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California Capitol Hill Bulletin

                Volume 8, Bulletin 20 -- June 21, 2001    [or see pdf version]

FERC Issues Order Expanding Price Mitigation Plan

Governor Davis Testifies On FERC and California Energy Crisis

Senate Finance Begins Debate on Trade Promotion Authority

House Immigration Subcommittee Examines Guestworker Programs

House Agriculture Subcommittee Examines Produce Issues

California Air Board Responds to EPA's Waiver Refusal

Energy and Water Appropriations Subcommittee Reports Bill; No Funding Included for Bay-Delta

Briefing: Uninsured Californians - Improving Coverage Statewide

House Appropriations Approves Transportation Spending Bill

House Resources Subcommittee Reports Dam Repair Bill

California State Society Annual Picnic June 23

To expand communications between Washington and California, the California Institute provides periodic faxed bulletins regarding current activity on Capitol Hill which directly impacts our state. Bulletins are published weekly during sessions of Congress, and occasionally during other periods. The e-mail edition is made possible in part by in kind donations from Sun Microsystems and IBM Corp.

FERC Issues Order Expanding Price Mitigation Plan

On Monday, June 18, the Federal Energy Regulatory Commission (FERC) announced the release of an order to expand its price mitigation plan for California spot market sales to 24 hours a day, seven days a week. The order also broadens the curbs on prices on the spot electric market to cover the 11 state western region. The Commission also announced that it will hold a settlement conference before a FERC administrative law judge later this month. All parties in the California ISO investigation proceeding will participate in the settlement discussions in order to resolve refund issues for past periods and help structure new arrangements for California's energy future.

FERC believes the settlement hearing and the order will provide a structure that will minimize potential abuses, ensuring reasonable rates for consumers, while also encouraging adequate supply in the market. Other elements of the order are as follows:

- all public utilities and non-public utilities selling into the markets run by the California ISO or using Commission-jurisdictional transmission facilities, who own or control generation in California, must offer power in the California ISO's spot markets.

- the same requirement will apply to sellers throughout the rest of the Western Systems Coordinating Council (WSCC), except that they may offer their power in the spot market of their choosing.

- power marketers will not be permitted to sell above the mitigated prices. Generators' bids during reserve deficiencies must reflect the marginal cost to replace gas used for generation, determined by the average of the mid-point of the monthly bid week prices as reported in Gas Daily for three spot market prices reported for California.

- bidders will be allowed to invoice the California ISO for the costs of complying with NOx and other emissions standards and for fuel used for start-up. The ISO is required to file a rate mechanism to bill those costs over the entire load on the ISO system.

- the price mitigation will end September 30, 2002.

FERC commissioners testified before the Senate Energy and Natural Resources Committee on Tuesday, June 19. The purpose of the committee hearing, chaired by Sen. Jeff Bingaman (NM), was to hear an explanation of the FERC order and to receive testimony on Senators Feinstein and Smith's bill, S 764. This bill would direct FERC to impose just and reasonable load-differentiated demand rates, or cost of service based rates, on sales by public utilities of electric energy at wholesale in the western energy market. Both Feinstein and Smith asked to withhold the markup of their bill, due to the release of the FERC order, to allow sufficient time to see its effect. Feinstein referred to the FERC order as "a great step forward."

Senator Barbara Boxer also testified at the hearing, agreeing with Feinstein that the FERC order was a move in the right direction. Boxer indicated concern, however, that the order did not make provisions for refunds and stated that Congress should authorize refunds if FERC does not. She referred to her legislation with Rep. Bob Filner (San Diego), which is similar to the Feinstein legislation, but includes provisions for refunds. Also testifying at the hearing were representatives of various energy and power companies, including Mr. Thomas R. Brill, Director of Regulatory and Policy Analysis of Sempra Energy in San Diego, who submitted testimony on S 794.

For more information or to review testimony please visit the committee website at or the FERC website at


Governor Davis Testifies On FERC and California Energy Crisis

Governor Gray Davis testified before the Senate Governmental Affairs Committee, chaired by Senator Joe Lieberman, on Wednesday, June 20. The hearing was on the role of the Federal Energy Regulatory Commission (FERC) in the restructuring of energy industries. The focus of the hearing was on the latest FERC order (see article above) and whether FERC has responded adequately to the energy crisis in California and other Western States. Along with Davis, others testifying included: Senators Maria Cantwell (WA), Frank Murkowski (AK) and Patty Murray (WA); Governors John Hoeven (ND) and Judy Martz (MT); Attorney General of Washington, Christine Gregoire; Mr. Roy Hemmingway, Chairman of Oregon Public Utilities Commission; and the five FERC commissioners.

