Northwest Energy Deficit Possible, but No One’s Building Power Plants

A cold, dry winter could leave the Northwest facing an electricity shortage because utilities are reluctant to invest in new power plants.

“There isn’t economic incentive to build,” said Roger Braden, general manager of Chelan County Public Utility District in Wenatchee.

“The bottom line is the marketplace will govern what is developed for resources--it takes into account the cost for energy and the difficulty of building those resources.”

In an increasingly deregulated energy market, utilities see construction as a gamble.

With the exception of Pacific Klamath Energy’s cogeneration project in Oregon, no power plants are under construction in the Northwest. About a dozen are planned, but construction is unlikely to begin until it becomes cost effective.

“This is mostly a wholesale issue. Instead of building generation and simply passing [the cost] through to customers . . . development of resources [is] now market-driven,” Braden said.

“People don’t build them if they won’t pay. It used to be guaranteed recovery.”

In December, the Northwest Power Planning Council warned of a nearly 1-in-4 chance that Washington, Oregon, Idaho and Montana could face a power deficit over the next four winters.

The report calls it a “reliability problem,” which is loosely defined as a time when all the power demand for the region could not be met--even with buying electricity from outside sources.

It could be a huge shortage or a series of very small ones, depending in part on the severity and length of a dry, cold winter.

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“The size of this reliability problem is not the issue; the fact there is one is the issue,” said John Harrison, a spokesman for the Portland, Ore.-based power planning council.

While widespread brownouts are possible, it is more likely the Western system would be unable to supply power in small units, he said.

The Northwest Power Planning Council is soliciting solutions now and preparing another installment on how to deal with any deficit.

Reducing the odds of shortages to an acceptable industry standard would require adding about 3,000 megawatts of capacity--roughly enough electricity for three cities the size of Seattle.

“That scares me,” said Vic Parrish, chief executive officer at Energy Northwest, a 13-utility power consortium.

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Recent mild and wet winters may have made people complacent, but in a hydropower-dependent region such as the Northwest, that can quickly change.

“The Pacific Northwest has a problem talking about that shortfall,” Parrish said.

Energy Northwest’s nuclear power plant on the Hanford nuclear reservation provides about 12% of the electricity sold by the Bonneville Power Administration, a federal power marketing agency that sells nearly half the electricity in the Northwest.

Energy Northwest plans to operate its 1,200-megawatt nuclear power plant through 2044, along with developing other means of generating power with wind, fuel cells and combustion turbines, Parrish said.

Jim Sanders, general manager of Benton Public Utility District in Kennewick, would like to see BPA develop new, more flexible retail options as it negotiates new contracts for 2001.

In contracts 20 years ago, BPA promised to meet the power needs of the PUDs, and PUDs promised to buy all their electricity from BPA. That needs to change, Sanders said.

Benton PUD is making diversification plans, and varied power-package options from BPA would help, he said.

“What we’re looking for is a mix of resources that have different drivers to the cost,” primarily hydropower, but also choices such as “green” power, he said.

There will be new options in the deregulated wholesale market, including non-utilities building power plants to sell electricity to utilities.

“The question is: Will there be sufficient construction of new plants by non-utility parties in order to generate enough power in the wholesale power market to meet everyone’s needs,” said Dick Byers, a policy analyst for the Washington Utilities and Transportation Commission in Olympia.

“That’s an open question. The direction of the federal policy is to foster a fully competitive wholesale power market with the expectation that it will lead to people building plants to sell into that market,” Byers said.

Investor-owned utilities, as opposed to public power, are regulated by the utility commission and account for about 40% of Washington state’s retail power sales.

PacifiCorp, Avista Corp. and Puget Sound Energy are obligated by law to meet the power demands of their customers, Byers said.

“They can build plants or plan to purchase power,” he said.

“The role of the utility still needs to be to secure enough power to meet the loads of its customers. If it turns out the wholesale power market isn’t providing a sufficient amount of power, that not enough people have built plants, then utilities are going to build.”

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For many years, there was a “share the shortage” agreement; utilities would shift supplies among one another to handle crises. But it has expired with the advent of the competitive wholesale market.

That leaves states with emergency action plans and laws that allow governors to order power curtailments during a crisis, but the backstop is not as reliable.

“There’s a risk there, and frankly marketplaces are notorious in terms of budget and operating on the margin. They don’t react until a crisis occurs,” Braden said. “It may be the region will have to experience a crisis before they . . . invest in resources to cover it.”