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Transcript: Government policy, legislation, and regulation Energy has become so necessary to modern ways of life that governments have become bigger and players in energy decisions. Policy makers research the technologies and their effects; legislators create laws that (usually) favor some policy options over others; and regulators have the responsibility for turning broad policy statements -- "residential housing should become more efficient" -- into specific guidelines and rules -- "windows for residential construction should have a minimum U-factor of . . . " These are selections from the whole transcript. Some comments will also occur on other themed pages because they cover more than one topic. Jude Noland: People should care because without electricity just about anything that they do would be impossible. We have developed a society that is very, very much based on technology and on using electricity. The problem is that you don't buy electricity per se. I mean it's something, it's a means to an end and so you don't, most people don't think about it at all. They think about what they get out of electricity. So this is a good time to try and take a step and think about what's behind what you're doing which is the electricity that makes all of that possible. The other reason people should think about it now is because we are at a point where as you mentioned before that we're at a point where the extra supply that we've sort of had in the region is diminishing and we're going to have to make some choices about where we get our electricity in the future and we've seen what's happened since the energy crisis of 2000, 2001 that hit California and had a dramatic impact on the northwest. And we have to decide where we want to go from here because we saw prices go up dramatically after that crisis and we really didn't get a lot for those price increases. We didn't get a lot of new resources. So we're going to have to be really careful about what choices we make in terms of what provides power in the future and decide what we do want to risk and what are we willing to pay and what are we willing to put up with basically to continue to use electricity. Jim McClure: And, and there's an investor-owned component to the transmission system too, that is , they're not making investments in that system now for regulatory uncertainty more than any other reason. Jim McClure: Well, but that's the regulatory environment and of course they work today because they're not at all certain that if they make the investment they'll get any return because they may be forced by, by some people to turn over those lines to access for other people with what they are fearful of not being an adequate return on their investment. So there, there's a, there's a regulatory aspect to the transmission system dilemma that we face today. But there are other costs that worry me too about today and Jude you mentioned what are people willing to pay and that's not just in economic terms its in environmental terms as well. The people have to make choices and that's why I think this discussion needs to be a public discussion we involving a lot of the public because they're going to have to make choices. I, I like the idea of, of the green power component to, to your utility bill on a voluntary basis that allows consumers to make choices say I'm willing to, to pay a little bit more because I believe that, that's important. Other consumers may choose something else, but certainly those are tradeoffs in the pricing of electricity which is a very major importance to a lot of people on limited incomes. Jim McClure: Let me inject one other little note in, in this question of whether we have enough energy and whether it's important for us to have enough energy. Back at the time we were having energy shortages in this county and they were having severe consequences I remember when President Carter declared war on energy and then he surrendered in the same statement, but it's the first time I ever heard a president declare war and surrender at the same time because he said we can't do it, we can't get enough energy. Well that I rejected that view then and I reject it now I think we have to measure the tradeoffs and make some hard decisions and the public ought to be informed about what the tradeoffs are and what the costs are so they can make informed decisions. But I remember very distinctly I'll paraphrase this because I can't remember it, can't quote it accurately, but the statement came from the NAACP they said we have learned by bitter experience that we can't get more for our people by taking it away from someone else. We're going to have to get more if we're going to share in the fruits of this great country of ours. We'll have to get more, but we'll have to get it out of more not by taking it away from someone else. And therefore we must have an energy policy that gives us adequate supply so even the most depressed of people. The people at the lower ends of our economic stock and social strata can share in the dream of this country. Now I thought that was a profound statement at the time that it was made and I think its adequate as a part of our discussion of why it is that energy policy must provide a, a sufficient supply for all our people. Peter Johnson: I'm going to jump in here. We made great leaps you know into the demand side and management . . . onset of energy needs. Back in the '80s after Senator McClure gave us that wonderful Northwest Power Act we made a lot of progress and but going back to the beginning Jude I think that one of the things a I've been thinking about this thing recently is that we have to somehow push the, the need to be concerned about energy down to the consumer, down to the meter, down to the people who are using it for these many, many things that you mentioned are so important. And it won't be just the directors and the administrators and the president of the United