Brad Sherman

Mr. SHERMAN

Mr. SHERMAN. I take up that issue about conservation research and renewables. The President's budget which then passed the floor of this House cut those areas by a third. We are in the middle of an energy crisis, but we cut our research on renewables conservation. It is absolutely absurd. Then the President, realizing that the whole country wants research into renewables and conservation, issued this glossy report in which he says he is going to provide $2 billion in tax credits for clean coal, billions more for those who buy energy-efficient appliances. Billions and billions, except for one thing, he cut the money in the budget. So which is the law of the land, the budget we pass here? The glossy booklet that they put out of the White House press office; it is unfortunately, in this case, the law. That is why the President needs a blackout because in the light of day it becomes apparent what he is advocating on the one hand out of the press office, which there is no money in the budget for, there will be no money appropriated for, it will never happen; but it will be talked about.

Mr. SHERMAN. As I was talking about before, the private sector was not anxious to build plants in California. A few years ago they bought the existing plants at bargain prices, which is proof that there is no pent-up demand or desire to build plants. You can serve San Diego or Los Angeles with plants built in Nevada or Arizona or Oregon, and nobody was anxious to build plants in those States either, either to serve Las Vegas, a booming market, or California. By the way, the electrons do not know when they pass a State boundary. The private sector did not want to build plants in the West. Now that we have these huge prices, a few companies are coming in to build, thank God. If we have a moment, I would like to illustrate why it is that economics 101, which we are being fed by the White House office, is entirely wrong. If you only take one course in economics, you are told if you pay more for electricity, if you let the price go up and up, you will get more. Supply meeting demand. Then you have to take the advanced courses to learn what happens when somebody has monopoly power. If we had a regulated market, you could make the electricity, and you are talking about kilowatts, I will talk with megawatts, which are a thousand times as large. You make a megawatt for $30, sell it for $50, and you have no reason to withhold supply. Every megawatt you make, you make $20 on.

Mr. SHERMAN. The answer is simple and long in coming. The answer is established by Federal law and ignored by a Federal regulatory agency. Our law says that the price being charged by wholesale generators, those who bought the plants from our local utilities and are operating them, chiefly big companies based in Texas, that they should only charge fair and reasonable rates. And the Federal Energy Regulatory Commission, FERC, is there to make sure that they only charge reasonable rates. Well, California has been FERC'd. The Federal Energy Regulatory Commission refuses to do its job. So we here in Congress need to force them to do their job. Alternatively, it would be just as good if we simply allowed California to do the job. It really is a multi-state market, but most of the plants that supply California are in California. Some might say, well, why can California not solve the problem by imposing fair, regulated price on these plants located in our State? The power of the Federal Government through preemption stands on our neck and watches our pockets being picked.

Mr. SHERMAN. That is a good profit. But if you have monopoly power and the White House is there to make sure that you do not get regulated, you produce less. Why produce a megawatt for $30 and sell it for $50 when by producing half as many, you can drive up the price to $500. You will sell fewer megawatts, but you will make an enormous profit on each one. That is what is happening in California, and it is that simple to explain. With monopoly power, with the absence of regulation, with a White House that prevents us from proposing that regulation ourself, with a White House commission that refuses to follow the law and impose that regulation, and with a House Republican leadership that refuses to tell the Federal Government to impose that regulation, the way you make the obscene profits is you produce a lot less electricity and you sell each megawatt for a fortune.

Mr. SHERMAN. And the other turbines in the same plant were generating electricity and selling it for prices 50 and 100 times the rates being charged.

