For Immediate Release
Office of the Press Secretary
May 29, 2001
Press Briefing by Karl Rove, Senior Advisor to the President, Robert Mcnally, Special Assistant to the President for Economic Policy, and Gerald Parsky, Former California Bush Campaign Chairman
Century Plaza Hotel
Los Angeles, California
3:45 P.M. PDT
MS. BUCHAN: Good
afternoon. We'll begin our briefing on the meeting between
President Bush and Governor Davis. Joining us will be Karl
Rove, who is the Senior Advisor to the President; Robert McNally, who
is Special Assistant to the President for Economic Policy; and Gerald
Parsky, who is a Californian and the former Chairman of the Bush
Campaign here in California.
ROVE: The President and the Governor had a very friendly and
constructive series of meetings this afternoon. The
President invited the Governor to join him at a meeting with high-tech
and business leaders to discuss energy conservation and energy
efficiency and technology programs. And then they continued on in a
very friendly and very constructive and positive meeting that went well
beyond its appointed time.
reaffirmed his commitment to helping California in every reasonable
way. He reaffirmed his commitment to seeing that federal
agencies -- FERC and other agencies, the Federal Trade Commission --
carefully examine questions of illegal price-gouging. And he
also discussed briefly the FERC efforts begun several weeks ago to look
into the significant and sustained price differentials in transmitting
natural gas to California. It's costing significantly more
on a sustained basis to transmit, to transfer that gas to California
than it is to other locales, some of them even further away.
As I said, it was friendly and
positive. They did disagree on one thing -- first of all, I
want to say -- agreed on one thing, that California is entitled to
price relief. The President believes that it's entitled to
price relief in cases of illegal price-gouging by getting refunds and
it believes that Californians are entitled to the price relief that
will come by having a comprehensive energy policy that encourages more
competition, creates more power plants from which power can be drawn,
fixes the problems in the transmission network and the transmission
grid that are causing some price inefficiencies in the system -- that
Californians are entitled to the price relief that we'll get through
increased technology, conservation and energy efficiency, and by
increased use of alternative energy sources.
Where they disagree is on the question of whether or not California is
entitled to a price cap. The President continues his very
strong belief that price caps will not add to the supply; in fact, it
will diminish the supply. You only need to look at the
experience that California had last summer where they had a price cap
in place, lowered that price cap, and saw 3,000 megawatts of power flee
the state to Arizona and other states where it could be
sold. California cannot afford to see 3,000 or 4,000
megawatts of power disappear from the state and be sold outside the
But I repeat, the President reiterated
his strong commitment to seeing that California gets rate relief, and
the way to get rate relief is competition, energy conservation,
efficiency, new plants, new sources, alternatives, and very careful
oversight by the federal government on these two significant questions
of price-gouging and transmission costs.
saw a little bit of the response that Californians who have been
looking at this issue had to the President's position on price caps
today in the speech before the LA World Affairs Council and in the
meeting with tech and business leaders. They very clearly
talked about their desire to avoid the shortages that price caps would
bring. Some of the high-tech officials talked about how it
would take literally days for them if a plant were set down
mid-production line, it would take, literally, days to power the plant
back up in an appropriate way. And it would cost them,
literally, tens of millions of dollars if that were to happen.
Q The Governor said
moments ago that he's still dissatisfied with what the federal
government has done so far -- to go through with the procedures when
they find out of price- gouging and things like that. Did
this come up in the meeting?
ROVE: It came up apparently at the end in an offhand comment
by the Governor as the meeting was breaking up. And, of
course, California is entitled to do what California wants to
do. We think it would be more constructive to focus on those
things that will increase the supply and lower the cost. And
those are to look at the specific instances of price-gouging, like FERC
is committed to doing and is doing, and looking at this transmission
issue, and then working on all the fronts to bring on line the power
supplies that California needs.
Q Did the President have any reaction to that --
MR. ROVE: Literally, it was, as I
understand it, in a remark as they were breaking up.
Q You gentlemen
obviously positions and made those well-known. Can you
point to one or two tangible things that came out of this meeting,
something that you've done at this moment that did not -- when they
walked in the room a couple of hours ago?