Governor Davis, introduced by Senator Barbara Boxer, indicated that the recent FERC order was a move in the right direction and that California is doing its part to meet the energy challenge. He indicated the order granted some price relief and corrected the most obvious errors of FERC's April 26th order. Davis began by outlining the steps the state has taken in the areas of increasing supply, conservation, and stabilization of the economy. He noted the state's attempts to increase energy supply by licensing 16 major power plants, with four scheduled to come online this summer. He also pointed out that California is now the most energy efficient state, using 42% less energy per capita than the national average.

Davis stressed that California is doing its part in addressing the energy crisis, but that only the federal government has the power to ensure a just and reasonable wholesale electricity market in California and other states. Davis asked the committee to carefully watch FERC to ensure that it is properly enforcing the terms of the order. Davis also urged the committee and FERC to make provisions for refunds to the state and ratepayers, indicating that the state has a potential overcharge of approximately $8.9 billion. Later in the hearing, two members of FERC, Commissioners Pat Wood III and William Massey, indicated willingness to consider requiring generators and marketers to refund revenues that exceed the price ceiling set in the FERC order released Monday.

Governor Davis responded to several questions from Committee members about the energy crisis and FERC. Questions from Sen. Joseph Lieberman (CT), Chair of the Committee, focused on whether the FERC order, which applies for 16 months, allots enough time to stabilize the energy problems in the state and on the issue of refunds. Republican Ranking Member, Senator Fred Thompson (TN), raised concerns about the history behind the energy crisis and whether the Governor and the state government ignored warning signs of a looming energy crisis. Senator George Voinovich (OH) asked Davis to seriously consider and explore the idea of California becoming involved in a Regional ISO.

Others testifying from other states, including Washington, Oregon, Montana and North Dakota, indicated concerns about the impact of the energy crisis on their respective states and FERC's role in addressing the problem. The FERC commissioners testified on the recent FERC order, as well as the steps the Commission has taken in the past several months to respond to California's energy crisis. To review the testimony of all the witnesses please visit the Committee website at .


Senate Finance Begins Debate on Trade Promotion Authority

The Senate Finance Committee, on Wednesday, June 20, and Thursday, June 21, held two days of hearings on granting the President free trade authority (FTA - also known as, fast-track authority). FTA restricts Congress to an up or down vote, within a limited time frame, on trade agreements negotiated by the Administration. The last fast-track authority legislation expired in 1994. The Bush Administration, as the Clinton Administration before it, has made renewal of fast-track a number one trade priority, arguing that the United States has fallen behind other nations in its ability to trade competitively in global markets. Over the last several years, controversy over the renewal of FTA has centered around the issue of whether labor and environmental protection provisions should be negotiated as core elements in U.S. free trade agreements with other countries.

In his opening remarks on both days of the hearings, Chairman Max Baucus (MT) expressed pessimism on whether FTA could pass Congress this year, because of the labor and environment issues. He cautioned that in order to successfully enact legislation this year, the House and Senate, Democrats and Republicans, and the Administration would have to be willing to negotiate a compromise agreement substantively addressing these issues. Sen. Chuck Grassley (IA), the Committee's Ranking Member, stressed the need to renew fast-track this year. He acknowledged that labor and environmental issues must be addressed, but stressed that they should not be made the focal point of the debate.

On Wednesday, the Committee heard from a number of witnesses, including: Representatives Charles Rangel (NY) and Sander Levin (MI), Ranking Democrats on the House Ways and Means Committee; John Sweeney, President, AFL-CIO; Harold McGraw, Chairman, McGraw-Hill Co., and Chair, Emergency Committee for American Trade; Chuck Merja, Former President, National Assoc. of Wheat Growers; and Mark Van Putten, President and CEO, National Wildlife Federation.