Mr. SHERMAN. Mr. Speaker, I thank the gentleman from San Diego, California (Mr. Filner) whose home county was ground zero for the consumer being directly affected by this Statewide and now regionwide rip-off. In 1999, California paid $7 billion for electricity generation. The next year, in the year 2000, we actually used less electricity at peak times, but for the same basic amount of electricity we paid $32\1/2\ billion. This year we will use the same amount of electricity as we used in the prior 2 years, and we will be charged $70 billion, from $7 billion to $70 billion, no more electrons, just more price. A transfer this year, if it continues, of $63 billion from the consumers of California to a few megacorporations coincidently based in Texas. The entire State said okay, we did not do the right thing with our deregulation. We want to reverse it. We want to regulate these same plants that used to be owned by our regulated local utilities and have been sold off to these big outfits based in Texas, and then we are told by the Federal Government, you cannot regulate these same plants that you regulated before, Federal law prevents it and we, the Federal Government, although the statute tells FERC that they are required, are required to insist upon fair and reasonable rates, they have decided to go AWOL. So the effect is to move $63 billion of wealth from consumers in California to megacorporations chiefly in Texas. Now, in order to justify or hide this incredible rip-off, what we are told by many of our Republican colleagues is that this is not a rip-off. It is a morality play. California is immoral and should be punished by a just God who should transfer money to their political supporters. Keep in mind, first, even if California made some mistakes in its environmental policy or its regulatory policies, it is hardly any reason for the Federal Government to tie our hands and prevent reasonable regulation, but it is also not true. California did not prevent the construction of these power plants. First of all, in 1999, we were exporters of electricity many months during the year, exported it to the Pacific Northwest to other States, no one really wanted to build power plants in California. Nobody filed a serious application. In fact, the private sector was able to buy the existing plants at bargain prices. They had no particular interest in building more, but let us say they have such an interest and let us say environmentalists somehow prevented them from building in California, two great leaps of imagination, physicists have informed me that electrons do not know when they cross a State border. We have one electric grid for the West. You can build a plant in Arizona, Nevada, Oregon and Washington and save the same market. If you are interested in selling electricity in the West, it does not matter which side of the State boundary you are. They were not building plants in Nevada, and they were not building plants in Arizona until a year ago. We had a Republican governor in California who in his 8-year term did not grant a single permit, because none was seriously requested. Now we have 14 plants under construction. The City of Los Angeles has no shortage because we have public power. We are exporting power from the City of Los Angeles to the other parts of the West. The reason we have this shortage is because a few megacorporations have discovered a new definition for ``closed for maintenance''; that is to say, the plant is closed to maintain an outrageous price for each kilowatt. That is what is happening.

Mr. SHERMAN

Mr. SHERMAN. If the gentleman will yield, I will point out that we on the Democratic side of the aisle, while we are opposed en masse to drilling in the National Wildlife Refuge in Alaska, this does not mean that we are not looking for more production. In fact, our side of the aisle, and not the other side of the aisle, is pushing to bring the natural gas from Prudhoe Bay, the part of Alaska that has already been developed. They are bringing the oil down, and if there is a leak in an oil pipeline, it causes the environmental problems that the gentleman talks about. The natural gas that is being produced from that already- developed field is being reinjected back into the Earth. Instead, our plan, the Democratic plan, calls for building a pipeline, even providing an incentive to build that pipeline, so that we bring that natural gas to market. Why is this so important? The price for oil is going to be set at the same price that OPEC is selling its oil. There is a world price for oil. We move oil from one continent to the other. A little bit of production by destroying the ANWR is not going to have any effect that helps consumers. A couple of oil companies might get rich on a big project, but it will not have any effect for consumers. In contrast, natural gas does not move from continent to continent. The North American market is based upon North American supply and North American demand. If we can bring the natural gas that is already there at Prudhoe Bay, we can reduce prices that are paid by American consumers, by California consumers, by electric consumers whose electricity is generated by the burning of natural gas, as well as people who use natural gas in their homes. So there is a project in Alaska that will reduce the price paid by consumers has no support in the President's plan, but there is this project that will despoil the environment and have no effect on world prices. Perhaps this administration, as has been asserted by us, has forgotten that they do not work for the energy industry anymore; at least, they are not supposed to.

Mr. SHERMAN. Mr. Speaker, I know we have limited time, but just in closing, I want to say that California is building 14 electrical generation plants now. Under our prior Republican governor, we built not one, but the private sector was not trying to build plants in our State until last year. We need help only in the form of being allowed to go back to the regulation system that we had before. We do not need billions of aid from the rest of the country, but we need the ropes untied from our hands.

Mr. SHERMAN. If it is an infrastructure bottleneck, it is also a cause for antitrust investigation, because there has been an explosion in the profit margin that refiners are generating. It may be that, as we have seen problems in the generation of electricity, that we may also have supply being artificially constrained. I would say that OPEC is probably charging 10 cents to 20 cents a gallon more than is fair, and that is a problem. But when we are paying $2 a gallon, as they do in my State, the 20 cents that is going to OPEC, which, after all, foreign countries are relatively hard to control, is not necessarily the focus of our attention. Of course, when President Bush was running for office, he said that a United States President who was strong could get OPEC to cut their prices just by lifting up the phone. Obviously, he has changed his mind on the definition of strength, and, as other speakers have pointed out, has been unwilling to make that call. I would like to comment on a few of the other points that have been made, if the gentleman will continue to yield. We have talked about the importance of conservation. I should point out that America has produced four times more energy through efficiency, conservation, and renewables than we have from all other new sources of energy over the last 20 years. Over the last 20 years, we have saved $180 billion on our energy bills because of this conservation. That is more than $200 for every dollar of Federal money spent on developing renewables and developing conservation measures.

