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Return to Previous PageLow snowpack could impact power prices

By Sean Ellis
Idaho State Journal

The extremely poor snowpack levels in Idaho this winter could have a significant impact on power prices down the road.

"There won’t be an impact his year, but there might be an impact next year,” says Gene Fadness, a spokesman for the Idaho Public Utilities Commission.

Snowpack is the fuel that generates hydropower and helps keep electricity rates in the Pacific Northwest among the cheapest in the nation. While it doesn’t appear power prices in the Northwest will rise in the near-term due to poor snow year, they could the following year.

Near-record low snowpack levels were recorded this year in many Idaho basins, which doesn’t bode well for future electricity prices since Idaho Power receives about half its power from hydro sources during normal conditions.

In ideal water years, the private utility is better able to utilize its 17 dam hydroelectric system. When conditions are less than ideal, the utility has to purchase more expensive power from the open market.

"Obviously, it’s better for us if we generate it within our own hydro system,” says Jon Bowling, engineering leader of Idaho Power’s water management division.

Idaho Power meteorologists are forecasting that runoff in the area most critical to the utility’s hydro production will be about 44 percent of average during the April – July period.

"That’s pretty low,” Bowling says.

The short-term good news for power customers is that Idaho Power has already filed its annual power cost-adjustment with the IPUC and is proposing to reduce its PCA surcharge by 3.2 percent for residential customers and 6.5 percent overall. The PCA proposes dropping irrigation rates by 6.17 percent and large general service rate by 7.89 percent. If approved those rates would be effective June 1.

Each year about mid-April, Idaho Power files a PCA that adjusts rates up or down to reflect the company’s actual power supply expenses not already included in base rates. Last year’s PCA increased 10.2 percent, one of the highest on record.

While the IPUC ultimately has the authority to approve or change Idaho Power’s proposed PCA, Fadness said there’s next to no chance the commission will opt to increase this year’s PCA.

"They asked for a decrease. We’ll never turn that down,” he says.

While low snowpack levels won’t cause Idaho Power’s rates to rise this year, 2011 could be a different story, depending on conditions.

Bowling says it’s too early to say for sure whether the low snowpack will affect prices in 2011. That all depends on whether runoff is as bad as predicted a hot and dry summer, how much reservoir carryover water there is at the end of the water year and how next year’s snowpack stacks up.

On the one hand, "There is a potential it could reduce flows in the future,” Bowling says. Then again, "If we have an average (winter) next year, we could be OK.”

Since Idaho Power’s hydroelectric generating conditions have been below-average 10 of the past 11 years, he adds, it’s better to root for favorable weather conditions for spring and summer. That would temper irrigation demand, keeping more water in reservoirs.

"Just think rain and cool,” Bowling says.

PacifiCorp, which does business as Rocky Mountain Power in eastern Idaho, increased residential rate by 1.29 percent effective April 1. But that company is less reliant on hydro than Idaho Power and much more reliant on coal and natural gas prices.

The Bonneville Power Adminstration recently announced that as a direct result of the low snowpack, the agency will receive $450 million less revenue that anticipated. BPA is looking at the fifth-lowest runoff in the Columbia River basin since its hydro system has been in existence.

"This is a bad situation that has just gotten worse,” says BPA Administrator Steve Wright. "We had hoped a wet spring would help snowpack across the Columbia River basin, but that didn’t happen.”

BPA, a non-profit federal electrical utility, markets more than a third of the power consumed in the Pacific Northwest. The power is produced at 31 federal dams and a nuclear plant in the region and sold to more than 140 utilities in the Northwest that serve an area with a total population of about 12 million.

BPA’s main customers are rural co-ops, municipalities and public utility districts. However, it does sell some power through the open market to investor-owned utilities, such as Idaho Power and Rocky Mountain Power.

BPA does not expect to make significant changes to prices in the short-term because it is sipping into reserves to cover costs. But company officials say the depletion of reserves could affect prices in the future in the event of another below-average water year or other financial crisis.
The possibility of the low snowpack affecting prices in the future "is something that we are very concerned about,” says BPA spokeswoman Katie Pruder.

Idaho State Journal
Pocatello, ID
May 16, 2010

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