States that are worried about energy and how to use it and use it efficiency it will be virtually everybody who consumes it. And I don't think we've done as good, we've been sort of pushing it down from the top. We tried to do that a little bit, went to Hood River and completely electrified the whole place or at least we you know weatherized all of the homes and the people got with it once they were into it and we have to find a way to do that too. I think we're too back, too far back with all of the different options and failing to realize that one of our best allies are the people who are consuming the electricity because demand side you know approaches to solving our energy problems and we've been spoiled because the price has been so low for years and years and years. In the early part of the 20th century every 20 years I think rates went down about 20%, now they're going to go back up again and I think even though the Energy Information Administration says they're going to be level or go down between now and 2007 I'm rather inclined to believe they're going to go up and go up a lot because of a lot of the things that are troubling our industry at the present time. We're going to have a lot of generation, base generation and that's going to be expensive. But the people have to be just as involved right down at the point of consumption. Jude Noland: And that's a very, very difficult thing to pull off. Corbin McNeill: It's very difficult. Jude Noland: And we've tried probably not as hard as we could have, but, but really wWhen you think about a society and life that's so complex -- when you get home from work in the evening do you really want to have to sit and think, Well, let's see -- if I run my dishwasher now before dinner because I'm out of dishes it's going to cost me five cents a kilowatt hour, but if I could just hold off and set it to go on automatically at 10:00 it'll only be two? Most people really don't want to get into that kind of detail in how they use their appliances or how their house works. That's why I think things like efficient building standards in fact Oregon just upgraded, is upgrading its commercial standards I understand. Michael Grainey: Correct, commercial and residential. Jude Noland: It makes so much sense because if you, if you build it in ahead of time if you put it in to the infrastructure it's much cheaper to do it that way then to go back and try and retrofit it and so it's just cheaper. It is using less electricity up front; people don't have to think about it. It's not such a big deal if you you know leave the, your kids open the refrigeration and runs across the kitchen for a few seconds if you're using one of those super efficient refrigerators which market transformation policies have brought to market here in the northwest. It's not as big of deal if you leave the door open for a second if the house is really energy efficient and when the door closes it closes really airtight. Corbin McNeill: But, but those transitions take a long, long time that's a 20 year, how often do people normally replace their refrigerator or their washing machine? That's a 15-year and to do it in shorter periods in time goes back to the issue that the Senator McClure had is that you have to subsidize people to go do that and while that may make sense on a very broad scale policy issue it is difficult to get public acceptance of that in large measure. Jude Noland: I don't know if we really try to get try to get public acceptance of that on a large scale. Michael Grainey: Well, I, I'd like to address that because in Oregon we've seen a lot of public acceptance and a lot of individual decisions by individual businesses, consumers, homeowners, individual schools, . . . conservation and renewable resources. They've had over 5,000 business invest over $100 million dollars in each of the last two years on energy efficiency measures. That helped them weather the enormous price fights [hikes] we had in the power market and stay in business and keep people employed, keep their jobs. We've had over 100,000 energy efficient appliances replaced in Oregon through our State Tax Credit program. We did upgrade our building code, but in both residential and the commercial code with the upgrades we've made over the last 20 years series of time the residential code is helping consumers save $100 million dollars a year in energy costs and our businesses through the commercial codes $75 million a year. And in total Oregon consumers are saving over $400 million dollars in energy bills. Energy bills that otherwise go out of the state and in some cases go out of the country. We have no coal in Oregon, we have no petroleum, we have a little bit of natural gas, we have no uranium, well we do have a little bit of uranium and we're still cleaning it up from the mining experience 50 years ago. So all of these sources of energy that play a role will continue to play a role, we think it's very important in Oregon that they be used wisely and efficiently and it doesn't mean doing without, but it means doing better with what we have. Even with the new energy code that we built we have new schools being built now with the design being built in right to new sustainability standards they use less than half the energy that buildings built to the new energy code can do, there's an awful lot that can be done through energy conservation, energy efficiency. Peter Johnson: I would say that I think the emphasis is on demand side management, efficiency and conservation more today than it's ever been before. And the simple reason is that this exercise in, experiment in deregulation has not worked. It is dismembered; it is, we're, we're in a crisis; most utilities can't even finance their base resources, not at this time anyway. Heaven knows how we're going to get through that as we try to get our feet back on the ground after this experiment in deregulation. But so all the more reason why right now, today? And for the next 10, 20 years