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The Price of Power: Complete studio transcript
The Price of Power
A FocusWest Discussion
November 5, 2003
Joan Cartan-Hansen: Hello, I'm Joan Cartan-Hansen. Welcome to this FocusWest presentation. Our electrical power system is at a critical point. Reserves are disappearing, power costs are going up. The east coast experienced a blackout earlier this year, and power experts tell Californians to expect the possibility of rolling blackouts next summer. The nation's current energy plan looks to the west to provide more power, but what kind of power do we want to develop in our own backyards? Tonight we've brought together a group of experts in various facets of the energy field to discuss our choices, practical options, and the price we will all pay for our future electrical power supply. So let's begin tonight's discussion by tossing out the question of why people should care about the health of our electric system and why is now a good time for them to get involved? Jude?
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.
Joan Cartan-Hansen: How is the health of our electrical grid system?
Mark Maher: Well to put it bluntly we're living in an age where we need to almost rebuild our system, the transmission system. New transmission really has not been built on the Bonneville system since 1985 and we're currently in the process of building new high voltage transmission, but it's just to reinforce our existing system and to serve our existing contractual needs. We're not putting extra margin in that could accommodate new generation at this point. We're just able to keep up with the demands that are placed on us today by our customers.
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.
Mark Maher: In return on investment I understand is.
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.
Joan Cartan-Hansen: There's really three components to the problem. There's how we produce the power, whatever way we get the electricity produced. How it gets transmitted, how it moves there, and then of course how we use it. Why don't we start with talking about how we produce that power and the tradeoffs that we use. Coal and fossil fuels is still the number one, even in the west the number one source for that kind of power and Wyoming is the place where that starts; right now that's where the focus is.
Jim McClure: Well, right now we have a tremendous demand for natural gas because it was relatively low priced, relatively abundant and relatively friendly to the environment and so the, the demand for natural gas went up very rapidly and now we're bumping against the ceiling of availability at prices we're willing to pay at the current market price.
Mark Maher: And it was easy to site gas plants went in at the intersection of gas pipelines and high voltage transmission so we saw proliferation of gas.
Jude Noland: And we also saw a tremendous leaps in efficiency in terms of gas turbine technology where they were must more efficient and they were also developed in to be much less polluting and so it was a to a large extent a win/win situation. The problem is that with everybody putting their eggs in that basket we had price, pressure on the price of natural gas and it starts to become expensive.
Jim McClure: Well, there's another reason they went to natural gas, it was a relatively short period of time in which to site and best build and get online.
Jude Noland: Exactly. Very quick to . . .
Jim McClure: Of a natural gas fired power plant other technologies take more cash, more capital up front and longer time.
Jude Noland: Right, right.
Ralph Cavanagh: Well there's a, we run a risk here, which with Peter Johnson in the room I can't let us run here, because I remember some things he did. If we distinguish sharply, if we say, well we talk, first we'll talk about how we produce it and then we'll talk about how we use it, as if those were completely independent, and it was Senator McClure I think who had a hand in the first legislation in the United States that said we are going to treat energy efficiency -- ways of getting more work out of less energy -- as a resource equivalent to production, and we're going, we're going to weigh them against each other and we're going to pick the best buys first. Peter of course you had to do it for the first time. And I just got to say we cannot talk about electric generation in isolation from decisions about use; we ought to be looking at them together. And the philosophy of the northwest and the legislation Senator McClure got through in 1980. I think it came down to a fundamental philosophy of let's just buy only what we need, pick the best buys first, treat energy efficiency options on equal terms with generation, and, you know, the leading resource developed in the Pacific Northwest over the past 25 years wasn't gas, wasn't coal, wasn't nuclear. It was energy efficiency.
Peter Johnson: Uh huh.
Ralph Cavanagh: Uh and so let's just keep that on the table, continue to look for the best buys, my optimistic view of this is that, that in fact we have a lot more options on the table than we had 20 years ago when Peter started this out. And we have them for both transmission and for energy production. And I just want to say one of the things Bonneville's doing that I think is great with transmission, putting all the options on the table. It's not, not viewing new transmissions lines, Jude, you wrote the story about this. Not saying that the only way to solve a transmission problem is a new line, there's a host of technology options; let's pick the best buys first.
Joan Cartan-Hansen: Right.
Corbin McNeill: But the, the reality is, is that we are going to have to produce more energy in a growing economic environment and clearly we have to balance environmental concerns with price concerns, with other social aspects that we have. If energy prices continue to rise as the Senator has indicated then in fact we're going to have to subsidize some people of low income in order to provide them the same quality of living that everybody else has. And while conservation can in fact and should be a part, green power should be a part, we need a diversity of energy sources that meet environmental concerns, that meet national security concerns, which may not be a regional problem here, but clearly a national energy policy is one thing that national politicians have to concern themselves with and we must have economic, a system that supports the economic advantage that the United States has in the world environment because we have low energy costs and its one of our competitive advantages in the world economy.
