Governor Gary Locke’s Remarks
Energy Press Conference
December 14, 2000

During the past week, we have seen some events in the Northwest that a few short years ago most Northwesterners would have thought impossible. First, we have seen energy shortages throughout the western US. Second, we have seen energy prices rise to levels that now have the potential to put our economy at risk.

There are two separate, though obviously related, issues: availability and affordability. The Northwest Power Pool's Emergency Response Team notified us last week that we faced an insufficient power supply and potential power disruptions - the lack of availability at any price.

This is due to a convergence of factors:

- Low rainfall for our hydro system;
- Power plants going off-line due to maintenance;
- Unseasonable temperatures in California this year that required some plants to operate all summer and hit their air pollution limits early;
- And chaos in California resulting from flawed deregulation where some power plants may have withheld generation to affect prices.

Some have likened this to "a perfect storm" - an improbable but nonetheless very real convergence of events.

Our efforts this week in calling for conservation and additional power generation were directed simply at keeping the lights on. I am pleased that Washingtonians responded to my call to conserve, and that we made it through the week without involuntary power disruptions. But we will need to be vigilant throughout the winter.

The second issue is affordability - the high cost of power. Energy prices are at unprecedented levels.

The Pacific Northwest has been hurt badly in recent months by unprecedented price increases in the wholesale power market. Several critical businesses have curtailed operations and laid off hundreds of workers, while others face permanent closure. Public agencies, schools and universities are faced with the possibility of curtailing programs to meet unexpected energy costs. And utility ratepayers are now facing surcharges as high as 100 percent of their monthly retail power bills.

This situation is untenable. Without action to bring wholesale power costs down to just and reasonable levels, the prosperity we have worked so hard to achieve during the past decade could be undermined in a matter of months.

Tomorrow I will be meeting with Georgia Pacific and other companies squeezed by high energy costs. Although these companies made voluntary business decisions to go off regulated tariffs onto a riskier wholesale market index, we need to do what we can to get wholesale power prices down, get our businesses back into production, and get workers back on the job.

As I said, it's not just these companies being affected - wholesale prices impact retail rates. Public agencies, schools and universities are faced with the possibility of curtailing programs to meet unexpected energy costs. And utility ratepayers are now facing surcharges - Tacoma and Snohomish PUD announced surcharges yesterday. I expect more in the weeks to come.

The wholesale power market is regulated by the federal government, not the state. Yesterday I asked President Clinton, Secretary Richardson and the Federal Energy Regulatory Commission to act immediately to cap wholesale power rates consistently throughout the western United States. I also requested that the Dept. of Energy and FERC take whatever action is available to require full and ongoing operation of all available power plants in the west throughout the winter.

I am relieved that we did not follow California over the cliff in deregulating the retail energy markets. But we are affected by what California has done and its impact on wholesale markets, and that is what the federal government must address.

I am pleased that the WUTC is today commencing proceedings to examine the issues regarding the special rate schedules for industrial customers that chose to move to market indexes. The UTC is an independent regulatory agency and my office has no authority to direct their regulatory actions. Nonetheless, I am hopeful the UTC can take a hard look at these issues and find a resolution that helps the industrial customers and their workers but that will not jeopardize Puget's other customers.

In the coming weeks, we will roll out a package of legislation to ensure that we have reliable, affordable power in the long term.

We must aggressively promote energy efficiency and conservation in the public sector both on peak and throughout the system.

We must increase power generation, and diversify our energy sources beyond hydropower and fossil fuels.

We must promote renewable energy and nurture our state's growing high-tech energy efficiency industries.

And we must protect low-income citizens from high power costs during winter months.

I will work with the outgoing and incoming administration to ensure that issues of energy availability and affordability are addressed so that we can maintain our strong economy and avoid hardship to our citizens.
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