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Power Peak Could Mean Lowered Income for PUDs by Christine Pratt Wenatchee World, April 25, 2011

WENATCHEE -- With huge amounts of late mountain snowfall promising to flush down area rivers in the coming weeks and more wind power than ever on the grid, the region's PUDs are bracing for what could be a record season of "negative pricing" -- having to pay to get rid of their surplus power.

For local ratepayers, it could mean their PUDs will have less revenue this year to keep local electricity rates low and bolster savings already hit by two consecutive years of drought.

"There is certainly pretty solid potential for over-generation events," said Kevin Nordt, director of power management at Grant County PUD.

The Ephrata-based utility regulates how much power all mid-Columbia River dams generate from moment to moment.

"We've looked to find all the operational options that would be available to minimize the impacts of over-gen events," Nordt said of efforts together with the Portland-based Bonneville Power Administration. "Supply and demand have to balance."

Over generation floods the region's wholesale market with surplus electricity, forcing prices down.

Gregg Carrington, director of energy resources at the Chelan County PUD, said pricing on the region's wholesale energy market already has fallen below zero 62 times this year, through mid-April.

Negative-pricing events even happened in January and February, when strong winter demand usually keeps prices high.

It could mean the PUDs have to pay other utilities to take their dams' surplus power generation.

But it also means that PUDs can benefit by powering down and "buying" -- being paid to take -- the surplus generation of other utilities.

Economic impacts on all three regional utilities have so far been minimal.

Last year, when below-average riverflow conditions prevailed in much of the region and around the Columbia River's source in Canada, Chelan PUD used its Lake Chelan Dam as a buffer, shutting down and allowing the lake to rise when pricing went negative. It ended 2010 in the black by about $6,800 in negative-price trading.

Nordt said Grant PUD ended up paying about $19,000 in negative trading overall. Douglas paid $725 to sell 145 megawatt hours.

This year, conditions are aligning that will make their balancing jobs more of a challenge.

• A recession-caused reduction in demand for electricity has already resulted in low market prices -- $25 per megawatt hour, compared to a prediction of $30.

• The Northwest River Forecast Center is expecting above-average runoff into the Columbia River from virtually all its tributaries. Flows at Grand Coulee Dam -- upriver of all PUD dams -- are forecast to be between 107 to 120 percent of average. Flows into Lake Chelan are forecast to be 120 percent of average.

• The water supply in California, traditionally a big buyer of surplus Northwest power, is also looking good. Utilities there may not have as great a need to seek power elsewhere.

• Driven by federal subsidies for investment and production, wind farms are expanding all over the region adding extra generation that isn't always needed. Wind power often peaks from breezy late spring to mid summer -- the precise time hydropower is at its most plentiful.

In June 2010, a temporary oversupply of generation from surging hydro, wind and thermal left the agency with more power than it could sell. This nearly caused federal dams to exceed their spill limits, potentially harming fish. Johnson says Bonneville officials estimate that the 3,500 megawatts of wind power on line now will grow to 6,000 or 7,000 by 2014.

"We've been able to avoid the unintended consequences of negative pricing," said Chelan PUD's Carrington. "We won't be able to do that into the future, because it's going to become more and more prevalent."

Related Pages:
PSE's Lower Snake River Wind Project to Boost Power Generation by Cameron Chai, Clean Tech, 4/15/11
Bonneville Power may Shut Down Wind Turbines to Protect Salmon by John Laumer, Treehugger, 4/14/11
Grid Problems Trigger Rolling Wind-Farm Outages in Pacific NW by William Pentland, Forbes, 4/14/11
Wind Turbines Shutdown Possible by David Mance, KAPP TV, 4/13/11
Wind-Power Producers Fight Possible Shutdown of Turbines by Hal Bernton, The Spokesman-Review, 4/10/11
Bonneville Power Plan Creates Buzz in Industry by Bert Caldwell, The Spokesman-Review, 4/10/11