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Puget Sound Energy Bracing for Change by Thomas Lee Seattle Times - May 16, 2000

As Puget Sound Energy holds its annual shareholders' meeting today, the Bellevue utility is bracing for regulatory change that has made the once-rigid U.S. energy market open to competition.

Earlier this month, the company and five other regional utilities announced they were looking to pool their transmission assets - about $1.8 billion worth of high-voltage lines and substations - into an independent, for-profit venture.

They envision a company that would ease the sale or lease of power lines under the auspices of a regional nonprofit organization, which would maintain and operate the equipment to ensure a reliable flow of power.

The Federal Energy Regulatory Commission has long championed independent transmission groups to provide equal access to power lines.

"If you deregulate the power-production business, that doesn't necessarily mean the benefits will go to the utilities if the transmission lines aren't completely open," said Bill Weaver, Puget Sound Energy's president and chief executive.

The deregulation of electricity is not unlike that of the telephone industry, said Steven Greenwald, a San Francisco-based lawyer who specializes in energy issues.

For years, utilities have owned all aspects of the industry: the generation, transmission and distribution of electricity. But just as local telephone monopolies such as US West have opened their networks to competition from the likes of AT&T and Sprint, Greenwald said, federal regulators are requiring utilities to do the same.

One anti-competitive practice federal regulators want to eliminate is "rate pancaking." For example, if Puget Sound Energy wants to purchase electricity from Montana, the supplier must pay several tolls to utility companies whose power lines it must travel across.

That cost, said Greenwald, is usually passed on to either a local distributor like Puget Sound Energy or the consumer.

The Northwest transmission company would create a uniform toll rate for electricity in its territory.

However, it is unclear what effect, if any, the venture would have for Puget Sound Energy or the Northwest.

The company buys most of its power from the Bonneville Power Administration, which transfers electricity from government-owned hydroelectric dams to interconnected utilities.

Because of this arrangement, Washington residents enjoy some of the cheapest electricity rates in the country, said Marilyn Meehan, a spokeswoman for the state Utilities and Transportation Commission, which must approve creation of the independent transmission company.

Puget Sound Energy officials stress that the idea for an independent transmission company comes from the federal government.

Still, will this new spirit of deregulation lead to further changes, such as allowing Washington consumers to pick their electric supplier?

Greenwald thinks so, noting that 25 states allow energy companies to compete for individual customers.

Puget Sound Energy isn't ready to predict if that will occur.

"That's up for each state to decide," said Weaver. "We really don't know what's going to happen." Puget Sound Energy's annual meeting is at 10 a.m. at Bellevue's Meydenbauer Center.