Northwest faces tight electric supply; volatile wholesale prices

Jan. 10, 2001
Power is so tight in the Pacific Northwest, Bonneville Power Administration, the region's biggest supplier, is faced with a potential shortfall of 3,000 Mw, while the regionwide deficit amounts to an estimated 400-600 Mw. If Washington, Idaho, and Oregon experience a normal winter and no generating plants are out of service, the area will 'squeak' through the winter season, says Mike Hansen, spokesman for BPA.


Ann de Rouffignac
OGJ Online

Power is so tight in the Pacific Northwest, Bonneville Power Administration, the region's biggest supplier, is faced with a potential shortfall of 3,000 Mw, while the regionwide deficit amounts to an estimated 400-600 Mw.

If Washington, Idaho, and Oregon experience a normal winter and no generating plants are out of service, the area will �squeak� through the winter season, says Mike Hansen, spokesman for BPA.

�We have no margin for error. If anything changes, there will be grave concern about meeting the energy needs of the region,� he says. �We are in a very tenuous power balance.�

The Northwest has been hit with growing demand, while few new generating plants have been built in region, mirroring California's situation. The region depends on hydroelectric generation for about 50% of its electricity. Hydroelectric power depends on precipitation.

This week, the Northwest River Forecast Center of the National Weather Service released its monthly report for the area�s river reservoirs, concluding December was drier than normal. The report indicated precipitation was 66% of average, stream flow was 64% of average, and the reservoirs of the Federal System Reservoir Storage were only 54% full.

Complicating the energy problem, is the responsibility of the dam owners to keep enough water below the dams for salmon to spawn. If there has been less precipitation than normal that means more water must be kept in the reservoirs to insure the proper stream flow below the dams, explains Don Badley, spokesman for the Northwest Power Pool, the organization responsible for area reliability.

�If the water level is low, that means that we will just have to use less water and generate less power,� he says.

But Badley notes that barring a severe cold front, the Northwest can usually meet its load by running the rivers a little �harder.�

�The rivers can be run below the biological limits for a short period,� he says �But then we all pray for rain.�

BPA in demand
Northwest utilities previously balanced their electricity supply portfolio by purchasing a certain amount on the spot market. But the Northwest has not been immune to rising wholesale power costs. The high costs of wholesale power have spread from California into the Northwest because the electricity grid is interconnected. In mid-December, the wholesale price of power at the Mid-Columbia trading hub reached $3,200/Mw-hr.

The rising costs have encouraged area utilities to flock to BPA to sign up for as much of the federal entity�s cheap power as possible.

BPA recently signed 10-year contracts with 145 Northwest utilities and industries for more than 9,000 Mw. If requested, BPA must serve these customers even if they ask for 100% of their load. This meant BPA now must supply nearly 3,000 Mw more firm energy than it can generate from its Federal Columbia River Power System, according to a BPA document.

�Recent steep increases in market prices have prompted utilities formerly purchasing power in the market to bring their business back to BPA,� BPA documents state.

Because BPA will have to buy the difference of what it can generate and it must deliver in power, the entity is seeking a rate increase to cover these anticipated costs. The amount of the rate increase is still under review but it must be sufficient to buy the megawatts needed to make up the deficit and to maintain financial reserves needed to make debt payments to the US Treasury.

Sources close to BPA say the increase must be at least 35-50%. With so many utilities buying a large portion of their power from BPA, the higher rates will cascade through the whole region, increasing energy costs.

Seattle City Light, anticipating higher costs from BPA and the spot market, is already back before its city council seeking another 18% rate increase to be effective by March 1. The municipally owned utility had already tacked a 10% surcharge on rates effective Jan. 1, 2001. But wholesale prices kept climbing requiring the utility to ask for more just 1 week after the first increase went into effect.

Seattle City Light said it is working diligently to become independent of the spot market. By more than doubling its power purchases from BPA to 495 Mw from 195 Mw, encouraging aggressive conservation, and buying a 100 Mw share of a power plant under construction, Seattle City Light expects to be independent of the market by Oct. 1, says Dan Williams, spokesman.