ROVE: Well, the request by the Governor to meet with Pat
Wood to see if this would provide them a steady line of communication,
which I thought a very constructive thing. I think the
Governor appreciated -- I hope he appreciated -- the President's strong
commitment to making certain that in instances of illegal
price-gauging, FERC and other federal agencies would be aggressively
pursuing this, and also that the federal government would be looking
into the issues of transmission costs for natural gas.
But I do think there was a lot of agreement on
the essentials. And the essentials are, we're going to
overcome this problem by focusing on conservation, efficiency,
technology, new supplies, improvements in the power grid -- we
announced earlier today, for example, or yesterday, announced that a
special federal effort to clear this bottleneck in Path 15, which keeps
power from flowing from Southern California, parts of Southern
California where there are a surplus of power, to Northern California,
where there is a clear deficit.
On that Path 15, the statement made by
Secretary Abraham suggested that you wanted to -- for the private
sector -- problems -- Is the President prepared to have the Governor go
ahead and --
MR. ROVE: We're confident that with proper conditions, that the market would respond. And I defer to my two energy experts here, one Californian and one from Washington, to further expound on that.
MR. MCNALLY: At this time, the
Secretary of Energy believes, and the President believes that
non-federal investment will be sufficient to expand Path
15. And we hope that within two to three years, that could
free up some 1,500 megawatts to move from the south to the north of the
state. So at this time, we're not considering a federal
Q If it's
been so many years, if there -- why hasn't there been already?
MR. MCNALLY: That's a very good
question. We think that there has been a reluctance on both
the federal authorities -- the side of the federal authorities and
state authorities, because, really, there are two entities that could
have expanded Path 15. One is WAPA, the Western Area Power
Administration, and the other is PG&E. And we haven't spent
a lot of time figuring out why that wasn't done in the
past. We're more interested in making sure that it gets done
in the future and as soon as possible.
PARSKY: The only comment I would make, just one comment
about Californians -- I think a number of us would reiterate the fact
that we don't believe that price caps are the answer. We do
think that price relief can come the way Karl described
it. One thing that we're -- we understand that the Governor
has promised that in February, that by July, there would be 5,000
megawatts of new power, and we look forward to that. If that can
happen, then I think that's about the amount that's needed in order to
close the shortfall. That would be a very positive
you address the Governor's issue, basically having to do with potential
FERC lawsuits? Specifically, step through -- number one,
does the President believe that the prices so far have been just and
reasonable? If not, does the President -- what, then, does
he see FERC's possibility if they are not just and reasonable?
MR. PARSKY: Well, I think the
President's made clear that he's asked FERC to take whatever action is
appropriate within the regulatory framework of FERC to deal with the
issue of the reasonableness of prices. There's a whole set
of procedures that FERC needs to go through, and they are in the
process of doing that. And I do think that the President has
made clear that if there are evidences of abuse under the FERC
regulations, they should take action. And he has every
anticipation that they will.
Q How does he square that with the unjust -- the
findings that prices were not just and reasonable from the fall?
MR. PARSKY: I'm not quite sure I
follow. Within the category of just and reasonable pricing,
there is a whole regulatory apparatus in place. Testimony needs to be
taken, the FERC needs to go through a process. And the FERC
has been instructed to do that. So that a determination can
be made if there's any gauging that has taken place, or if the pricing
is unfair and unreasonable.
Q Why has that not happened -- since that
finding was made in the fall, why has that process not started?
MR. PARSKY: Well, to some extent,
there has been some action taken by the FERC, and that's an ongoing
process for them.
Q The Governor maintains that following the
finding in November, that prices were unjust and unreasonable by FERC,
that the Federal Power Act had -- there's no ambivalence. It
doesn't matter what your particular philosophy is on whether price caps
work or don't, but the law says the FERC must set the
price. How do you get around that allegation that FERC is
not upholding the law as it exists right now?