Reps. Rangel and Levin testified that if all sides could agree to negotiate in good faith, they did not see any obstacles to passage of legislation that could not be overcome. However, Rep. Rangel complained that Rep. Phil Crane, Chair of the House Ways and Means Trade Subcommittee, had not discussed his bill, H.R. 2149, with him or the Democrats, before its introduction. H.R. 2149 does not address the treatment of labor and environment protections in free trade negotiations. Reps. Rangel and Levin asked the Finance Committee to help them "to create the atmosphere" necessary to get a bill done, and not "put up barriers between us based on party labels."

As expected, Mr. Sweeney strongly opposed H.R. 2149, because of its failure to address workers' rights and environmental protections. He proffered the recently concluded U.S.-Jordan Free Trade Agreement as an important advance, because it incorporated labor and environmental protections under the same dispute resolution mechanism as the core trade provisions. Mr. Van Putten stressed that the National Wildlife Federation supports trade liberalization, but cautioned that environmental protections must be addressed and trade agreements must ensure that environmental laws are enforced and environmental standards are not lowered in order to gain trade advantages.

Mr. McGraw and Mr. Merja both urged expedient action on renewing fast-track authority this year. Mr. McGraw testified that any linkages between trade and labor and environmental protections should not be punitive and that sanctions for violation of labor and environmental provisions would be counterproductive. Mr. Merja pointed out that U.S. wheat exports have lost market share over the last ten years, and argued that the Administration must have strengthened trade promotion authority in order to negotiate trade opportunities for wheat exports, as well as other agriculture exports.

On Thursday, the Committee heard from Rep. Phil Crane (IL) on his bill, H.R. 2149; Secretary of Commerce Donald Evans; and, U. S. Trade Representative Robert Zoellick. Rep. Crane called for early consideration of trade promotion authority, and argued that labor and environmental protections were not included in his bill, H.R. 2149, because they do not directly relate to trade. He argued that increasing trade was the best way to help developing countries grow economically and move toward higher labor and environmental standards. He also stressed the extensive role Congress was given in participating in the negotiation of trade agreements under his bill.

Sec. Evans and Ambassador Zoellick both testified that the Administration was committed to working with Congress to enact trade promotion authority this year. Under questioning from Sen. John Breaux (LA), Ambassador Zoellick indicated that he was not opposed to considering some provisions concerning labor and environment in a bill. He mentioned that, perhaps, a "tool box" of administrative measures, such as foreign aid, incentives, and sanctions, could be included in a bill and the Administration could use those measures to encourage U.S. trading partners to implement labor and environmental protections. Secretary Evans did not state a position on the Crane bill, during questioning, but instead said that during the normal course of legislative consideration and consultation with Congress, he expected that changes would be made to any bill being debated. He hoped that in the end they could come up with a bill that all parties could live with.

Testimony of these and other witnesses can be obtained through the Committee's website at:


House Immigration Subcommittee Examines Guestworker Programs

On Tuesday, June 19, the House Judiciary's Subcommittee on Immigration and Claims held an oversight hearing on U. S. Guestworker programs. Witnesses included: Susan Martin, Institute for the Study of International Migration, Georgetown University; Randel Johnson,

Vice President for Labor and Employee Benefits, U.S. Chamber of Commerce; Mark Kirkorian, Executive Director, Center for Immigration Studies; and Cecilia Munoz, National Council of La Raza, Vice President of the Office of Research, Advocacy, and Legislation. Ms. Martin outlined three preconditions that should be met before U.S. guestworker programs are expanded. First, an adequate level of control over unauthorized entry and work must be established or the guestworker program "becomes a supplement rather than a substitute for illegal movements." Second, mechanisms should be included to reduce the dependency of employers on guestworker programs. And, third, there must be adequate protection of the rights of the migrant workers.

Mr. Johnson testified that there is a shortage of both unskilled and lesser-skilled workers in economic sectors, outside of agriculture. He argued that even with the recent slowdown in the U.S. economy, labor markets have only moved from "very tight" to "tight." Johnson cited several reports by industry association groups to bolster his argument on the need for an expanded guestworker program. He acknowledged that the current programs need to be restructured to benefit both the workers and employers, and stated that the Chamber and other groups are developing reform proposals that they will submit to the subcommittee in the near future.

