I want to thank Chairman Wood and Commissioner Brownell for holding this
important meeting on Western energy infrastructure. It is vitally important
that the Commission understand the unique character and challenges of the
Western Interconnection before making decisions that affect our energy
infrastructure.
Unlike the Eastern Interconnection and ERCOT (Texas interconnection), the
Western Interconnection has unparalleled diversity in generating resources. We
have huge hydroelectric generation in the Northwest, major coal generation in
the inland West and gas and nuclear generation in California and Arizona. We
have diverse loads with demand in the Northwest peaking in the winter and
demand in the Southwest peaking in the summer.
Unlike the other grids, our grid includes our neighbors to the north in
Canada and to the south in Mexico. Sufficient transmission to take advantage
of our diversity of fuels, particularly our abundant coal and wind, is a major
challenge.
I appreciate the Commission holding this meeting on the West in the West.
We value the Chairman’s leadership in this regard. And I appreciate
Commissioner Brownell’s further efforts to reach out to the states, and
particularly the West. You have recently observed, quite correctly, that many
of us know little about FERC, we know little about how you operate, and we’re
limited in the people we know in your organization. But we do know that you’re
now a vital partner in providing for the energy needs of our citizens, and
your efforts to inform and communicate are welcomed.
I also want to thank the Commission for approving the Western Electricity
Coordinating Council. The WECC is an important piece of the institutional
infrastructure needed to address western electricity issues.
This morning, I am wearing two hats: Governor of the State of Arizona, and
Chairman of the Western Governors’ Association. I would like to comment from
both perspectives.
(Western Governors’ Association perspective)
The members of the Western Governors’ Association serve states covering a
vast and diverse part of North America. We are keenly aware of the unique
character of the nation’s power grids, but we also hold common views on the
principles that should guide grid decisions.
This August, Western governors adopted an energy policy roadmap for the
West. This roadmap reflects the intensive work on electric power issues by
Western governors over the past year. The Western electricity crisis has
illustrated the limitations of unilateral action by single states and by
federal agencies. States must take the lead in shaping the region’s
electricity future, and we urge the federal government to support us in this
effort.
It is important for our friends from FERC to understand that they are not
dealing with a blank slate in the Western Interconnection. A solid foundation
for ensuring the adequacy and reliability of the Western grid is being laid.
The electricity crisis in the West should not be used as an excuse to
gather powers for the federal government and effectively disenfranchise those
who pay the costs and bear the consequences of grid decisions. We are very
sensitive to such efforts given the wholesale power market debacle of the past
year in the West.
Western governors have taken a leadership role in addressing electric power
and particularly transmission issues. We realize that we cannot wait until
RTOs (Regional Transmission Organizations) are in place before beginning to
address our transmission needs. On May 9, Western governors brought together
public and private sector leaders from around the Western Interconnection to
address three key questions:
1. What transmission enhancements are needed in the Western
Interconnection?
2. How can needed transmission be financed?
3. How can needed transmission be expeditiously sited and permitted?
The Governors created a Working Group and charged it with developing a
Conceptual Transmission Plans for the West in about 60 days. Jack Davis, the
CEO of Pinnacle West, and Marsha Smith, commissioner with the Idaho PUC,
chaired the Working Group and we cannot thank them enough for their hard work
and the quality report they produced. And your letter inviting us to this
meeting noted the valuable contribution made by that report, and we’re
grateful for your kind assessment.
The report identified two key policy issues that I hope will be part of
today’s discussion:
·
How much should consumers pay for transmission to mitigate
the exercise of market power?
·
How much should we pay for transmission to foster greater
fuel diversity and how could such a fuel diversity policy be
implemented?
The study did not have time to evaluate the adequacy of our natural gas
pipeline infrastructure, a critical issue for the region. I am pleased that
you will be discussing this today.
I am also pleased that Chairman Wood is interested in improving the
analytical capabilities at the Commission. The Commission needs to better
understand the Western electricity system before adopting policies. Calls for
national uniformity cannot be a substitute for understanding the impact of
FERC policies on the Western Interconnection.
Regarding transmission financing, we have asked the WGA Transmission
Working Group to develop a paper on the pros and cons of the financing options
identified in the Conceptual Transmission Plans report. We also note that
extensive work on transmission pricing is part of the RTO (Regional
Transmission Organization) work in the West. This is an issue requiring the
cooperation of the Commission.
On the critical issues of transmission siting and permitting, we are
dismayed at the approach of some inside the Beltway. To those who want to
grant FERC the power of eminent domain for transmission, we urge you to
carefully examine the real hurdles to new transmission and the track record in
the Western Interconnection.
We are presently engaged in an effort to develop a multi-state protocol for
the expeditious review of interstate transmission proposals. The states met on
Wednesday to discuss a draft protocol. We are hopeful that federal agencies,
including federal land management agencies and federal power marketing
administrations, will join this cooperative effort.
In the West, it is often the federal government through its land management
agencies that present the greatest challenge to the expeditious siting and
permitting of new transmission. In fact, the Western states have a sterling
record. No state in the Western Interconnection has ever denied a permit for
an interstate transmission line.
Regarding reliability management and oversight, we are deeply concerned
about the "give-it-to-FERC" approach to reliability that is popular
with some in Washington. We urge that federal reliability legislation delegate
those responsibilities to the West. We also believe that those who pay the
bill and bear the consequences of reliability decisions should oversee the
process.
The world has changed since September 11. We need to carefully examine the
security of our energy infrastructure in the West and to incorporate into our
infrastructure decisions an analysis of the risks of terrorism. However, we
need to be wise in our response. We cannot arbitrarily shut off the flow of
information to limit access by terrorists. Information is the lifeblood of
competitive markets and sound government decision-making.
(Arizona perspective on the Western energy situation)
In my capacity as Governor of Arizona, I am confident saying that we are
doing our part to contribute to the region’s generation, transmission and
reliability needs.
Recently, I had the pleasure of "starting up" the Griffith Energy
Plant in Kingman. It is the 4th major new plant in Arizona this
year, adding another 600 megawatts to our state energy supply. We added a
total of 1830 megawatts in the first nine months of 2001. This year, we’ve
added more capacity than the State of California, or any other Western state.
All of these are clean-burning, environmentally-friendly projects.
We’re increasing generation, and conserving to meet our remarkable growth
needs.
At the same time, we are moving forward on a coordinated transmission plan.
Through the combined efforts of our generators, distributors, regulators and
policy makers, Arizona has developed a transmission "roadmap" for
our state that will integrate into the plans being developed for the region.
We’ve been making the tough decisions and working through the public
processes to ensure that we have the lines we need in Arizona to move the
additional thousands of megawatts we have under construction.
Without going into any detail, I believe everyone here is aware that the
stakeholders in Arizona have been at the forefront in achieving substantial
progress toward a seamless, transparent electricity infrastructure in the
West. We are not making this progress because it was ordered by someone in
Washington -- far removed from our situation and our circumstances. We’ve
been making these significant strides because it is the best way to provide
reliable and affordable electricity to our consumers. That has been the
motivation for most of our progress in the West, and we welcome the
opportunity to continue moving forward in that manner.
I am pleased the Commission is holding this meeting in the West. I urge you
to focus on cooperative actions that will help address the central questions
Western Governors posed in May.
In this time of national crisis, each of us needs to do what we can do
best. The federal government clearly needs to focus on the international
energy challenges we face. The Western states are focusing on the energy needs
of a robust Western economy.