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.
Jude Noland: Well I think that also reinforces what we're also saying about the importance energy efficiency because if you do the right kind of weatherization and build housing stack to super efficient standards those folks at the lower end of the economic spectrum will be spending a lot less of their money on energy because it won't cost as much to run their household.
Jim McClure: Well, but Jude, there's another one of those tradeoffs because it costs money to do those things. So you put money into the housing stock instead of the into the energy that's consumed -- that's one, one of the problems I had with the Seattle Master Builders program; they wanted to force economic energy efficiency into the building standards, but they didn't want to measure the economic tradeoffs that were involved.
Ralph Cavanagh: But of course the solution to that is your own Northwest Power bill, which requires that the cost of the conservation be compared to the savings delivered.
Jim McClure: We even gave 'em a 10% kicker.
Ralph Cavanagh: You even gave 'em a 10% kicker, and then the rule was best buys first.
Jim McClure: Yes.
Ralph Cavanagh: As we sit around a logo of an incandescent light bulb . . . that's obsolete technology. Where you get the same service with a quarter less the energy. That's a good reminder of how often we miss those opportunities, but Peter I, I interrupted you and I don't mean to.
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.
Joan Cartan-Hansen: I think even if we do make a massive effort toward conservation we still need to look to the future toward building that base supply, and right now coal and all the fossil fuels are still going to have to play a major part in that. But it also has some real environmental tradeoffs.
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.
Mark Maher: We're looking at a least cost planning process as we rebuild this transmission system of Bonneville's reinforcing in the various areas of the utilities that we serve of looking at conservation measures for demand side management because it is becoming extremely difficult to site and build new transmission, even expand current transmission corridors that we have. We're also part of a 18 member panel that Bonneville is, is sponsoring and that is looking at screening criteria on all new projects that we'll be looking at our transmission and I believe we've identified three pilot projects that we're going to be looking at the demand side management.
Ralph Cavanagh: One in Idaho.
Mark Maher: That's right.
Joan Cartan-Hansen: We're talking about new technologies. Nuclear power's not a new technology . . .
Jim McClure: It can be.
Joan Cartan-Hansen: It can be . . . it is an industry . . . that is overshadowed by its past, but it is one that in the energy bill there's money to push for that.
Kathryn McCarthy: Uh huh absolutely and one of the things I wanted to point out is while all of the discussion earlier on conservation efficiency is extremely important, it absolutely is, thinking parallel to that we really do need to look at new generation and I think we have a tendency to look five years ahead and think, Gosh, that's a long way away, and we don't plan beyond that. We've really got to look beyond that. And in nuclear power, one of the things that we're doing right now -- we've got our national program, actually international program: the U.S. is a part of the Generation IV nuclear reactor research -- and the whole idea is to develop the next generation of reactors that have advantages over existing reactors and will come online about the time that the existing reactor licenses expire. So we're, we're working to, to get ready for that and have a lot of activity going on in that area right now.
Jim McClure: That's why I injected that it can be new technology, it isn't just old technology, because I don't think anybody is really suggesting today that we go ahead and expand the current generation or the past generation of nuclear power plants, but I do believe that there are a lot of people that are looking at the development of new technologies that achieve our objectives in the more economical and acceptable way then the old technologies did.
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.
Jim McClure: And I think one of the comparisons we can make from our past experience is that the Russian designed reactors were inherently less safe then the ones that were built in the rest of the world, and we can do more in the future to make them even safer than the current generations of reactors -- as safe as they have proven to be.
Kathryn McCarthy: Yes.
Joan Cartan-Hansen: I don't know Mike, you're not looking . . .
Michael Grainey: I guess I have to note a voice of skepticism. I worked for the Nuclear Regulatory Commission for 7 years, so I'm certainly not a rabid anti-nuclear person. But I've been hearing talk for 25 years about a new generation of nuclear reactors -- new, safer, less expensive, more efficient generation -- and we haven't seen any. We haven't seen one new nuclear power plant since Three Mile Island, and I'd be very surprised if we see a new generation anytime soon. I think we really need to focus instead on renewable energy resources like wind, solar, geothermal biomass. We have limited federal budgets, in the history of energy in this country has been it does need federal support it needs federal support for exploration in the case of fossil fuels for development, for technology, and I see the, the energy bill pending before Congress as not providing enough of the support that it needs for renewable resources to make them more competitive. Wind is essentially competitive now in many circumstances with natural gas and other fuels, but we need continued federal support there. Given the fact we have limited federal funds I think putting much money into new nuclear research at the expense of those renewable energy resources is a mistake.