Testimony of all the witnesses can be obtained through the Subcommittee's website at:


House Agriculture Subcommittee Examines Produce Issues

On Tuesday, June 19, the Livestock and Horticulture Subcommittee of the House Agriculture Committee held an oversight hearing on fruit and vegetable agriculture issues.

At the hearing, William J. Lyons, California Secretary of Agriculture, testified that the next farm bill "must provide assistance in marketing, creation of a level playing field for international competition, better access to conservation programs, tools to manage risks, and other market-based programs that will empower producers." He also emphasized the continuing struggle to control Pierce's disease and the glassy-winged sharpshooter. Lyons commended Chairman Pombo for his leadership in helping to enact the Plant Protection Act, and called on the Subcommittee to help ensure adequate funding to control and eradicate the problem.

Several other witnesses testified, including Maureen J. Marshall, Chairman, United Fresh Fruit & Vegetable Association, Research & Education Foundation. Ms. Marshall outlined several areas of interest to United's members, including: legislation expanding APHIS authority to develop an adequate emergency $50 million eradication/research fund to address economic and health threats posed by invasive pests and diseases; doubling the current funding for the Environmental Quality Incentives Program to encourage conservation efforts; a $500 million annual funding outlay for surplus purchases of produce commodities to optimize the amount of fresh fruits and vegetables in the USDA feeding programs; and legislation to increase funding authority for the Market Access Program (MAP) by $110 million.

Testimony of all the witnesses can be accessed through the Subcommittee's website at:


California Air Board Responds to EPA's Waiver Refusal

Michael P. Kenny, Executive Officer of California's Air Resources Board wrote Robert Brenner, Assistant Environmental Protection Agency Administrator, earlier this week to object to EPA's refusal to grant California a waiver from the two-percent oxygenate requirement under the federal reformulated gasoline program (RFG). The letter takes exception to EPA's technical analysis and challenges the conclusion that granting the waiver would lead to greater uncertainty on volatile organic compounds (VOC) emissions.

Mr. Kenney expresses his "disagreement and extreme disappointment" with EPA's decision. He responds to EPA's conclusion in denying the waiver that "there is no clear evidence that a waiver will help California to reduce harmful levels of air pollutants." He points out that the "emission benefits of a waiver have been fully demonstrated in materials submitted to the U.S. EPA on December 24, 1999 and in supplemental materials submitted on February 7, 2000." Mr. Kenny also argues that further materials supporting California's request were provided to EPA in extensive meetings and phone conferences.

In conclusion, the letter urges EPA to reconsider its decision, stating that unless it is reversed, it will "result in higher levels of ozone and PM10, in greater exposure to toxic air pollutants and, because it will reduce refiners' ability to immediately replace methyl tertiary butyl ether (MTBE) with an oxygen-free gasoline, will result in greater risk of contamination from MTBE."


Energy and Water Appropriations Subcommittee Reports Bill; No Funding Included for Bay-Delta

On Tuesday, June 19, the House Appropriations' Energy and Water Development Subcommittee reported its FY02 Appropriations recommendations. The Subcommittee did not include any funding for CALFED Bay-Delta restoration, because the project's authorization expired in 2000.

The bill provides a total of $23.7 billion in funding for the Bureau of Reclamation, the Army Corps of Engineers, the Department of Energy, and several other agencies. The bill is $147.7 million above fiscal year 2001 and $1.2 billion above the President's budget request. For the Bureau of Reclamation, the Subcommittee provided funding of $842.9 million, an increase of $23.2 million over the President's request and $26.3 million over last year.

The recommendation of $18.7 billion for the Department of Energy is $640.8 million over the President's request and $444.2 million above fiscal year 2001. DOE science programs are funded at $3.166 billion, an increase of $6.5 million over the budget request and $13.9 million below fiscal year 2001. High energy physics is funded at the request level of $716.1 million. Nuclear physics is funded at $361.5 million, an increase of $1 million over the President's request level. Biological and environmental research is funded at $445.9 million, an increase of $2.9 million over the request. Funding for basic energy sciences is $1 billion, an increase of $2 million over the request level. The Advanced Scientific Computing Research initiative is funded at $163 million, the same as the President's request. Fusion is funded at $248.5 million, the same as the President's request. California receives a substantial share of DOE science program funding.