demand side management, in other words efficiency and conservation, are going to be at the forefront of how we best deal with this problem that we've created. Corbin McNeill: To some extent it is, but it's both a supply and demand supportive bill; there's energy, or let's say it is more probably more production than it is a conservation bill, but there is conservation elements to it and there are renewable energy investments in that bill. But again I think while Peter is right I you know there the Pew Trust in Philadelphia has recently come out with a program that says that many of these programs that environmentalists would like to portray as coming to the fore in the next 20 years don't have as much of a chance of coming to fruition as the environmentalists would have liked to have portrayed them to do. And I would offer that we have had while we have not had, we've had attempts at demand side management, but they have not been overly successful and in part it goes back to what Jude has basically said is individuals find it difficult to try and manage their choices on fractional tenths of a cents differences in energy that they don't see. This is a macro policy problem its one that Ralph is very familiar with because it, this is the sum of millions of people doing business with incremental savings to them and individuals don't get overly concerned about the incremental savings. So you have to have broad policy issues of, of conservation you know better building standards and things of that nature, but to spite all of that and there's been a lot of it and, and in one of the pieces that we saw earlier it talked about cutting consumption from 3% growth to 1 to 1 1/2 % growth. A lot of that did come through some of the conservation measures that we have taken over the years. Ralph Cavanagh: But Corbin you wouldn't suggest for a second that we've tried as hard as we could. Look at the utility industry across the country where there are just enormous disparities there are some superstars, but there are a whole lot of people who aren't even trying. And look at the record just if you think sure its hard if the question is how to get people to react to hourly changes and prices nobody's suggesting that's been a roaring success, but if you're talking about base load energy efficiency and centers and standards to do better that same Pew Charitable Trusts you just invoked has written the book on the national success story in energy efficiency. It really has been the fastest, cheapest and cleanest way to take the pressure off both the power and the gas grid and that's what we're talking about here the big base-load programs. Let's get them revived. Let's get the whole utility industry engaged because you know its not now. Corbin McNeill: But you need to find the incentivized way to do that. It's not in the utilities' interests to reduce its sales. Jude Noland: And that's one of the big problems, that's one of the big reasons that energy efficiency and conservation has, has not it I think going back to what you said Peter I think after the Northwest Power Act passed in the 1980 the '80s was a time of incredible growth in conservation activities a lot of utilities in the northwest were very creative in terms of things that they came up with, programs that they could do. With the start of the move towards deregulation and the Energy Policy Act of the early '90s utilities kind of stopped because they're saying well we don't know if we're going to have to do this. We don't know if we're going to get reimbursed for it. And so a lot of that activity as well as transmission, infrastructure upgrades and new generation all of that was put on hold because no one knew what was going to happen as the industry started down this path towards restructuring. So I think now is the time when we're coming back and conservation is seeing a much bigger emphasis you're seeing utilities get back into least cost planning where they take a look at what all these different resources are going to cost them to provide to their customers. And the other thing I wanted to point out is with the new technologies in terms of meter reading and other things you could take that away, the individual customer doesn't have to think about whether its costing him 5 a kilowatt hour at this point or 2 later you can do direct control of water heaters where people don't even know that the utility has turned the water heater down during a certain period. It can all be done automatically and not affect the lifestyle or the activities of the person in the household. Jim McClure: But you've touched on something that I have to return to for a moment. There has to be an incentive whether it's a base load or a transmission system or an individual consumer there has to be an incentive of some kind. It doesn't have to be economic, but the ones that seem to work best seem to be economic. So there has to be a reason why people do these things in order to affect their own bottom-line whether it's a homeowner or a business or a base load provider or the transmission system. And we ought to be spending more time trying to find the ways in which we structure the, the systems that we all use in order to make sure that the people who have to make investments or pay bills have an incentive to do it in the way that's most constructive for our society. Kathryn McCarthy: Well, the current generating, the current nuclear reactors are run extreme safely and what we're doing is looking at ways to, to improve that and it's a, it's a, an industry that has continuously worked to improve itself. And one of the things that we're trying to do is with this new generation of reactors we have goals to make them, to make the safety case more simple that makes the whole regulatory process easier, quicker and it results in better economics. Corbin McNeill: The American public doesn't have to be there, alright? The policy decision makers have to be there, this is an issue in which as many other issues