Jude Noland: What makes me uncomfortable is that we still don't know what we're going to do with the nuclear waste that we've generated from the existing power plants and I have a real problem with even discussing building more plants that are going to generate more of that nuclear waste until we've figured out what we're going to do with what we have. I've been covering energy issues since the '70s and we've been fighting over whether we're going to put the stuff at Yucca Mountain since then and it's still not there and I just read recently that even if we did open that nuclear waste repository it will be full by 2010. So I just have real kind of I think that's a big issue.
Jim McClure: We haven't talked about fish issues, but a red herring just floated by.
Jude Noland: Let me, let me address the waste issue for a minute Yucca Mountain is, is coming close to being licensed and will be the repository for commercial fuel and we are looking at ways to best utilize that space, both in terms of dealing with the commercial waste that already exists and minimizing the mass or the volume that needs to be disposed and the toxicity of that waste and then looking at with the next generation of reactors how do you minimize the waste that actually needs to be disposed of for those also. So you know we're doing things in parallel with what's going on at Yucca Mountain and now I for one am perfectly comfortable with how that is progressing and the advantages that we see from nuclear energy from an environmental point of view absolutely outweigh the, the issues that we need to deal with, with the waste, but technically we know how to do.
Jude Noland: I'm not sure the American public is there yet.
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.
Jude Noland: Well, we do that all the time. I think we reject things all the time for people being ill-informed.
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.
Michael Grainey: Well I think it's, I think it's the direct result of the risks and the impacts of Three Mile Island 25 years ago.
Jim McClure: There were, there were nobody was hurt.
Michael Grainey: Nobody was hurt, but . . .
Jim McClure: The systems worked.
Kathryn McCarthy: They worked exactly as they were supposed to.
Michael Grainey: The cleanup costs of that reactor ran into the hundreds and hundreds of millions of dollars if not billions of dollars to that utility, lost to the damage caused by the meltdown. I think that there's certainly not a utility in the United States that's been willing to take that kind of risk since then and for a new generation of reactors I think it's going to be a very hard sale. You know I think we also need to recognize that any resource has environmental impacts, even renewable energy, and I admit that, that there's adverse impacts. I think there's less and I think they're easier to control, but they all have impacts and I think that's why energy efficiency is really fundamental. Whatever resource we use we need to use wisely.
Jim McClure: I want to get back for a moment to the promise of nuclear power because we're going to be there, you just look at all the alternatives what has to be done over a period of years and whether its next year or five years or 10 years or 50 years from now we, we will have nuclear power so I think these people that say hey no we can't do that are, are delaying the time when we will find that the answers that we need to find and we need to find them there's no question.
Corbin McNeill: The issue is not so much in the United States as it is on an international scale because you have the underdeveloped region of the world as they come up to the same electricity consumption standard that the developed countries have, they have energy needs that far, far, far outweigh the energy needs of the United States. And too they are not all susceptible to using solar voltaic they're not all in wind areas, they are going to have to have a diversity of sources and, and some of that has got to be nuclear or in fact you are not going to be able to have the international climate environment change the way the international policy agents would like it to be done.
Ralph Cavanagh: I, I'm just reminded I always, nuclear power is fortunate in its champions and it has many and they're eloquent and effective. In the end you don't want the enthusiasts making the decisions on any of this it seems to me. What you want is a hard-headed process that looks at all the options and picks the best buys first and what I've got to say for me what's, what's at least eloquent in terms of the record of nuclear is that the region of the country with probably the strongest nuclear culture and the strongest nuclear technology culture. The region of the country with the most rigorous system for picking winners and losing on the merits over the last 25 years has . . . nuclear plants, and that's the Pacific Northwest. That could change if the technology gets much better, if it gets faster, if it gets more nimble, if it solves some of these problems and I don't want to rule out the possibility that any of these technologies could break through, but let's stay, let's make sure we have an honest way of picking on the merits, let's make sure we have Peter Johnson's calling the shots at the end of the day who have to look at, I mean and Peter you had to make some of the toughest choices in the history of the nuclear industry.
Peter Johnson: Very difficult, very difficult.
Ralph Cavanagh: Extraordinary, you had to go into the communities that were hurt and face them and you did. But you were in the end calling the shots as an investor for the larger society.
Peter Johnson: We were driven by fiscal circumstances.
Ralph Cavanagh: Exactly.
