By Reilly Kneedler / The Wenatchee World
WENATCHEE — The Chelan County PUD is now the sole electricity provider for all of Microsoft’s campuses in the Puget Sound area, including its headquarters in Redmond.
As part of the arrangement, Microsoft will consult with the PUD on the utility’s broadband expansion across Chelan County. The new relationship will also help the PUD break into a new market of large businesses, PUD General Manager Steve Wright said Friday.
“We certainly expect to make some money off of this and we see this opportunity to be able to work together on broadband to solve a problem that troubles us … and then expanding markets in any business creates more choices and more choices generally leads to more value,” he said.
The five-year contract provides Microsoft with 50 average megawatts, which is around 4 to 5 percent of the PUD’s annual hydropower generation capabilities. The PUD began supplying power to Microsoft on April 1.
The contract is protected by a non-disclosure agreement, so it’s unknown how much Microsoft pays for the power. Wright said the secrecy will allow both entities to better negotiate other contracts. Microsoft and the PUD “will be entering into other contracts with other companies and we’d rather not release our pricing, and they’d rather not release the pricing as well, because it puts you in a more difficult negotiating position,” Wright said. “Everything we generate comes back to benefit our ratepayers so we are always out there trying to get the best possible value for our ratepayers.”
The PUD sells about 80 percent of the power generated by its three dams on the wholesale market, subsidizing rates for local customers. The power provided to Microsoft will also come from the utility’s wholesale supply and be priced similarly to other wholesale contracts, Wright said.
Most of the utility’s other wholesale agreements are with other utilities, but a contract this size with a private company is “unusual,” Wright said. The relationship began in 2017 when Microsoft sent out a request for proposals looking for power suppliers.
Many large companies have chosen to invest in wind and solar instead of hydropower. The PUD submitted a bid to Microsoft to break into that market, Wright said.
“We saw an expanding market of Fortune 500 companies who were committing to 100 percent renewable and not including hydropower as a renewable,” he said. “So, when you’re a hydropower utility, you begin to look and say ‘Wow, the market share is getting smaller here.’”
Microsoft is looking to buy either a wind or solar project in the next few years, so the deal may change after that, Wright said, but for now the PUD is the sole provider for its headquarters in Redmond.
“This is an exciting day for the state of Washington and especially for residents of Chelan County,” Gov. Jay Inslee said in a Friday news release from the PUD. “This agreement between Microsoft and Chelan PUD is a perfect example of how Washington’s renewable, reliable hydropower resources will continue to play a central role in driving innovation, supporting rural economic development, and transitioning our economy to 100 percent clean energy.”
That relationship began with a power agreement and a broadband expansion partnership was folded in later, Wright said. The PUD is hopeful this agreement will open the door for future collaborations on other topics.
“Business relationships matter ultimately and our feeling is that it’s a good idea to have a good, strong relationship with a company like this that has a presence that this one does in Washington state,” Wright said. “We’ll see where it goes from here.”
Read about the broadband expansion effort here.