whether its conservation or, or other things not all the American public is, is in with conservation, but the reality is, is that we have people that claim that coal fired generation is killing people because of asthma, that natural gas has explosive characteristics to it that blows up apartment houses in New Jersey the reality is that nuclear energy has in fact killed no person in the United States, the, the Three Mile Island accident a person that had the most exposure in the civilian populous had the same exposure that they would've gotten if they moved from Pennsylvania to Denver, Colorado, that's the reality of the situation and we have to make sure that people are informed, but in fact we don't build things are reject things because of some specific individual being ill-informed about things and that's why you have a regulatory process. Jim McClure: Well, you that's, that's the reason I made the comment I did a moment ago the, I'm not one of these guys who believe that science and scientists can solve every problem in society, but our scientists can solve some problems, they can do better in many areas than we do today. The fact of the matter is nuclear radioactive waste is not a technological problem; it's a political problem, and if the public understood what that problem is and how it could be managed with existing technology they would be much less inclined to say hey wait a minute it's too dangerous let's don't do it. You're right, nobody's built a plant a nuclear power plant recently, but there are regulatory reasons why. Kathryn McCarthy: Nobody in the U.S. Jim McClure: Nobody in the U.S. Who, who in the U.S. would undertake to build a nuclear plant today with the political and regulatory climate that we have? Michael Grainey: I think it's a financial climate. Jim McClure: Well it's a financial climate that was driven by regulatory policy. Jim McClure: Well I'm very skeptical that you can uh, you can see much done in the an emerging nuclear technology field until the public is brought along. Jim McClure: I've been involved in politics all of my adult life. Don't ask policy makers to do what the public won't tolerate. Ralph Cavanagh: But the fact that you need a portfolio doesn't mean you need everything, and this is the challenge -- you can't afford everything. When Congress passes an energy bill -- I don't fault this Congress; every Congress for a quarter century's done this. Congress never saw an energy source it didn't like. Congress's solution to a comprehensive energy plan is give something to everything. Senator, you know this to be true. Ralph Cavanagh: The great exception was the Northwest Power Act where Congress actually set up a system for letting the winners and losers emerge on their merits, but that's rare. And I'm just saying we don't have unlimited money in this society; we actually do have to pick the best buys, and the question for nuclear's going to be at the end of the day: can it do all the things Corbin describes better than alternatives? And there are alternatives and we'll see. Jim McClure: There's one other thing that I have to respond to when you say Congress didn't ever see anything they didn't like. Ralph Cavanagh: Right. I can't think of anything. Jim McClure: Well, there's another side to that, and that is as far as I was concerned I was quite willing that we put money into research and development of a lot of different kinds of technologies because we didn't know which one would have the best pay-off. The very point you're trying to make is what I in the Congress and many other Congressmen tried to, to implement. Wind wouldn't be where it is today if we hadn't been supporting investment in wind technology. Corbin McNeill: Gas turbines wouldn't be where they are today if we hadn't put money into gas turbines. Jim McClure: But and, and the there has been a very substantial question as to whether we put too much money into nuclear research. Jim McClure: And I think that's a legitimate question that needs to be discussed and decided or at least acted upon I don't suppose it'll ever decided. But one of the reasons why that was done is there's, there are other policy reasons to be concerned about as a conservationist, as a person interested in, in the utilization, efficient utilization of our natural resources. It's offensive to me to believe that we take natural uranium, we mine it, produce yellow cake, put it through a process and build fuel rods and then at the end of the life of the fuel rods we throw it all away and we've utilized 7% of the potential energy in that uranium ore and thrown 93% away. Now, is that waste of a resource good public policy? I think not. Ralph Cavanagh: But let's remember why we do it and this, an MIT study in the last three months reminded us. The reason we do that is we are concerned about the global risks of weapons . . . Jim McClure: Well and that's a false one because there are things we can do in our technology to consume those products which are of proliferation risk. When we abandoned reprocessing as a, as a policy and we did that in the early 1980s in this country we, we locked the door against creating the means by which we took care of those radioactive wastes in a more economic and environmentally efficient way. And there, there's a place where public policy closed its door on investment in technology where we should've opened the door, left it open. Not to say we shouldn't put more money into, into biomass, into geothermal, into wind energy. Wind energy is today a marginal winner; it's not the sole source nor the sole answer, but it would never have gotten there without the investment of federal research dollars. Ralph Cavanagh: And I think the question then goes when you, when do you decide? At some point you've got to pick the winners and losers and all I'm saying is it's not clear that the Congress is very good at that. For, for every for every good investment there's a magnetohydrodynamics, there's a synfuels project -- I mean