US FERC Chairman Vows Action By Dec On Western Pwr Woes
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10/05/2000 
Dow Jones Energy Service 
(Copyright (c) 2000, Dow Jones & Company, Inc.) 
WASHINGTON -(Dow Jones)- The U.S. Federal Energy Regulatory Commission will 
act no later than December in response to power capacity and volatility 
problems that plagued Western power markets this year, Chairman James Hoecker 
said Thursday. 
Hoecker, after appearing before the Senate Energy Committee, told reporters 
that he expected the results of an expedited staff investigation of the 
matter to be forwarded to the commission before the month is out. 
The commission will "take serious action" in response to the staff report 
"before the holidays," he said, without elaborating. 
Before the panel, Hoecker said he expected the commission to act in response 
to the staff's nationwide probe of problems besetting competitive wholesale 
markets before the end of this year. The staff report on the nationwide 
investigation is due Nov. 1. 
In meeting with reporters after the hearing, Hoecker appeared to indicate 
that the response to the Western market woes could come sooner than December. 
Hoecker outlined the tentative timetable after the Senate hearing into 
concerns the Pacific Northwest is becoming increasingly prone to power supply 
shortages in the coming years. 
The Northwest Power Planning Council projects that by 2003 the regions runs a 
one in four risk of a power shortage - and resulting grid blackouts or 
brownouts - during peak summer and winter demand periods as demand outstrips 
supply. 
In order to lessen that 25% risk to an acceptable 5%, the council determined 
the region would need an additional 3,000 megawatts of new generation 
capacity, either installed or imported from elsewhere. 
The hearing featured testimony from the Bonneville Power Administration and 
others regarding how California's grid capacity problems this summer have had 
an adverse affect on the region in terms of price volatility. 
Prepared testimony from BPA featured a graph illustrating that the region's 
spot market prices during the two years prior to California's power market 
restructuring never exceeded $50 per megawatt-hour, and typically were well 
below that level. 
Since the California power exchange began operating in May 1998, spot market 
volatility markedly increased into a price spike this summer in excess of 
$200 per megawatt-hour. 
But another key factor in the Pacific Northwest's problems was dry weather 
that depressed available hydropower generation from the region's massive 
complex of federally owned dams, said Stephen Oliver, BPA's vice president of 
bulk power marketing and transmission services. 
The difference between a wet year and a dry year is 5,000 megawatts of power 
generation capacity, Oliver told the committee. 
Sen. Slade Gorton, R-Wash., who chaired the hearing, elicited from Oliver 
that operational changes mandated to aid migration of salmon and other 
endangered fish cost the system another 1,000 megawatts of capacity. 
"At this point, the pricing problems in California and the Northwest appear 
to be related," he said, citing near-record warm weather in the region and 
lower-than normal hydropower availability. 
Additionally, Hoecker attributed the region's price volatility to 
California's "very high reliance on the spot market." 
The supplies of power in the U.S. West are "simply inadequate," Hoecker said. 
The picture painted by the hearing testimony served in contrast to the 
"rumbling" of officials in California that imports of federal hydropower from 
the Pacific Northwest were contributing to California's market problems, 
noted Sen. Gordon Smith R-Ore. 
"It is the structure of (California's) market that has created the problem," 
said Smith, noting, too, that the state's discouragement of new power plant 
capacity has contributed to the problem. 
"It looks like the markets have gone haywire," said Sen. Ron Wyden, D-Ore., 
who attributed the problems to deregulated power markets. He vowed to fight 
any congressional deregulation legislation that threatens to raise power 
costs in the Pacific Northwest. 
-By Bryan Lee, Dow Jones Newswires; 202-862-6647; bryan.lee@dowjones.com