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Calif. Gets Limited Power Price Caps

Federal energy regulators directed limited price controls on California's wholesale electricity markets Wednesday, but the order fell short of the sweeping price caps California officials have wanted.

The Federal Energy Regulatory Commission voted 2-1 to order that wholesale prices be capped in California when electricity reserves fall below 7.5 percent, triggering an emergency alert by the state's power grid managers.

California Gov. Gray Davis said Wednesday that he had urged FERC to extend the price controls so they would take effect when a Stage 1 alert was declared by the California Independent System Operator.

A Stage 1 alert means electricity reserves have fallen below 7 percent.

FERC chairman Curtis Hebert said the order, which came after a day of intense negotiations, seeks to "balance" the need to protect against unreasonable prices and still encourage investment in power plants and promotion of conservation measures.

But another commissioner, Democrat William Massey, said the commission's requirement is a "half a loaf solution" to the electricity crisis plaguing California and the rest of the West. He said the price controls apply too narrowly and are dependent on California's agreeing to join a regional power transmission group, something the state has not wanted to do.

"The order turns into a pumpkin and will have no effect" if California does not join the northwest in a joint power transmission system, said Massey.

In issuing the order, Hebert reiterated his strong opposition to broader price limits based on producers' cost of generation. Reflecting the views of the Bush administration, Hebert said he continues to believe "the best solution to California problems are market-based solutions."

However, the commission's action reflects growing pressure on both FERC and the Bush administration to take additional action to ease the West's power problems, which are expected to become worse this summer as electricity demand increases and supplies continue to lag.

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The state was put on a power alert for a second straight day Wednesday as warm weather spurred demand for air conditioning amid continued tight backup supplies from the drought-stricken Pacific Northwest.

The ISO ordered a Stage 2 alert at 3:18 p.m. Pacific Time.

The alert, called when reserves fall below 5 percent of demand on the grid, was to remain in effect until 10:00 p.m.

ISO officials did not expect to escalate the emergency to a Stage 3, which raises the possibility of rolling blackouts to avoid overloading the system. California has had four days of blackouts so far this year.

The ISO reported that 13,525 megawatts of generation was out of service on Wednesday for scheduled and emergency repairs — enough eectricity for about 13.5 million homes.

ISO spokesman Patrick Dorinson also said there was little power in Washington and Oregon available for shipment to California.

Demand for power to run air conditioners climbed as California temperatures approached typical summer levels in many areas.

The thermometer soared to 99 degrees Fahrenheit in Palm Springs, east of Los Angeles, and reached 88 degrees F in Fresno in the heart of California's central valley.

The power crunch stems from a flawed 1996 deregulation plan that allowed wholesale electricity prices to soar but capped retail rates for consumers.

The results have included blackouts in January and March, an average 40 percent emergency retail rate increase, a spotty power supply and the bankruptcy of the state's biggest utility.

Davis Tuesday named a blue-ribbon panel to oversee power plant construction, a process sure to pit the state's growing energy needs against environmental concerns, reports CBS News Correspondent Sandra Hughes.

Davis said he plans to boost the state's energy supply to more than 15 percent more than demand by 2004. The governor has plans to build 13 new plants, saying the air and water won't suffer.

But power companies already foresee a slew of not-in-my-backyard campaigns against new generating stations.

"No one wants to live next to a power plant, whether it's in California or anywhere else," said Ed Blackford of AES Energy. "But people expect the lights to go on."

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