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Could You End Up Paying 90 cents a KWH For Electricity?*

A Special Message from Randy Knowles,
PUD Board Secretary

In the fall of 1998, at the PUD's annual customer meetings, the PUD commissioners discussed why it was so important for us to be able to utilize the full potential of the Roosevelt landfill as a source of reliable, affordable electricity.

At that time, discussions about so-called deregulation of the electricity industry were underway in Washington, D.C. and state capitols across the country, including Olympia. Proponents talked about giving customers a choice of power suppliers. If you believe the rhetoric, this would lead to a highly competitive and economically efficient wholesale power market. The Promised Land would be lower rates for customers everywhere.

At our 1998 customer meetings I expressed my skepticism about whether ratepayers in Washington-and Klickitat County specifically-would benefit from these deregulation proposals.

We displayed a map showing the average price of power in each state. That map clearly demonstrates my concerns. Oregon, Washington and Idaho have the lowest rates in the nation, while California, and to a lesser extent Arizona, have some of the highest.

At that time I did not think it likely that this discrepancy in rates would continue in a deregulated environment, particularly when low rates in the Northwest were largely due to a federal hydropower system increasingly utilized for purposes other than energy production. Since that time, almost half of the states (including nearby Oregon and Montana) have passed some type of deregulation legislation. Many in Congress are still pushing hard for federal action. The result? Here are some recent newspaper headlines:

Electricity Prices Rise as Heat Hits
"Electricity prices are soaring in the deregulated wholesale markets of the western United States . . . Prices in central Washington's Mid-Columbia Basin market ranged from a low of $300 to a high of $900 per megawatt hour." --Yakima Herald Republic, June 29, 2000

Power Loss Sends Price to Ceiling
"Wholesale power prices skyrocket in the Northwest and California as major power plants went offline last week . . . With no cap on prices, the deregulated spot market had some power being sold at $1,353 per megawatt hour Tuesday, instead of the normal range of $25 to $29." --The Dalles Chronicle, July 3, 2000

Electricity Costs Jolt Businesses
"When wholesale electricity prices spiked in late June, they did more than skewer a handful of aluminum smelters, paper mills and other large power users. They pierced the Northwest's abiding confidence in its stature as a region dripping with cheap power . . . Soaring electric prices grabbed the public's attention last month when Vanalco, Alcoa, Kaiser Aluminum and Georgia-Pacific announced plans to curtail and in some cases shut down plants in Oregon and Washington, laying off hundreds of workers." --Portland Oregonian, July 9, 2000

Contributing to high power prices this summer are a significant decline in power generating capability (as discussed in the April 2000 issue of "Ruralite"), escalating natural gas and oil prices, hot weather and a growing economy.

Further complicating matters is a regional transmission system showing signs of stress from overload and old age, and increasing BPA transmission rates (going up 30 percent in 2001).

As I feared, deregulation is not providing the savings many have promised. So, what is answer? What are we to do? I believed in 1998-and recent events only serve to reinforce my belief-that there is not one single thing more important to the PUD (and thus to the electric customers in Klickitat County) than having access to the methane gas produced at the landfill and using that gas to generate electricity.

With landfill gas (which costs nothing to produce, so should cost nothing to purchase) we have a ready supply of fuel to generate electricity. Having the power plant within the PUD's service territory means we can use our own transmission system. That saves us paying BPA's higher transmission charges. With both the gas and the transmission advantages, we feel certain we will have a locally controlled, affordable supply of electricity for decades to come.

What is the alternative if we are denied the landfill's potential? Most likely we will depend on BPA for a portion of our power supply. We will likely also rely on uncertain and expensive natural gas and electricity prices to make up the remainder. We might also fill in with wind and other renewables, whose prices are high and whose reliability is questionable for many of our customers' needs.

While BPA will continue to be part of our power supply solution, it will likely not be the total solution. I am committed to taking advantage of the opportunities in our own backyard-and putting responsibility and control of our electricity future in our own hands.

 
*By the way, today Klickitat PUD's residential customers pay an average of 6 cents a kilowatt hour.