PUD cautiously prepares to buy for first time since crisis

Snohomish County PUD is preparing to buy electricity on the open market for the first time since the 2000-01 West Coast energy crisis.

It was the high-priced contracts that the public utility signed with Enron Corp. and others during that crisis that led to rates going up by more than 50 percent in 2001.

Now, just as those high-priced contracts are expiring, the utility is being pushed into action by a rush of new homes and businesses that need electricity.

Promising that they have learned from mistakes made in the past, PUD officials say they won’t be forced into buying high-priced electricity that would lead to more rate hikes.

With 8,000 to 9,000 new homes and businesses hooking into the PUD’s electrical grid each year, the utility will need to add about 15 megawatts to 20 megawatts of new electricity per year, said Dana Toulson, assistant general manager for power and transmission services.

One megawatt keeps the lights on in about 600 homes. The utility uses about 750 average megawatts to power all of Snohomish County and Camano Island.

By the end of this year, the utility estimates, it will have 310,000 customers. By the end of 2007, it expects to have 318,000.

The utility actually isn’t projecting that it will run short of electricity for another two years, but it has to start planning now to fill that need. In 2007, the PUD will do a more exhaustive study on what its future needs will be, and what sources of electricity may be available to fill them.

In the short term, the utility may partner with other utilities to meet its electrical needs. Or it could buy more electricity from energy brokers.

If contracts were signed, they would be at prices that are more reasonable than those offered during the energy crisis, when prices were being illegally manipulated, Toulson said.

Toulson said the utility will secure the largest chunk of federal hydroelectric power that it can get from the Bonneville Power Administration in fall 2011, when the federal energy wholesaler enters into a new 20-year rate period. The PUD already gets 80 percent of its electricity from BPA and the hope is to bump that percentage up to 96 percent.

“The first thing you do is try to get as much Bonneville as you can,” Toulson said.

Then it’s up to the PUD’s governing commission to decide what direction to go, she said.

Even if the PUD gets more Bonneville power, the utility will have to find other sources of electricity as it continues to grow.

“Those are big decisions that we’ll be making, and we’ll have to make them next year,” Toulson said.

PUD Commissioner Dave Aldrich is pushing to use conservation and renewable energy to keep the lights on at the utility, pointing out that it has only cost the utility $18 per megawatt hour to “buy” electricity saved through conservation.

That’s much cheaper than the $30 per megawatt hour BPA charges or the rate of $50 per megawatt hour charged on the open market.

Commissioner Toni Olson said it’s a little early to say how the utility should secure the new electricity it needs.

“We want to look at a variety of options,” she said. “This particular board is also interested in options that are low cost, and that are benign in terms of their impact on the environment. As benign as we can get while keeping cost down.”

Commissioner Kathy Vaughn could not be reached for comment.

General Manager Steve Klein’s proposed budget for 2007 is $604 million. It proposes to keep rates flat. The commission is expected to vote on it in December.

A surge of new homes and businesses is pouring new dollars into PUD savings, but the cost of building the power lines needed to deliver electricity to those new homes and businesses is eating through that money, said Glenn McPherson, the PUD’s assistant general manager of finance.

The utility also is now paying the bill for delaying maintenance on its infrastructure during the years after the energy crisis. Tens of millions of dollars in repairs and upgrades were put off so the utility could avoid raising rates even higher.

Reporter Lukas Velush: 425-339-3449 or lvelush@heraldnet.com.