Peter Johnson: The cost of these plants as were out of control they were just going to the point where they were going to literally sink this federal agency and so I had to act it was a fiscally driven decision rather than a technology driven decision, but I'm going to come back and ask you're right in the middle of the INEEL program looking at new potential nuclear options. I can remember there was a 1,000 megawatt unit that was twinned in order to get construction you know advantages of scale then I served on the committee of the National Academy of Sciences looking into the future of nuclear power in 1990, 93 and we came up with a 500 megawatt light water reactor with passive safety features. It was going to have passive methods by which it would you know turn itself down in the event of an incident. Then I read here just recently where the Nuclear Energy Institute is recommending in this new energy bill 1,000 megawatt plants, again apparently twinned and it's going to require federal financing to get 'em going. So here we. And then in the meantime there's been some fluidized bed techniques or technologies and now we're talking about gas cooled if I understand correctly. Why, tell us why can we feel better about the science behind nuclear today then we could earlier?
Kathryn McCarthy: Well we've learned a lot over the years and if we talk specifically about what are we looking at in the nearest term of generation four, what we're looking at one of the six reactor types that, that's being investigated is a very high temperature reactor now this one the idea is you have a dual purpose, it does both electricity production plus hydrogen production which imposes certain requirements has far as outlet temperatures and temperatures that you need to actually do the hydrogen production. The gas cooled reactor this is one that's referred to specifically in the energy bill, what we're looking at in this particular incidence is deployment, operating at about the 2015, the year 2015 right around there and would then feed into the President's hydrogen initiative. Now we've done a lot of work looking at passive safety for example which is one of the goals for these generation four reactors and this reactor in particular would if it were to lose all cooling basically shut down cool off you know you don't have the severe accident. It the idea is you would license it by the nuclear regulatory commission and that would show licenseability and then show the utilities that yes you know we can do this, we can do this cheaper, better, faster we're looking at various sizes on the order of 500 megawatt thermal to higher than that depending on what the application is and so for this particular one the VHTR its on the order of 500-700 megawatts thermal and then because you really want to have small modular units that you can deploy in countries that don't need a, a 1 gigawatt electric power source.
Corbin McNeill: If I can interject. I just got back from South Africa last week, and I've been involved in the development of one of the competitive designs for this for four years now 200 basically 200 million dollars to build 160-170 megawatt plant, two year construction time, competitive with natural gas at prices at $3.50 a million BTUs. And cannot have an accident similar to Three Mile Island.
Peter Johnson: What's that technology?
Corbin McNeill: It's high temperature gas.
Peter Johnson: High temperature gas.
Corbin McNeill: It's a spin-off of a proven German design that has been enhanced by South African engineers such that it instead of using a steam generator and steam turbine you just like in a natural, in a natural gas plant you go directly to a gas turbine.
Joan Cartan-Hansen: But how do you convince the public?
Corbin McNeill: I argue that you don't need to do it, you need to have an economic design that a somebody's willing to invest in. The public, public, my argument is, is that public confidence will be built over a period of time by the successful operation of current plants, by the licensing of Yucca Mountain, and then 50 years from now from the potential non-proliferation resistant reprocessing of fuel.
Mark Maher: But you have to site that plant somewhere. That's where the public opposition is going to be.
Corbin McNeill: The public opposition, we're running into public opposition in putting windmills on one of the islands off the Massachusetts coast I mean.
Ralph Cavanagh: But 160 megawatts of wind just went into operation in the San Francisco Bay area.
Corbin McNeill: I understand.
Ralph Cavanagh: The . . . you can't site anything [everything??]; there is a palpable difference.
Corbin McNeill: There, there, there is, but I am going to bet you that you are going to run out of places to put windmills in within 10 years.
Michael Grainey: I don't think so. We've had just sited 300 megawatts on the Oregon/Washington border. We've been approached by two developers in Oregon who want to . . . megawatts site.
Corbin McNeill: I hear you, but people are going to get . . .
Michael Grainey: I think the prospects are very promising, and I guess I'm still very skeptical about utility executives and you know the industry better than I you, you were there.
Corbin McNeill: Well no I, I . . .
Michael Grainey: Is willing to invest in your nuclear power.
Corbin McNeill: And in fact it's not clear to me that the first, the first investors in new gas turbines were not traditional utilities, they were the upstart, independents like Calpine, Dynagy, and I'm not so sure that the new nuclear plants are not going to be built by a non-traditional utility company.
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.
???: You know.
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.
Corbin McNeill: Jim, let me point out to you that in the middle of the California energy crisis there was a survey done that showed 64% of the people supported new nuclear plants now that number has re, has gone back to the. That's exactly right, gone back to it is a variable kind of thing and, and my view is that you have about 20% of the public is adamant against nuclear, you've got about 30% that's very supportive, you have a broad general base in the middle that swings back and forth with time depending on circumstance.
