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Push is on to Cap Lofty Power Rates in West by John Dodge The Olympian, December 15, 2000

Bloated rates may damage economy, Locke asserts

OLYMPIA -- Federal regulators meeting in Washington, D.C., today are expected to consider a cap on wholesale power rates in the Western states as requested by Gov. Gary Locke, the federal Department of Energy and others.

Action won't come a minute too soon, Locke suggested at an energy briefing in Olympia on Thursday.

Without relief from bloated wholesale power costs, the economic prosperity that took years to build in the region could be undermined in a matter of months, Locke said.

The Federal Energy Regulatory Commission meets today to consider a West Coast-wide cap on wholesale power prices. Before the meeting, Commission Chairman James Hoecker promised swift action.

Here in Olympia, the Washington Utilities and Transportation Commission postponed any decision on a request from seven large industrial customers for emergency rate relief.

"They want to wait to see what FERC does," said Marilyn Meehan, a spokeswoman for the utilities commission.

The companies, including Containers Northwest Corp. of Tumwater, allege that Puget Sound Energy has engaged in price gouging with electric rates that could drive the companies out of business.

If PSE residential customers faced the same type of rate hikes, it would boost a typical $60 monthly electric bill to $2,500, Melinda Davison, an attorney for the industrial companies, told the utility commissioners.

The seven large industrial customers buy power based on volatile wholesale power market costs under contracts they signed with PSE in 1996 and 1997.

PSE officials said they have not been profiteering from the pricey power. They said their earnings under rates set by the UTC are within 0.5 percent of what they are allowed.

However, Davison argued, PSE isn't even out in the market buying the expensive power. Still, the companies are being charged for it.

The industrial companies gambled on market-priced power and have no one but themselves, and the volatile market, to blame, suggested PSE attorney Stan Berman.

"The single most effective thing that can be done is West-wide price cap imposed by FERC," said Marilyn Shoalwater, utility commission chairwoman.

The commission did agree to conduct an emergency hearing on the industrial customers' case Dec. 29. It also recommended PSE and the complainants enter into mediation.

Meanwhile, Locke said he'll meet with officials from the aggrieved companies today to hear their concerns.

"I have no evidence of price gouging," the governor said Thursday.

However, he urged the independent utilities commission to find ways to help the industrial customers and their workers.

Apart from emergency relief, Locke said he will roll out a package of bills in the 2001 Legislature to ensure reliable, affordable power. They include:

-Tax incentive packages for energy conservation and new power plants.

-Protect low-income citizens from high power costs during winter months.

-Diversify power generation beyond hydropower and fossil fuels.

"We need to intensify our energy conservation efforts," he added.

Energy activists said Thursday that the region's decision years ago to pull back from aggressive investments in energy conservation has come back to haunt us.

"Renewed energy conservation is part of the solution," said Mark Glyde, spokesman for the for the Northwest Energy Coalition, which promotes renewable energy resources. "It would be a knee-jerk response to go out and build a bunch of natural gas-fired power plants."

The governor also may recommend changes in the state building code to achieve energy savings from new technologies in windows, lighting and air conditioning, said Dave Danner, the governor's energy advisor.

"New buildings could use 25 percent less energy than current standards require," said Olympia energy economist Jim Lazar. "It's time to update these standards so that buyers of new homes and tenants of commercial buildings get the huge financial benefits of energy savings."

Locke continued his call for state residents and business to conserve energy, noting that voluntary measures earlier this week, combined with cutbacks in service to some industries and schools, saved the region 800 megawatts of electricity.

That's almost enough power to meet the needs of a Seattle-sized city, he said.

"Through conservation measures alone, we could quickly cut energy consumption 10 percent," Congressman Brian Baird, D-Wash., said.

Locke likened the current electricity mess to the movie "Perfect Storm," where there was an improbable but very real convergence of events. They include:

-Low rainfall that has hampered operation of hydroelectric plants.

-Unseasonable temperatures in California that required some fossil-fuel plants to operate all summer. They hit their air pollution limits early and had to shut down.

In the winter, the Pacific Northwest derives up to 25 percent of its power from California. But California's idled power plants have forced the Pacific Northwest to sell power to the south instead.

-Chaos in California from flawed deregulation where some power plants may have shut down to intentionally drive up power prices.