[California Energy Commission Letterhead]

SPEECH TO THE NASEO BOARD
WILLIAM J. KEESE
Chairman, California Energy Commission

SUNDAY, SEPTEMBER 10, 2000



I would like to personally welcome you to the Golden State and thank you for attending the 2000 Annual Meeting of NASEO.

The nation's energy use and future has again become front page news and captured the interest of our elected representatives on both the state and federal level. For years, an adequate supply of energy and stable prices lulled many into a belief that the days of oil embargoes, high prices, and long lines at the gasoline pump were behind us. Unpleasant, but distant memories.

As such, energy issues generally remained below the public "radar screen" with the exception of the Gulf War and a few gasoline price spikes. Consequently, the average citizen in the 1990s would not have placed energy in a David Lettermen list of the top ten things to worry about. That has changed.

In California, we pride ourselves on being on the cutting edge of technology and change, on living closer to the future, with all the risks, challenges, and excitement it adds to living, much like our earthquakes.

We enjoy these challenges, but recognize the risks. Today, we face risks that require decisions and action.

Like many other state energy offices and departments, the California Energy Commission was established in response to public concern about how to address the problems associated with high energy prices, scarcity of supply, and threats to the environment. Many of the same issues we faced at our inception 25 years ago we must confront again today. If Yogi Berra were an energy expert and here today he might say, "It's dj vu all over again."

In the next two years, I believe that our state energy offices and departments, working in concert and as part of NASEO, can help address and solve the energy issues/problems that confront us.

But it will require hard work and cooperation as the energy issues that challenge us at the beginning of a new century are not isolated in one state or region, but are inextricably linked and interwoven throughout the entire country.

In California, where we have been in the forefront to deregulate our electricity industry, we have encountered significant problems. In the San Diego area, residences and businesses witnessed a dramatic increase in their electric bills, brought about by a scarcity of supply, not only in California, but throughout the west. I believe the scarcity of supply has been compounded by the lack of adequate conservation efforts and the inability of the small commercial and residential ratepayers to respond to changing price signals.

While the problems of high prices in California have so far been most severe in San Diego, the lack of adequate supplies to meet growing demand is an issue facing the entire interconnected western grid. Solutions to these problems, including additional supplies, energy efficiency, and the ability of consumers to reduce load during periods of high prices are the same in Denver, Phoenix, and San Diego. As I said, we are linked and share common concerns.

An adequate and reasonably priced supply of electricity is not our only problem. High prices for gasoline and diesel fuels have also plagued California and other parts of the nation this year.

Yet the answer here is not merely lower prices, for we are still confronted with, more than 25 years after the first oil embargo, a transportation sector dangerously dependent on oil, much of it imported. Here, as in the electricity sector, we must avoid the temptation to rush to quick fixes that do not address underlying causes.

We need more efficient vehicles to stretch our increasingly limited supplies of oil. We need alternative vehicles that do not rely upon a single fuel source. But we cannot ignore the critical need for fueling stations to service the increasing fleet of alternative fuel vehicles available to the consumer as a result of the federal CAF standards.

We need cleaner fuels that do not contribute to poor air quality, whether it be in Houston, Los Angeles, Chicago or Atlanta.

Diversity is needed not only for vehicle fuels, but also for electric generation sources. Most of the new power plants being proposed for California and the west are natural gas-fired. This raises serious questions about the long-term availability and price of natural gas, as power plants often operate for more than 30 years.

Concerns about a mono culture of natural gas-fired power plants evokes images of 1973 in California when the lights dimmed as our utilities, dependent on oil-fired generation, faced fuel shortages. We don't want to put all our eggs in one basket again and be reminded of an old adage that says "Those who fail to learn from history are doomed to repeat it."

In California we believe the economy and environment must go hand-in-hand. That is why despite the current problems with the reliability of the electricity system, the commitment to environmental protection on the part of the Davis administration has not lessened.

Clean air, water and land and a strong economy are not incompatible.

I believe that more than ever, with the challenges facing us, NASEO can serve as an effective means to advance our shared goals. Our strategy and programs must be characterized by their efficient use of taxpayer funds and attention to both the nation's economic growth and the environment, and we must continue to advocate initiatives that together foster a balanced approach to energy opportunities and challenges.

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