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Tuesday, 19 June, 2001, 12:13 GMT 13:13 UK
US regulator curbs electricity prices
The California state power grid during a blackout
The Federal regulator plans to impose a ceiling on electricity prices
The US Federal Energy Regulatory Commission (Ferc) has voted to expand restrictions on electricity prices in California and 10 other states.

The agreement means consumers will be protected from rate hikes during periods of peak demand.

Under a so-called "price mitigation plan", the regulator will bring prices under control, while still providing enough incentives for the development of infrastructure.

The plan should also safeguard supplies by encouraging consumers to take voluntary steps to reduce the amount of energy they use.

The White House has not yet commented on the passing of the plan.

However, President George W. Bush had indicated on Monday that he would go along with a program "to mitigate any severe price spike that may occur."

He described the move as "completely different from price controls", which his administration opposes.

Appeasing the Democrats

The plan has also been interpreted as a sop to Democrats, who have long argued for price controls to protect consumers.

The Democrat Senator Barbara Boxer, who has chastised Ferc for inaction in the past, called the new steps "a stunning turnaround".

The plan will also cover 10 other states across the West from Arizona to Washington state.

With temperatures rising to more than 35 degrees Celsius, California is already on alert for rolling blackouts.

Electricity demand soars along with hot weather because of an increase in air conditioning use.

Closing loopholes

Ferc wanted to close several loopholes that allowed power generators to take advantage of the current energy crisis by increasing rates.

For example, smelting plants and other heavy power users have been closed for months because it is more profitable to sell power than use it.

Wholesale costs of electricity have rocketed more than 10 times over the year.

Earlier this year electricity prices were as high as $300 a megawatt hour, but have recently slipped to below $100.

This is still above the average price of $30 a megawatt hour in 1999. A megawatt hour is enough to serve about 600 homes for an hour.

California's energy crisis has been blamed on the state's 1996 deregulation of the electricity market.

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See also:

08 Jun 01 | Business
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Hostile reaction to Bush energy plan
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Is there a US energy crisis?
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US power giant files for bankruptcy
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California approves power plan
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California blackout: Why it happened
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