Mr. SHERMAN. Mr. Speaker, I thank the gentleman from Wisconsin (Mr. Kind) for yielding. I agree about the importance of bipartisanship. I came to this floor last night with intensity, as any of us would have intensity if we were living through what California is and soon will be living through. What was missed was I was here chiefly to support a bill submitted by the gentleman from California (Mr. Hunter), from the San Diego area, one of the more conservative Members on the other side of the aisle. This is a bipartisan Hunter-Eshoo bill. We need it passed only for one reason, and that is the repeated pleas of our Governor and our entire State government to the Federal Energy Regulatory Commission have been ignored. We have asked the Federal Energy Regulatory Commission, look, since we are prohibited by Federal law from imposing reasonable costs-plus- profit regulation on what is being charged at the wholesale level, they, as is required by law, should do it. FERC has closed their eyes to what is happening, and we in California have been FERCed. Instead, we need a Federal Energy Regulatory Commission that does its job or a Congress that is willing to make sure that California gets the kind of regulation that so many other States already have; that we in California had for about 100 years successfully; that we have made the mistake of going away from and that we need to get back to for a couple of years. That is why the Hunter bill simply provides that for a temporary period California will get the same kind of rate regulation that so many of our States are enjoying now. Instead, we are being told that California should be crucified on an altar of near-religious zeal, near-religious dedication to a deregulated market. We are told that if the wholesale price of electricity is regulated, we will get less of it. This is true if one has only taken Economics 101. Economics 101 would say if one pays more for something they will get more of it, more will be produced. But one has to take the upper division courses as well, and they have to learn the policies of those with monopoly power, and then they discover that sometimes what is supposed to happen does not happen. In fact, the California Public Utilities Commission determined that because we have this enormously high price, this deregulated price, plants are being closed for maintenance. Why? Well, think about it. If one has regulated production and they can make a megawatt for $30 and sell it for $50, they would say, I want to do that all day every day as much as I can, make $20 on every transaction. But what if they have a deregulated market where it costs $30 to create a megawatt and instead of producing all that can be produced and making all the $20 profits that could be made, the production is suppressed? Then the price goes not to $50 a megawatt but $500 a megawatt. Obviously, the incentive is to withhold production under this deregulated system with monopoly power; and that is why virtually all elements of California society, including not only a majority of the delegation from California but some prominent Republican conservatives, have urged that we have this temporary regulation. Instead, we are told Washington knows best; they have to be told that it is their problem, solve it, but they will be tied up by Federal preemption law that does not allow them to solve it; and in that way they will have this enormous transfer of wealth. We paid $7 billion for electric generation in our State in 1999. In 2000, we used the same amount of electricity. We paid $32.5 billion. This year, we are going to be charged $70 billion for the same amount of electricity that we paid $7 billion for in 1999. All that is going to a few very large corporations which happen to be based in Texas. I do have a couple more comments. I will ask the gentleman from Wisconsin (Mr. Kind) whether it is appropriate to continue, and he is nodding, yes, because I want to talk about conservation a bit and how important it is. We are told by the Vice President that conservation may be a personal virtue, but it is not a sufficient basis for a comprehensive energy policy. We have to respond. Environmental degradation and enormous energy company profits may be politically profitable, but they also are not a sufficient basis for a comprehensive energy policy. The gentleman from Wisconsin (Mr. Kind) went through the list of how this administration's budget cuts money for renewables, for conservation, for research. I want to point out that those cuts that he enumerated so clearly, those very deep cuts, are a cut of the current year's fiscal budget. But what about the prior years? In each of the 6 years of Republican Congresses, President Clinton's budget request for conservation, for renewables, for research was cut by this Congress. So we start with 6 years of research lost, 6 years of opportunity behind. Then we get to the current year, and we get a budget that slashes from even the depressed levels of the current year. Then after that budget resolution is passed, we get a glossy pamphlet from the administration saying that they are now in favor of spending money, billions of dollars, on research, on conservation. Where is that money supposed to come from? The budget resolution does not provide it. The appropriations bills will not provide it, and we are in a situation where perhaps we have an administration that has a reason to hope for blackouts because in the light of day it is obvious that one cannot claim they are in favor of something and put out a glossy pamphlet describing how they are going to do something if they will not budget for it and they will not appropriate for it.