there are a host, you know this. And you were one of the people who insisted to your great credit that at some point the pork barrel had to come to an end. Ralph Cavanagh: I agree with that. And for research and development you should look wide and you should take risks. But then at some point when you're in a deployment and commercialization. I don't support, Oregon's biggest investment I think has not been through the tax system it's been through the utility bill and the fundamental point there is I think the Oregon judgment and I agree with it is you want for the very diversification reasons we've been describing you'd like to have part of your portfolio out of fossil fuels and that's a judgment that a number of other states are in the process of making too. Michael Grainey: You know utility programs have been a big part and as part of the issue was raised earlier about how utilities can finance conservation and be against their own interests, one of the ways we dealt with that was with the public purpose charge that was imposed on all utility customers regardless of who your utility is it's a 3% charge on your utility bill that funds energy conservation and renewable resources. And that replaces it's about the level of the utility programs that they were in the past and that's about $50 million a year. So that's an important part although its just one piece of the effort for energy conservation and renewable resources in Oregon. Peter Johnson: When nuclear was first approved the Congress was behind it solidly, reprocessing of the fuel rods and one thing another, there were a number of other technologies that were taking a great deal of money. But I think what we have to look at today is the fact that we've run out of money. Our federal government's run out of money. I think our utilities have run out of money; they can't even finance, for heavens sake, what they need today. There's going to have to be a selection made of the premier options and again I believe that demand-side management, conservation, efficiency has to be right up at the front because I think there is, that's one of the best ways we have. The title of our program, the Price of Power, if we want to keep the price down I think it will do a better job of it by putting a great emphasis right now. We can buy some time until the money catches up with those three or four technologies that should lead us into the future, but I think that, that one of the reasons we haven't gotten very far with several of 'em is simply because we were trying to do too many and we don't have the money to do that anymore. Ralph Cavanagh: Well, see I think this is, this is precisely the wrong way to look at it because then you have quotas for everybody, like in the relative level of enthusiasm and political clout and I still think we are best off if we have an honest process that has all of us theologians in there. I'm going to push for all efficiency and Corbin is going to be in there with every nuclear plant he can muster. But Peter is right there isn't, the fundamental problem is one of economic scarcity, and my biggest concern right now is the, the institutions that are most important in making these decision are our utilities. We haven't talked enough about them. Because they have one fundamental problem if you want to take Peter's advice that efficiency and demand side solutions are the best it is a problem as Corbin mentioned that most utilities profits are tied to increasing sales. The good news is we know how to fix that. Like you know Oregon pioneered rate reforms that break the link between utilities profits and the amount of electricity and natural gas they sell. The problem is those reforms have not been executed across the west and in fact virtually every utility in the west now has its profits tied directly to increases in the use of gas and electricity and that throttles investment inefficiency in demand side. The most important message for me to leave with folks is we know how to fix that problem, it is not inherent in the utility business. There are utilities that have solved that problem and become international leaders in energy efficiency and an overriding priority for the west right now ought to be solving that problem so the financial interests of the utility system are aligned with the interests of their customers in greater efficiency. Corbin McNeill: The I'm going to disagree with Peter here and because its related to Ralph's thing. Its not clear to me that deregulation has been a failure all right. Now I come from the east where there are a number of successful implementations of deregulation. It has I will say that it has removed, it has shifted the economics of the system from individual decision making rather than top down planning. The utility industry was prior to this and in many cases still remains one of implementers of public policy. Now you can debate whether that's right or wrong and there will be some people that will debate that it is not, it is wrong because it shifts issues from a economic determination to a political determination and that's shown through the subsidization, the taxes and things of that nature that go on and thee are many people in this country that are not for that kind of implementation. If Peter, or excuse me Ralph. Corbin McNeill: If Ralphs premise were fully implemented -- that we had winners and losers based upon economic determination without subsidization -- I, I have no difficulty with that at all. But I have not seen that in implementation to date. That doesn't mean its not feasible to do it, but I just don't think that it has, it has succeeded to date. And there are, I mean there are fundamental underlying beliefs in this country that object to that kind of way of doing things and right or wrong and I happen to believe that we are relatively well-centered so that we swing back and forth in small increments rather than going back and forth in, in very destructive kinds of changes in what we go