Power price surge prompts PUD to re-examine needs

By KATHY DAY

Herald Writer

EVERETT — While Californians were being urged Tuesday to delay turning on their holiday lights to conserve energy, Snohomish County PUD commissioners were discussing the dramatic increase in electricity costs.

Their discussion was prompted by a report that the cost of buying 1 megawatt of power — enough to supply about 20 homes — on what is known as the "hour ahead market" jumped to $1,200 Tuesday morning. Commissioner Don Berkey, who raised the issue, said that a year ago the price was about $30 an hour. The price is the most costly way of buying power and is used when a utility’s need for power exceeds its supply on hand.

"Do we really want to rely on the open market?" Berkey asked the board. "I do not. Sooner or later, and probably sooner, this will catch us."

General manager Paul Elias added that if the utility has to buy 10 percent of its power on the open market "at prices like this it could double our power costs."

The cost of power this year is higher because demand is increasing while supplies have been limited by a lack of power and timing of rainfall that supplies the hydroelectric systems on which many Western utilities rely for supply. In addition, several key plants that generate power are out of service for repairs.

Combined with cold weather in the Northwest, the shortages prompted California officials to issue on Tuesday an alert urging businesses and residential customers to cut power between 4 and 7 p.m. when businesses are still open and customers are arriving home from work. They also urged residents to hold off on turning on holiday lights until after 7 p.m.

That state’s problems are acting as a signal to PUD commissioners and utilities around Washington state that they need to brace for rising power costs.

Even as commissioners Tuesday approved the proposed 2001 budget of $468 million, the staff was starting to look at changes in PUD financial plans, said John White, assistant general manager. Those changes will affect recommendations for rate changes, which are likely to come before the board in February.

He noted that the PUD largely has been able to avoid buying power on the open market and that not many utilities were buying at the $1,200 price.

In the last few days, White said, predictions of cold weather for December and January, an anticipation by the Bonneville Power Administration indicating that we’ll have a dry winter based on rainfall to date, and California generators being off-line have all come together to drive up prices.

To buy now for 2001 — when the district will be operating under a higher-priced BPA contract — would cost about $225 a megawatt hour, up from $10, he added.

BPA is seeking approval for rate increases and has already warned it will need a 15 percent surcharge on top of that to cover its increased costs. When power from the facilities along the Snake and Columbia rivers fall below what BPA customers need, the agency purchases power on the open market.

The increase in market prices will play into the PUD’s decision on how to structure its final contract. To go the route planned —called block/slice — would leave the district open to more variation in prices. To shift to a program called partial/complex would mean slightly higher but more predictable prices.

"These prices are causing us to take another look," White said.