Bush: Price controls won't solve energy crunch

WASHINGTON (CNN) -- With federal energy regulators expected to clamp down on wholesale electricity prices in the West, President George W. Bush on Monday reiterated his belief that price controls will do nothing to solve the energy crunch.

The Federal Energy Regulatory Commission, or FERC, is to meet on Monday to consider a "price mitigation plan" for Western states. The plan would seek to prevent severe price increases primarily during peak hours, while not threatening supplies by encouraging consumers to take steps voluntarily to reduce the amount of energy expended.

Congressional Democrats want price caps to stabilize the cost of electricity and lashed out at utility executives, accusing them of price gouging.

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Bush said he was interested to see "what FERC comes up with" and that the commission knows "full well my administration's belief that price controls will not solve the problem."

"Price controls do not increase supplies nor reduce demand," he said.

The debate on Capitol Hill has broken down along party lines. Sen. Barbara Boxer, D-California, has said she doesn't understand how "electric generator executives can sleep at night." House Minority Leader Richard Gephardt, D-Missouri, said FERC has come up with "less than optimal solutions that don't really solve the problem."

The power crunch -- affecting several Western states -- has been particularly severe in California, where soaring utility rates and intermittent blackouts have frustrated residents and businesses. Wholesale costs have skyrocketed more than 10 times what they were a year ago, and many observers point to the state's 1996 deregulation of the electricity market as the root of the problem.

The state's attorney general, Bill Lockyer, announced last week that a criminal grand jury will be convened in early July "to get at the truth about energy pricing practices for electricity and natural gas that hit California pocketbooks hard."

Over the last year, California has gone from paying peak prices for a relative small amount of time to paying those high prices for hundreds, if not thousands, of hours per month from out-of-state suppliers. In April, the peak price was an average of $372 per kilowatt hour compared to $26 per kilowatt hour last year.

FERC already reviewed wholesale power transactions in California for the first couple months of this year and found $124 million in possible overcharges. The suppliers defended the increases, blaming them on a shortage of power and uncertain finances of the state's two major utilities, Pacific Gas and Electric Co. and Southern California Edison.

FERC has the ability to regulate when it deems the wholesale prices currently determined by the open market are not fair and reasonable.