on. So I, I think the tension is right just that I fall on one side of the line and I think Ralph falls on the other side of the line. Jim McClure: Here I am sitting on Peter's right, but I'm going to disagree with him a little bit on what we can afford to do. And I'll put it a little bit on the other side of things. What, how can we afford not to meet this challenge? I participated several years ago in an energy forum in Atlanta sponsored by former President Carter. And we it was after the Kuwait, Desert Storm original battle in Kuwait when we threw Sadam out of Kuwait. And we went around the room at the end of that discussion and then the when Jimmy Carter said now how many people in this room believe that the war was all about oil and everybody in the room except myself said yes it was all about oil. Well without quarreling with that for a moment how much did we spend if indeed that was all about oil. How much did we spend on the military adventure, how much do we spend on a military posture, how much do we spend on the indirect costs to our economy because we didn't have an energy policy that avoided that impact from that section of the world. So I don't think we can afford to look at, at it from the standpoint of just it costs X number of dollars and we're operating in the red today because we're operating in the red today for two reasons. One is economic downturn and the others military expenditures. Both of which are driven by energy policy. Corbin McNeill: And if you looked at one of the results of natural gas expansion there are 13 liquid natural gas facilities under plans for licensing in North America today. They each of those implies, importing more natural gas to this country and making us, and displacing our current dependence on oil with dependence on natural gas and part of that is because we don't have the, we have opposition toward utilizing existing resources in the country valid or invalid, but just saying we have debates on that issue in the United States. There's a book coming out later this year that really looks a paradoxes that we deal with as a nation. You know with the fact that we want cleaner and cleaner water and cleaner and cleaner air, but at the same time we have tremendous increases in life span. The fact that we had objection to building the pipeline in Alaska because we were going to decimate the caribou herds, and the caribou herds have grown by something like 200% in the time that, that's been there. This issue of what happens when you have a nuclear accident is another one that has you know a great deal. And we really struggle as a nation to some extent with these things, it's not unnatural, but in fact its probably good for us to debate those kinds of issues as we go forward, but there is a lot of paradoxical outcomes that come from, from these debates. Jim McClure: Well, one of the choices we cannot make is one that was urged on us 25 years ago and that is policy of forced insufficiency of energy supply. In order to force social changes that would accommodate to that and I don't think we can afford that choice, that's a bad energy choice in my view. Michael Grainey: No, I agree with that. I think two things are a mistake. One is wasting energy, because then that puts pressure on making bad energy choices and secondly the replacing one form of imported dependence for another makes no sense either and I know the chairman of the Federal Reserve has called just for that and I think he, he's dead wrong on that. And we have had a history of federal support and subsidies of energy fossil fuels have received 100 years of federal support, nuclear 50 years. I think we need to make the choices for transition to cleaner resources that don't have as much environmental impacts or as much risk. And as part of that though during that transition I think energy efficiency is a fundamental element of a sound energy policy. Jim McClure: You asked a moment ago about what mistakes can we make in this field and what, what shouldn't we do. And we touched on this a little earlier, but I want to return to it because I think its fundamentally important. If you expect find answers don't expect the utility industry by itself to find all the answers. On the other hand don't expect the government by itself to find all the answers either. I think its going to take a partnership between all of the parties that are involved each one doing their part of it. Don't expect utilities to do what they will not do. Don't expect the government to do what it cannot do. Jim McClure: Well, there was one way to get more capital available and that is to have a regulatory climate in which there is predictability so that people who want to make the investment can make the investment with the assuredy that they will get a return on their investment. Ralph Cavanagh: This is it seems to me fundamentally is I happen to agree with Senator McClure on this point you have got to have a utility sector that can invest based on reasonable assurance about who its customers are and where the money will come from. A fundamental premise of Northeast style electric restriction Corbin as you well know is that all of that certainty is stripped away. The utility is denied its ability to serve as an investor on behalf of its customers and you basically rely on the spot market and entrepreneurs coming into the spot market and that I would submit hasn't worked very well. That is sure, in the short-term you can get some price reductions as the existing assets are shuffled around, but if you want long-term investment in the kind of infrastructure we're all talking about, demand or supply side there has to be a portfolio manager, a utility with the capacity to look along the arm, weigh the options against each other and pick the best buys. Without that we have chaos and we sure got that in the West in 2000 and 2001. Corbin McNeill: But that's a transitional issue. Until we learn the mistakes and they are expensive mistakes, but you have to go