Congress probes energy woes

WASHINGTON (CNN) -- Lawmakers in the House and Senate argued back and forth Wednesday about the pricing and availability of electricity and natural gas in the West, as well as clashing over proposed caps on energy prices in California.

With the onset of hot summer weather, and the pressing warnings that California energy providers will not be able to produce enough electricity to meet a soaring demand, sharp divisions emerged Wednesday in the approach the Republican House and newly Democratic Senate will take to the problem.

Just a week after taking over as the majority in the Senate, the Democrats held their first hearing on the California energy crisis -- a lengthy affair that focused on theories that electric companies in the Golden State may be taking advantage of the short supply of electricity by gouging consumers and the state government.

VIDEO CNN's Brooks Jackson says defining 'price gouging' is a difficult thing in economic or political terms (June 13) Play video (QuickTime, Real or Windows Media)   IN-DEPTH SPECIAL The energy crunch in California   MESSAGE BOARD Power crisis   ALSO Armey apologizes to Watts for hearing remarks

The state's Senate delegation -- both of whom are Democrats -- supplied a good deal of ammunition for the Government Affairs Committee, chaired by Sen. Joe Lieberman, D-Connecticut, to store up for later use against power companies.

"The belief among many of us, and I am one, is that the generating community has made use of the problems in California to manipulate the market and gouge prices," testified Sen. Dianne Feinstein, D-California.

Sen. Barbara Boxer, also D-California, asked: "How can these electric generator executives go to sleep at night? I really don't know. They are hurting real people."

Both women blasted the Federal Energy Regulatory Commission for not stepping in and imposing caps on the price of electricity as the summer begins, saying the federal body is neglecting its duty to regulate prices if it finds the rates being charged are unjust and unreasonable.

The FERC has set a meeting of its commissioners for Monday and may act then to expand orders issued in April to "mitigate" electricity prices in California and other Western states, mainly because California has been forced to buy excess power from its neighbors.

The FERC instituted its April plan in California to curb wholesale prices for a few hours when a power emergency is declared.

Feinstein said the FERC's action, should it happen, would be a step in the right direction but argued that power companies could use the price changes as incentives to keep their "dirtiest" and least efficient plants operating at full capacity, to offset the costs of running more efficient and environmentally friendly facilities.

The Democrats were backed by a panel of economists, who provided an array of reasons as to why California was experiencing such a perilous shortfall in energy supply, and its attendant price hikes.

"Electricity now costs in California 10 times as much as it cost a year ago," Feinstein said, adding that natural gas prices were up by a factor of three.

Severin Borenstein, director of the University of California Energy Institute, also testified.

"There is a real tight market in the Western grid, and that creates a supply-and-demand mismatch," Borenstein said.

Borenstein blamed the current crunch on the state's power companies, saying they were too short-sighted, and were operating with flawed projections, when they opted not to apply for permission to construct any new power plants in the late 1990s.

Accusations that environmental regulations were too stringent for approval of such applications, Borenstein added, were "myths."

"Between 1995 and 1998, they believed prices were going to stay low," he said. "They thought it didn't make sense to build plants."

Meanwhile, House Minority Leader Richard Gephardt said Wednesday that the possible move next week by the FERC to expand its plan to clamp down on spikes in wholesale electricity prices falls short of Democratic calls for congressionally imposed temporary price caps.

"I think what's happening here is the Republican leadership is panicked that a price cap bill is going to go through the House and be put on the president's desk," Gephardt, D-Missouri, said at a Capitol Hill news conference.

Democrats have promised to bypass normal parliamentary procedure and force a price caps bill to the floor. Price caps, they said, would guarantee lower prices.

"I wish that instead of trying to delay this action with things like trying to get FERC to come up with less than optimal solutions that don't really solve the problem; rather than trying to get the energy industry to spend $50 million on TV ads to take the heat off the Republican Party; they would get on the floor with a bipartisan effort to cap wholesale electric prices on the West Coast," Gephardt said.

Republicans have argued that price caps are not the answer and are hard to get rid of once they're in place. Sen. Fred Thompson, R-Tennessee, the new ranking member of the Government Affairs Committee, compared price caps to rent control in New York City -- "a good idea that never went away."

An aide to Gephardt said many Democrats don't believe that expanding the FERC's pricing mitigation program will work.

Gephardt dismissed that possible move as a "fig leaf" intended to "create deception that they are doing something when they really aren't."

Energy Secretary Spencer Abraham appeared before the House Energy and Commerce Committee on Wednesday to defend the administrationís energy policy.

President Bush's long-range plan, Abraham said, balances conservation with the capabilities of emerging new technologies that will allow for the broader exploitation of energy sources in a more environmentally sound manner.

CNN's Ian Christopher McCaleb and Ted Barrett contributed to this report.