05.03.01

Cantwell Tells FERC Commissioners That Rising Power Costs Are Creating Economic Hardship For Thousands Of Families

WASHINGTON, D.C. - At a hearing of the Senate Energy and Natural Resources Committee today, U.S. Sen. Maria Cantwell (D-Wash.) told commissioners from the Federal Energy Regulatory Commission (FERC) that thousands of families in Washington state and throughout the West are losing jobs and suffering severe economic hardships because the FERC is not using its statutory authority to help stabilize the energy market and bring power rates under control. She said the order issued by FERC last Thursday doesn't do enough to help California and does nothing at all for Washington, Oregon and most other Western states.

Senator Maria Cantwell's opening statement (as prepared):

I am glad we are having this hearing today and I want to thank Chairman Murkowski and Senator Bingaman for recognizing the importance of the energy issue to those of us from the West.

The western power crisis is taking an enormous toll on all sectors of the Washington state economy--from traditional energy-intensive industries such as aluminum smelting and paper production, to small businesses, high-tech companies, and farmers.

I recently visited with workers from Georgia Pacific in Bellingham, Washington, who are either already out of work or facing the prospect of two-year layoffs due to the unprecedented and prohibitive rise in power prices. Additionally, layoffs have been announced for businesses like Abitibi - a pulp and paper company in Steilacoom, Washington - and Pioneer Chlor-Alkalia - a chemical company in Tacoma, Washington. These layoffs are early indicators that without federal intervention now, the energy crisis' impact on the economy will get much worse.

These business closures have a devastating effect on Washington state families. Rachel Evans, an 11-year-old from Wenatchee, Washington recently sent me an emotional letter about how the energy crisis is affecting her and her mom. They are living paycheck to paycheck and if her mom loses her job at a local plant, they will no longer be able to afford their home. She writes:

... this is the very first time I've lived in a house. ...this is the most important thing in my life! ...Please listen to what might happen to hundreds of other kids (including myself)."

I've received other letters from senior citizens who fear they will have to choose between heat next winter and buying prescription drugs. One couple from Coulee Dam, Washington wrote:

"...We are both senior citizens, 66 and 65 years old, raising a grandson and living on a limited income. ...With the increased cost of health insurance, prescription drugs, heating, gasoline and just about everything you can think of, [the increase in energy prices] would put a heavy burden on not only us but almost everyone in our area. ...I don't know what people are supposed to do as they definitely can't afford [this]..."

And finally, a woman wrote to tell me about the situation in Okanogan County, Washington:

"My friends, neighbors and myself cannot afford these higher rates, but many of us only have electricity for heat. I am in a total panic because I am disabled and barely can pay for heat now, with the rates going up this much it will make it a life threatening situation...This will become a public health disaster...To make matters worse many businesses are planning on shutting down here due to the terrible economy and the power costs. This is putting the last nail in the coffin of our dire economic circumstances here in Omak, Washington. ...The pressure must be put on the Bush Administration for their refusal to address this problem."

That's what I intend to do because clearly, the federal government owes it to Rachel, her mom, these seniors and hundreds of families struggling to make ends meet to act and act swiftly. The cost of the energy crisis is real and being felt by real people throughout Washington state.

While our situation in Washington has been exacerbated by drought, far more devastating have been the effects of a wholesale electricity market that's careening out of control. Wholesale prices have already increased 11 times over this time last year. The Bonneville Power Administration, meanwhile, may be forced to raise rates by up to 200 percent this October--largely the result of the agency's exposure to exorbitant wholesale market prices.

A rate increase of this magnitude, once passed on to consumers, is too much for the average family budget to absorb. Working families will have to choose between keeping the lights on, paying the rent, or putting food on the table. These are choices no family should have to make when the federal government has the power to enact a solution.

The Public Power Council estimates a 200 percent BPA rate increase next fall would put close to 50,000 jobs directly at risk--with close to 25,000 of those in Washington alone. Coupled with the 7,500 aluminum workers who are looking at two-year lay-offs, the impact on the economy -- and human lives -- is tremendous.

Washington state has already suffered many of the early casualties of this crisis including business closures and retail rate increases in the high double-digits. It is unacceptable for western states to continue to carry this burden alone.

This is not merely a California nor even a West Coast crisis. If left unchecked, its economic effects will reverberate throughout the nation.

Western states account for approximately a third of the national GDP and more than a third of U.S. growth (34.5 percent). Layoffs in the West have already resulted in the loss of 20,000 jobs.

We cannot allow our government to sit idlely by and allow a tragically flawed and easily manipulated power market to wreak havoc on our economy and quality of life.

The crisis is being felt where the rubber meets the road: where families pay the monthly bills, where small businesses try to balance their books, where farmers operate their equipment. Even water and sewer bills will soon be affected by the cost of the electricity it takes to run the equipment.

Clearly, we are operating under distorted markets. Distorted markets send distorted signals. We need the FERC and the Secretary of Energy to do their jobs and help the market to stabilize.

The Federal Power Act 206 (a) 824(e) states:

"Whenever the Commission, after a hearing had upon its own motion or upon complaint, shall find that any rate charge, or classification ... is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order."

Unfortunately, the order FERC issued on April 26 fails to meet this goal. The price mitigation mechanism--itself insufficient and structurally flawed, in my view--is applied solely to California, once again excluding the Pacific Northwest from any semblance of relief. In addition, it only goes into effect during system alerts, when reserves in California fall below 7 percent. As Commissioner Massey has pointed out, "the record is devoid of any evidence" that our problem in the West is limited to these periods. It persists 24 hours a day, 7 days a week. I'm afraid I must also share his lack of confidence that this order will ensure the return of just and reasonable prices.

I encourage Chairman Mikulski to move quickly on the Smith-Feinstein legislation. This legislation directs the FERC to exert authority it already has, but has refused to exercise. If we do not force FERC's hand, power prices will escalate even further this summer than last. That will leave people sitting in the dark in California this summer, and in the Northwest next winter. The bipartisan Smith-Feinstein proposal will help keep the lights on.

While not an ideal solution, temporary and effective government intervention will allow the West the time it needs to put its house in order, contain the damage that has already been done, and prevent the crisis from moving eastward. If we don't stop the crisis now, the letters like the one I received from Rachel in Wenatchee, Washington will soon be coming from kids in Birmingham, Alabama and Ponca City, Oklahoma.