Mr. SHERMAN

Mr. SHERMAN. If there is a particular time, I am available either now or at some other time that the gentleman suggests.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, before I begin the speech I had planned, I would like to comment on some of the comments made by other speakers. I want to add my voice to the gentleman from Michigan (Mr. Bonior) when he spoke about how Federal employees, particularly those at the IRS, are doing the work of this country and doing it in a professional manner. He quoted from a rather vicious attack that proposes that somehow if we have a flat tax, that all problems of tax administration will be solved and the IRS could be dismantled. Mr. Speaker, I headed the organization that collects the largest flat tax in America, the California sales tax, and let me assure my colleagues that flat taxes involve some of the same contentiousness, some of the same enforcement concerns as does any other tax or a progressive tax. And the IRS employees were professional and responsible, just as were our auditors, just as were our tax collectors with the California State Board of Equalization. Let me also comment about the speech of my friend, the gentleman from Oregon (Mr. DeFazio), where he said that one company, Reliant, that made $500 million, increased its profit by 2,000 percent. The gentleman from Oregon said, well, they did not do anything creative to raise that money. I have to disagree. Reliant, along with some of its sister corporations, invented a new definition for the term ``the plant is closed for maintenance.'' ``Closed for maintenance'' means closed to maintain an outrageous price for each kilowatt. A new definition and true creativity. They invented new ways to gouge California consumers, and they invented new ways to seek power here in Washington so that they would have the impunity to turn off the power in California. It is this inventiveness that led to Reliant's 2,000 percent increase in its profit. Mr. Speaker, last night, several Members from the other side of the aisle came down to this floor to attack me personally, and that needs no response, and to attack my State. They came down here to say that the problems California faces are our own fault; that we prevented the building of electric plants in California, which is totally false and which has not one scintilla of evidence behind it. They talked about how our opposition to offshore oil drilling is somehow responsible for electrical shortages in California without even knowing that we do not use oil to generate electricity in California, nor are we about to, nor do any of the other States with similar air pollution problems. They came down here in total ignorance of what is happening in California. Now, I do not blame them for their ignorance. After all, I am not terribly knowledgeable of what is happening in all the other States. But what bothers me is that someone with so little knowledge of what is happening in California would come down here and say that our misery represents justice and that our efforts to solve our own problems should be barred by Federal law. But of course that is what is happening when Federal law prevents California from imposing even the most reasonable of regulations on the price of these independent energy producers. Mr. Speaker, imagine that your home is burning down. The gentleman might have a neighbor who for one reason or another does not tell. That might be okay. But imagine the most malevolent of neighbors who seizes the hose while the house is burning, and then gives a lecture how it is the gentleman's fault because the house is on fire, while continuing to hold onto the hose. Mr. Speaker, California is burning and the hose is the right to regulate the price of electric generation, and the hose is being held captive here in Washington, DC. We have an administration which is hosing us down with self-righteous declarations that our misery is our own fault. Mr. Speaker, if you want to know where something is made, check the tag on the bottom. California consumers are going to look at their electric bill, they will look at the tag, and it will say ``Made in Texas under license from Washington, DC.''

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, this weekend I was disappointed by the comments of the Vice President in talking about the California energy crisis. Vice President Cheney put forward the theory that California made a mistake with its deregulation, and therefore, California should suffer without any Federal action; that the blackouts and outrageous prices being faced by people in my State are somehow part of a divinely ordained morality play. Well, California did make a mistake. We put ourselves at the mercy of gougers, chiefly independent energy companies based in Houston, Texas. Our theoretical economist told us that if we deregulated, all these companies would produce independently as long as they could make a profit; that they would maintain their output. What we discovered instead was that if we came anywhere close to a shortage, a few of them would close down, create the prospect of blackouts, all in an effort to drive up the price. That is why the California Public Utilities Commission determined that not only are we paying outrageous prices, but deregulation, which according to the theorists should maximize the production of electricity, is actually causing the blackouts by causing them to underproduce. By producing a little less, they can charge us the outrageous prices that my colleague, the gentleman from Oregon, just pointed out to this House. But returning to the Vice President's idea of fault, that this is somehow California's fault, and therefore, Californians should suffer, this might make some sense if Californians were rushing to this floor asking for tens of billions of dollars of aid. But that is not what we are asking for. We are only asking for the right to reregulate, whether that is done at the Federal level or whether it is done at the State level. We are asking for the reinstitution of the same system of regulation that served this country so well for 100 years. The Vice President's statements are analogous to the following situation. Assume our neighbor's house is burning down. If that happens, one approach is to steal our neighbor's hose and lecture our neighbor about fire safety, that the fire should never have started. That is in fact what this administration is doing. On the one hand, we are lectured that California made a mistake, and given the current outcome, that is no doubt true. But then, instead of being given help, instead of even being left alone, the hose is stolen, impounded, and a smile comes across the administration's face as the house burns down. At a very minimum, California needs to see cost-based regulation of the electric plants located in California. Federal law prevents us from doing so. We are bound and gagged by Federal law. It is time for this House and this administration to direct FERC, the Federal Energy Regulatory Commission, to institute the kind of price caps, the kind of rate regulation, that all California is asking for. Instead, we are lectured. We are lectured and told that we will be prevented from helping ourselves, we are going to be prevented from regulating that wholesale price, and that the Federal government will not do so. We are told by people who suffer not at all that we should adopt their economic theories. It is time for the Federal government to return the hose. It is time for the administration to remove its foot from the neck of California. We are not asking for billions in aid, although, if this house burns down, we will need it. We are only asking for regulation of the same type that we imposed ourselves when the plants were under California regulation. We need this level of regulation, either from the Federal government, or we need the right to do it ourselves.

