Ann de Rouffignac
OGJ Online
PORTLAND, Ore., Feb. 2�Governors from 10 western states stopped short of endorsing regional price caps at an energy summit Friday, even though governors from the Northwest and California argued for such a measure.
The governors were sharply divided over a temporary regional cap on wholesale electricity prices during conference sponsored by the Western Governors� Association.
Many did agree the entire region is experiencing an energy �crisis," if not now, then by summer.
�We are all vulnerable to this. It�s not isolated to California. The crisis is not over for California or the West. It may be just the beginning,� Idaho Gov. Dirk Kempthorne, a Republican, predicted. These states have been hard hit by very high wholesale electricity prices and are experiencing an industry slowdown and layoffs due to the energy crisis.
Democratic Gov. Gary Locke of Washington was most adamant about the need to impose a short-term regionwide price cap.
�We need immediate relief and immediate solution to the price excesses,� he said. �We export $1.5 billion/month out of our region and we have thousands unemployed.� Energy costs in Washington are up 40-100%. Utility rates have been increased by 50-70%, he said.
�This needs federal intervention and help," Locke said. "Energy deregulation started with the federal government. I call on FERC [Federal Energy Regulatory Commission] for a price cap or cost-plus pricing on a temporary basis,� Locke said.
While they disagreed over short-term approaches, the governors agreed needed long-term solutions include more energy supply, more transmission, better coordination, energy efficiency, streamlined regulatory processes, and demand side management programs with teeth.
Abraham concerned about caps
Speaking for the Bush Administration, US Energy Sec. Spencer Abraham said he had �grave concerns� about the FERC instituting price caps. With proper price signals, short-term problems will work themselves out, he suggested.
He said the administration is taking an active role in solving the western energy crisis, which could develop into a national crisis without some kind of policy in place. �Our national security and economic security depend on energy security,� Abraham said. �Our goal is to develop a plan to insure this security.�
Democratic Gov. John Kitzhaber of Oregon agreed a comprehensive energy policy is a laudable goal�if the region could just get past the short-term supply shortages and high prices wreaking havoc on industry and consumers. �Energy deregulation has created market prices that are untenable causing incomprehensible rate increases,� said Kitzhaber. �There is a transfer of wealth from consumers to energy marketers.�
Citing a very tight energy supply situation for the winter, last month Locke and Kitzhaber called on their states' residents to conserve to avoid more problems later.
Kitzhaber asked FERC to grant temporary cost-plus pricing across the entire region. California Gov. Gray Davis, a Democrat, also supported a cost-plus pricing plan for generators. He acknowledged California's problems with supply and high prices are being exported to his neighbors and called for regional caps.
Arizona, on the other hand, is content with the existing price structure and would object if the �rules of the game� were changed now, said Republican Gov. Jane Hull.
�We are 2 years behind California on deregulation,� Hull said. �If the rules are changed, I would be concerned.�
Arizona has 9,200 Mw of new power plants already sited in the state. Most of new power is destined for export to California under the current price structure.
Without a consensus, the association did not endorse price caps. �At this point, there is not agreement on price caps. It would have to be unanimous,� said Idaho's Kempthorne.
