This is a good article, on balance. Interesting how utilities have charged the highest rates. Tx, Rick

 -----Original Message-----
From: 	Schneider, Chip  
Sent:	Monday, April 16, 2001 12:50 PM
To:	Calger, Christopher; Steffes, James; Ngo, Tracy
Cc:	Buy, Rick; Gorte, David
Subject:	Article on Power/Enron from the Seattle Times



From the Seattle Times
(seattletimes.com)

Energy costs soak City Light
by Jim Brunner <mailto:jbrunner@seattletimes.com>
Seattle Times staff reporter
Seattle City Light spent a record $92 million buying power on the market in
March, more than any month in its 91-year history.
City Light officials say the cost of buying power for local residents and
businesses eclipsed the previous records - $84 million set in February and
nearly $80 million in January.
To put that in perspective: In 1999, before the current power crisis, the
utility's total power bill for the entire year was $90 million. "We're
spending that every month now. The dollars that are involved are
staggering," said Paula Green, deputy superintendent of City Light.
It's a cash hemorrhage brought on by Washington's drought, which means less
water in the reservoirs at city-owned dams. That increases Seattle's need to
purchase electricity on a market where prices have zoomed to unprecedented
levels.
Adding to the frustration for Seattle city officials is the fact that most
of that money is flowing to out-of-state utilities and power brokers who are
profiting enormously from the energy crunch.
Last month alone, the bill from Enron, a Houston-based corporation, was
$25.5 million, putting it well ahead of the No. 2 seller, California's
Sempra Energy, which sold $7.4 million worth of electricity to City Light.
City Light still gets most of the 1,200 megawatts necessary to serve its
load from city-owned dams and from its contract with the Bonneville Power
Administration (BPA). The utility buys only about 15 percent of its power on
the market. But that thin slice now accounts for more than 90 percent of its
power costs.
Part of the explanation for March's record power-buying binge was City
Light's recent decision to store up extra water behind Ross Dam on the
Skagit River instead of spilling it through the dam's power turbines.
In a normal water year, City Light officials would be spilling water for
energy and expecting it would be replaced with spring runoff. Now, they're
saving the water so it can be spilled later to help salmon runs and to
generate power for Seattle this summer, when energy prices are expected to
surge even higher, to more than $400 per megawatt hour.
"We're insulating ourselves. By putting out one eye now, we're avoiding
cutting off our head later," said Bob Royer, City Light spokesman.
Seattle ratepayers are feeling the pain, with a 28 percent City Light rate
increase so far this year. More rate increases are likely on the way.
Higher rates have also led to plant closures and layoffs in Bellingham and
Spokane.
Meanwhile, Enron's revenues more than doubled last year, to $101 billion.
Its stock prices surged to end the year at $88 a share, up from $44 the year
before. The stock was trading at $57 a share last week.
"It doesn't just feel unfair, but immoral that these major companies like
Enron are making billions of dollars at the expense of everyday people and
businesses," said City Councilwoman Heidi Wills, who chairs the Council's
Energy and Environmental Policy Committee.
"There's this enormous transfer of wealth from our ratepayers to the
shareholders of these companies," Wills said.
Northwest leaders have called for the Federal Energy Regulatory Commission
to impose price caps. But opponents say price caps would do nothing to
encourage the construction of new power plants, or energy conservation.
Karen Denne, an Enron spokeswoman, said it's unfair to fault the company for
selling power at prices dictated by the free market. "Enron is providing
electricity to a market that needs it," Denne said. "It's unfortunate when
regulators are pointing fingers, looking to fix blame, when this is a
problem of supply and demand."
The company hails from President George W. Bush's home state of Texas, and
is one of the top "soft money" donors to political campaigns. Enron and its
executives gave $435,000 to the Democrats and $1.2 million to Republicans
last year, according to Common Cause.
Its chairman, Kenneth Lay, has consistently been one of the top donors to
Bush's presidential and gubernatorial campaigns.
Enron doesn't own a lot of dams or power plants. Instead, the company makes
money as a middleman - buying power from utilities and then reselling it for
a profit. The company, formed in 1985 from the merger of two pipeline
companies, has become the largest trader of wholesale electricity in North
America.
Part of its success in the energy market stems from its groundbreaking use
of the Internet to make buying electricity as easy as ordering a book
online. You just point, click and spend.
"It's easier than Amazon," said Steve Lewis, a power marketer with City
Light, demonstrating the company's Web site. It lists available power
"products" and the asking price for both buyers and sellers.
Lewis and other power marketers monitor City Light's projected power needs
and then use the phone or Internet to schedule electricity for the next
hour, next day or months ahead. They try to find the best price available,
but it's clearly a sellers' market.
Utilities routinely buy power that used to cost $30 per megawatt hour for
more than $200. At times last month, City Light was buying power for $450 a
megawatt hour. And it's not because the cost of generation has gone up.
"This is pure profit," said Green, deputy superintendent of City Light.
There is evidence that the Northwest is in some ways being hit even harder
than California, whose experiment with deregulation is blamed for roiling
the power markets. A recent analysis found that Pacific Northwest utilities
are paying the highest prices in the nation for the next-day delivery of
wholesale power.
However, regional utilities also sell power for extraordinarily high prices.
In fact, some of the highest average prices paid by City Light last month
were to neighbors.
Puget Sound Energy, Western Washington's largest electric utility, charged
City Light the highest average price of any seller last month, at $303 per
megawatt hour, according to City Light's preliminary billing estimates.
Spokane's Avista Energy charged $281.
That compares with Enron's average price of $173 per megawatt hour and an
overall average of $194.
The BPA, by comparison, charges City Light $22 per megawatt hour.
City Light typically relies on local utilities more when it needs power
delivered immediately. And prices for short-term deals can be higher
depending on the time of day. The city has only a long-term contract with
the BPA.
Despite the record-setting month, city officials hope they'll be in better
shape before the year is out. Mayor Paul Schell has taken to calling Oct. 1
Seattle's "energy independence day" because that's when the city will begin
receiving more hydroelectric power under a new contract with the BPA.
The historically cheap BPA power, combined with a contract with a gas-fired
power plant in Klamath Falls, Ore., should reduce the city's reliance on the
open market, city officials say.
But the BPA, too, has been stricken by higher market power costs and may
have to increase its rates to City Light by 250 percent. The City Council
has already agreed to pass those higher costs on to Seattle ratepayers
although it's unclear how much that would raise the bill of the average
person.
Even at a higher rate, City Light officials regard the BPA power as a good
long-term strategy for getting power costs under control. If they succeed,
the rate increases approved this year could eventually be rescinded.
Until then, local ratepayers will have to keep writing bigger checks to City
Light with the knowledge that some of their money will find its way to
Texas.
Jim Brunner can be reached at 206-515-5628.