Mr. SHERMAN

Mr. SHERMAN. Will the gentleman from Pennsylvania (Mr. Weldon) yield?

Mr. SHERMAN. I yielded back some time.

Mr. SHERMAN. Will the gentleman yield----

Mr. SHERMAN. Or will his arguments not stand scrutiny?

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I rise today to commemorate Mr. Horace Heidt, Sr. of Los Angeles on the 100th anniversary of his birth. On May 19th, 2001 a plaque on the Walk of Stars in Palm Springs, California was dedicated to the memory of Horace Heidt, Sr. In addition, his memory and great array of accomplishments are to be saluted at a special reception on May 26th in Los Angeles. Early in his music career, Horace started the famous Musical Knights, who were once one of the most popular Show Bands in the United States. This group was known for performances at landmark hotel venues in Chicago and New York. The Musical Knights also aired on radio in the 1930s and 1940s on such shows as Horace Heidt and the Alemite, Treasure Chest, and The Pot o' Gold. The Pot o' Gold was America's first ``give- away money'' game show and later turned into a movie starring Jimmy Stewart. In the 1950's, Horace created The Original Youth Opportunity Program, which was a celebrated talent show that aired both on radio and television. Through this program, Horace discovered many great talents which earned him the nickname ``The Starmaker''. The Musical Knights created many great hits and fostered several famous projects such as Gone With the Wind (1937), Ti-Pi-Tin (1938) and I Don't Want to Set the World on Fire (1941). Mr. Speaker, please join me in paying tribute to an unforgettable musician, father, and true American, Horace Heidt, Sr.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I thank the gentleman from New Jersey. He may have noticed that 60 minutes ago on this very floor, the gentleman from Pennsylvania attacked me personally, and attacked my State. This gentleman refused to yield for even 30 seconds because his arguments were subject to such total rebuttal. Mr. Speaker, I thank the gentleman from New Jersey for yielding more than 30 seconds because to outline all of the mistakes of the gentleman from Pennsylvania, a man who would not yield 30 seconds, yet ended his speech a full 20 minutes before his time had expired, this gentleman needs rebuttal on this floor, not to the attacks against me personally, but to the attacks against my State. The gentleman tried to create the image that California's suffering is somehow the just-desserts for environmental extremism in California, and that our energy shortage is as a result of opposing offshore oil drilling. Keep in mind that all offshore oil drilling would be an attempt to develop petroleum, and we do not use petroleum in the West, and certainly not in my State, to generate electricity. This attack that we somehow prevented the building of a sufficient number of plants. First of all, California has had sufficient plants to generate all of the electricity we need. Now at times the supply might be a little tight, but enough electricity to keep every light bulb on in the State was available except for one thing: They deliberately withheld supply. Nothing the environmentalists do or have been accused of doing rises to the level of deliberately withholding supply in order to jack up prices; and nothing the environmentalists did or were accused of doing would solve that problem. But let us go through this argument that somehow environmentalists prevented the creation of plants in California. First, it is simply not true. The incredible lack of knowledge about what is going on in California is matched only by the loud vituperation of those who are not from anywhere near my State when they come to this floor. There was no effort to build plants in California. I know, as every elected official in California knows what happens when powerful interests want to build something and environmentalists are trying to hold them back. It becomes a political question. It is brought to a variety of political levels. Nobody made any attempt to build a major power plant in California until quite recently. The utter proof of that was that there was no big, political brouhaha anywhere in the State, except for one plant in San Jose, and that related to just a few miles one way or the other, and was very recent. Over the last 10 years, no plants were built because the private sector did not want to build them. And a further proof of that is when the private sector had the chance to buy all of the existing plants, they did not pay a premium price for them. So to say that private industry was desperate to build plants, they did not even pay a premium for the plants that were already there. But also, contrary to the physics that may be taught on the other side of the aisle, the physicists that I consulted tell me that electrons are unaware when they pass a State border. You can supply Los Angeles with power just as easily building a power plant in Nevada or Arizona as you can building one in Northern California or far Eastern California. Yet no private company was trying to build plants in Nevada or Arizona unless we are to believe that these are States where environmental extremists are in total control. So they did not try to build plants in our State, they did not try to build plants near our State, and they were not anxious to buy plants already built in our State because there was not a lot of money to be made until they saw that opportunity to withhold supply; and then the absence of rate regulation on the wholesale utilities became obvious. Then, by withholding supply, by redefining ``closed for maintenance'' as meaning ``closed to maintain an outrageous price for every kilowatt,'' these gouging utilities, chiefly based in Texas, have been able to charge sometimes 10 times, sometimes 100 times the fair price for energy they generate from those same old plants that served California so well under the previous regulated regime. So we are told that the Federal Government must do everything possible to ensure that Californians suffer, and this administration is doing that, but it is not out of a sense of justice or retribution; but rather, for the beneficiaries. You see, as long as gouging occurs, there will be a huge transfer of wealth from California to a few very rich corporations, mostly based in Houston, mostly very close friends of the current administration. We paid $7 billion for electricity in 1999. In the year 2000, we paid over $30 billion for the same electricity. This year we will pay over $60 billion. We are not using any more; we are paying more, and we are paying more to those who withhold supply to drive up price. Let us not blame environmentalists in California. Let us not come to this floor and assert that somehow environmental extremists control Carson City and Phoenix. Let us realize that the private sector bought these plants thinking they would earn modest profits. They fell into an opportunity. They fell into the opportunity to withhold supply and charge outrageous profits. That is what they are doing for the benefit of a few companies based in Texas. This is not a morality play. This is an economic crisis. California needs price regulation based on cost of our wholesale electric generators.

