PORTLAND, Ore. (AP) -- Gov. Ted Kulongoski says Oregon must take the initiative for energy policy changes without waiting for a response from the federal government.

"Delay will only make the hole we're in deeper," Kulongoski told an energy summit he convened on Wednesday.

About 175 leaders of the business community, energy suppliers, and environmental and consumer groups gathered at Nike's Beaverton-area campus to grapple with the state's energy future.

Kulongoski said he will create an advisory group by the end of September to focus on what he calls "the most important public policy question facing the state."

The questions facing the panel will include how much energy does Oregon have and need, and how will it make up the difference while acting aggressively to reduce carbon emissions.

Oregon's 1.6 million households spent $2.1 billion on natural gas and electricity in 2006, and the overwhelming consensus among energy experts is that costs will go up no matter what policies state leaders adopt.

Ratepayers will get a taste of what's to come this winter, as both natural gas and electricity rates are expected to spike because of rising commodity costs.

One in four households in the state qualify for a limited pool of low-income bill paying and weatherization assistance. Meanwhile, manufacturers are struggling to keep up with increased production and transportation costs.

According to the Northwest Power and Conservation Council, regional demand for electricity will grow 40 percent during the next 15 years because of higher per capita consumption and population growth.

"Renewable energy will not be able to satisfy Oregon's demand for energy," Kulongoski said. "We may have to accept solutions that are not to everyone's liking."

Options include liquefied natural gas terminals, clean coal, nuclear energy, a carbon cap and trade system, and a major buildout of pipelines and power lines to tap more fossil fuels and renewables.

The policy prescription topping everyone's list Wednesday was a major increase in spending on energy efficiency.

The cost of saving a kilowatt hour of electricity is about 1.3 cents, while the cost of generating a new kilowatt hour is anywhere from 8 to 10 cents, according to the Energy Trust of Oregon, which coordinates energy efficiency and conservation programs in the state.

The governor already has an energy-efficiency work group that is slated to deliver a report next month on legislation for the 2009 session.