Clallam PUD ponders 20-year power contracts

By the end of this year, the Clallam County Public Utility District must decide how and where to get its power supply for the next 20 years beginning in 2011.

“There’s a lot to be done between now and December. There’s a lot for the staff and commissioners to find out and big decisions to make,” said Clallam PUD general manager Doug Nass.

“We must sign the contract by the end of the year. It’s a 20-year contract, that’s the scary part,” he said.

Clallam PUD serves about 28,500 electricity customers in Sequim, Forks and unincorporated Clallam County, plus the Port Townsend Paper Corp. mill.

The district buys 99 percent of its electrical power from the Bonneville Power Administration, the federal power marketing agency that supplies wholesale power to the Northwest.

Nass attended a workshop July 15 in Shelton where commissioners and staff from Clallam PUD and two other public utility districts discussed the two options for 20-year power sales contracts from Bonneville.

“It was a learning meeting mostly. We discussed where we are and what are our next steps might be,” he said.

Nass said the issue will be discussed further during a July 25 conference call among Clallam PUD staff and the district’s consultants.

Beginning with the 2011 power sales contracts, Bonne-ville customers such as Clallam PUD must decide whether to depend upon the federal power marketing agency for all their additional power needs or seek out other resources to serve their additional power needs for the next 20 years.

One option utilities have is receiving a percentage or “slice” of the federal power system’s output and then obtaining additional power from other sources such as the open market or joining with other utilities to build power projects.

Another option for utilities is receiving part of their power needs from Bonneville at “Tier One rates,” which are being decided in the current rate case, and then buy additional power from Bonneville at more expensive “Tier Two rates.”

Nass said even though the new power sales contracts won’t take effect until 2011, Bonneville needs to know now how many utilities are interested in buying the Tier Two power so it knows how much additional power to seek out.

Some utilities, such as Benton County PUD in eastern Washington, already have chosen to buy a “slice” of the system and pursue additional power needs on their own or in conjunction with other utilities, he said.

But Bonneville doesn’t want to commit more than 25 percent of the power system’s output to “slice,” Nass said.

So if too many utilities try to buy a “slice” of the system, then the amount each can buy would be reduced, which could mean that’s no longer a viable option, he said.

Clallam PUD commissioners had similar concerns that there’s not enough information right now to make such a monumental decision.

“The problem with the whole thing is there’s a lot of unanswered questions and Bonne-ville is pushing its members to sign contracts before the rate case is resolved,” said Clallam PUD Commissioner Will Purser of Sequim.

“The problem is Bonneville is pushing for us to sign 20-year contracts before we know the rates from the ongoing rate case,” he said.

“They are saying ‘Trust us.’ Well, that hasn’t always worked out for us before,” Purser said.

The situation is further complicated by Initiative 937, he said.

I-937 was approved by the state’s voters in November 2006.

It requires both investor- and consumer-owned utilities with more than 25,000 customers — such as Clallam PUD — to obtain 3 percent of their energy from renewable sources from 2012 to 2015.

The requirement increases to 9 percent from 2016 to 2019, then to 15 percent by 2020.

Purser said that renewable energy now is selling for as much as $100 a kilowatt versus $34 a kilowatt from Bonneville, the majority of which is hydroelectric power.

“But that’s going to change, although we don’t know how,” he said.

Clallam PUD Commissioner Hugh Haffner of Port Angeles said the difference between cost-based rates and market-based rates can be significant as the 2001 West Coast energy shortage showed, Haffner said.

“The 2001 perfect storm really scared me. We had 1-2 percent of our load from the market but it was at $1,000 a megawatt, which instills a fear in you,” he said.

“Who would have thought in 1999 that we would have seen those prices we saw in 2001?” Haffner said.

“There’s actually more requests for hydroelectric system than there’s capacity. What if we have another really dry year?” he said.

Benton County PUD general manager Jim Sanders said that district has been a “slice” customer of Bonneville’s since October 2001 and after some challenges during the first year, it is working fine.

The first-year challenges included no one having experience with the arrangement, high market prices for power and that year’s drought that reduced output from the hydroelectric system, he said.

Bonneville still meets the district’s power needs now but that will change in 2011 with the new contract, Sanders said.

So the district already has integrated Energy Northwest’s Nine Canyon Wind Farm project into its power portfolio to meet future power needs, he said.

Clallam PUD became an Energy Northwest member last month, which enables the district to have priority access to similar projects developed by the 22-member utility group.

“There’s actually more requests for hydroelectric system than there’s capacity. What if we have another really dry year?”

-Clallam PUD Commissioner Hugh Haffner

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