back, we didn't go into deregulation because the existing system was working. We went to deregulation because many people thought it was broken and that's what drove deregulation. It didn't, deregulation didn't occur in the Northwest because they didn't have a broken system. Jude Noland: It did, it didn't occur, but we were the victims of deregulation and so I think . . . Corbin McNeill: I've got to disagree with you on that. Jude Noland: So from that perspective I think to, to get policy makers and, and utility customers in the Northwest and California to look favorably on deregulation is going to be a real challenge because we saw our rates go up by 50% when we had done nothing literally. Corbin McNeill: I'll go back and reiterate: we didn't go into deregulation because the existing system worked. We went there for those areas of the country that went to it, they went there because they considered the previous system broken. Jim McClure: I would submit that it was the wrong answer for whatever problem existed. There were some problems. Deregulations not the total reason for California market cratering the way it did; it was a regulatory climate that preceded that, that prohibited investment. Jude Noland: But part of the, part of the issue was there were a lot of people who believed that they could make a lot of money if the utility industry were deregulated and, and a lot of people did make a lot of money and then of course that money went away for a lot of those people, such as Enron, but, but regardless that was a big part of the incentive was if we open this market up to deregulation and prices are based on the market that's great because then you know if, if power's in short supply its going to be more expensive and so we can build new plants and make a lot of money building. . . plants. Corbin McNeill: I will tell you that the consumer in Great Britain under similar circumstances has incurred a windfall in lower prices in their market. Jude Noland: I'm not sure if that's necessarily totally true. Corbin McNeill: Well, at least in the last four years they have. Jim McClure: There's an answer for that too if you want to do it long term. But I, I at one time I suggested to some friends in California that we chip in some water, a barrel of water for a barrel of oil we'd have two pipelines one brings water down there and one brought oil up here because we're short of oil in the Northwest and we could use some. No, you'll get those regional discontinuities in policy and we're going to fight to protect ourselves; there's no question about that. Will we be successful? Well, as you look at national policy it's easier to be negative than it is to be positive. It's easier to stop something from happening than it is to cause something to happen and I think we'll be successful at least for a number of years in protecting our resources and our regional position in those resources. Corbin McNeill: No I, I agree I think clearly the, the energy bill is going to reflect a victory for the Northwest and Southeast and mitigating some of the proposals to more nationalize the grid and protect the pricing and advantages that the Northwest has. And I'm not in disagreement with that as a concept. I think there will be a point in time in which, for the nation's health, we will need to make sure that we don't have disadvantaged, excessively disadvantaged areas of the country and energy supply is one of those, is a big, a big important issue for people. So I, I'm not agree by to keep current state of the energy bill. Ralph Cavanagh: But we have never treated electric resource portfolio management as a national issue. We have treated it as an issue for the individual systems affected. The whole west is interconnected, but within the west there of course smaller systems. I think the biggest risk is not that someone else will take it away from us, but that we'll fail to seize our own opportunities. Michael Grainey: Well and I think that the largest failure in the energy legislation coming before Congress is the failure to increase vehicle efficiency standards. Jim McClure: But there, there you get back to what I said a moment ago and that is don't expect policy makers to make policies that are not supported by the public. Jim McClure: Pay attention to the regulatory climate. One of the great problems across the country, we move to put public utility, regulatory commissions that were elected by the public and they were elected as you might guess by those who promise the most to the consumer. And consumers were inclined to look for the bargains without looking at the internalized costs and I think that the consumer needs to be better educated about the choices and insist that their regulatory commissions reflect those choices. Peter Johnson: You say they should be better educated. I come back to Mark. At the Bonneville Power Administration we weren't getting anything done until we began to consult with the public, and then we could do just about anything that was worthwhile and necessary. But to try to move without keeping the people who were going to be the beneficiaries of efficiency and conservation and energy -- they've got to be involved and that comes from the utility, it comes from the federal government, it comes from all of us around this table because I think once you commit to that process of decision-making you have unbelievable earned power, earned power people would put a trust in you. We've got to do that with the nuclear option. Absolutely essential, essential. If it is disengaged from the public in its advancement, you know it will be just what Senator McClure says -- if the public doesn't want it, we're not going to have that. Jim McClure: One of the greatest changes brought about in the Northwest, particularly during the time Peter was the administrator of the Bonneville Power Administration, was the public process involvement that undergirded a good public policy. |
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