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Council: Near-Term Power Supply Good, Risk Increases 2005 by CBB Staff Columbia Basin Bulletin - December 13, 2002

While the risk of electricity shortages is low in 2003, the risk increases in 2005 and 2006 if new power plants and energy conservation initiatives are not developed in the next three years, the Northwest Power Planning Council reported Tuesday.

According to an analysis prepared by the Council's Power Division staff, the probability of electricity shortages during the winter of 2002/2003 is no greater than 4 percent, which is below the 5-percent standard accepted by the utility industry. However, the probability increases to 7 percent during the winter of 2003/2004 and to 15 percent in the following two winters. The Council's four-member Power Committee reviewed the analysis at a meeting Tuesday in Portland.

"We will be OK this winter, but for the 2004-2006 period we are exposed to a level of risk that is higher than we think it should be," said Tom Karier, Power Committee chairman and one of Washington's two Council members.

The problem identified in the analysis is the same, although smaller, as the one identified by the Council in March 2000, several months before the energy crisis of 2000/2001 began. Through the 1990s, development of new power plants and energy conservation lagged steadily farther behind the growing demand for power -- on the West coast generally and in the Northwest specifically. The problem was that the wholesale price of power generally was lower than the cost of power from new power plants or most types of energy conservation, and this discouraged new investments. Then, when the California power crisis developed and the Northwest suffered drought, power supplies diminished and the prices jumped to more than 10 times normal levels and stayed there from the fall of 2000 through the late spring of 2001.

"We could be headed right back into the problems we faced in 2000, and we need to think about how we will respond as a region if the new power market fails to encourage adequate investment in new power plants," Karier said. "We've had a very dry fall, and we anticipate we will not have average runoff this year in the Columbia River. This is an important reminder that the Northwest is still very dependent on hydropower and vulnerable to the variability of weather."

According to the analysis, if the region relies entirely on price signals from the wholesale power market to provide the incentive for developing new resources, by 2005 the region will experience significant high prices -- three and four times normal -- in the summer months. "Nobody wants to see this as our future. This is alarming," Karier said. "We can make different choices and change the future."

The Council will continue to periodically analyze regional and West coast power system reliability, and will propose options to improve future reliability in the next version of its Northwest Power Plan. The power plan is scheduled for completion in 2003. Options could include ways to reduce exposure to the volatile wholesale power market, develop conservation and other methods of demand reduction in the face of low market prices for power, and further diversify the region's power supply.