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Energy Enigmas

December 22, 2000



One of the hotter potatoes being tossed at the incoming president is the country's energy problems. At the moment, they stretch coast to coast.

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Easterners relying on natural gas for heat are being zapped by soaring prices. Californians, meanwhile, are wondering more than ever what deregulation of their state's electric-power industry hath wrought.

So far, utilities that have to buy power wholesale have felt the pinch more than homeowners, who are shielded by a rate freeze written into the 1996 deregulation law. But that freeze is thawing, as Gov. Gray Davis tries to negotiate a politically acceptable rate hike.

The US Department of Energy and the Federal Energy Regulatory Commission are trying to keep the Golden State from going dark. DOE has ordered reluctant out-of-state power suppliers to sell into California's starved market (see story, page 1). The FERC is pushing utilities and power generators toward long-term contracts that will end, it hopes, the volatile ups and downs (mostly ups) of the current daily "spot market" for electricity. It also slapped a "soft cap" on wholesale electricity prices - negotiable if power suppliers can prove higher production costs.

As we noted here when California was confronted by rolling blackouts last summer, some re-regulation may be needed, as these federal actions indicate.

One underlying factor is inadequate power generating capacity for California's now bustling economy. Companies have plans for new plants on the drawing boards. The difficulty is getting official approval when no one wants smokestacks or high tension power lines next door.

That has to change. Supply has to be boosted. No less important, conservation measures have to be strengthened. Homeowners and businesses will have little choice but to conserve if electricity rates rise.

A similar dynamic is at work with natural gas. This clean-burning fuel has been growing in popularity for industrial use (including power plants) as well as residential, but low gas prices over recent years discouraged investment in new sources. US production capacity is 6 percent lower than three years ago.

Now consumers faced with early cold snaps want more gas - but abhor current price hikes of 40 to 60 percent.

The new president and his Energy secretary will be challenged to stabilize this picture. Can they help retool deregulation schemes? Can they encourage the construction of new power plants? Can they increase energy supplies without trampling the environment?

Mr. Bush, an oilman by training, has a grasp of energy needs. His first impulse may be to increase the supply of natural gas. But that should be just one part of a comprehensive energy policy that analyzes the country's needs and comes up with responsible long-range solutions.

(c) Copyright 2000. The Christian Science Publishing Society