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Era of Cheap Power is Ending by Rocky Barker Idaho Statesman, June 8, 2008

Idaho Power has long relied on hydropower and coal. That is changing. The utility's new pursuits
are more expensive, but they are key to its plans for efficiency and conservation.

Idaho Power Co. is embarking on an ambitious program to build new transmission lines, natural gas power plants, and wind and geothermal facilities to meet growing demand.

At the same time, the company is aggressively pursuing energy-efficiency programs and working to turn them into a business opportunities, an approach that is getting national attention.

But as one of the state's oldest companies heads into the future, one thing is clear: The cheap and abundant power that defined its past will become just a memory.

The company that long depended on 50-year-old hydroelectric dams and 25-year-old coal plants in Nevada and Wyoming plans to spend more than $900 million on a proposed natural gas plant and two major transmission lines in the next three years, linking the Treasure Valley with Wyoming and the rest of the Pacific Northwest.

"These investments will add more balance to our power supply options," Lamont Keen, president and CEO of Idaho Power, told shareholders earlier this month.

Idaho Power provides electricity to 400,000 residential customers, 62,888 commercial and industrial customers and 18,126 irrigation customers across southern Idaho and eastern Oregon. It brought in more than $879 million in revenues in 2007.

Until early 2007, Idaho Power planned to meet its growth demands primarily by building new electric generation units at the mouth of coal mines in Wyoming. But the threat of new regulations and taxes aimed at reducing carbon dioxide - the main greenhouse gas blamed for global warming - dried up capital to build new coal plants.

"It became obvious it wasn't going to happen," said James Miller, Idaho Power vice president for generation.

So the company shifted gears. It has just completed a $60 million, 170-megawatt natural gas-fired power plant near Mountain Home to help it meet demand during the summer.

The company also is taking bids for a 250-megawatt natural gas turbine plant to replace the planned units in Wyoming. But with the volatility of gas prices, the company is looking at a range of generating sources, transmission lines and energy conservation strategies to balance out its demand.

THE END OF CHEAP POWER

Idaho Power's 17 hydroelectric plants, which can still produce half of the company's needs, produced a surplus of power for the company until the late 1970s. The company added coal plants, and a downturn in the economy kept the surplus available into the early 1990s, Miller said.

As southern Idaho grew, Idaho Power met the demand by buying cheap power. But since early in this decade, the supply of cheap power has dried up.

So have Idaho Power's reservoirs, though, and last year, only a third of its power came from hydroelectricity. So the surplus of cheap power is all but gone, too.

This new reality hit Treasure Valley economic development officials when two manufacturing plants - each needing from three to four times more electricity than Micron - ruled out the area because Idaho Power could not assure them of sufficient electricity. To build the power plants necessary to meet such demands would have cost current Idaho Power customers hundreds of millions of dollars.

CLEAN POWER

Since then, the company has aggressively sought contracts with wind power generators and could have 360 megawatts of wind power capacity by 2009. That would be about 12 percent of Idaho Power's power supply, and the company also has plans to add 45.5 megawatts of geothermal power by 2011.

Ralph Cavanagh, an attorney with the Natural Resources Defense Council in San Francisco, is one of the leading advocates for clean power and energy conservation. In 1987, he came to Idaho to testify against Idaho Power for its poor commitment to energy-efficiency programs.

Today, Cavanagh uses Idaho Power as an example of a utility that has found a way to integrate energy conservation into its business. The Idaho Public Utilities Commission approved a program that lets Idaho Power cover its fixed costs in power plants, transmission lines and other equipment even if its customers reduce their power use.

That gives Idaho Power a reason to encourage energy conservation that utilities in all other states, except California, don't have.

Idaho Power has programs that pay customers to reduce power use during periods of high demand. Its most prominent residential program, A/C Cool Credit, pays customers who agree to connect their air conditioners to communication devices that allow the company to turn them on and off in periods of high demand to manage the power load.

In Emmett and McCall, customers with a special meter pay an adjustable rate, with power cheaper at times of low demand.

"The Idaho program is the regional leader," Cavanagh said.

But for energy-efficiency to really take off, Idaho Power needs a financial incentive, he said. The utility has a pilot program with the PUC that allows it to get a share of the incentive money offered to green builders, if the utility persuades enough contractors to build energy-efficient homes.

But still, Idaho Power makes more money if it builds more generation plants.

Eventually, Cavanagh and Idaho Power officials hope they can make energy-efficiency profitable for the company as well. They would like to restructure the entire energy-efficiency program with incentives that make it a revenue center.

COSTS WILL GO UP, BUT THE DAMS COULD HELP

Whether the company turns to natural gas, geothermal or wind, the costs of generating electricity will be higher than Idaho Power's traditional hydroelectric or coal plants. So rates will rise. But when Idaho has a good water year, as is anticipated in 2008, hydroelectric power will take up more of the burden and the power costs will drop.

Idaho Power had no choice but to spurn new coal plants. And the decision has made former opponents like the Snake River Alliance, which advocates clean power, allies. Ken Miller, the alliance's program director, said hydropower, along with programs to reduce consumption, can help customers keep their electric bills down.

"No one wants their rates to go up, but we pay among the lowest rates in the nation," Miller said. "We are still well-positioned to have relatively cheap energy and clean energy."

HOW YOU CAN SAVE POWER (AND MONEY)

Watch your thermostat.

Insulate your ducts.

Don't close your vents.

Sign up for the A/C credit.

Install a ceiling fan.

Replace filters.

Use fewer bulbs and dust them.

Use compact fluorescent bulbs.

Weatherize.

NEW PROJECTS

Idaho Power Co. has several new initiatives to increase generation and bring power in from other areas:

Transmission

The Gateway West transmission project is a partnership with Rocky Mountain Power in eastern Idaho to build more than 650 miles of 500-kilovolt power lines and 200 miles of 230-kilovolt lines across Wyoming and southern Idaho. It is under environmental review now and could be completed in 2012.

The Boardman to Hemingway transmission project would have a 260-mile 500-kilovolt transmission line running from Boardman in Northeast Oregon to southeast of Boise, where it would connect with Gateway West.

Generation

Idaho Power just completed a 170-megawatt natural gas-fired power plant near Mountain Home. The plant represents an expansion of the Evander Andrews Power Complex, which already has two 45-megawatt gas plants and is connected to 160-megawatt Bennett Mountain plant in Mountain Home.

The utility has bids out for a generation plant of at least 250 megawatts, which probably will be a natural gas plant.

Wind generation plants near Glenns Ferry built by Idaho Power contractors are expected to add 265 megawatts of capacity when completed.

HOW YOU CAN USE IDAHO POWER'S RESIDENTIAL ENERGY EFFICIENCY PROGRAMS

Energy Star Appliance Program: You can get an incentive payment from Idaho Power for purchasing a qualifying Energy Star appliance.

Energy Star Lighting: Encourages the use of compact fluorescent light bulbs.

Energy Star Homes Northwest: This gives an incentive to builders for each home built to the Northwest Energy Star standard, which is 30 percent more efficient than one built to Idaho energy code.

Rebate Advantage: An incentive to eligible customers who purchase a new electrically heated Energy Star manufactured home.

A/C Cool Credit: A $7 per month credit for customers who allow Idaho Power to cycle their air conditioning system during some June, July and August afternoons.

Heating and Cooling Efficiency Program: Helps you make the most of your heating and cooling equipment.

Energy House Calls: A free package of services, including duct sealing, designed to help save energy for residents of manufactured homes heated by an electric furnace or heat pump.

Weatherization Assistance for Qualified Customers: Free weatherization measures for electrically heated homes of qualified customers.