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Energy Summit Could Shed Light on Issue, Fixes by David Steves The Register-Guard - December 16, 2000

SALEM - The U.S. secretary of energy may convene an emergency summit on the Western energy crisis, a spokesman said Friday, as the Federal Energy Regulatory Commission adopted what it called "remedies for the seriously flawed electric power markets in California."

Secretary of Energy Bill Richardson is "strongly considering" a summit and considers it feasible to convene such a gathering as soon as next week, spokesman Tom Welch said Friday. He declined to comment further.

Gov. John Kitzhaber had issued what he called an "urgent request" on Thursday to Richardson, calling for a summit next week that would deal with the California power shortages that are cutting into Northwest electricity supplies and driving up prices for this region's ratepayers.

Kitzhaber's energy policy adviser, Roy Hemmingway, said Friday that he was encouraged that Richardson's office was considering a summit. However, he said prospects for such a gathering remained up in the air.

"We're not able to say whether it's going to be or not be at this point," Hemmingway said. "We're hoping to be able to say something more definitive by this weekend."

Spokesman Jeff Weathersby said Washington Gov. Gary Locke was interested in participating, as well.

In his letter to Richardson, Kitzhaber said the summit should "lay the groundwork for a much needed integrated strategy to resolve this crisis in both the short and the long term." The governor wrote that the summit should consider not only problems with California's power market, but also the impact on demands throughout the region at the industrial and residential levels.

Kitzhaber offered no specific solutions, although he was critical of the effects of California's energy deregulation on the crisis. Among them: reduced use of less profitable power plants, and an inability for utilities to buy power because the threat of bankruptcies has prompted potential sellers to seek assurances they'll be paid.

Hemmingway said that among the concepts Kitzhaber would want the summit to pursue were:

Conservation and increased energy efficiency throughout the region. Saying it was time to "dust off some of those old conservation plans" as well as pursue increased efficiencies, Hemmingway said it was important that all the Western states join in such efforts.

Incentives for businesses that curtail demand. Hemmingway cited such a program offered by Portland General Electric in which businesses are offered deep market-rate discounts if they follow such practices.

Long-term supply. The number of power plants proposed in the West's power grid are too few to keep up with demand driven by industrial and residential growth. Besides combustion turbines, renewable energy production also should be given greater consideration.

Steve Loveland, general manager of Springfield Utility Board, said he would welcome a summit, which he said should first and foremost address the problems of deregulation.

"There's got to be some sanity brought back into this power market situation," he said.

The problems with the market aren't limited to California, said Loveland, who cited the recent practice of Northwest aluminum producers that are getting energy at below-market rates from the Bonneville Power Administration and, instead of using it for their operations, selling it in this high-price, high-demand environment at 10 or 20 times what they've been paying. Loveland said the BPA should exercise its legal authority to halt such contracts.

He said the Springfield Utility Board's 28,000 electricity customers aren't facing the shortages or rate spikes that Californians have endured, but he worried that Northwest utilities, including his own, may eventually be forced to increase rates if California continues to tap into dwindling electricity supplies in this region.

One development meant to help ease the crisis was Friday's order of an overhaul of California's electricity market by the Federal Energy Regulatory Commission. The move was meant to control skyrocketing prices and curtail supply shortages that have pushed the nation's most populous state to the brink of blackouts.

The commission's order will set a soft price cap on wholesale rates and let the state's investor-owned utilities keep the power they generate rather than sell it on the open market, as required under California's 1996 utility deregulation law.

Hemmingway said he and others on Kitzhaber's staff hadn't had a chance to fully analyze the federal action but considered it "definitely a step in the right direction to dealing with some of the structural issues in the California market.

"It remains to be seen whether this will have any effect on the prices that utilities outside of California are paying for power, including here in Oregon," he said.

Washington's governor was far less hopeful. Locke said in a prepared statement that the federal regulatory action "ignores altogether that consumers and businesses in the Pacific Northwest are also being harmed. I am disappointed that FERC failed to act."

Locke said the inadequacy of the FERC decision will make Kitzhaber's proposed summit more critical in providing solutions.