Mr. SHERMAN. I would like to comment on the misperception of some of our colleagues that California is asking for a handout. California wants nothing more than to have our hands untied. For 100 years we were successful with cost-plus profit regulation of our private utilities. A few years ago, we made a mistake. We went with this new-fangled system. Had there not been conspiracies and probably illegal actions that we will never be able to prove, it would have worked. We were not completely stupid. We went with a system that worked on paper, but it did not work in reality. So we went with a system that did not work. We now want to go back to the system that we know works. We do not want to affect anybody else. We do not want any tax revenue. We just want to have cost-plus profit price regulation of electric generators. Federal law prohibits us from doing it. Federal law preempts. Federal law has us bound and gagged while the muffled laughter from the White House can almost be heard here on Capitol Hill. All we ask is that we who benefit or are harmed by the electrical policies affecting our State be able to return to the policies that served us and almost every other State very well for nearly 100 years. Instead, we are told it is California's problem, California has to deal with it and, oh, by the way, they will remain tied, bound and gagged. Now, the White House tells us that we will be tied; we will be bound and gagged for our own benefit because the kind of sane regulation described in detail by our colleague from the State of Washington is somehow bad for us and the White House should protect us from it. We are told that reasonable prices for electricity will prevent conservation. The President himself has admitted that California is already doing a spectacular job of conservation, that we are about to be first, we are now second, we are about to be the first on the list of States who minimize their use of kilowatts per person. We are doing a spectacular job of conservation, and I can assure the House that everyone in our State will continue to do so. Now, I might say the President does not praise us for this conservation effort in order to praise California. He praises California's conservation effort in order to degrade the concept of conservation, saying conservation must be terrible, they are good at it in California. But nevertheless, even the President admits, we are doing a spectacular job of conservation. We do not need to be hog-tied by Federal preemption laws in order to diminish our usage. But second, we are told that price regulation will diminish supply. As the gentleman from Washington points out, both his bill and the bill put forward by the gentleman from San Diego, California (Mr. Hunter) and the gentlewoman from northern California (Ms. Eshoo) exempts new production. So it cannot prevent the production of electricity through the construction of new plants. But then we are told that only if there was unlimited prices are we going to get maximum production. Now, think about it for a minute. If it costs $40 to create a megawatt and you are allowed to sell it for $60, you only make $20 for every one you make and you maximize your effort by making as many as possible. But what if, instead, it still costs $40 to create a megawatt and one of your options was to make as many as you could and sell them at a nice profit, but your other option was to produce less, produce fewer megawatts, force the price up not to $60 a megawatt, not to $600, but to $700, $800 a megawatt. By producing less, the price goes crazy, the profits go crazy, the transfer of wealth from California to Texas exceeds anything that anybody ever thought was possible. So that is what is happening. The California Public Energy Commission has determined that we are getting less because we are paying more than a fair price. About withholding supply, we get blackout and enormous electric bills. The solution is obvious. Let California have the system that Californians are begging for. Allow California to regulate its own wholesale generators, or better yet, have the Federal Energy Regulatory Commission do its job and impose these regulations. That is why the bill of the gentleman from Washington (Mr. Inslee), the bill of the gentleman from California (Mr. Hunter), these are the bills that this House ought to pass. But the only reason we have to pass them is because the President of the United States has instructed his Federal Energy Regulatory Commission to stand on the neck of California, and the laughter is almost audible here over 2 miles from the White House from which it emanates. Mr. Speaker, I yield back to the gentleman from New Jersey.

