COMMENTS OF PORTLAND GENERAL ELECTRIC

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					                  COMMENTS OF PORTLAND GENERAL ELECTRIC
                    TO THE WESTERN CLIMATE INITIATIVE ON
                     THE DRAFT DESIGN RECOMMENDATIONS
                              DATED MAY 16, 2008

Dear Western Climate Initiative partners:

         Thank you for the opportunity to submit comments on the draft design
recommendations. Portland General Electric (“PGE”) has participated in all of the fora available
to Oregon stakeholders, including conference calls, stakeholder meetings, regional meetings
and written comment opportunities. We have expressed serious concerns at those times
regarding the Western Climate Initiative partners’ (“partners”) proposals for a regional cap and
trade system. Unfortunately, the Draft Design Recommendations released May 16, 2008,
resolve few, if any, of the concerns we have raised. Rather, the partners seem to be headed
down a policy path that is likely to penalize Oregon and impose significant costs on PGE
customers. After looking at the recent release of design recommendations we wish to highlight
the following issues:

CREATING A LEVEL PLAYING FIELD

      Each WCI partner state must have the same reduction target under the cap and trade
       program. The partners have created an aggregate regional goal from individual state
       goals that were not adopted with a larger, regional context in mind. Requiring Oregon to
       achieve an emissions reduction target under the cap and trade that is more than double
       the target required of all but one other partner imposes an unfair and unreasonable
       burden on Oregon citizens and businesses – both in terms of per capita costs and as a
       percentage of state gross domestic product.

      We strongly oppose the recommendation to allow individual state partners to set
       fundamental market rules on a state-by-state basis. We believe the partners must set
       common rules for allowance allocation, percentage of allowances to be auctioned, cost-
       containment and key program design features. Creating a state-by state hodge-podge of
       market rules will impose unequal carbon costs on utilities and other regulated entities
       solely on the basis of the entities’ location within the WCI region. Perhaps more
       importantly, the actions of any one state could create market distortions that will affect
       carbon and power markets throughout the west. We need only look to the western power
       crisis to see the profound effects that one state’s energy policy decisions can have on
       western power markets, utilities and their customers throughout the WECC.

MINIMUM AUCTION AMOUNT IS TOO HIGH

      While we note that the partners have suggested lowering the auction amount in the early
       years of the program, we are opposed to requiring a minimum of 25% of allowances in
       the auction. A small auction, 3 to 5% in the early years, but perhaps increasing over
       time, would be more appropriate. Allowances should be allocated at no cost to rate
       regulated utilities on the basis of their historic emissions. Requiring rate regulated
       utilities to purchase allowances at auction needlessly increases the costs of program
       compliance for utility customers.

SHARING THE BURDEN

      We view it as a positive development that the partners have called for including
       residential and commercial fuels in the cap and trade. Every sector that contributes to
       the problem must pull its weight so that we can achieve the reductions that scientists say
       are necessary. The bottom line is that we’re all in this together. However, residential and
       commercial fuels, as well as transportation fuels, should be included within the cap from
       the very beginning, not phased in over time.

PLANNING FOR THE FUTURE

      The partners have not provided for transition to federal regulation of greenhouse gases.
       A federal compliance system is only a few years away and will, by virtue of its national
       scope, provide a more efficient regulatory framework for addressing this global problem.
       The regional system must be designed to integrate smoothly into the federal system,
       once it is in place.

         We are sympathetic to the difficult job that the partners face. Developing a new market is
no easy task, but the partners must do the hard work and make these decisions at the regional
level so that we minimize the risks of market dysfunction and soaring carbon and power prices.
Proper market design, one that has adequate protections against the unknown, including
flexible compliance tools and systems to prevent market manipulation, is crucial. We still believe
that a pre-established cost containment mechanism like a safety valve is essential.

      Thank you for the opportunity to comment, and we look forward to the next step in the
WCI process.