It's up to California's home owners and renters to hunker down, continue to push the envelope on energy conservation efforts, build in energy efficient home improvements, replace old appliances with new Energy Star machines and otherwise limit or reduce power use to do their part to cut the cost of electricity.

Power generators certainly aren't about to stop gouging the public and federal limits on electricity prices won't offer sufficient financial relief to consumers, according to Consumers Union, the independent, nonprofit testing, educational and information providing parent and publisher of Consumer Reports magazine.

"The changes FERC (Federal Energy Regulatory Commission) announces (June 19) will have some impact -- instead of being overcharged by $50 billion a year for electricity, consumers will now only be overcharged $25 billion," said Dr. Mark Cooper, CFA's Director of Research.

"Is that an improvement? Yes. Is that acceptable? No," he added.

In advance of FERC's plans for electric price controls, Consumers Union petitioned FERC to impose cost-based electricity rates for the western United States.

What CU got was more than the Bush administration initially suggested, but remains an end-run around price caps and electricity suppliers willing to shuffle some paperwork can continue to offer inflated electricity prices.

Under the plan, scheduled to begin yesterday, June 20, and continue through next summer, electricity suppliers in 11 western states can continue to bid daily to sell power to the state and its utilities. The Feds will then use those bids to set a ceiling for regional electricity sales during emergencies.

The price is set during Stage 1, 2 or 3 (rolling black outs) emergencies. When there is no electricity emergency, prices will be based on the most recent Stage 1 emergency. Short-term wholesale electricity sales' price ceiling will be 85 percent of the highest hourly price limit set during that emergency.

For example, if power sold for $250 a megawatt hour during the last emergency period, the price limit during a non-emergency period would be $212.50 a megawatt hour.

Power sellers could charge more, provided they successfully petition the commission to justify the higher price. Higher prices could be based on a range of expense factors including additional costs of a given power plant or other power generating expenses. Regulators would later determine if that justification is warranted or order refunds.

The new rules set an initial price ceiling of $107.9 per megawatt hour of power. The day before the ceilings were set, power sold into the Golden State for about $115 per megawatt hour, but prices have peaked beyond $1,500 per megawatt hour during severe electricity shortages experienced recently during brief heat waves.

CU says FERC's regulations don't mirror true supply and demand economics.

Under the new plan, ceilings are based on the bid of the least-efficient, natural gas-fired power plant in California needed to provide power on a given day.

"FERC should set prices based on each generator's cost of producing power," said Adam Goldberg, a policy analyst at CU.

"That's the way it works in most industries. Why should electricity be any different? FERC has been content to take baby steps in response to runaway prices in California, but consumers can't keep waiting for this agency to walk while runaway prices keep eating at their pocketbooks. That's why we filed the petition."

Both the Consumer Federation of America and CU said the commission's plans will fall short of what is needed to keep electricity prices at a reasonable level and accused FERC of dragging its feet investigating reports of market manipulation by a few powerful companies. The groups said if prices are found to have been unjust and unreasonable, the agency should order excess profits returned to the consumers who had been gouged.

"Over the past year, wholesale electricity prices have skyrocketed from ten to twenty times the prices charged a year ago," said Goldberg

"These staggering increases are not the result of natural market forces, but rather a seriously dysfunctional one that is producing unjust and unreasonable electricity prices for millions of consumers."

Among the FERC actions sought by consumer groups:

• Price mitigation that covers transactions 24 hours per day, seven days a week, not just in emergency situations.

• Regulations extended beyond California to cover all the states in the Western States Coordinating Council.

• Police "megawatt laundering." Energy companies shouldn't be allowed to sell power outside the region, only to import it back in with no restrictions on the price they can charge.

• The California Independent System Operator (CAISO), not FERC, determining whether generating facilities are available to generate required electricity for the market.

• All rates subject to refund.

• An order retroactive to October 2, 2000, when San Diego first lodged its complaint regarding wholesale electricity prices.

• A new policing mechanism to ensure that markets function properly, a task CU says FERC has failed to carry out effectively since the start of electricity restructuring.

Obviously, consumer groups were largely unsuccessful in efforts to obtain their goals.

Unfortunately, it remains up to California's home owners and renters to hunker down, continue to push the envelope on energy conservation efforts, build in energy efficient home improvements, replace old appliances with new Energy Star machines and otherwise limit or reduce power use to do their part to cut the cost of electricity.

For more articles by Broderick Perkins, please press here.

Published: June 21, 2001

Use of this article without permission is a violation of federal copyright laws.

Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.