 PenLight Chief Executive Officer, Jafar Taghavi |
June 2009
Our Energy, Our Future.
Nationwide electric co-ops like PenLight are using the “Our Energy, Our Future” campaign to start conversations on how we are going to address our future energy needs. Concerns for global and regional climate change are pushing the agenda on dealing with carbon pollution. Our utility business is about to undergo major changes with new regulatory requirements from both state and federal governments.
Unlike other co-ops located east of the Rockies who rely upon coal and natural gas for their energy sources, we have been fortunate to have an abundance of clean hydroelectric power from the 32 dams on the Columbia River System. Our fuel mixtures consist of 86% hydro power, and only 4% of our total energy comes from carbon-based power supplies. You would think utilities like us in the Pacific NW would be in a fairly good position when it comes to reducing our impact to climate change—not so. The passage of Initiative 937 in 2006 by Washington voters requires utilities that have over 25,000 consumers to have 15% renewable energy by 2020, excluding current hydro power.
The first phase of I-937 starts in 2012 at 3%, reaches 9% by 2016 and ends with 15% in 2020. Faced with the challenge of meeting this new renewable mandate, the Board of Directors approved that PenLight enter into a partnership with three other utility partners to build Harvest Wind, a 100 megawatt, $250 million wind generator project located near Goldendale, WA. Our $50 million share of the project’s energy output will only meet half our renewable mandate. PenLight will still need to acquire additional renewable resources.
Our current power purchase agreement with the Bonneville Power Administration (BPA) ends on September 30, 2011. In December 2008, we signed a new agreement that will take us through 2028. A major change in our contract requires us to pay market rate for any new load growth as of October 1, 2011 (known as Tier II). The contract guarantees us that we can still purchase at a preferred rate our Tier I load set at our 2010 level. We are exploring whether we want to purchase our Tier II power from BPA or purchase through a third party. Either way, it will be at market rate. Starting October 1, 2009, BPA will start a new two-year rate period. BPA dialog over the last year pointed to a wholesale rate as high as 20% due to low snowpack and lower than forecasted wholesale electric prices. We are now looking forward to a lower than expected wholesale rate increase. At this point we know it will be a single and not a double digit rate increase. BPA’s final wholesale rates will be announced by the end of the summer.
We see conservation and energy efficiency as a means to help reduce our future load growth, thus reducing our exposure to market volatility. Since 1982 Penlight has invested $9.1 million in conservation, representing a savings of over 131 million kWh of energy, enough electricity to power over 8,700 homes for a year. PenLight will continue to offer new programs to help its members save energy and money. The Northwest Power Planning and Conservation Council is responsible for setting regional conservation and efficiency goals. The current plan recommends a 50% increase for a target goal of 6,000 average megawatts over the next 20 years. These goals will be divided among BPA’s customers, like Penlight, as part of our power purchase agreement. Furthermore, starting in 2010, I-937 requires us to evaluate our conservation potential and achieve a percentage of that potential over the succeeding two years. This assessment must be updated every two years to ensure we are achieving the most cost effective conservation.
Since 1991 the federal government has been trying to produce a salmon recovery plan for the Columbia and Snake Rivers that would be acceptable to all the stakeholders. The plan is known as the Biological Opinion (Bi-Op). The opportunity to embark on a new era of salmon recovery and end decades of litigation and divisiveness is within our grasp. Unprecedented agreement emerged during the crafting of a new plan to help protect listed salmon and steelhead. An overwhelming majority of the states, tribes, federal agencies and river interests in the region now stand ready to move forward with implementation.
However, despite the broad-based support for the investment of billions of dollars in the next decade, the plan remains at the mercy of US District Court Judge Redden. Opponents are demanding extreme measures, such as removal of the four lower Snake River dams, and the Obama administration is reviewing the plan.
This new plan will provide real benefits for salmon and is based on sound science, which we believe will be evident as the administration does its review. Supporters recognize that the hydro system provides the region not only with clean, renewable energy but also with jobs, economic stability and cleaner skies. These also are priorities for the Obama administration.
As you can see, our business environment is rapidly changing. Our challenge for the future is to stay ahead of these changes and find the resources to meet them. We have over 500 Penlight Ambassadors assisting us by contacting legislators to let them know where we stand on critical issues. We welcome your interest and involvement; please consider joining the Penlight Ambassador program.