MR. PARSKY: I would refer you to FERC for a full answer on
that. But after FERC made that determination, FERC began a
process of price mitigation, which has resulted in
refunds. Refunds for overcharges were ordered in January,
February and March. I'm not sure if they've done April or
Today, FERC has toughened and expanded
that price mitigation framework they are using, which followed as a
result from their determination, I believe it was in November and
December. So, really, the winter -- that prices were
questionable in California.
So the question
is not whether FERC has acted or not, it has acted, it has ordered
refunds for overcharges. It continues to do
that. What we're focused on is measures to increase supply
and reduce demand.
Q What was the President's response to the
Governor's assertion that without price caps, the state may have to
spend $50 billion in power, and that could trigger a recession and drag
down the entire nation into a recession?
ROVE: Well, the President believes that price caps will make
the problem in California worse, not better, that it will make the
California economy weaker, not stronger. And that the way
that we ought to go about seeking relief and increasing supply is to do
what we are suggesting in the comprehensive energy program, which will
have an effect almost immediately. It already has begun to have an
effect. When you begin to talk about, for example, fixing
transmission problems, it helps stabilize prices and stabilize the
So we believe very strongly that the
way to do this is not to make the problem worse for the California
economy. These chip manufacturers were sitting there talking
about how, literally, literally, hundreds of millions of dollars' worth
of sales are dependent upon having uninterruptable power supplies, and
how power supplies that have got interrupted would cause them the loss
not only of sales, but start-up -- to restart their lines would cost
them literally $10 million, $12 million a pop. So price
caps, like they did last summer, will simply drive way from supply in a
situation where supply is an urgent need.
Q Does your answer mean that the administration
rejects the warning from the Governor?
ROVE: No, it means that we believe that the better way to
assure a strong California economy and to keep people working is to
give them the power to keep working, and the way you get the power to
keep working is by emphasizing conservation technology, alternative
sources, new supply and fixing the problems in the transmission lines.
Those five approaches stand a better chance of
keeping people at their jobs, getting paychecks and keeping this
economy working, than a price cap which, last summer -- I repeat --
when the cap was lowered by this administration in California, what
happened was, 3,000 megawatts of power disappeared from the state and
was sold elsewhere. And that isn't going to help California
when people are going to face the tough summer that they're going to
face. We understand the human cost of this
problem. We want to keep the California economy strong, we
want to keep the California economy humming, we want to keep people
employed and we want to minimize the disruptions that people are going
to feel in their lives.
Q Last year, you came here pretty often, and you
made some fairly optimistic claims about how you would do in the
fall. In the end, they didn't quite come true, and now
you've been to 29 other states before coming here. I guess
either for you are Jerry, I think even some California Republicans have
-- in recent weeks about what took you so long. So at the risk of
being a skunk to the party here, what did take you so long?
MR. ROVE: We did have plans to be
here in early April, and events intervened that kept the President in
Washington, namely the issue with China. But we'll be back
in California plenty of times, give you plenty of opportunities to come
and cover us when we do.
Q Mr. Parsky, what do you think the effect upon
California's economy is going to be with the run-up in electricity
prices? I mean, are businesses -- what's the effect?
MR. PARSKY: The vast majority of
the businesses that we talked to today and that we've been talking to
over the course of the last few weeks have emphasized the disruption as
a major short-term -- having the most economic impact. Today
the blackouts and brownouts are -- were emphasized as having the most
direct negative economic impact on the state.
So these policies that we've been outlinimg are really aimed at trying
to minimize that. And if the Governor brings on his stream
what he has promised, then I think those blackouts and brownouts can be
minimized, and the economic impact, as a result, will be less.
Q You don't think the
price is going to have an impact on the state's economy?
MR. PARSKY: Well, again, the think
that is going to have the most impact on this economy is not having the
supply and demand equation come into balance. Price caps
have not worked in the past --
Q I'm not asking about price
caps. I'm just asking, do you think that the run-up in price
is going to have an effect on California's economy?
MR. PARSKY: The question is the
best way to address it. And the best way to address it is by
moving forward on conservation technology, energy efficiency, new
supply and fixing the transmission problems, not price
caps. That's the best way that will guarantee additional new
supplies so people compete for California's business, and prices will
be going down.
END 4:01 P.M. PDT