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Gov. Davis Threatens to Sue for Price Caps

Davis met yesterday with President Bush to argue his case for caps on wholesale prices charged by energy suppliers. But the president rejected the idea, saying such price limits would lead to further energy shortages and higher prices.

Gov. Davis said that if the Federal Energy Regulatory Commission did not provide “some form of price relief,” he would sue the commission for not meeting its obligations. Davis pointed out that the agency has determined that energy costs in the state are unreasonable.

In April, the commission allowed price caps on electricity sold to California during power emergencies. But yesterday the 9th U.S. Circuit Court of Appeals in San Francisco said it would not act on a lawsuit brought by Democratic state legislators requesting limits on wholesale prices, indicating the case did not call for “intervention of this court.”

Davis, a Democrat, was not part of that suit. But he seeks to limit wholesale power prices that have jumped from $200 per megawatt hour in December to as much as $1,900 per megawatt hour.

Yesterday Davis also issued a letter in which 10 leading economists argued for a compromise between hard price caps and an unregulated electricity market.

President Bush, who is making his first trip to California since the election, met with Davis for 35 minutes in Los Angeles. “Price caps do nothing to reduce demand and they do nothing to increase supply,” the president said.

Instead, President Bush offered more federal money to help low-income families with energy bills. And, in step with his administration’s new energy plan, he promised to speed up reviews of plans for new generating plants. He also called for longer-term solutions such as conservation and new energy technologies.

In the last year, rising demand, reduced power supplies and retail price caps mandated by the 1996 deregulation legislation have produced an energy crunch in California. The situation has been marked by price hikes, billion-dollar debt for major utilities and occasional rolling blackouts.

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