Joan Cartan-Hansen: But the public is very pragmatic.
Corbin McNeill: And is very influencible based upon whatever the existing conditions today area. But the reality is, is that nuclear would, would only be a component of a diverse energy supply.
???: I agree with that totally.
Corbin McNeill: If you put all of your eggs in one basket, whether it's natural gas, coal, nuclear, wind. I'll give a nice example here. Part of the California energy crisis was in fact a failure of renewables -- the lack of rainfall and snowfall in the Northwest created a shortage of available hydropower. The city of Fairbanks, Alaska, has a very unreliable power supply today, and if you want to build a big system of renewables you've got to have an energy storage mechanism. Well, the city of Fairbanks, Alaska just put in a large battery. It takes up a whole building; it lasts for seven minutes.
???: Oh dear.
Corbin McNeill: You know in transition so that if you have to have base load thermal source of energy you cannot build a system in reality today maybe for another 100 years that's totally based on renewable sources.
???: And nobody's suggesting that.
Corbin McNeill: And, but, but you also need to understand that the more you build alternate sources of you know a windmill in the United States has a capacity factor of about 18-20 percent which means you need to build five times as many.
Ralph Cavanagh: Oh no, no, northwest, here in the northwest they're at 35%.
Corbin McNeill: Sorry 35% on a nationwide basis it's like 18% and which means that you need to build three to five times more generating capacity than you need in a thermal plant and, and the result of that is, is that you escalate the cost with time and while you have to take into account the environmental differences.
Ralph Cavanagh: And the fuel cost in wind, which isn't any.
Corbin McNeill: Well you're correct, but in fact what I'm saying is that you cannot build a system fully on variable sources of . . .
Ralph Cavanagh: You need a portfolio.
Corbin McNeill: You're exactly right, you need a portfolio.
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.
McClure???: Well there's.
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.
???: Yeah right.
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.
Michael Grainey: I agree.
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.
Jude Noland: Uh huh.
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: That's one of the reasons.
Ralph Cavanagh: Biggest reason I think.
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.
Jim McClure: Yeah.
Ralph Cavanagh: I'm just saying the current Congress hasn't proved to be enormously good at that.
Jim McClure: Well.
Joan Cartan-Hansen: Well, we value where we put our money, we hope so at least. Green Power -- Oregon has put a huge amount of money toward it, they've put their money where their mouth is, they're putting tax dollars to support green power. Is that what the rest of us should do?
Jim McClure: Some of it. Some of it. Like everything else, you point to the failures unless you're trying some things that fail you'll never know whether they would've succeeded.
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.
Joan Cartan-Hansen: Let me throw out to the table an idea and get all of your opinions. We've all said tonight that there's got to be a mix in your portfolio of plans. What should that mix be? What percentage should we try on these particular sources of power? Let's jump around the table and I'll start with you.
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.
Ralph Cavanagh: We're not often mistaken for each other.
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.
Joan Cartan-Hansen: We can agree on what's good, but can we agree on what's bad? Are there bad energy choices?
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.
Joan Cartan-Hansen: You're shaking your head.
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.
Jude Noland: I think the other thing, something that Mark started to talk about that we really neglected to discuss is a problem of getting energy generated at a distant site -- a coal plant in Montana for example -- to population centers in Boise and Seattle and Portland. That takes transmission and as Mark said we haven't done much with the transmission system in a long time and part of the reason is because nobody wants you to build a transmission line in their backyard and that, to me that's the, that's the big issue that we're all ignoring. That you've got to move the power somehow and the more transmission you have to build the harder its going to be and so that to me makes smaller scale generation, energy efficiency, distributed generation makes a lot more sense because you don't need as many of those high voltage transmission lines to move that. Certainly the situation that we've seen here in the Northwest over the last few weeks with the sabotage or attempted sabotage of transmission towers makes it even more important. The more that we can site energy smaller sources of generation, less intrusive sources of generation, closer to load, closer to where the people are using the energy, the better off we're going to be, and we haven't even started talking about that.
Mark Maher: And that has to be part of the public debate on where we're going to site those resources.
Jude Noland: Exactly.
Mark Maher: And if we're going to smaller, more locally distributed resources it's going to be "not build in my backyard again" the arguments we'll have to go through. If we continue with wind development the sites will get further and further away from existing infrastructure and transmission is going to become a major cost component of that too and so that's an issue we're looking hard at how, how can we minimize the cost of that transmission. Large coal plant development they tend to be mind mouth plants and they're far from grids also so as we look at that portfolio development the transmission component becomes a pretty large player in there. Even though transmission is probably what 10% of a rate payer's bill it's, it's the environmental, social impacts also that transmission bring along with it.
