was our last and best effort to get more and cleaner energy that was needed in California,'' said Sean Gallagher, CPUC's staff counsel. ``Edison and FERC killed it off, not the environmentalists.''

Gov. Gray Davis, who will testify Tuesday along with FERC officials at a Senate hearing on the state's energy crisis and FERC's regulatory role, has charged energy companies with price gouging and manipulation.

He backs a bill by Sen. Dianne Feinstein, D-Calif., that would cap energy prices at cost plus a reasonable profit and return on investment.

FERC has been under fire from Democrats since November, when agency officials determined that price gouging had taken place in California. But the agency did not act to curb prices, a power granted to FERC in 1997 when it was set up by Congress as an independent agency within the Department of Energy.

Curt Hebert Jr., the Mississippian appointed by Bush in January to chair FERC, was not a party to either the 1995 or the November actions. He has defended FERC's recent actions and claims that the agency has already begun to ease the energy crisis in California.

``We're up and running,'' he said during a recent speech to an energy- industry trade group. ``And our price mitigation program is working. We have the tools to stop price manipulation and FERC has done that.''

Hebert said his agency deserves credit for recent declines in electricity and natural gas prices and well as increased supply that has kept blackouts at bay in California since mid-May.

Schiff and Sherman laid out a far different scenario for declining energy prices.

``The gouging by energy companies didn't stop and FERC didn't begin to act until the Democrats took over the Senate,'' Schiff said. ``They were dragging their feet until it became clear there would be consequences.''

``On the day that Sen. James Jeffords, I-Vt., quit the Republican party and gave control of the Senate to Democrats, El Paso Energy Company dropped its price for delivering 1,000 cubic feet of natural gas from Texas to California from $6.33 to 23 cents,'' Sherman said. ``I don't think that's a coincidence.''

Hebert is paid $133,700 to oversee the nation's energy markets. The other commissioners - Bush appointees Nora M. Brownell of Pennsylvania and Pat Wood of Texas, and Bill Clinton appointees William Massey of Arkansas and Linda Breathitt of Kentucky - are each paid $125,500. All commissioners serve five-year terms, and their nominations are subject to Senate confirmation.