Former utility CEO says problem will continue to worsen 2001-02-08 by Clayton Park Journal Business Editor

BELLEVUE -- Get ready. Those high electricity and gas rates aren't going away after this winter. They're here to stay, and they're going to get worse.

Those are the views of John Ellis, retired CEO of Puget Sound Energy, the Bellevue-based utility company, who shared his observations regarding the Pacific Northwest's current energy woes in a recent Journal interview.

While Ellis is perhaps best known for the seven years he spent as CEO of the Seattle Mariners, from 1992 to 1999, he spent the greater bulk of his career -- 17 years -- as president, CEO and chairman of Puget Sound Power and Light Co., which later merged with Washington Energy to become Puget Sound Energy. He still sits on the utility's board of directors.

According to Ellis, the country's energy picture is much worse today than in 1977, when President Jimmy Carter declared the country's then-energy crisis the ``moral equivalent of war.''

Locally, Ellis warns that the Puget Sound region's energy woes likely will be even worse next winter because this year's snowpack, which he describes as woefully inadequate, ``is next year's energy supply.''

By one measurement, the volume of water available to power hydroelectric generators will be just 63 percent of normal, according to the Northwest Power Pool.

See POWERPROBLEM,A12

To bring reservoirs up to average levels would require rain or snow totaling 151 percent of normal.

``I don't like to be this harbinger of doom,'' Ellis said, ``but obviously the conclusion is going to be: We'll have some problems.''

Don't blame Californians

Ellis doesn't believe it's fair for Pacific Northwest residents to pin all the blame for our energy woes on California. Even if some of our energy wasn't being diverted to California this winter, Ellis believes we would be headed for a crisis because of this region's growing population and increased energy consumption.

California, now in its fourth straight week of a full-scale power emergency, narrowly averted rolling blackouts yesterday caused, in part, because low water here means Californians are assured only half the power they normally draw from this region during peak periods.

Ellis and other Northwest utility officials feared that this day would come when the power transmission lines connecting our region with California were built in the early 1970s.

The theory at the time was that California would send us its surplus energy during the winter, when the Northwest's energy usage is higher due to the need to heat homes, and the Northwest would reciprocate in the summer, when Californians' use more energy air-conditioning their homes.

But Ellis said utility officials here worried that ``if we build transmission lines to California, they'd be able to exercise their muscle and basically take our cheap Bonneville power and move it south, and we'd lose our advantage.''

What eased Ellis' mind was the creation by Congress of a regional preference provision that gave the Northwest permanent priority over the use of Bonneville Power. That rule remains in effect today, he said.

Looking for solutions

As far as possible solutions go, Ellis believes price controls aren't a viable option because they are only a Band-Aid fix. The unassailable fact is that demand is outpacing supply in this region, he said.

While government intervention to keep energy costs capped mollifies rate-payers in the short term, it will ultimately lead to rolling blackouts, like the ones Californians are experiencing.

Ellis isn't surprised at what's happening in California because he saw it coming when that state decided to deregulate its utilities while continuing to maintain price controls.

``Deregulation, if you leave one side regulated, is by definition nonsense,'' he said.Fortunately, the problem in the Northwest isn't that bad -- yet.

Increasing the supply by building new energy generators would seem the obvious answer, but Ellis points out that such a proposition is easier said than done.

There are no places left in this region to build new hydroelectric dams, said Ellis, who notes that, if anything, the trend has been to reduce the number of dams because of environmental concerns and the recent emphasis on restoring salmon runs.

Tradeoffs

The regional Bonneville Power Administration estimates that one-fifth of federal hydroelectric power is no longer available due to fish protection. That is expected to increase to 25 percent within the next 10 years.

Ellis doesn't necessarily oppose such efforts, but he said the public needs to be aware of the tradeoffs: Eliminating dams will make our energy supply even tighter.

Thermal plants also are an iffy proposition at this time, even though several private companies have received permits to build new generators, Ellis said. Because the price of natural gas has skyrocketed in recent years, the operation of gas-fired generators is cost-prohibitive, he said.

Alternative energy sources, such as wind-powered generators, ``sound nice, but they are not only expensive but obviously the wind doesn't blow all of the time. It's not like a coal or nuclear plant where you can run it 90 to 95 percent of the year,'' Ellis said.

He added that wind generators also are difficult to locate, and require a large amount of space.

Stepping up conservation efforts can help but, Ellis notes, much of that work already was done in the 1980s and early 1990s. Once a homeowner has replaced their single-paned windows with more energy-efficient, double-paned windows and installed insulation, etc., there's not much left to be done, he said.

In the past two decades Puget Sound Energy provided extra insulation and energy efficient windows to more than 165,000 homes, wrapped 378,500 water heaters in energy saving insulating blankets and installed 680,000 efficient showerheads and faucet aerators.

Puget estimates such programs now save about 1.8 billion kilowatt hours of electricity annually -- enough to serve 153,000 homes.

Watching the clock

With those ``easy'' solutions already in place, the most viable next step, according to Ellis, is to encourage consumers to reduce energy usage during what utility companies call peak times: the hours of 6-8 a.m., when most people are waking up, taking showers and turning on appliances, and 4-7 p.m., when most are returning from work, cooking dinner and turning on televisions or home computers.

Ellis said utility companies should follow the lead of Puget Sound Energy, which recently launched a program called Time of Use Pricing, which encourages consumers to reduce peak-time energy consumption. By next year, the utility hopes to charge a lower rate for off-peak times.

Gov. Gary Locke has proposed an energy package allowing utilities to charge less for off-peak power.

If consumers are charged the same rate no matter what time of day or night they use energy, there is no incentive for them to change their habits, Ellis said.

``It's very important that people understand why prices are going to go up and what they might be able to do themselves to keep costs down,'' he said.

Ellis remains hopeful the nation can dig itself out of this energy mess, much like it did in the 1970s when Americans responded to Carter's declaration of war on our dependence on foreign oil.

Conservation stopped

Those efforts continued into the 1980s during the Reagan years, to great success, but for some reason dissipated in the '90s after the Gulf War.

In the past decade, Ellis said, he has seen a return to wasteful energy-consumption, thanks in part to the proliferation of electrical appliances and gadgets, such as home computers and even Palm Pilots, as well as gas-guzzling vehicles such as SUVs.

In the Northwest, he said, the energy supply problem was masked in recent years because of higher-than-normal rainfall levels, brought about by La Nina. Now that our region's weather patterns have returned to more normal conditions, the limitations of our energy supply have become exposed.

In other words, the energy joy ride is over, folks.

``The best analogy I can think of is transportation,'' Ellis said. ``It's like what's happened with our roads and highways. We've let them go without adding new roads. Now we've got traffic jams everywhere. The same thing has happened with our energy supply.''

Ellis believes the federal government needs to get serious about the problem by adopting a new, aggressive energy policy that encourages renewed efforts to develop the nation's supply of domestic oil.

``We've had no energy policy the last 10 years,'' he said. The country needs to take a closer look at potential energy sources across the board, including ``gas, oil, green power where it exists, and additional hydro,'' he said.

Now that George W. Bush, a former Texas oil man, is in the Oval Office, Ellis is optimistic that the nation's energy woes will be addressed.

``The old timer here is not telling you I told you so,'' said Ellis, ``but we did it once before, and I think we can do it once again.''

Journal staffer Mike Ullmann contributed to this report. Clayton Park can be reached at 425-453-4224 or clayton.park@eastsidejournal.com.

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-- Martin Thompson (mthom1927@aol.com), February 08, 2001