Corbin McNeill: And the more you move toward at least natural gas and/or potentially hydrogen generation sources you're going to have to build pipelines and pipelines don't have quite as much impact, but I don't know of any pipeline in the country that's been built without some degree of resistance to it at some point in time.
Ralph Cavanagh: A final constraint that certainly bears mention and here I might actually drag Corbin along with me. I think we are all increasingly concerned about the gigantic experiment that we're collectively conducting with the atmosphere in terms of increased concentrations of greenhouse gases. I'm sure this panel is all over the place is terms of how it feels about climate science, but it has to be cause for at least alarm that in our lifetimes the atmosphere is changing in ways that we have reason to think have, have significant implications for the climate of the country and the earth. And I think all of us would like to see that climate experiment suspended if it could be done at a reasonable cost. That will enter into the equation about what to do and it will influence the development portfolios. It will help nuclear, but it will also help energy efficiency and renewable and my own view is that they will end up prevailing, but that's part of the competitive equation that we haven't mentioned yet. And I think for the public and for policy makers an increasingly important part.
Kathryn McCarthy: I would certainly agree with that. It's interesting somebody I think maybe it was you Joan who had mentioned green power, and I would argue that nuclear is green power because it is an environmentally benign energy source . . . gases and I think more and more environmentalists are starting to realize that.
Ralph Cavanagh: Well, we always got it, but we our skepticism remains. We're looking at all the solutions and we're not sure this one's going to end up at the top of the list.
Kathryn McCarthy: Sure.
Corbin McNeill: And I would agree with Ralph if he were to change the word from alarm to concern.
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.
Mark Maher: We see that struggle today in generators wanting to site their power plants and then want Bonneville and in my case to take the business risk and build transmission without a commitment of funds upfront or a long-term contract and so we don't have the money as, as Peter mentioned earlier. Government funding is going down and our borrowing authority ability is capped and limited and so our resources, transmission systems a capital sink, it takes a lot of capital to keep that running and maintained and to do expansions takes large amounts of capital. We don't have that and so we're looking for generators who want a site to front that. They don't have the funds to do that now and so we're, we're seeing a real lull in, in development.
Jim McClure: Well, Peter mentioned a while ago that . . .
Joan Cartan-Hansen: So what's the solution? If the generator doesn't have the money and the distributor doesn't , who's going to come up with the money?
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.
Corbin McNeill: And in fact you have private transmission companies now who may be willing to step in and do some of that; in fact the bypass on the Path-15 in California was in fact done in that manner.
Mark Maher: They were guaranteed.
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.
Jim McClure: And that's a large component of what happened in California.
Ralph Cavanagh: I think the dominant reason yeah. We forgot, we lost our portfolio manager and we were all riding the spot market until one summer day when the hydro . . .
Mark Maher: Well, and what we're saying is there's a real lag with transmission because we're not building ahead of need. When those generators do want to come on, when that demand is there and, and gas fired generation can be built in a couple years we can't build a transmission.
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.
Mark Maher: There was chaos when the price in power in California was up. We had 50 applications for combustion turbines that wanted to connect with our system and get into that gold rush in California, and they almost all have disappeared and so it, it's, it created a fits and starts environment.
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.
Ralph Cavanagh: But it's called . . . to the west. I think what it comes down to here, I doubt you disagree with this, in the west right now for better or worse the investment decisions we're talking about are by in large going to have to be utility decisions. The old, the high-flying entrepreneurs who were going to come in and take over for the utilities are either gone or bankrupt.
Corbin McNeill: Or they don't have the resources.
Ralph Cavanagh: Or dependent on utility contracts to do anything and so I think as, as the public tries to sort out how is this going to play out, what's going to happen the big utilities of the west -- the Idaho Powers, the PacificCorps', Pacific Gas and Electric when it emerges from bankruptcy in the wreckage of the California restructuring -- what decisions they make, what incentives they face and how they figure out to bring their customers into some of this, that's why this is really going to play out and happily everybody has a hometown utility and sometimes the hometown utility's policies are a whole lot easier to influence as you know Senator then a distant capitals on the east coast. And I think all of us would encourage folks who care about these issues to learn more about what the local utility's doing, what is it investing in energy efficiency, what efforts is it making to tap into those opportunities that Peter Johnson identified. What renewable energy options is it seeking. What's its long-term perspective on nuclear and fossil? These issues are being played out in every hometown utility in the west and that's where the real action will be for the foreseeable future on all of this.
