Price Controls Stir Controversy

It was a price that symbolized a market out of control. Last January, with California desperate for power, Duke Energy charged $3,800 for a megawatt hour of electricity. The price last week was down fifty-fold, to $70 an hour.

"It's working, it's brought prices down, the evidence is there," said Curt Hebert.

Hebert, the Republican chairman of the Federal Energy Regulatory Commission (FERC), claims a price relief plan he pushed for California gets the credit. Under so-called "mitigation," prices are limited, set to the most expensive electricity generated that day, reports CBS News Correspondent Wyatt Andrews.

"Since the plan has gone into effect the prices have been down every day," said Hebert.

But Bill Massey, a Democratic Commissioner at FERC says the commissioners plan is too little too late. "We have not been nearly tough enough," he said.

Massey sides with critics who say FERC has fiddled while California burned — allowing months of price gouging by out-of-state traders. The chairman's price mitigation, he complains, is ineffective partly because it only kicks in during emergencies.

"It ignores our responsibility to insure just and reasonable prices in all hours. We have an obligation under federal law to step in forcefully to ensure that prices are just and reasonable every hour of the day and we have failed in that obligation," explained Massey.

And that's exactly what may happen on Monday. Under political pressure, FERC will consider extending price mitigation around the clock. The questions now will be, will the plan have teeth and can it keep the lights on this summer?

Economist Severin Borenstien calls mitigation a good start but warns there are ways around it.

"It's a fantasy to think this will solve the problem," he said. "One way generators can manipulate these rules is simply by taking low cost power off the market. It's so easy to manipulate these rules that they're not going to have a significant effect this summer."

Hebert rejects criticism he tolerates price gouging. Bring hard evidence of manipulation he says, and FERC will act.

"If there is illegal conduct 24 hours a day 7 days a week this commission is vigilant," said Hebert.

There's no denying the FERC vote on Monday represents a political reversal. The same Bush administration that in February was hands-off California, is now pushing to monitor the California market 24/7.

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