Power rate jumps not going away Experts warn

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Power rate jumps not going away Experts warn: Without more generating capacity, price spikes will be fact of life Source: The News Tribune Tacoma, WA

Publication date: 2000-07-19

SPOKANE - The Northwest needs to get used to periodic spikes in the price its industries - and, eventually, its residents - pay for electricity. It will be years before they go away. "This is really a doomsday presentation," Tim Belden, vice president of energy giant Enron North America, told members of the Northwest Power Planning Council on Tuesday.

"This will probably get worse before it gets better."

Since late May, the price of electricity on wholesale energy markets from Washington to California has surged to unprecedented heights. In some markets, prices have jumped to $1,000 for a megawatt hour.

Historically, average prices have ranged from $20 to $50.

Prices soared because the West Coast's weather was hot, creating very high demand; rivers that power hydroelectric dams had low water; and several large generating plants were off-line.

"I wish this was just a speed bump," said Don Quander of Montana Industrial Customers, "but we've had hot weather, low water and plant outages before.

"This is a real crisis, not an anomaly.

"If we can't create a stable, competitive, reasonable market, it's a long-term issue."

A major part of the problem is that few new plants have been built in the region, and they haven't been able to keep up with the growth of demand for more power in the region.

The Bonneville Power Administration has said the region is 3,000 megawatts short of having enough capacity to meet peak demand. That's about enough energy to power three Seattles.

The power planning council itself has said that, under some conditions this winter, the Northwest has one chance in four of suffering blackouts.

No new electric generating plant will start up in the region until sometime in 2002.

West Coast Energy, a Calgary, Alberta energy company, plans to have a 248-megawatt, gas-fired combustion turbine at Frederickson, in southern Pierce County, operating by then, said company executive Harvey Campbell.

But whether higher prices will push other firms to build similar plants is the question. And nobody knows the answer.

"You do not build a 20- or 30-year plant based on one or two months of (price) volatility," Campbell said. "Your banker won't let you."

So far, the higher prices have been felt only by industries located in the Northwest, but the results have been dramatic.

Kaiser Aluminum shut down potlines. That idled 400 workers, 280 of them in Tacoma. Others have been shut down also - about 1,000 employees are out of work in the region because of the spikes - and numerous plants have been forced to modify their production processes to keep running while remaining something resembling profitable.

"The price doubled in May. It went up fivefold in June," said Bob Boschee, general manager of the Smurfit-Stone containerboard plant in Missoula, Mont.

"That's $4 million, about a 15 percent increase in our operating costs."

The power planning council is concerned about electric reliability for the entire four-state region, not just its major industries. It knows there are some things that can be done.

"Maybe it's time to get more serious about (energy) conservation," suggested Steve Johnson, executive director of the Washington Public Utility District Association.

Many utilities, for example, are now equipping their customers with so-called "smart" meters. With Internet access, a homeowner could turn off the water heater when nobody's home, reducing the demand for power when it's not really needed.

Perhaps, Johnson suggested, large commercial operations like supermarkets and malls could be persuaded to lower their lighting levels, again reducing demand.

People probably would have to be paid to take part in such programs, Johnson said, but the cost would be far less than the price of plants needed to generate that 3,000 megawatts that Bonneville said is needed.

Meanwhile, the price spikes will continue.

"They're here to stay," said Seattle City Light's Jim Harding.

"California will be driving Northwest prices for the foreseeable future. Spikes in California will drive spikes in the Northwest."

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=12154674&ID=cnniw&scategory=Utilities%3AElectricity

-- Martin Thompson (mthom1927@aol.com), July 20, 2000


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