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West can expect hefty prices and maybe blackouts

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Electricity customers should continue to expect high power prices — and still face the possibility that rolling blackouts will spread from California to other Western states.

Those dire predictions are part of the forecast presented by 10 Western governors who spent Friday formulating both short- and long-term solutions to the energy situation. The meeting in Portland, Ore., was the second-such energy policy summit for the Western Governors' Association.

Utah Gov. Mike Leavitt and the association's president, Idaho Gov. Dirk Kempthorne, both cautioned that the energy crisis remains in its early stages.

"This is not over," Kempthorne said. "This may just be the beginning, because as we enter the summer, it may be tough for many states because, again, the demand may be there."

Leavitt noted that summertime electricity use will increase as air

conditioners are flipped on. "That's when the peak of the power season begins," he said.

The governors could not agree about whether the Federal Energy Regulatory Commission should impose price caps if now-volatile wholesale electricity markets do not stabilize by spring.

In fact, Energy Secretary Spencer Abraham rejected a plea from several of the state leaders for the federal government to impose temporary caps, after listening to their worries that "exorbitant" and "out-of-control" electricity costs were spreading economic havoc across the region.

"I have great concerns about that, and the president has expressed concerns as well," Abraham said in response to requests for price caps from at least eight Western governors, including those in the three West Coast states of California, Oregon and Washington. "At a time when demand is a very serious challenge for us this summer, anything that puts disincentives in place, that would work against reducing demand, I think has to be looked at very closely."

Washington Gov. Gary Locke said he applauds President Bush's plans for a long-term national energy policy, but "I don't think our economy can wait that long."

Several governors noted that low water reservoirs with hydroelectric facilities in Washington and Oregon are contributing to the problem. Many of the already low pools have been drained earlier than usual to meet electricity needs, at a time when they're usually being built up to meet the summer's anticipated needs. And Kempthorne said snowpacks in some cases — in the critical Sierra Nevada range and in the Northwest — are half their normal depth at this time of the season.

After this summer? "We have a problem I think we'll have to manage carefully over two or three years," Leavitt said.

And Kempthorne mentioned that other states may see the same type of rolling blackouts as those in California. "I'm not going to say that they're inevitable, but I do think they're very likely," he said.

Among the governors' actions was a call for conservation. "It is a constant need," Leavitt said. "We have power, but there will be more than just the reason of conservation as an ethic. Prices are going up as a result of what's going on across the West."

In addition to pushing conservation, the governors' short-term actions include fast-tracking the regulatory process so electricity generation plants can be built quicker, out-of-use plants reactivated and existing generation increased. They also call for eliminating regulatory barriers to the building of small power plants so they can be constructed in 12 to 24 months.

They also want state approval of contracts allowing customers to get money in exchange for voluntarily reducing usage, a setup already in place for large customers in Utah.

The governors want rate reforms that send accurate pricing signals to customers, although Leavitt said Utah already has a good system. "I think this is really designed to say that you really can't shield ratepayers from the true cost of their energy for long, because ultimately the piper has to be paid," he said.

Leavitt said he was pleased to see California Gov. Gray Davis participating in the energy summit although California's electricity transmission dilemma is "sobering."

The Western Governors' Association will meet at the end of the month in Washington to assess progress, and Leavitt will meet with Utah's new Energy Supply Working Group on Tuesday to pin down figures on the state's future energy needs.


E-MAIL: bwallace@desnews.com