Mr. SHERMAN. Mr. Speaker, if the gentleman would yield, I would point out that these price gougers in California, the ones that are generating electricity, withholding some of that possible generation, driving up prices, their profits are not up 40 percent, their profits are up 400 percent. And, the four big companies, the four big companies that have pipelines that bring natural gas into California from Texas and Colorado, they have increased their prices by a factor of 12, they have increased their profit by a factor of 2,000 to 3,000 percent. The gouging from a few huge Texas-based companies is not limited to those that deal with petroleum companies that are having the rather startling profit increases that the gentleman from New Jersey indicates, but those that are crucial to the generation of power in California. The natural gas pipeline companies and the wholesale electric companies are beyond comprehension in their profit increases. I yield back.

Mr. SHERMAN. Mr. Speaker, to chime in on this, I am so focused on the short-term disaster in California that so far I have not mentioned the long term. Some of the less progressive elements in the energy industry have sought to crush the alternatives. They have sought to eliminate conservation as a way to go, to eliminate research and to slash renewables. The President's budget reflects these worst elements in the energy industry. He cut by an average of one-third, here in the middle of an energy crisis, cut the precrisis efforts for renewables, research, and conservation. That is the budget he brought here to us. Then, that budget is rammed through both Houses, and this week they are going to ram through the tax cut that locks that budget in. Then, the President, having arranged for the passage of a budget that cuts by one-third the amount for conservation renewables and research, dares to have a press conference in which he says he wants to spend more money, tax credits he wants, expenditures he wants. What hot air it is to propose things only after one has maneuvered a budget through the House and the Senate that guarantees that there will not be a penny to do any of the things the President was talking about. In fact, the President's budget does not provide adequately for the other tax cuts that he is working so hard to achieve, some of them as necessary as extending the R&D tax credit, does not provide for the military increases that we know this House will adopt; provides nothing, not one penny of an increase in Federal spending on education, and does not reflect the proposal of our Secretary of the Treasury that every corporation in America should be exempted from income tax. So how, how are we going to provide for conservation research and renewables? Obviously not at all. The only source of money would be dipping deep into the Social Security trust fund, and I do not think even those of us who are dedicated to new forms of energy want to see that. So the President stands before the green and the blue posters and promises while, at the same time, his people are here on Capitol Hill making sure that not one penny will be provided to meet the President's promises. Mr. Speaker, there is something else subliminal about those blue posters, and that is, and I hesitate to say this, Californians will be very blue when they review, will be singing the blues when they see their electric bill. But what Californians have to understand is if their electric bill is double, that does not mean that these wholesale gougers are only getting double a fair price. Sixty percent of the energy we use in California is regulated, so 60 percent of our bill is made up of electrons sold to us at a fair price. Forty percent is what we are getting from these gougers. Yet, our bill is double. That is because 60 percent of the energy we are buying at a fair price and 40 percent we are buying not at double but at triple or quadruple the fair price. Now, we might think that means triple or quadruple profits. No, profits is what is left over when we pay our expenses. If we are able to jack up the price by a factor of three or four while the expenses are not affected by the gouging activity, then the profits might be going up by 800 percent, 1,200 percent. That is indeed what is happening for a few huge corporations based in Texas who are, with such a powerful friend in the White House, able to avoid commonsense rate regulation on the electricity they are selling in California.

Mr. SHERMAN. I thank the gentleman for his leadership on this issue, especially because his State is not facing quite the disaster we are facing in California. I think it is simply outrageous that we in California are prevented from having the kind of rate regulation at the wholesale level that we all want, that we so desperately need, and that we are precluded from having by Federal preemption.