Joan Cartan-Hansen: We're rapidly running out of time, but I wanted to get in two more kind of more philosophical questions and then we'll make sure nobody misses their flight. How do we prioritize those western values in light of the national need? Do we in the west give up our low cost power so that the rest of the nation kind of evens out?
Michael Grainey: We all agreed on that, no.
Joan Cartan-Hansen: But then are we strong enough in the west to stand firm against the rest of the nation or is that the case?
Mark Maher: Well, physically, as Jude just said, you cannot transport power out of the west. There's a limited interconnection, there's three interconnections in the country, one in the west, a large one in the east and then there's Texas. So in the west we are not interconnected, but there is a huge west coast.
Jim McClure: But there are people who want to interconnect us.
Corbin McNeill: Just open up another interconnect.
Jude Noland: The line losses you'd get to try and move, to physically move power from Oregon to.
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.
Joan Cartan-Hansen: You look like you're shaking your head.
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.
Jude Noland: Exactly.
Ralph Cavanagh: About which and we've been talking as much about opportunities as threats around this table and let's be clear there's a lot we need to do to capture the economic and environmental benefits that we've all been discussing. Let's not worry about the rapacious northeasterners taking away, let's worry about our failure to get what's within our own region and available to us.
Joan Cartan-Hansen: So where do we go from here?
Peter Johnson: Joan, let me suggest let's go back to one of the things we saw in the beginning and that is the methane natural gas source here in the western you know in Wyoming starting there, but its suggested it's going to go all over the country potentially. I for one and I'd be interested in how others feel about that, I think that has merit because natural gas and the combined cycle gas turbines are right at the leading edge of what I consider to be right now the best base resources that we can build. So and, and as somebody mentioned earlier maybe Corbin that yeah we're not natural with natural gas we're particularly liquefied natural gas we're brining it in from all over the world so we're just as vulnerable as we are with oil. But I think that obviously there's going to be an EIS, an Environmental Impact Statement, that should be you know prepared for that entire you know idea of technology that we'll end up you know with recommendations to mitigate impacts on wildlife and habitat. Now whether it survives that test that's something again that I compliment Senator McClure. Thank goodness we have a National Environmental Policy Act so that we can critically look at all of the alternatives, but that one seems to have merit in the back of my mind particularly to supply they say in what 10 years of supply of natural gas for this country to serve the needs because right now I think the fastest growing base technology that's being invested in is gas.
Corbin McNeill: Peter, I live in Wyoming and while I'm not involved in the politics of Wyoming I can tell you this is probably the most contentious issue in the state today. And right in the area, the Green River Basin that was highlighted in that article and it, you know if you over fly that area you have some sympathy for the people that say because you see the roads and the bare-scaped lands and everything else.
Ralph Cavanagh: And the waterways.
Corbin McNeill: Yeah my view is that each of these and this would be supportive of, of Ralph and that each of these issues needs to be addressed under the circumstances of you've got to restore the place to its natural habitat. That then incurs a cost that begins to find the right economic source. I, my view is that what many people call externalities right whether it's CO2 emission into the air we don't have ways to value those to charge the cost to the person that utilizes them and it is the inability to do that in my opinion and, and to have a definition that, that goes out 30 or 40 years in time that really causes us to have these just arguments about cost versus environmental impact and things of that nature. For instance if you were to say, All right, all those places have to be restored like you know in I think coal mining regions in the midwest when they have a pit mine they've got to restore it back to something similar to what it was.
Jim McClure: Approximate original . . .
Corbin McNeill: Yeah and, and if we could do that in what we have going forward then we begin to achieve what I think are the right economic decision criteria that I would be confident in which I'm not confident in today as to what is the right portfolio choice.
Ralph Cavanagh: But the . . . there are special places where we shouldn't drill.
Corbin McNeill: I, I'm not going to argue about you know I don't want anybody drilling in the Grand Teton National Park and a fine wilderness area or things of that nature. I'm not, these are open public lands, Bureau of Land Management lands, I mean they're, they're not highly valued for by most people for other purposes.
Jim McClure: Having been at the focal point of a lot of those environmental debates -- they are highly valued by a lot of people, and there isn't an acre out there anywhere that isn't highly valued by some, somebody who's going to contend for their protection and for their use in the way they define the use. But I do agree with you that we need to find a, a much, much better way to internalize cost.
Corbin McNeill: Right.
Jim McClure: And I agree with that if it's anything in the environmental movement that has occurred in the last 50 years that's the most important basic question is how to internalize the costs and I wish . . .
Corbin McNeill: And you were beginning to do that in terms of forests and . . .
