Northwest leery of energy plan

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WASHINGTON - A federal initiative designed to improve the efficiency of the electrical grid is facing skepticism in the Pacific Northwest, where officials are disillusioned by the Federal Energy Regulatory Commission's response to the regional energy crisis.

Regional transmission plan What is being proposed: Federal officials want to create six "Regional Transmission Organizations" (RTO) across the country. Under the RTOWest, all transmission lines in Washington, Oregon, Nevada, Utah, Idaho and parts of Montana and Wyoming would be monitored. The lines would still be owned by separate utilities. Why they want it in place: Bonneville Power Administration and other program supporters say the consolidation will improve reliability and save consumers money by eliminating charges tacked on as electricity moves across lines owned by separate utilities. How much will it cost: Estimates range between $30 million and $90 million. The initial investment will fund construction and computer equipment for a new transmission-control center. What the critics say: Officials in the Pacific Northwest, reeling from the energy crisis, don't have time to focus on a major new initiative. Some also worry about ceding any additional influence to the Federal Energy Regulatory Commission, the agency proposing the RTOs.

When the commission called for the formation of "Regional Transmission Organizations" (RTOs) in 1999, regulators called the move "its most significant action on electric-industry restructuring" in years.

And officials at the Bonneville Power Administration and other supporters of the plan remain convinced that consolidating control of the routing and delivery of electricity under regional umbrella organizations will increase reliability and lower customers' rates.

But some question the wisdom of pursuing the program when Western electricity markets are in disarray. Stoking those doubts is the Federal Energy Regulatory Commission's (FERC) refusal to impose cost-based price controls on the wholesale electricity market, where prices have been soaring.

Electricity passes through lines controlled by several utilities as it moves across states and regions. As it travels, it accumulates fees known as "pancake charges" from each new line operator. FERC is proposing that utilities combine their transmission systems under a single new entity, eliminating some of those "pancake charges" and streamlining efforts to monitor supply and demand.

"The RTO formation provides for FERC a greater degree of jurisdiction over critical transmission assets - and we're not seeing a great deal of action on the part of FERC to be aggressive about putting the power market, generally, in the West, back into reasonable order," said Dick Byers, electricity adviser to the state Utilities and Transportation Commission.

"There is skepticism about whether it makes sense to place that much reliance on FERC's jurisdiction over critical power-market matters," Byers said. "That skepticism is becoming pretty broad."

Coordinator remains confident

Seattle attorney Egil "Bud" Krogh has been retained by BPA and other private and public utilities in the region to coordinate the lengthy FERC filing process to form RTO West. Asked whether there was sufficient political resistance to the plan to halt the program, he said, "I hope not."

"It's always a truism that crisis conditions can sort of push out good long-term policy-making," Krogh said. "We can be responsive to the emergency conditions that we face today as well as keep ourselves focused on developing the best RTO."

The coordinating committee has held public hearings and its filings are available for scrutiny, but the project - whose start-up costs could range from $30 million to $90 million - has received surprisingly little attention.

FERC is expected to issue an order within a month accepting or recommending changes in a preliminary proposal for the structure of RTO West, which would cover Washington, Oregon, Idaho, Montana, Utah and Nevada, as well as parts of Montana and Wyoming.

Concerns expressed by officials like Byers could be significant, because state commissions must approve the transfer of oversight of any investor-owned transmission lines before the new organization can be formed.

"It is quite possible that FERC might like such a move, and state commissions might block it," said Jim Harding, government-affairs director at Seattle City Light. "If that happens, RTO West is no more."

Why regulators want RTOs

The RTO concept grew from deregulation of the wholesale electricity market following passage of the Energy Policy Act of 1992. Federal regulators believe that combining transmission operations will alleviate stress on the bulk power market, improve management of the transmission grid, cut transaction costs and eventually answer many of the concerns growing out of the current power crunch.

Peggy Olds, who is heading up the RTO West project for BPA, said the system could save consumers as much as $30 million a year across the region.

"There are parts of the market that have generation sources, but because of lack of transmission investment can't get those transmissions to the areas that need them," she said. "I see RTOs as part of the solution."

Critics, led by Seattle City Light and several other public utilities, believe the current crisis is reason enough to at least delay the plan.

"The current power-supply shortage in the West is a problem that requires the priority attention of all concerned," members of the Public Generating Pool (PGP) wrote last month to the Northwest congressional delegation.

The PGP is made up of City Light and public utilities in Cowlitz, Douglas, Grant and Pend Oreille counties.

"We strongly believe that the projected expense of setting up and running an RTO in the Northwest would be better directed to fixing problems, as well as making investments in new generation capacity and conservation programs," the letter said.

Krogh, Olds and others remain optimistic that they will eventually win over the critics.

"We have the time to do it right," Krogh said.

Kevin Galvin can be reached at 206-464-8550 or kgalvin@seattletimes.com.