Mr. SHERMAN

Mr. SHERMAN. I would like to pick up on the gentleman from New Jersey's comment about this really ludicrous idea put forward by the President that his tax cut bill is a solution to the gouging of prices that we face in California, both for gasoline and electricity. First, the idea of giving people their tax money back so they can give it to the energy and oil companies, that strikes me as so inefficient. Why does he not have the courage of his convictions and simply ask the American taxpayer to send the money directly from the Federal Treasury to the oil companies? As the gentleman from New Jersey (Mr. Pallone) pointed out, a portion of that money to the oil companies will go to the Republican Party, so you can send a portion of the surplus to the Republican Party and the bulk to the energy companies. The second thing to point out is as working Californians are paying $2.10 for regular gasoline, as they are paying double and triple the electric bills, if you say a single mother in California with a couple of kids, an income of $20,000, how much money does she get out of this tax cut? Zero. So she still pays the $2.10 a gallon. She still pays double or triple the electric bill, and she gets nothing from the tax cut.

Mr. SHERMAN. The Vice President made some remarks recently that have become rather famous. He said conservation might be a personal virtue but it was not the basis, not a sufficient basis, for a national energy policy. I think we can only respond that degrading the environment and maximizing energy company prices might be good cash generation politics, but it is not the basis, not the sufficient basis, for a comprehensive energy policy. I want to talk a little bit about how California is being hurt because we do not have rate regulation on the wholesale generation of electricity. Technically what is being called for is not price caps but technically what we are asking for is temporary cost- based price regulation, basically the same system that existed in this country for electric utilities, privately owned electric utilities for 100 years, when America went from a rural society to the world's only superpower. Now, these lack of price regulations are responsible and will increasingly be responsible for blackouts in California. We are told by some economic theorists, oh, if you could just increase the price of electricity, Californians would conserve and you would not need blackouts. These folks have not been schooled in the school of hard knocks that we are experiencing in California. You see, no matter how much Californians conserve, the owners, the robber barons, can still suppress supply even more so that they can charge huge amounts for each kilowatt while not having to pay for the fuel to generate very many kilowatts. So the absence of regulation reduces supply. Higher prices will not reduce demand. As I pointed out earlier, California is now second, we are about to be first, in terms of energy conservation, electric energy conservation among all 50 States. And there is a real spirit in California to conserve electricity wherever we possibly can. Conservation is what we are doing already. Limits on wholesale prices will eliminate the incentive that these companies have to suppress production, to close their plants for maintenance, and will instead ensure that they generate electricity because they know they can only get a fair profit on each kilowatt that they generate. Second, we are about to see prices paid by California consumers be roughly double what they are used to. Double what they paid just a year ago. But that does not fully convey to Californians the degree of this rip-off. You see, the electrons flowing to each California home, about two-thirds of them, are coming at a fair price. One-third are not coming at double a fair price, or triple a fair price. No, these unregulated producers are charging 6 or 10 times a fair price on average, and at peak times, or at times of particularly acute engineered shortages, they are charging 50 and 100 times a fair price per kilowatt. So if you are getting an electric bill that is only double what is fair, do not think that these few megacompanies are only earning double what is fair. They are earning 10 times what is fair. The solution is in the White House. But I think the headline is clear: ``President to California, Drop Dead.'' There is one possible California response and it comes not from the California Democrats. We have already responded. The onus is on California Republicans and Republicans from the other western States. Four have had the courage to tell the White House that destroying our State is not acceptable and they have cosponsored the bill sponsored by the gentleman from California (Mr. Hunter), a Republican from San Diego County, to provide these cost-based price regulations. We need every Republican from the western States to cosponsor that bill. And if they do not do it this month, they are going to face their constituents next month and the month after. But it has to go beyond that because President Bush will simply veto a bill. He will veto a bill that requires fair prices in California. He would veto a bill that prevents a justified transfer of $50 billion from the people of California to a few megacorporations, most of them based in Texas. The only way to prevent that veto is to get every Republican from the western states, starting with those in California, to come down to this floor and announce that they will not support any Presidential initiative, that they will vote ``present'' and not ``yes'' on every one of those Republican proposals, until we save our State. I am calling on my colleagues from California, put your constituents above your contributors; put your State above your party. Come down to this floor tomorrow and say you are going to vote against every proposal. You do not have to vote against it. Just vote ``present'' on every proposal until the President signs the legislation we need to save California. If you think that maybe we in California do not deserve any Federal legislation, then, for God's sake, let us pass a bill that gives California the right to regulate the wholesale price of electricity generated at plants located in California. If you do not believe the Federal Government should play a role, at least untie our hands. We need at least that, and we need California Republicans to stand up for our State.