Kec Hopes To Plug Into Lower Rates
In a move being contemplated by other Northwest utilities served by Bonneville Power Administration, Kootenai Electric Cooperative Inc. signed a deal with a San Diego power broker Thursday to find cheaper electricity.
The agreement calls for Enova Energy Management Inc. of San Diego to locate new sources of power that could be cheaper than what BPA offers later this year in its new power contract to customer utilities. However, the contract does not commit KEC to purchasing non-BPA power, said Bob Crump, KEC general manager.
A non-regulated subsidiary of San Diego Gas & Electric, Enova will hunt down the best power deal for KEC and share the savings with the cooperative, Crump said.
That its customers are foraging to find cheaper power is nothing new to Bonneville, said Rick Itami, the non-generating public utilities manager.
“We view these types of agreements just as competition to us, and it’s something we’re seeing happen everyday,” Itami said. “We’re going to try to retain all of our customers, even if that means we cut special contracts with them.”
Greater expenditures to help save Columbia River salmon and mitigate other environmental impacts of the Northwest’s vast electrical system have most utilities expecting higher power costs.
Crump said BPA’s attempt to “get their house in order” administratively also will raise power costs.
Bonneville is widely expected to offer tiered prices for its power to Northwest utilities, Crump said. The first price tier for the majority of power a utility gets will probably be reasonably priced, Crump said.
But the tiers for the final 10 percent or so of power a utility needs may be too expensive for KEC, he said. That’s where Enova will seek cheaper power.
“Our main concern is to provide an alternative for our power needs,” Crump said. “We feel that BPA has been a good, reliable power supplier, but it boils down to economics for us.”
The agreement doesn’t mean KEC will abandon BPA entirely, but Enova already has begun searching for KEC, Crump said. If Enova found a good enough deal, KEC could get all of its power from other sources, he said.
KEC may continue to keep its full requirement contract with Bonneville that runs past 2001. But KEC has the option to take the new BPA contract in October, and would then restructure its mix of power with the new sources Enova will find, Crump said.
The extra incentive for Enova, a new enterprise modeled after a program San Diego Gas & Electric did with the California Public Utilities Commission, is that it keeps half the savings of the power it finds for KEC compared to what it would have paid to Bonneville, Crump said.
“These people know what they’re doing,” he said. “We thought this incentive arrangement best fit what we were looking for in a power broker.”
If Enova finds longer-term power deals for KEC, the utility gets more of the savings each year of the agreement. Under a four-year deal with a new power source, KEC would receive 80 percent of the savings and Enova 20 percent by the fourth year of the contract, Crump said.
The agreement between KEC and Enova has a two-year trial period, Crump said. “Unless the world gets turned upside-down or something, the agreement can continue until one party serves notice.”
Will other utilities follow KEC’s lead? Crump said the bottom line will do the talking for many.
“I didn’t want to be a prognosticator with this, but utilities with full requirement agreements with BPA are going to need to look elsewhere for some of their power,” he said.