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Energy Crisis in California Fails to Move Its Neighbors by Sam Howe Verhovek New York Times, January 26, 2001

SEATTLE, Jan. 25 — Soaring electricity rates. Record-low reservoir levels at some big dams, which could imperil migrating salmon this spring. Deregulation plans in turmoil. A crash conservation program being urged on consumers and businesses. A dispute over whether to resume a long-abandoned nuclear power project.

For public officials in California's neighboring states and elsewhere in the West, these sound like ominous political problems. And they certainly are, except that those leaders, at least for now, have a convenient one- word explanation for the debacles and a place to blame: California.

"California made their mess and we're paying for it," said Ken Rust, the chief financial manager for Portland, Ore. Utah's governor, Michael O. Leavitt, blamed California's "disastrous deregulation scheme" for an 11 percent increase in electricity rates that a major utility is proposing in his state.

"Consumers in other Western states are left to pick up the tab," Governor Leavitt said. An editorial cartoon in The Salt Lake Tribune shows California plugging into an electrical outlet in snowy Utah to run a hot tub to the south.

Criticism of California, long popular in the West, has reached a crescendo in recent days as that state's electricity woes continue to mount, forcing rolling blackouts and threatening its largest utilities with bankruptcy. Far from expressing much sympathy, many people outside of California say that state has brought a huge problem on itself and, increasingly, on the entire region.

There is truth in this finger-pointing, but it hardly tells the whole story. While California is desperately seeking electricity during a season in which it normally exports electricity to the Pacific Northwest and the Rocky Mountain states, there are plenty of other reasons for the rising rates here.

Natural-gas prices are soaring throughout the nation, and reservoir levels for the mammoth hydroelectric projects in the Northwest are low mainly because the region's rainfall in the past few months has been among the least in decades.

John Savage, Oregon's energy director, acknowledged this factor in testimony before the State Legislature's House Committee on Smart Growth and Commerce on Wednesday when he said, "Our hope is for 75-degree weather and rain of biblical proportions for the rest of the winter."

And even as California gets blamed for failing to build any major power plants in a decade as its population grew by four million and its economy boomed, many other Western states do not have a much better record of increasing generation of electricity in the face of burgeoning populations.

"First and foremost, there is a shortage of megawatts," said Lawrence J. Makovich, senior director of power research for Cambridge Energy Research Associates in Cambridge, Mass., referring to problems throughout the Western states. "There simply isn't enough generating capacity attached to the grid to meet the demand. The second problem is that when shortages hit, prices go through the roof."

Montana, the nation's fourth-largest energy-producing state on a per- capita basis, is one Western state that no longer has huge surpluses. Until recently, it exported 40 percent of the energy it produced. But over the last decade, the state population has grown nearly 13 percent, and state lawmakers are considering loosening environmental regulations to make it easier and faster to build new power plants.

Still, people in other states say California is failing to hold up its end of a long-running bargain, even as its governor, Gray Davis, blamed "out- of-state profiteers" for driving up the price of electricity and pushing the state to the brink of crisis. Neighboring states are angry about California's demands for power.

"It was a very complementary system," said Jacques P. Lawarree, an economics professor at the University of Washington and an expert on deregulation. "California sends power in the winter, when it's most needed here, and in the summer we send back power. It's always been a very good thing.

"Now that they have a problem and cannot do their part, we in the Northwest are suffering for that," Mr. Lawarree said, "and there are some who wish we could cut off California entirely from the grid. But it's also clear that we've benefited for many, many years."

Indeed, like it or not, there is recognition that the Western states will remain tied together on the power grid that sends huge amounts of electricity across the region, and that more cooperation, not less, is needed between California and other states. The Western Governors' Association, a nonpartisan group, is scheduled to meet in Portland next week with federal regulators and the new energy secretary, Spencer Abraham.

"It's very important that this doesn't deteriorate into a Northwest versus California thing," Gov. John Kitzhaber of Oregon said before a meeting with Gov. Gary Locke of Washington and Governor Davis of California in Sacramento earlier this month. (All three are Democrats.)

"We're all in this together," added Governor Kitzhaber who, with Governor Locke, has urged home owners, businesses and state agencies to find ways to cut electricity consumption by at least 10 percent. "We cannot afford to let California go down the tubes."

Still, as Mr. Rust, the director of Portland's bureau of financial management, put it, the federal mandates compelling the Northwest's generators to send power to California have aggravated the often "tenuous relationship" between his state and its much larger neighbor to the south.

As federal reservoirs have been drawn down to generate more power during this emergency, Mr. Rust said, the odds are being driven up that more young salmon will die this spring because river flows will not be adequate to get them downstream. The region, under the Endangered Species Act and a plethora of lawsuits, has spent billions of dollars on plans to save the fish.

"This is a huge issue in the Northwest, and it seems like it's barely getting factored into the discussion right now," Mr. Rust said in a telephone interview. "The concern is that with this requirement to send power to California, all the concerns about protecting the stream flow, the salmon habitat, all the money that's been spent to protect those fish, it all could get thrown out the window in an instant."

Officials at the Bonneville Power Administration, the federal agency that sells power from a network of two dozen dams in the Northwest, said that low reservoirs are, indeed, danger signs, but are the result of the weather more than of the demands that the California crisis has placed on the system. The fate of the fish this spring will depend a great deal on the amount of rain and snow in the coming months and on the rate at which the winter snowpack melts into the region rivers.

But senators from Washington and Oregon have pleaded with federal regulators to stop an order requiring Bonneville electricity to go to California, so far to no avail. President Bush recently extended that order until early February but said it would not be continued after then.

"Frankly, I think my state is being set up — and I include Washington State — to be an energy farm for California," Senator Gordon H. Smith, an Oregon Republican, complained last week. He said he had received calls from several business executives in his state who said electricity rates for their companies had gone up between 30 percent and 40 percent, and they blamed California's demands.

Meanwhile, while no other Western state is as far along with deregulation as California is, the recent woes seem to be putting the brakes on any movement toward deregulating. Several Oregon officials, including Mayor Vera Katz of Portland, have called for postponing a limited deregulation plan in that state.

And earlier this week, Gov. Kenny Guinn of Nevada, said in his State of the State speech that he would delay a plan there that had been set to begin this fall.

"I cannot and will not support deregulation until I am assured that power supplies are secure," Governor Guinn, a Republican, said.

The recent problems have even sparked a debate here in Washington State that for much of the last decade would have been unthinkable: whether to finish a nuclear power plant, which was abandoned three- quarters finished in 1994, at the giant Hanford reservation. The organization building it, the Washington Public Power Supply System, known by its initials, W.P.P.S.S., and widely called Whoops, had a spectacular financial collapse and defaulted on more than $2 billion in bonds.

Officials at a successor utility consortium, Energy Northwest, said recently that the plant could be completed and generate electricity at competitive rates, given the recent spike in the market. But the idea outraged environmentalists and some utility executives, and prompted another official at the the consortium to say that it was about as likely to fill in the Grand Canyon as to resurrect the nuclear plant.