Tech Plugs Into Bush's Plan By Aaron Pressman
With blackouts looming, the president's free-market approach to energy could prove costly to industry.
WASHINGTON - Just hours after President Bush unveiled his controversial national energy plan this week, Vice President Dick Cheney was on the phone, drumming up support from the technology industry.
In a 30-minute call with Intel CEO Craig Barrett, newly retired Microsoft COO Bob Herbold and other tech leaders, Cheney stressed that the power plan would secure future energy supplies while bestowing substantial tax credits and other benefits on companies developing energy-related technology.
But like the proverbial pink elephant that no one wants to notice, none of the hard-driving execs pressed Cheney on how the administration's plan would help forestall looming blackouts in California and elsewhere this summer. Every hour the technology-driven Golden State spends in the dark will cost businesses $1 billion, according to industry analysis. The Bush report itself warns the power crunch threatens to spread to the Pacific Northwest, New England and the Southeast in the coming months.
"We kept it tech-specific - there was no dissent," says Dave McCurdy, president of the Electronics Industries Alliance, a trade group. Other execs on the Cheney call say neither California's predicament nor contentious issues such as the president's recommendation to drill for oil in the Arctic National Wildlife Refuge even came up. Instead, the conversation focused on the Bush administration's call for sweeping deregulation to promote the construction of nuclear plants, pipelines and transmission lines. The plan also calls for opening environmentally sensitive lands to oil and gas extraction and supports tax incentives to boost energy conservation and efficiency.
Given the high price that business is likely to pay for the administration's drop-dead policy toward California, why no flack for Cheney? While no one wants to offend the vice president, the executives also largely oppose federal price caps on electricity rates. Instead, they want to see higher rates - for residential consumers.
"The biggest thing that needs to be done on prices in California is not a federal action, it's a state action," declares Stephen Harper, Intel's director of health and safety policy issues. "There needs to be a substantial increase in retail rates, not a federal price cap of any kind."
In fact, the California regulators last week bowed to pressure from Silicon Valley firms and other large power users and shifted a greater share of a record $5.7 billion rate hike to consumers. Business execs complain they still bear the brunt of the burden.
"Price controls and re-regulation aren't the answer," says McCurdy, a former Democratic congressman. "The market has always worked best. It just has to be priced so that it encourages conservation and innovation."
But that free-market approach could backfire, given Californians' propensity to rein in big business at the ballot box. In any event, consumer advocates argue that industry has it all backward: Today's sky-high rates are discouraging suppliers from producing more power because they can make big profits from their existing facilities.
"The simple fact is that a market producing the aberration of $300 per megawatt hour of electricity provides a disincentive to production," says Mark Cooper, director of research at the Consumer Federation of America.
Bush and Cheney may have sold their plan to industry, but if the administration's own predictions come true, many business executives will be sitting in the dark this summer, counting billions of dollars in lost production and sales. If that happens, the free market won't be looking so free.
------------------------------------------------------------------------ Eric Young contributed to this report.