Air Date: Week of January 19, 2001

Transcript

TOOMEY: This is Living on Earth. I'm Diane Toomey, sitting in for Steve Curwood. As George W. Bush settles into his new job in the Oval Office, his cabinet picks are just about set to begin their work, too. Christine Todd Whitman sailed through her hearing for head of the Environmental Protection Agency. Meanwhile, Gail Norton, up for Interior Secretary, faced more intense questioning of her environmental record. As part of our ongoing coverage of the leading environmental players in the new administration, we take a look today at Spencer Abraham, George W. Bush's choice to run the Department of Energy. Matt Wald, reporter for the New York Times, attended Abraham's confirmation hearing. Matt, thanks for joining us.

WALD: Hi Diane.

TOOMEY: Things have been fairly heated in some of the hearings lately. Talk to me about the temperature of the room for Abraham's questioning.

WALD: Oh, this was about as bland as it gets. The senators kept referring to him as "Spence." They each have some peculiar, particular energy interest. They tried to pin him down, but didn't try very hard and did not succeed. And it was all very friendly.

TOOMEY: Tell us what some of the issues were that the senators on this committee - this is the Energy and Natural Resources Committee - brought up during the hearing.

WALD: They want to know about the Arctic National Wildlife Refuge, which he did not commit himself to up front, but it seems likely the Bush administration's going to move to drill there. They want to know about what we're going to do to increase domestic production. Some of them want to know what we're going to do about conservation. Mr. Abraham was not specific about anything. He did, as a senator, oppose making the mileage standards on cars stricter. But he did not talk about specifics of how we would stimulate drilling, how we would improve efficiency of land use. He promised to study lots of things, but he didn't commit himself.

TOOMEY: Abraham, in his past, wanted to abolish the Department of Energy. Did he get asked about that?

WALD: That was one of the few specifics he foreswore his previous position. He had called upon the department to sell off some hydroelectric generating assets, and that's a hot political topic for people in the Northwest who get cheap electricity from these things because they're government, they're not commercial. And he said he no longer thought that was a good idea, to general chuckles around the room.

TOOMEY: Of course, the energy issue that's been making the most headlines of late is the energy crisis of California. The state government there has relinquished control of the power industry to make it more competitive, but a number of factors have conspired to produce those rolling blackouts in that state we've been hearing about. How did Abraham say the Energy Department would deal with this issue?

WALD: They asked him three times and three times he said he wasn't going to say a thing, because he doesn't want to interfere with the negotiations now going on between the utilities, the state legislators, the governor of California, and the power producers. They pushed as hard on that as on anything, but he was pretty resolute in sitting back and leaving this to the current administration, at least for the next few days.

TOOMEY: What was the committee's reaction to that?

WALD: They just kept asking. To a certain extent they're playing to their home audiences, which are two. One audience is California, which has a problem. And the other audience is the Pacific Northwest, which is now under an order from the Energy Department to sell electricity to California. This is not to their economic advantage under present circumstances. And they don't want to do this forever.

TOOMEY: So, was there a chance that the energy crisis will spread beyond California's borders into the Northwest?

WALD: I don't think it will spread in the form of rolling blackouts. Generally, when you have a problem in one power control area, neighboring areas will be required to sell power, shipping what they can, but not to the point of turning off the lights themselves. It will spread in a different way, which is, it could drive up power costs outside the area in a way that will be detrimental to other parts of the West.

TOOMEY: Let's step back a bit and talk about the reasons why California is in this crisis. Can you give us a brief summary of what led up to this?

WALD: In the good old days, you had a monopoly utility that was responsible for generating electricity, transmitting it and distributing it. And those places, those companies, did not run short of power because they could make money by investing in new plants. They could also have the finger pointed at them if they ran short, so they always built and built and built. Deregulation has been coming in all kinds of places around the United States, but California was out front on this. California severed the utilities from the generating stations, told them to sell their generating stations, said we'd get independent companies to build generating stations, and that this would encourage competition on the generating side. But they, in this process, did two things they didn't think through too clearly. They let the wholesale price fluctuate according to the market. And at the moment buying electricity in California, it's like selling lifeboat seats on the Titanic. The price becomes astronomical because there's no flexibility in demand. And the other problem is as part of this deregulation deal, they froze the price to the consumer. So the utility is paying higher and higher prices, but can't get higher prices from homeowners, commercial customers, etc. The result is they're going bankrupt. And this has developed with increasing rapidity. It'll take a long time to solve, because what you really need to drive down prices is either to build more power plants, which you can do but not instantly, or to cut demand. You can do that by raising prices, but the legislature doesn't want to let the utilities do that.

TOOMEY: Many other states around the country are at varying points in the process of deregulation. Are they doing it differently than California did?

WALD: Well, New York is interesting. Each state has done it slightly differently. In New York, the wholesale price was deregulated, but so was the retail price. So the increases in wholesale price were passed through to customers who complained loudly and were paying through the nose. But it probably held demand down somewhat, which in turn held down the wholesale price.

TOOMEY: It seems that energy crises at the state level are either avoided or created at that level. So, is there any possibility the Department of Energy can come in on its white horse and save the day in California, for instance?

WALD: The role is pretty limited. What the current Energy Secretary, Bill Richardson is doing, strikes me a little bit as what Bill Clinton's trying to do in the Middle East, which is bring parties together, knock heads together, and get them to agree without having any direct control over the situation.

TOOMEY: Matt Wald covers energy and other issues for the New York Times. Matt, thanks for joining us today.

WALD: Thank you, Diane.

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