Jim McClure: I wish we did it across the board much better and I agree with with Peter that I'm glad we have those environmental policies in place, I think that they've in some instances overrun their objectives and we need to balance that dialogue better and make it just better decision-making process, but nevertheless we're there and I'm glad we're there. There are a couple of areas we haven't touched on Joan one is where do we go. We talked mostly about electricity -- maybe its because of this light bulb out.
Ralph Cavanagh: This obsolete light bulb.
Jim McClure: Yeah but there are other things, we touched a little bit I'm very, very strong in the future of hydrogen technology. And I think we will have a hydrogen economy sometime in the future. We'll depend a great deal upon electricity in order to do that however. I think fuel cells have a, a great promise, but they also have an energy feed stop that you've got to find and utilize so it, those are not total, total answers, but I look at the conservation ethic and we've gone through a great deal of that and yet I just picked up a, a magazine published in August of this year General Motors has now developed a 1,000 hp engine for an automobile. Isn't that great? I look at.
???: It's not a hybrid engine either.
Jim McClure: I, I look at, at all of the advertising for automobiles today and they're all on high performance, high horsepower and, and just a couple of footnotes about a couple of Japanese people that come up with what I predicted 50 years ago was going to be the or 30 years ago that was going to be the future and that was hybrid automobiles. There are two of them on the road today, one makes 60 miles to the gallon. Contrast that with General Motor's plans for a 1,000 hp engine in a Cadillac.
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.
Corbin McNeill: Senator, I'd only bring one point up -- hydrogen in itself is not an energy source; it is an energy carrier.
Jim McClure: Uh huh.
Corbin McNeill: And you need basic energy sources whether it's some form of renewable energy, whether it's nuclear, whether it's coal and, and CO2 sequestration, you, you and not many people. Well I won't say not many but people tend not to understand that issue when they talk about hydro.
Jim McClure: Well, we've talked mostly about electricity today because it, it is the energy's, it is the form of energy chosen most by people today in business or individual homes except for transportation and that's where hydrogen comes in because it becomes a transportation fuel as your fossil, liquid fossil fuels are and something we badly need. But electrical energy is the energy of choice today and that's why we're looking mostly at how, how you produce and distribute and price the availability of electrical energy.
Joan Cartan-Hansen: Any last thoughts on where we go from here? Where do we as a public who may not own a utility or who may not have the time to go to every public hearing -- what can that person do as we start making these choices and move forward?
Ralph Cavanagh: There are a wealth of resources available to members of the public two, two things we talked a lot about today, one is use energy more efficiently where increasingly your local utility is helping and there are a wealth of options available to you and I, like Senator McClure, am a technology optimist in this though we're probably optimistic about slightly different technologies. On renewables, if you like renewables, you can invest in them directly through your, through your utility bill increasingly across the Northwest that's possible. There are institutions like the Bonneville Environmental Foundation that let you, if you want to wherever you are in the country simply buy out your pollution emissions associated with your electricity use if it's important to you as an ethical matter to do that. I do that, I encourage others to do it.
Mark Maher: From a local level utilities more and more are having least cost planning and having public meetings. Get involved. Go to those meetings, express yourselves, understand what those issues are. I encourage folks to do that. We'll be embarking on several public processes in Bonneville, and I just ask people to get involved and give us your input.
Corbin McNeill: Look at what is happening in your local arena and becoming knowledgeable, staying current on that and looking for the advantages that you can achieve. I last year Bonneville through my local cooperative offered a big energy savings discount and I didn't pay an electric bill for like six months, but.
Jim McClure: I knew you'd find a way.
Michael Grainey: I think our goal should be to assure an affordable, reliable supply of power with environmental impacts that don't cause significant damage so that we can pass on the environment to our next generation and be proud of what we pass on to them.
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.
Kathryn McCarthy: Right people, people really do need to become better informed and part of the burden for that is on those of us in the nuclear industry to help them to do 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.
Jude Noland: Just the only other thing I would say is this is such a complicated subject and issue people can start by actually reading their utility bill because nowadays your utility will usually tell you the where the power that you use comes from and gives you an option as Ralph mentioned that if you want to pay a little extra to buy wind power you can do that. So you can start by looking at your utility bill, try and understand what's in there and what your utility is doing. Lots of people spend time surfing the web there's lot of sources of energy information on the, on the internet, so start that way, find things that you're interested in and Google 'em.
Ralph Cavanagh: But of course we don't want to have to rely solely on volunteers to solve national environmental problems and so the other, if you read your utility bill and can't understand it, if you don't know where the power is coming from and don't see the energy efficiency investments then the hometown utility remains a crucial point of leverage as an investor for all of us.
???: Let them know what you think of what they're doing.
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