Arctic blast to drive up power costs

"We will have to do something," PUD General Manager Paul Elias said. "Our cushion is not there any more."

Preliminary indications, he said, are that rate increases to cover energy expenses could "reach as high as double digits next year."

An odd confluence of events, ranging from the cold to inoperative power plants, has pushed the cost of spot energy purchases skyward.

Utilities that paid $30 a kilowatt hour for extra electricity a year ago had to pay $750 on Monday and $5,000 on Friday.

The events had officials scrambling to react, hoping to avoid alerts such as those faced in California, where the possibility of rolling blackouts was averted Thursday only after more water was pushed through Western dams.

Dick Watson of the Northwest Power Planning Council warned people Friday of the need to conserve now so energy will be available when the cold hits. The warning — which is not classified as an emergency — includes calls to operators to crank up generation systems to the maximum.

"Clearly, the intent is to try and take early voluntary actions to avoid more draconian mandatory actions later," Watson said.

The alert, combined with BPA’s declaration of an emergency, clears the way for the agency to bypass rules about how much water it must maintain in reservoirs for salmon protection. As a result, on Monday, BPA will run 180,000 to 200,000 cubic feet per second — compared to a normal 150,000 cfs — through its system.

National Weather Service forecaster Jay Albrecht said it should get a lot colder tonight.

"A little chunk of the Arctic system will push south," he said, bringing 1 to 2 inches of snow and temperatures in the 30s with 15- to 25-mph winds.

It will only get worse, as far as power officials are concerned. When people go back to work and turn on their lights and computers on Monday, highs are expected to be in the 25- to 30-degree range and on Tuesday probably will drop to the 10- to 20-degree range.

The weather’s only one part of the energy puzzle, but it is adding to rate pressures, said Elias, the PUD general manager. He compared the rising cost of power to the cost of buying gasoline.

"If you were paying $1.50 a gallon and the price jumped to $250, would you even think about filling your tank?," he asked.

He was meeting with district staff even before Gov. Gary Locke, in a joint release with Oregon Gov. John Kizhaber, called for conservation and directed state offices to trim energy use.

Elias said the district wants customers "to reduce nonessential uses. We think we have enough supply, but it’s tight."

The PUD gets much of its power from the BPA, but also buys some on the open market.

BPA must also turn to market purchases when it can’t generate enough energy. Its reservoirs are already low because of a water shortage.

It’s the open market purchases that are creating the financial burden, Elias explained. As prices rose in November, the district outspent its power budget by $11 million. By the end of December, the deficit could be another $37 million above what had been planned, he added.

The PUD has a rate stabilization fund, but the high price of power "is eating that up now," Elias added.

The costs are also pushing the district’s credit limits, creating a situation akin to maxing out a credit card.

"We’re there now," Elias said.

PUD financial staff spent much of the day looking at the numbers and coming up with a variety of rate-hike scenarios. Any rate hikes would require public hearings before they could be enacted.

Commissioner Kathy Vaughn, who had just attended a two-day utilities association meeting where prices were a hot topic, said Friday, "We have to do what’s best to keep the district solvent."