By COOKSON BEECHER
Capital Press Staff Writer

August 8, 2002

PORTLAND - Hold on. Not so fast. Don’t rush into something that could trigger a repeat of the 2000-2001 energy crisis.

That’s the plea a coalition of power utilities and other organizations is sending out about the Federal Energy Regulatory Commission’s proposal to make sweeping changes to the way electricity markets operate.

For agriculture, FERC’s proposal to impose a one-size-fits-all rule for electricity transmission on the nation sends up warning flags of possible rate hikes and a repeat of the market manipulation brought about by California’s failed experiment with deregulation, say several energy officials.

Under its proposal released on July 31, FERC is calling for a “standard market design” that would create deregulated markets for transmission rights.

As part of that, the agency also wants an independent organization to take over control of a state’s electrical transmission grid connecting energy suppliers to local utilities. The agency says that would ensure the electricity needs of consumers throughout a region are met.

But many energy experts warn that these changes would make the Northwest and California even more vulnerable to the market abuses that have already cost ratepayers up and down the West Coast billions of dollars.

“A recipe for disaster,” is the way the newly formed Northwest Power Works describes FERC’s proposals.

Last month, the campaign, which includes more than 50 utilities in the Northwest, sent a letter to the region’s congressional delegation, urging the members to ask FERC to delay electricity restructuring at least until the multiple investigations of power-market manipulation have been completed.

“Until these investigations are completed and we thoroughly understand how the companies manipulated electricity markets and how such machinations can be prevented, it would be irresponsible and dangerous to proceed with the proposed restructuring of the Northwest electricity system,” says the letter, which was signed by more than two dozen leaders of public power utilities.

FERC, meanwhile, says its proposal has built-in safeguards designed to make sure those problems aren’t repeated.

Speaking specifically about agriculture, Stu Trefry, government relations specialist for Washington state’s Public Utility Districts Association, warns that FERC’s proposed changes would lead to higher power rates and instability.

“Agriculture thrives on stability,” he said. “FERC’s market-based system is not built for that. We want utilities to be able to set their own rates instead of being subject to the wild swings of a market-based system.”

Trefry warns that the comparatively low power rates that irrigators and food processors in the Northwest pay would definitely be in jeopardy.

“It’s a disaster based on unpredictability,” he said.

Dennis Conley, owner of Basic American Foods, a potato processing plant in Moses Lake, Wash., is equally concerned about the possibility of rates going up under FERC’s proposal.

“Any of us in food processing and agriculture would be against anything that does that,” he said. “Our businesses are very fragile. We’re already operating under conditions that put us at a competitive economic disadvantage.”

Pointing out that agriculture in the Northwest is hindered by being a long way from domestic markets in the Midwest and on the East Coast, Conley said that the low-cost, stable energy that the region has enjoyed historically is an advantage that helps offset that geographical disadvantage.

“It’s a fragile balance,” he said. “It doesn’t take much to tip the scales.”

Conley is satisfied with the region’s current contract-based system that’s geared to the public good.

“It seems to work,” he said. “I’m a big supporter of local control. I haven’t seen many federal oversight programs that lead to efficiency.”

During a press conference last week, 18 regulators from utility commissions in 15 states issued a statement expressing grave concerns about FERC’s proposed rules seeking to standardize electricity markets.

“In our opinion, FERC’s proposal is nothing more than a power grab by a small federal agency that cannot be as effective as the 50 states in ensuring reliability and protecting consumers,” said Loretta Lynch, California Public Utilities Commission president.

“FERC is subjecting our consumers and economy to a reckless experiment,” said Marilyn Showalter, chair of the Washington Utilities and Transportation Commission.

Showalter also pointed out that while FERC’s proposal might work in other parts of the country, it wouldn’t work in the Northwest, where much of the power is supplied by a river system, that is also managed for other uses such as fish protection and recreation.

Timeline

FERC will accept comments no later than 75 days after it issued its notice of proposed rulemaking on July 31, 2002. By Sept. 30, 2004, public utilities that own, operate or control interstate transmission facilities are to be operating under FERC’s standard market design.

FERC’s proposed rules can be viewed at the agency’s website: www.ferc.gov. Once on the agency’s home page, look on the side of the page for “featured topics” and click on “standard market design.” The site includes a 19-page news release about the proposal, the 600-page proposal, a fact sheet, questions and answers, and other information about the proposal.

Comments about the proposal can either be sent electronically through FERC’s website or by mail to: FERC, Office of the Secretary, 888 First St. NE, Washington, D.C. 20426.