Power Prices Soar in Pacific Northwest

LCG, Dec. 6, 2000--Demand for electricity has caught up with supply in the U.S. Pacific Northwest, sparking high wholesale power prices that yesterday soared as high as $1,200 per megawatt-hour at the Mid-Columbia Hub, a transmission junction in the heart of the region's hydroelectric generation.

There were the usual charges that the electric market is "broken" and demands for price caps, but, in fact, the market is not broken and is behaving exactly as it should. When there is an insufficiency of jelly beans, the price per jelly bean goes up, prompting confectioners to switch to making jelly beans. Pretty soon, there are too many jelly beans and the price of jelly beans sinks to new lows.

Like California, the Northwest has let the last decade slip by without building new power plants to provide the electricity needed by a robust, energy-consuming high-tech economy. Microsoft, in Redmond, Wash., probably represents a load equivalent to a medium-sized community, and it wasn't there a few years ago.

Some electricity traders in the Northwest were blaming the high prices on California. "California is a mess. It all originates from there," one trader told Reuters news agency, and he was partly correct for reasons he didn't suspect.

California has for years imported surplus Northwest power during the summers, when hydroelectric facilities were running full tilt and demand was low because of cool weather. But this year there was little Northwest power for California to import because of the buoyant northwestern economy and reduction of power production at the region's dams because of concern for fish.

During the winters, California has exported power to the Northwest, where most homes are heated by electricity and the winters are colder than in California, where most homes are heated by natural gas. This winter, California has no power to ship to the Northwest (see related story).

Duly Maher, spokeswoman for the Bonneville Power Administration, the federal agency that runs most of the hydroelectric facilities in the Northwest, said "We have always taken for granted that California will help out the Northwest in winter as we help them in summer," but this year is different, and it is likely to stay different.

Maher said that if it came to a choice between fish and blackouts, Bonneville would declare an emergency under the Endangered Species Act and lift measures designed to protect fish from the dams' turbines. "We take the view that blackouts pose a threat to human life," she said.

http://www.energyonline.com/Restructuring/news_reports/news/1206sply.html

-- Martin Thompson (mthom1927@aol.com), December 06, 2000