Davis to Ask Abraham to Reconsider Caps on Electricity Prices

Washington, Feb. 24 (Bloomberg) -- California Governor Gray Davis said he'll ask U.S. Energy Secretary Spencer Abraham to reconsider ways to impose price caps on wholesale electricity when he and other western governors meet with Abraham this week.

``I continue to believe there is a way to moderate wholesale prices that will help the entire West,'' Davis said during the National Governors Association's winter conference in Washington.

Davis said his proposal would guarantee generators they could recover their cost plus a profit of eight to 10 percent.

``If that could be done for six to nine months I think it would give us what we need,'' he said.

Davis, who's a Democrat, conceded his plan would be a tough sell to Abraham and others in the Bush administration, who have refused to impose regional price caps. ``It's an uphill battle, no doubt,'' Davis said.

California has faced intermittent power shortages, rate increases and the threatened bankruptcies of its two biggest utilities. Davis is trying to reach an agreement with the utilities to buy their transmission lines and allow them to issue bonds to finance payment of more than $12 billion in debt.

Davis is in Washington for the annual winter meeting of the National Governors Association. Energy policy is among the items on the group's agenda, with a vote scheduled Tuesday on a resolution to accelerate gas exploration on public lands and build a natural-gas pipeline from Alaska's North Slope.

These proposals mirror legislation that will be introduced in the U.S. Congress Monday and were voiced by President George W. Bush during the election campaign.

Also Washington, Oregon

Republicans cite California's problems as an argument for a national energy policy that departs from the Clinton administration's focus on promoting cleaner-burning natural gas and energy conservation.

Davis's plan has support in the Pacific Northwest, where California's power troubles have caused sharp rises in utility costs in parts of Washington and Oregon.

The governor is quick to point out that California's problems are felt by other Western states as well, noting that California isn't ``just sucking up electricity,'' and that, per capita, it uses less power than every other state except Rhode Island.

No `Energy Island'

Idaho's Republican Governor Dirk Kempthorne, who will also meet with Abraham, said he's sympathetic to California's situation and will press for a national energy policy -- but he said he did not support price caps.

``None of us is an energy island,'' Kempthorne said. ``The country is in for a difficult time with regard to energy prices.''

Kempthorne has called for electricity and water conservation in light of a dry year and has placed priority on getting new power online.

``Conservation alone is not going to be the answer,' Kempthorne said. ``We need to find ways to expedite the siting process and the licensing process'' for power plants, he said.

The siting and licensing of power plants is a concern for other governors as well.

Montana Governor Judy Martz, a Republican, said her state legislature is examining and rewriting environmental regulations to speed the process. ``Not in any instance do those things weaken environmental laws,'' she added.

Murkowski's Bill

Senate Energy Committee Chairman Frank Murkowski plans to introduce his national energy plan Monday. Murkowski, an Alaska Republican, said his bill would boost oil and natural gas drilling on federal lands and give tax breaks for clean coal technologies, some oil drilling, and power generated from the sun, the wind and other renewable sources.

This plan doesn't sit well with some Democratic governors, who object to drilling in the Arctic National Wildlife Refuge and complain that the bill pays only lip service to maintaining environmental standards.

``Yes, we need a stronger national energy policy, but it's important we do not destroy our environmental laws in the process,'' said Maryland Governor Parris Glendening, a Democrat, who is chairman of the National Governors Association. ``I would add a note of caution on some discussions going on on Capitol Hill on this,'' he said.

Taxes, Education

The 48 governors attending the four-day meeting will also be asked to vote on policy statements involving on tax relief, education and health care.

Michigan Governor John Engler, vice chairman of the National Governor's Association, said Bush's tax-cut proposals will be high on the list along with his plan to require states to set up standardized testing programs for students.

While there is broad support among state governors for measuring student achievement, they have concerns about how to structure and fund the programs, Glendening said.

``Our initial concerns were who's actually going to be writing the test and paying for the test,'' he said. ''There still are some challenges'' on those issues, as well as how to avoid an overrun in standardized tests.

Engler, a Republican, said they'll push for some kind of agreement by Tuesday, when the biannual meeting wraps up.

Medicaid

The governors will also consider a new policy to loosen federal controls on Medicaid, the government-run health program for the poor. In recent years federal lawmakers have made changes requiring increased state level spending, the governors say. Medicaid is now the second largest expenditure in state budgets, according to the association.

Some states like Vermont have seen annual cost increases of around 11 percent, said Howard Dean, the state's Democratic governor. ``That's not going to be compatible with the budget growth we think we're going to have,'' he said. Others states want options to expand their programs, said Dean.

Dean and Governor Don Sundquist of Tennessee, a Republican, have hashed out a proposal they'll float during a lunch meeting tomorrow. ``We think we've got a very solid margin of governor's who are going to support this,'' said Dean. He would not provide details.

The governors will also take up Bush's $1.6 trillion, across- the-board tax cut proposal. Glendening said there is broad support for a tax cut proposal. Yet, like in Congress, there is disagreement over the size and scope. He noted that states want ''the flexibility to deal with some of our most expensive areas.''

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-- Martin Thompson (mthom1927@aol.com), February 25, 2001