Several California specific projects were included in the bill, including $17 million for the cleanup of the Rocketdyne site in the Simi Hills. The site has been used since the 1950s to conduct energy testing and research, including nuclear energy. Rep. Elton Gallegly (Simi Valley) was instrumental in securing full funding for the project. The budget request was for only $13.3 million.

Further information on the energy and water appropriations can be obtained from the Committee's website at:


Briefing: Uninsured Californians - Improving Coverage Statewide

The UCLA Center for Health Policy Research and The California Wellness Foundation will hold a briefing, entitled "Uninsured Californians: Improving Coverage Statewide and In Your Congressional District." The breakfast briefing will be held Thursday, June 28, in Room B339 Rayburn House Office Building, from 8:30-10:30 am. The briefing will include an overview of the uninsured problem in California and in each Congressional District, an examination of employment-based insurance coverage, and Medicaid and the State Child Health Insurance Program (S-CHIP). To attend, please RSVP by telephone to 310-794-6254 or by fax to 310-794-2686.


House Appropriations Approves Transportation Spending Bill

On Wednesday, June 20, the House Appropriations Committee approved the Fiscal Year 2002 Transportation Spending Bill, which provides nearly $59.1 billion in total budgetary resources, an increase of $1.1 billion (2 percent) over the fiscal year 2001 enacted level. Total highway spending amounts to $32.7 billion, an increase of $1.2 billion (4 percent) over the fiscal year 2001 enacted level. Of this total, $31.7 billion is under a limitation on obligations.

Total transit program spending in the bill is $6.7 billion, an increase of $493 million over the fiscal year 2001 enacted level. The Transportation Appropriations Subcommittee in its previously released report earmarked $49.6 million in New Starts-funding to complete the Los Angeles Metro Rail North Hollywood extension and $3.35 million in Bus and Bus related funding for the Metro Rapid Bus program.

The bill also provides $13.3 billion for the Federal Aviation Administration -- $690 million (5 percent) over the fiscal year 2001 level. Funding for the airport improvement program is $3.3 billion, an increase of $100 million over fiscal year 2001. Several provisions to address the problem of airline delays are also included in the bill, as it fully funds the Free Flight program and raises funding for the Safe Flight 21 program -- both programs develop technologies which have the potential to improve airway capacity.

The bill provides the additional $88.2 million requested by the administration to maintain trucking safety on the border with Mexico, as the border is opened up fully to Mexican-registered trucks next year pursuant to NAFTA. During the markup, Rep. Martin Sabo (MN) offered an amendment that would have required Mexican companies to undergo safety inspections by the Federal Motor Carrier Safety Administration prior to moving more than 20 miles into the states. Rep. Harold Rogers (KY), Chair of the Transportation Subcommittee, was successful, however, in watering down the amendment with a substitute that only requires safety audits of Mexican trucks during the initial 18 month period after the NAFTA provisions take effect. The Rogers amendment was adopted by a vote of 37-27.

A total of $5 billion is provided for the Coast Guard, an increase of $486 million (11 percent) over fiscal year 2001 enacted levels and $59 million below the budget request. Additional information can be obtained on the Committee's action through its website at:


House Resources Subcommittee Reports Dam Repair Bill

The House Resources Subcommittee on Forests and Forest Health, on Thursday, June 21, reported, by voice vote, H.R. 434, to allow private contractors to repair and maintain several small dams and weirs in the Emigrant Wilderness Area of the Stanislaus National Forest in California. The bill was sponsored by Rep. John Doolittle (Rocklin) and co-sponsored by Rep. Gary Condit (Ceres). During the markup, the subcommittee adopted a substitute amendment by voice vote that reduced the number of dams covered by the bill to 12, from the 18 covered in the original bill.


California State Society Annual Picnic June 23

The California State Society will host its annual picnic on Saturday, June 23. Bring your family and friends to enjoy a great time in DC with your fellow Californians. The picnic will be held on Saturday from 11am to 4pm on the Mall at 15th and Constitution. Admission is free to CSS members and only $10 for non-members, which includes membership. Tickets can be purchased at the picnic. Admission includes a BBQ lunch and California wine and beer. The picnic will feature a Taste of California table to sample California produce and goodies, live music, activities for children and a volleyball tournament. Visit the State Society website at for more information and to RSVP or call 202-745-1938.

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