Governors gather to discuss energy

Pressure will be on California's Gray Davis to raise rates on his state's customers

Thursday, February 1, 2001

By MIKE LEWIS SEATTLE POST-INTELLIGENCER REPORTER

When 10 governors from the Western United States meet today in Portland to map out a strategy to cope with soaring energy costs, they will have one group of electricity ratepayers in the forefront of their thinking: California's. Few will be thinking warm thoughts.

While California Gov. Gray Davis has resisted a permanent rate increase on his state's utility customers, many other governors and power officials gathering today for the Western Governors' Association meeting resent the fact that as other states must raise rates, in part to respond to California's deregulated market, California electricity ratepayers have seen only a temporary upward shift in costs.

Many want assurances from Davis that this will change.

"Gray informed us that there was no political will on the part of Democrats or Republicans to raise rates in California," said Gov. Gary Locke, who met with Davis two weeks ago to discuss the crisis. "I don't see how they can avoid it. Without raising rates, their utilities are going bankrupt."

Planned for two days in downtown Portland, the governors' conference will focus on ways to stabilize the power market that has sent wholesale electricity costs hundreds of times higher than at the same time last year. Natural gas shortages, insufficient water flows for hydroelectric power, alleged profiteering by private power companies and an unevenly regulated, or deregulated, power market have been blamed. The meeting will focus on how states can curb their own electricity thirsts, develop more supplies and stabilize a wildly erratic market.

High on the governors' wish list: A return to federal caps on the maximum price of wholesale electricity. While it is within the federal government's power to replace the caps that have been removed, President Bush has said he doesn't support that sort of control on the market.

Locke said the meeting isn't designed to point fingers at California, which has received the bulk of the blame for deregulating its wholesale -- but not retail -- power markets and badly upending the interconnected energy market in the West.

"I'm not getting into California-bashing," Locke said. "Governor Davis inherited this problem, and he is trying to fix it."

Davis is expected to back a plan in California to use $400 million in state money and $10 billion in future bonding capacity to buy long-term power contracts. The legislation might include a rate increase in California.

Taken together, power officials in the Pacific Northwest said, the effect could help ratepayers throughout the West.

Ed Mosey, a spokesman with the Bonneville Power Administration, said California's capacity to enter into long-term contracts is key.

"Everyone right now is looking into a long-term deal," he said.

The BPA is the one of the nation's largest producers of electricity, with 29 dams and one nuclear power plant. It produces roughly half of the electricity used in the Pacific Northwest, and virtually every ratepayer in the region receives a portion of its power from BPA.

The BPA sells power at cost to the Pacific Northwest -- a federal standard called a regional preference -- and at a far higher market rate to other Western states. For that reason, Mosey said, public officials these other states have tried to remove the federal standard and get power at cost as well. Already there has been talk of pushing for that again this year, he said.

Locke said he plans to make it clear at the meeting that the status quo must be preserved.

"People in the Northwest are going to protect what we have."

http://seattlep-i.nwsource.com/local/gov011.shtml

-- Martin Thompson (mthom1927@aol.com), February 01, 2001