California senator calls for full deregulation or re-regulation

WASHINGTON (AP) -- Sen. Dianne Feinstein says California should either fully deregulate or re-regulate its electricity market.

"Piecemeal actions buy time, but they don't solve the fundamental problem," Feinstein said Tuesday in a speech at the American Public Power Association conference in Washington.

Feinstein, D-Calif., said that while the commitment by Gov. Gray Davis and the Legislature to buy $10 billion of electricity buys time, a long-term solution -- either toward full deregulation or re-regulation -- must be forged by summer.

Power shortages are expected to become more dire in the summer months, when Californians crank up air conditioners to avoid sweltering heat.

Fully deregulating, by lifting the state cap on what customers of the state's biggest privately owned utilities pay for power, would demonstrate the higher costs of costs of electricity and could curb demand, Feinstein said. "If you deregulate the retail market, you send a clear price signal to consumers and provide them strong incentives toward cutting their energy use -- preventing blackouts and lowering prices," Feinstein said.

She said the federal government should step in to prevent price gouging by electricity generators "until the market straightens itself out."

She has introduced legislation to allow the energy secretary to cap wholesale power costs if prices are "unjust and unreasonable," as federal have regulators found.

She also urged the energy secretary to require a 15 percent reduction in electricity consumption at all federal agencies in California, called for faster state approval to build new power plants and urged consideration of bringing portable generators into the state to meet higher summer demand.

Davis spokesman Steve Maviglio said lifting the retail price cap on electricity is "strictly off the table."

Electricity prices have been frozen since California's deregulation law went into effect in 1996. The state Public Utilities Commission ordered a temporary rate hike last month after two cash-strapped utilities told them they were nearing bankruptcy and that their poor credit ratings made it nearly impossible to buy power.

"Deregulation was promised to consumers as a way to lower rates, and the governor believes they shouldn't have to pay the price for this experiment," Maviglio said.

Feinstein suggested some of the state's 30 closed military bases be considered as sites for new power plants. She also called for an energy summit with input from economists and other experts that would examine where the state now stands and how it should proceed.

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