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ASHINGTON — It didn’t take long for President Bush to face his first “crisis” in the Oval Office — how to deal with California’s widespread energy shortages.
One group that hopes Bush acts quickly is the Building Owners and Managers Assoc. International (BOMA), the nation’s largest lobbying organization for corporate facility operators.
Early this year, BOMA leaders from around the country convened in Washington to draft a federal energy policy proposal aimed at helping their 18,000 members. The resulting document called upon the federal government to enact a policy that ensures that “all consumers have access to adequate supplies of reasonably priced energy by addressing the energy challenge from both the demand and supply perspective.
Specifically, BOMA advocates that the Bush Administration:
- Identify reliable sources of domestic and renewable energy.
- Eliminate unreasonable regulatory burdens and restrictions that inhibit the development of these energy sources.
- Identify and eliminate regulatory structures that impose artificial pricing schemes.
- Ensure an uninterrupted transmission and distribution energy network.
- Protect consumers in the absence of competitive market forces.
No group of Americans is watching this issue more closely than corporate real estate executives and their facility managers – and with good reason. For many of them, maintaining access to adequate, affordable power supplies is their most important consideration in facility location.
In a recent interview with Site Selection, Karen Penafiel (pictured below), vice president of government and industry affairs for BOMA in Washington, discussed her organization’s views and efforts on this issue.
SITE SELECTION: How did the leadership of BOMA come to the conclusion that a federal plan guaranteeing access to adequate energy supplies was needed to address this crisis?
KAREN PENAFIEL: BOMA’s goal all along has been to create a national energy marketplace. The federal government has balked at enacting such a plan. So this has created exactly what we didn’t want to see happen. This has created a crazy quilt of patchwork energy solutions around the country. Then the California crisis happened. Timing being on our side, we had a large segment of our membership together in January for our winter meeting. It was a perfect opportunity for us to re-examine our own policy. We realized that the energy situation had changed dramatically. The supply in California no longer exceeded the demand. We decided that we needed to make a change to the BOMA policy statement. The Northwest states also spoke up and said, ‘Look, this is impacting us.’ And other states such as New York are looking at facing a severe power shortage in the near term. Plus, we had a lot of our members who were on interruptible contracts. They had experienced only one brownout in the previous 12 years. And now they were experiencing prolonged power shortages, and the penalties they incurred for not shutting down were huge. It was not part of the expected business plan for them. All you have to do is look at who’s in California. It’s the large high-tech firms that are pulling the strings. They finally rose up and said, ‘Fix this problem, or we will locate our business elsewhere.’
SS: How has the West Coast energy problem directly affected your membership?
PENAFIEL: From our members’ perspective, people are looking at property deals differently now. They will no longer invest in a building unless it has a triple net lease that requires the tenants to pay 100 percent of their utility costs. Real estate as an investment in California has been affected.
SS: What created the crisis in the first place?
PENAFIEL: Part of it has been all the barriers erected against the construction of new power plants. And California is not the only state that has a problem. Florida has huge regulatory barriers to building new generation plants. In the past decade, very little has been built in terms of new power plants in these high-growth states. Meanwhile, California’s demand has grown 5 percent each year for the past decade without the building of any new power plants. Part of the problem also was deregulation. The fact that the question of deregulation of the energy industry in California was on the table for so long created uncertainty in the marketplace. This forced power companies to face this question: Would any new generation plant be deemed a justifiable expense? So I think that the whole cloud of uncertainty contributed to the problem. California’s problem also was the way it set the retail prices for electricity artificially low. That made it extremely difficult, if not impossible, to allow competitors to enter the marketplace. The California utilities were required to buy power on a day-to-day basis and could not enter long-term contracts.
SS: How optimistic are you that President Bush will take the steps necessary to prevent the California problem from becoming a national crisis?
PENAFIEL: I fully agree that this is a national problem, but I’m not sure that anyone knows what the answer is. I don’t think an easy answer exists. There are so many facets to the problem. It is going to be very difficult to find something that hits the heart of the problem. The time is right for some federal legislative effort to pass this year. A bill introduced Feb. 26 by Alaska Sen. Frank Murkowski, a Republican, has already received the support of Senate Majority Leader Trent Lott and fellow Republican Sen. Pete Domenici of New Mexico. It is called the National Energy Security Act of 2001. A lot of the incentives to develop new energy resources in that measure cost money. Does it address the supply side? I think it does. There is a lot of emphasis in that legislation on identifying the barriers to new power sources and on promoting new technologies. Those are critical steps. But this bill will also be extremely controversial because it includes a provision to open a portion of the Alaska National Wildlife Refuge for oil exploration and extraction.
SS: What advice are you giving to BOMA members right now?
PENAFIEL: We are trying to let our people know that we are a source of knowledge and solutions on the issues affecting their business. We tell them what is going on in Washington and in their home state. We are also being proactive in the area of new technology. We want to give our members the tools they need to meet the challenges they face.
Editor’s Note: For up-to-date information on BOMA’s legislative efforts on the energy issue, go to www.boma.org.
