Press Release 

In a letter, Schakowsky said that in the short run President-Elect Bush should reach out to his close allies in the industry to bring immediate relief to consumers who are seeing a doubling of their heating bills since last year.   Schakowsky wrote, “In the immediate term, I believe that we should act to prevent price-gouging by ensuring that domestic oil, gas and electricity suppliers are not charging excessive prices.  Given the close relationships you and Vice President-Elect Cheney have with decision makers in major oil and gas companies, I encourage you to meet with representatives of the industry as soon as possible to ensure that there is no excessive profit-taking or exploitation.”

Schakowsky continued, “In Illinois and the Midwest, natural gas prices have increased by as much as 100%.  It has been estimated by the local distribution company serving my district that a family which paid $400 last year to heat their home through the winter should expect to pay closer to $800 this season for the same service.”

In addition, she said that millions of families, small businesses, and farmers are struggling with high energy bills and, in some instances, severe shortage, and encouraged the President-Elect to expand the Low-Income Energy Assistance Program.

Schakowsky called on the President-Elect to take an active role in shaping an energy policy that is fair to all Americans.  “The fact is that the current crisis is one of market failure that requires a governmental response to protect the nation’s economy.  Managing energy policy is similar to managing fiscal and monetary policy.  The federal government has an important role to play to maintain a fair and balanced marketplace.” 

She added, however, that the Bush Administration needs to take action to develop long term solutions to avert future price hikes and “…[t]o prevent any recurrence of this year’s crisis or repetition of last summer’s gasoline crisis.”  She encouraged the new Administration to focus such initiatives such as energy efficiency, renewable energy sources, and energy reliability and affordability. 

 
                                          January 3, 2001
 

President Elect George W. Bush
Bush-Cheney Transition Headquarters
1800 G Street, NW
Washington, D.C.  20270

Dear President-Elect Bush:

As you prepare to take office on January 20, millions of American households, businesses and farmers are struggling with high energy bills and, in some instances, severe shortages.  In Illinois and the Midwest, natural gas prices have increased by as much as 100%.  Even worse, this winter has brought unusually cold weather to the Midwest.  It has been estimated by the local distribution company serving my district that a family which paid $400 last year to heat their home through the winter should expect to pay closer to $800 this season for the same service.  There are reports that businesses, unable to find affordable natural gas, have cut back production and even that some gas-dependent businesses, such as ammonia plants, have decided to relocate abroad as a result. Last summer, while the major oil companies were enjoying record profits, families in my district and throughout the Chicago area were paying unusually and disproportionately high prices at the pump for gasoline-$.40 more per gallon than the rest of the country on average.  

The Midwest is not alone.  From the electricity crisis in California to the problems facing heating oil users in New England, it is clear that deregulation has failed and that we cannot afford to leave our energy future solely in the hands of the private marketplace.  I appreciate your decision to make energy a priority in your Administration, and I urge you to move forcefully and expeditiously to establish a national energy policy that will assure ample supplies of safe, affordable and reliable energy for all users.

In the 1980’s, the decision was made to deregulate natural gas and oil prices, a move that energy producers argued was necessary to stimulate new production.  At the same time, however, the increased trend to short-term contracts allowed the price of already-discovered resources to track market prices, creating disincentives for production when prices were low and subjecting consumers to sharp increases in costs in times of market volatility like today.  Deregulation has also occurred in the transmission and distribution levels.  The rapid erosion of the local utility role in assuring reliable supplies to customers in their service area – particularly smaller users unable to negotiate on their own behalf – creates significant problems for consumers in today’s “sellers’ market.”  This is particularly true in natural gas, where increased demand by independent electric generators threatens supplies to core residential, small business, and manufacturing customers.  Consolidation and deregulation in the production industry, short-term contracts, and the separation of transmission and distribution responsibilities have all contributed to this winter’s soaring bills and supply problems. 

