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Nervous Energy by Bert Caldwell The Spokesman Review - February 18, 2001

Outlook for summer bleak without more rain or snow

Longer days will not brighten the Northwest's electricity picture, regional officials say.

Every day without rain or snow darkens the outlook for summer.

Although shortages will not likely become blackouts, stressed transmission systems could collapse, creating outages anywhere from Mexico to Canada.

And even if the lights stay on, measures taken to suppress demand for power could disable key sectors of the Northwest economy.

The aluminum industry was first. Agriculture could be among the next to suffer.

Salmon runs that rebounded last year are threatened, too. Agencies that manage federal dams on the Columbia River are generating power now with water that may be needed later to flush juvenile fish downstream.

"What we are faced with are a lot of crummy choices," said Steve Wright, acting administrator of the Bonneville Power Administration.

Wright attributed the region's dilemma to drought, the failure to develop new transmission and generating resources, and the implosion of California's deregulation plan.

Solutions will take time, he said, and the warm weather that last year sent shock waves through the West Coast utility industry looms ahead.

Although Wright and other officials said the lights will stay on, few are optimistic about the potential cost.

Until last week, Bonneville planned to introduce rates this fall double those of today, with the increase to average 60 percent over the next five years, starting Oct. 1.

Wright said the agency, which sells electricity generated at federal dams on the Columbia and its tributaries, will instead implement a rate schedule that resets prices every six months.

The hope, said a representative for Washington electric cooperatives, will be an initial rate increase below 50 percent.

Aaron Jones, manager of the Washington Electric Cooperative Association, said public utility officials expect that first rate hike to be the worst. Additional power from new generating plants should start alleviating shortages next year, he said.

Whether those new resources turn the tide on rates depends on efforts to reduce demand and, most importantly, refilling the region's shrinking reservoirs.

Few expect that to happen.

Last week, Lake Roosevelt behind Grand Coulee Dam was at 25-year lows, and falling.

Avista Utilities Vice President Kelly Norwood said runoff will not top off company reservoirs on the Clark Fork and Spokane rivers.

Although Idaho Power officials project refill at the Brownlee Dam on the Snake River, company spokesman Russ Jones noted snowpack in that watershed is just 55 percent of normal.

He said Idaho Power has spent $121 million on electricity to supplement its own generating resources. The company in April will file for a rate increase that may be as much as 24 percent, said Jones.

Other utilities have already hiked rates: Tacoma Power, 42 percent; Seattle City Light, 28 percent; Snohomish County, 33 percent.

Northern Lights Inc. in Sandpoint has told its customers to expect an increase; how much depends on Bonneville's next move.

Most other Inland Northwest residents may feel as if they are in the eye of the storm.

Inland Power & Light Co., with 30,000 customers, and Kootenai Electric Cooperative Inc., with 15,000, buy all but a sliver of their power from Bonneville under contracts that lock in the current low price until Oct. 1, 2006.

Only a handful of utility managers had such foresight.

Avista Utilities serves 310,000 electricity customers in the area. The company spent more than $33 million on supplemental power during the last six months of 2000. Washington regulators are allowing Avista Utilities to track those expenditures -- and others through June 30 -- in a separate account.

In March, Norwood said, the company will file a rate case designed to cover the cost of that purchased power.

But there could be no rate increase at all.

Norwood said Avista Utilities may ask the Washington Utilities and Transportation Commission to extend the period during which power expenses are accrued.

He said the company hopes to offset the first-year costs with profits from the sale of power surpluses in 2002 and 2003.

How that equation works out will depend on stream flows and regulatory approval of plans to extend the operating hours of natural gas-fired generating plants in northeast Spokane and Rathdrum, Idaho, he said.

Other wood- and coal-burning plants must avoid breakdowns, Norwood added.

Bonneville, which supplies 40 percent of all power consumed in the Northwest, needs water, Wright said.

The agency agreed in December to keep enough water stored in Columbia River reservoirs to assist fish migration.

But the agency has invoked emergency provisions in that agreement. The declaration allows river managers to release stored water if the region needs electricity.

So far, agency officials said last week, releases will affect spring stream flows only fractionally.

Meanwhile, forecasts predict spring flows at The Dalles, Ore., at only 63 percent of normal, and that figure has dropped consistently as precipitation continues to bypass the region.

Bonneville announced last week that generating capacity on the Columbia has fallen by 4,000 megawatts, enough to meet the requirements of four cities the size of Seattle.

Buying replacement power has cost Bonneville $500 million since Oct. 1 -- 120 percent of the amount budgeted for the entire fiscal year.

Financial reserves needed to make Bonneville's annual $730 million debt payment to the U.S. Treasury are rapidly dwindling, Wright said.

