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Twin Steps Needed for Northwest Energy by Gary Locke, Governor of Washington Special to Seattle Times, January 17, 2001

Arresting rising energy prices and minimizing the threat of electricity blackouts on the West Coast require a two-pronged attack:

• In the short-term, the Federal Energy Regulatory Commission (FERC) must extend the temporary cap on wholesale electricity prices. It should include the entire Western region, not just California.

• And, of course, we in the Northwest must change the way we use energy. I call on all of us to conserve at all hours of the day for the foreseeable future.

Washington is now embarking on a program to promote renewable energy and new generation facilities. We'll offer incentives in the form of tax breaks to ensure we have adequate supplies of affordable electricity.

Those short-term measures of extending the price cap and conscientious conserving are going to be particularly important this month and in February. If the weather turns unseasonably cold again, we could end up close to the brink. Our capacity to find new power will be limited if we experience such a cold snap or if California continues to demand power bailouts from Northwest producers.

What's causing this energy crisis? Most of it has been brought on by an unusual combination of deregulation of the power industry in California, cold temperatures in both California and Washington, power plant outages and a rapidly growing population with a thirst for energy.

The wholesale energy market right now is unregulated. Some states, particularly California, went even further and deregulated retail markets, which forced consumers to pay wildly fluctuating market prices. Fortunately for Washingtonians, four years ago I refused to support a proposal that would have deregulated the consumer market in this state.

Utilities must go to wholesale marketplaces that are very much like the New York Stock Exchange or Nasdaq to purchase electricity to meet demand. Utilities must bid for power at these exchanges much like you and I purchase common stock. The wholesale rates have been bouncing from five to 50 times last year's prices and, as many of you know, utilities are already passing on these costs to consumers in double-digit percentage increases.

These increases are due in part to tight supplies caused by a huge disparity between rapid population growth along the West Coast and slow energy development.

In this unregulated wholesale market, inadequate reserves can cause prices to skyrocket. And threaten power shortages.

FERC should - and can - restore some stability to this unregulated marketplace by expanding the temporary cap on wholesale electricity prices that California enjoys.

It is fundamentally unfair, and harmful to the Northwest economy, for FERC to require Washington utilities to provide precious power to California at below-market prices.

FERC must expand its price cap to other Western states soon. If it waits too long, debts will pile up for Washington utilities, customers and businesses. FERC waited too long in California and two of its utilities racked up billions of dollars in debt in just a few months. Caps can get all of us through the short term without bankruptcies. They can be removed as soon as prices subside.

Each of us can do his or her part by conserving energy and avoiding the use of dishwashers, dryers and other electricity hogs during peak hours, from 6:30 to 8:30 a.m. and from 4 to 8 p.m. But the idea is to conserve 24 hours a day.

In the longer term, we will review and streamline the siting process for new generation plants in a way that retains essential environmental and community safeguards while removing unnecessary delays.

Generation plants already sited should be built. Six facilities, capable of generating 2,786 megawatts, have already been approved. Three more, which could generate 3,060 megawatts, currently are going through the state siting process. Four more, with a generation capability of 1,592 megawatts, have been proposed or are under consideration.

We also need to find new ways to ensure we have cost-effective conservation, adequate renewable energy and sufficient generation in the future through direct investments and creative partnerships. The Northwest Power Planning Council has identified ways we can conserve more than 1,500 megawatts over the next 20 years.

We are going through a difficult time. If we act wisely and quickly, we can protect our great energy resources and assure we will have reliable and affordable power for the future.