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Governors Focus on Power Cost by Staff & Wire Reports Seattle Times, December 21, 2000

DENVER - U.S. Energy Secretary Bill Richardson yesterday extended an order requiring Western electricity producers to supply surplus power to California to alleviate its energy crisis.

He also asked Western governors to support a regionwide cap on wholesale electricity prices and to work together to solve problems that have created power shortages and skyrocketing rates throughout the West. Some Puget Sound utilities will raise rates next month as much as 50 percent.

At an emergency informational meeting in Denver, the governors called upon California to save energy and take steps to stabilize its own power market. In return, the governors agreed to coordinate conservation in their states over the next two weeks to reduce demand for power at peak times, 6 to 8 a.m. and 6 to 9 p.m.

"The wild increases in electricity prices is a regionwide problem and it will take the cooperation of the Western states and the federal government to bring them down," according to a statement from Washington Gov. Gary Locke, who attended the meeting.

Last Friday, the Federal Energy Regulatory Commission, which regulates electricity prices, approved a flexible rate cap in California of $150 per megawatt hour that allows suppliers to charge more if necessary. California Gov. Gray Davis has asked for a firm regional price cap of $100 per megawatt hour. He did not attend the conference, staying home to address the crisis.

But Jim Hoecker, FERC chairman, speculated a regional price cap wouldn't help much.

"Nationally, we have not improved our infrastructure enough to meet (power) demands," Hoecker said.

Last week, Richardson issued an emergency order forcing 75 Western generators, including the Bonneville Power Administration, Puget Sound Energy and Seattle City Light, to supply electricity to California. Some producers had been reluctant to, afraid that California's two largest utilities couldn't pay or didn't have sufficient off-peak power to trade.

Wholesale electricity prices in the West have been as high as $5,000 per megawatt hour in recent weeks. A year ago, they averaged $30 to $40 a megawatt hour. The California-only price cap worsened the state's energy shortage because suppliers stepped up their sales to other Western states willing to pay higher rates.

California's two biggest utilities, Southern California Edison and Pacific Gas and Electric, have accumulated more than $8 billion in debt buying high-priced electricity they must resell at dramatically lower prices under a 3-year-old rate freeze.

Around the Puget Sound, electricity rates are increasing as utilities cope with the chaotic wholesale power market.

On Tuesday, the Tacoma City Council approved a 43 percent surcharge for Tacoma Power's residential customers. The 6-3 decision is expected to increase the average electricity bill from $85 to $124. It will boost small-business rates by 40 percent and those for larger businesses by 58 percent to 74 percent.

The surcharge is essential in the current red-hot market, utility managers said. Without it, financial reserves could be tapped by the end of February.

Tacoma Power originally sought an 86 percent surcharge on residential rates but halved its request after public outrage.

The Snohomish County PUD last week approved a 35 percent increase, which on average represents a $22-a-month increase for residential ratepayers.

A 1.5 percent rate increase for Puget Sound Energy customers will take effect Jan. 1, approved long ago by the state Utilities and Transportation Commission under PSE's 1997 rate-stability plan.

The Seattle City Council this month approved a surcharge of about $3 a month for the average residential Seattle City Light customer, or an extra 8 to 10 percent. The charge takes effect Jan. 1 and is likely to run through 2002.

In California - where deregulation was established in 1996 - utilities stunned by rocketing wholesale prices have urged a rate increase of more than 10 percent.

On another energy front, Puget Sound Energy is seeking a 25 percent increase in natural-gas rates, spokeswoman Dorothy Bracken said yesterday. If that boost is approved in January, the average customer's gas bill would increase from $64 a month to $80.