How do I write a cover letter for a journal that has a double blind review process when I need to reference my previous conference paper?
The editor is not subject to the double-blindness and is usually the only one to see the cover letter. They have to know who the authors are so that they can reconnect with you once reviews are in, not try to use any of the authors as reviewers, etc. I'd submit a normal cover letter and make sure that the paper itself is properly blinded. You must cite the prior conference article you are extending, but you have to do it in the third person (e.g., "...in Rosh, et al. they show that..., in this article, we extend their work to show that ...", etc.). 

If you are still confused about this issue, contact an editor at the journal and ask for clarification.