He and other Northwest officials are calling for massive conservation efforts to alleviate the stress on the region's generating resources.

"It's a hard thing to ask people to do," Wright said.

Washington Gov. Gary Locke has asked all state and local government agencies to curtail electricity use 10 percent. He could declare an emergency and extend his order to businesses.

To further reduce demand for federal electricity, Wright said, Bonneville may approach irrigators about shutting down pumps in return for payments that compensate them for lost farm income.

Russ Jones said Idaho Power has already negotiated several such agreements.

Although the payments could make farmers whole -- Bonneville has not yet released a plan its utility customers can take to irrigators -- Wright said he is concerned about the broader implications for food processors and farmer-dependent communities.

"I know there will be secondary impacts," he said.

Washington PUD Association Executive Director Steve Johnson said state residents should consider every kilowatt-hour they save as a job preserved.

If Bonneville could trim its load 20 percent by pursuing power repurchases and conservation, there might be no need for a rate increase, he said.

Officials must impress on Northwest residents the urgency of the situation, he said.

"They're hearing 200 percent rate increases, but it's not sinking in yet," Johnson said.

"We're almost on the brink of very negative times in Washington," said the cooperative association's Aaron Jones.

Jones said public power officials may ask the region's governors to back a bond issue that would cover any shortfall in the reserves Bonneville maintains to make its Treasury payment.

A bond issue could reduce any proposed rate increase by 20 percent, Jones said, and would demonstrate to outside interests the region's commitment to Bonneville and the benefits of the federal power system.

Though officials discount the possibility of blackouts, they are prepared just the same.

Jerry Rust, president of the Northwest Power Pool, said a regional team that was convened in December to help California through its crisis remains in place.

"I don't think awareness could be more urgent than it is now," he said.

Like others, he pressed the conservation message.

"Every kilowatt-hour we conserve now is a kilowatt-hour we can use in the future," he said.

A pool assessment released early this month showed regional generating resources were slightly below expected demand; in March, just slightly above.

"This isn't a case where we're asking people to save energy to help California," Rust said. "We need to save energy to help the Northwest."

Still, California's woes will destabilize the balance of electricity supply and demand -- as well as prices -- all over the West.

The Golden State may be on its own if shortages recur.

"They can't count on the Northwest to bail them out," Wright said.

California will launch a $400 million conservation effort next month, and Bonneville has a $200 million conservation plan.

Aaron Jones said summer's end, and relaxation of demand for air-conditioning, will not necessarily ease the region's energy squeeze.

One year of drought could be followed by others, as was the case in the 1930s.

"If we have a second or third year, we may be a long way from managing our way through this," Jones said.

FAST FACTS: Q and A

Question. Is California to blame?

Answer. The Golden State's deregulation plan forced electric utilities to sell generating plants. Also, they were barred from signing long-term power supply contracts. When electricity became scarce last spring, desperate buyers bid prices to unprecedented levels -- more than $1,000 per megawatt compared with a normal range around $30.

Northwest utilities needed that power as well, and paid the price. But the region has not built enough generating capacity to meet its own loads. And for every megawatt of electricity the Bonneville Power Administration has shipped south during peak-use daytime hours, California has returned two at night, when utilities there don't need all they can generate. The deal has allowed the federal agency to conserve precious water for hydro-generation later this year.

Q. Why are my power bills so high?

A. Electricity rates for Spokane-area customers of Avista Utilities, Inland Power & Light Co. and Kootenai Electric Cooperative Inc. are the same or less than a year ago. But persistent cold temperatures have increased consumption -- and bills -- for electricity as well as natural gas. Gas is twice as expensive as it was in November 1999, because bidding for supplies from Canada has intensified.

Q. How are salmon affected?

A. Water pouring through generators now does compromise reserves that will be needed in the spring to assist fish passage. If stream flows remain low, expect more contention between those who want to maximize hydro-generation and those who want to preserve salmon runs.

Q. Who decides who gets Bonneville's inexpensive power?

A. Federal law says residential customers get first dibs. Industrial users, such as aluminum smelters, signed 20-year supply contracts with Bonneville in 1981, but were allowed to modify those deals and buy cheaper power in wholesale markets in 1996. They are not entitled to federal power after Oct. 1, but were allotted 1,400 megawatts -- less than half what they need to operate at full capacity.

Q. Does conservation really help?

A. Not only does using less save you money, every kilowatt-hour saved now enables utility managers to hold back a little water they can use later.

Q. What can I do?

A. Turn your thermostat down to 68 degrees, and lower water heater temperatures.

•Clean or replace dirty furnace filters.

•Buy energy-efficient appliances.

•Turn off your computer when not in use.

•Let the sun (when shining!) do the work. Open south side windows during the day to make the best of solar heat.