Some will argue that soaring prices are simply a rational market response to rising demand and limited supplies and that government intervention is unnecessary.  The fact is that the current crisis is one of market failure that requires a governmental response to  protect the nation’s economy.  Managing energy policy is similar to managing fiscal and monetary policy.  The federal government has an important role to play to maintain a fair and balanced marketplace. 

I believe that we have moved too far in deregulating the market, given the fundamental importance of energy to our economy and our constituents.  Over the next few weeks and months, we need to provide assistance to help individuals, families, farmers and businesses cope with the impacts of deregulation.  Then, we must address longer-term issues.

In the immediate term, I believe that we should act to prevent price-gouging by ensuring that domestic oil, gas and electricity suppliers are not charging excessive prices.  Given the close relationships you and Vice President-Elect Cheney have with decision makers in major oil and gas companies, I encourage you to meet with representatives of the industry as soon as possible to ensure that there is no excessive profit-taking or exploitation.  This is also important to ensure that domestic energy supplies are being priced reasonably.  

Second, I hope that you will act as soon as possible to review the adequacy of funding for the Low-Income Home Energy Assistance Program at $1.4 billion.  In addition, I hope that you will consider assistance programs for energy consumers who are not eligible for LIHEAP.  For example, we should investigate expansion of LIHEAP eligibility requirements, programs to help extended payment programs, Small Business Administration support, Department of Agriculture assistance, and ways to help school districts with energy costs.  Just as the federal government has acted to respond to emergencies such as floods and tornadoes, we should act to respond to this winter’s energy emergency brought on by frigid temperatures and high energy costs.
 
We must take immediate steps to ameliorate the harsh impacts of high energy bills this winter, but we must begin to act now to prevent any recurrence of this year’s crisis or repetition of last summer’s gasoline crisis.  As you begin to consider ways to address our nation’s energy crisis, I hope you will focus on the following initiatives:
 

• Energy efficiency: The federal budget should include greater incentives for consumers to invest in efficient appliances, housing, and manufacturing processes.  This would yield great benefits for consumers and the environment.  For example, on lighting alone, American consumers and businesses spend some $21 billion annually and could cut their costs in half with energy efficient bulbs and fixtures while improving the environment.  If all states adopted modern building energy codes, the new homes built in the U.S. this year could would use about 7 trillion BTU’s less than homes built under current building codes.  The average home owner could see an average savings of 12% on their annual energy costs.  Finally, by investing in energy efficiency, utility companies can avoid rate increases because energy-efficiency measures are more cost effective than building new power plants.  

• Renewables:  We should invest more heavily in renewable energy sources.  In the past several years, we have seen great advancement in the field of alternative energy with the marketing of highly efficient and low polluting vehicles and the spread of wind and solar energy sources.  One way to ensure energy security for America is to develop energy sources that do not depend on other countries or exhaustible sources like the few remaining oil reserves we do have.  

• Energy reliability and affordability: Your Administration should create a bipartisan task force, including representatives of all sectors, to determine how best to guarantee secure supplies of affordable energy for our nation’s residential, commercial and industrial consumers.  This task force would be responsible for developing recommendations on how to guard against excessive price volatility and the establishment of minimum inventory requirements that are needed to provide adequate supplies, respond to disruptions and avoid rapid price spikes.  It should also recommend improvements in energy information collection so that we are better able to predict and respond to changes in energy supply and demand trends, such as the impact of the increased use of natural gas for peaking purposes on traditional residential and commercial natural gas customers.  Finally, this task force should explore how best to guarantee reliable supplies to ultimate customers in a deregulated market where energy suppliers are free to sell to the highest purchasers, and pull in and out of markets.  

Mr. President-Elect, I am pleased that you have decided to make America’s energy policy a priority for your Administration.  I appreciate your consideration of the recommendations I mentioned above and look forward to working with you to ensure reliable energy at reasonable prices for American consumers.  I look forward to your response.

Sincerely, 

Jan Schakowsky
Member of Congress