From the March 9, 2001 print edition

Electricity crisis slams Cheyenne

Cathy Proctor Business Journal Staff Reporter The effects of California's electricity crisis are coming to Colorado's border.

Energy consumers in Cheyenne, Wyo., already reeling from a near doubling of their natural gas bills, are about to be hit with a doubling of electricity rates now that their power company is forced to buy energy on the same open market that California is using to buy power.

Cheyenne Light, Fuel and Power Co., a subsidiary of Xcel Energy Inc. like Public Service Company of Colorado, serves 36,300 customers in and around Wyoming's state capital. The company will ask state regulators before March 15 to double electricity rates charged for residential and business consumers, said Cheyenne Light president Rick Kaysen.

Wyoming laws allow utilities to pass the cost of electricity on to their customers, just as natural gas price spikes over the last year have been passed along to consumers.

If approved by regulators, the electricity rate increase would take effect on April 15, Kaysen said.

"Gas rates have also nearly doubled," Kaysen said. "For our customers, it's been a double whammy. We've been around here for more than 100 years. This is not something we take lightly. This is a whole new situation."

Unlike PSCo, Cheyenne Light doesn't have any electricity generating plants of its own. For the last 37 years the Wyoming power company bought all the power it needed from PacifiCorp., based in Portland, Ore. Cheyenne Light bought about 140 megawatts of power from the company, enough to power a community of 140,000.

But the series of renewed and extended contracts ran out at midnight Feb. 24.

"As a result of not being able to come to terms on a renewed contract, we were forced to go out and purchase supplies on the open market," Kaysen said.

"The timing could not have been worse for the expiration of that contract," he said.

PacifiCorp. set new contract prices at levels the company refused to swallow, Kaysen said, adding that so far Cheyenne Light has been able to buy power at prices below what PacifiCorp. wanted to charge.

PacifiCorp. supplied Cheyenne Light with power bought on the open market, which has gone haywire in recent months, PacifiCorp. spokesman David Eskelsen said.

Over the last decade, electricity prices averaged between $25 and $50 per megawatt hour, but rose up to the $100 to $300 per megawatt hour, range with spikes 10 times higher in recent months, he said.

PacifiCorp. wanted to raise prices for Cheyenne Light to reflect the new market conditions, Eskelsen said.

But when Cheyenne Light rejected the new contract it, like California, started trying to fashion a set of short- and long-term contracts to take care of its power needs. The contracts are backed with loans totaling up to $100 million, at a 7 percent interest rate, from Xcel.

The loans from Xcel to Cheyenne Light are not expected to affect any other part of the Xcel system, Kaysen said.

Nor could Cheyenne Light's power problems be mirrored in Colorado, said Steve Roalstad, spokesman for Xcel's Colorado subsidiary.

PSCo owns plants that can generate nearly 70 percent of the power the company believes it will need to meet its customers peak demands this summer.

"All the rest is in long-term purchase agreements, so in short, no," Roalstad said.

Wyoming regulators granted Cheyenne Light permission to get the intra-company loans after noting "the unprecedented problems facing the electric utility industry in the United States, especially in the western part of the nation ... making the procurement of electricity a difficult, expensive and, to a degree, uncertain process."

Wyoming's Public Service Commissioners also said the availability of power "cannot be taken for granted and ... the possibility of negative outcomes, such as blackouts and supply emergencies seen on the West Coast, must be acknowledged."

But worried about the possibility of Cheyenne Light following two of California's major utilities to the brink of bankruptcy over the cost of buying power on the open market, commissioners ordered Cheyenne Light to file an exhaustive quarterly report detailing its negotiations and contracts for power as well as how much of those power costs are being deferred.

Kaysen called the reporting requirements "prudent."

"From a regulator's perspective, they need to make sure that this company is not put in a position like what some companies in California are in," he said. "At this point in time, we're in an OK position."

While customers rates are expected to double, Xcel Energy's costs to buy electricity are expected to triple, according to company spokesmen.

Kaysen said Cheyenne Light also will file a plan to recoup those additional costs over several years.

http://denver.bcentral.com/denver/stories/2001/03/12/story2.html

-- Martin Thompson (mthom1927@aol.com), March 12, 2001