This article was originally published in the May/June 1993 issue of Home Energy Magazine. Some formatting inconsistencies may be evident in older archive content.
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Home Energy Magazine Online May/June 1993
TRENDS IN ENERGY
Trends in Energy is a bulletin of residential energy conservation issues. It covers items ranging from the latest policy issues to the newest energy technologies. If you have items that would be of interest, please send them to: Trends Department, Home Energy, 2124 Kittredge St., No. 95, Berkeley, CA 94704.
Snohomish PUD Slashes Conservation
The Snohomish County Public Utility District, an electric utility in Everett, Washington, unexpectedly dropped its conservation plans for 1994 after failing to negotiate a new contract with Bonneville Power Administration (BPA) for a conservation power plant. A chief reason given for the decision was lost revenue. The move has created an ironic situation for Snohomish, according to Al Aldrich, the utility's director of communications and service development. For 1993, the district has the largest conservation program budget it has had since 1983, about $18 million, but we've also given layoff notices to 41 employees out of our total conservation staff of 61. Layoffs are scheduled to take effect between June and December as existing contracts are completed and programs slow down in early 1994, when conservation activity will reach its lowest level since the district began such programs.
The BPA contract would have been the largest of its kind in the Northwest, with $186 million earmarked for energy savings of 350 million kWh over seven years. The contract had been under negotiation for 18 months when the utility's three-member commission decided in a 2-1 vote to stop negotiating. Soon after, the commissioners directed staff not to negotiate new conservation contracts or loans with district customers. They revised the latter directive after outcry at a public hearing in December, regarding the utility's 1993 budget, in order to fulfill work in progress.
A primary stumbling block in the negotiations was the issue of lost revenues and dissatisfaction with BPA's reimbursement policy for losses. A letter to BPA by District Commissioner Matt Dillon read The PUD is no longer able to absorb the lost income (let alone add to it) in order to make conservation less expensive for BPA. Although the contract would have only cost the utility $2 million of the net operating cost of the $186 million program, at its peak the contract would have cost the district an additional $8 million in annual lost revenue, Dillon estimated. BPA's reimbursement policy extends only to small, slow-growing utilities with less than 25,000 meters and an annual growth rate of 1% or less. The utility wanted BPA to extend this provision to cover lost revenues at all utilities.
Stuart Clarke, external affairs manager for BPA's Puget Sound office, also said the issue of lost revenues came up quite late in the game. We made an offer that adequately covers the cost of the conservation program, he said. The issue of lost revenues had not been a part of the negotiations until the last two weeks.
Snohomish PUD is BPA's largest priority customer, purchasing 80% of its power from BPA while generating the rest from hydroelectric and steam plants. With 850 employees, and an annual budget of $350 million, the utility serves 217,000 customers. Economics have become a concern for the district, whose service area has experienced rapid growth, with a current and anticipated need to expand service 3.5% per year to accommodate new customers. BPA will increase wholesale rates to the district later this year by 11.5% which, with other factors, will require the district to raise its retail rates for the first time in 10 years.
For the past 12 years, the district has aggressively pursued conservation with residential weatherization programs, electric water heater upgrades, low-flow showerheads and water conservation devices, incentives for new residential construction efficiency beyond code, and commercial and industrial retrofit and building construction. Aldrich said such programs saved Snohomish roughly 200 million kWh annually. There's no question our programs have been successful, Aldrich said. Conservation program costs have been a concern, but lost revenues only recently became an issue. Dillon's decision was a reversal because he had been a leading proponent of conservation on the commission.
Aldrich, who served as conservation program manager until assuming his present position in 1991, hasn't ruled out the possibility that things may change. He said that there is still time for customers to influence the utility's 1994 budget at public hearings later this year. Snohomish's negotiations with BPA may not have been completely futile, however. Other Washington utilities--including Seattle City Light, as well as utilities in Tacoma, and Clark and Grand counties--have expressed an interest to BPA in similar contracts.
Ted Rieger is a freelance writer for trade publications and specializes in energy topics. He lives in Sacramento, California.
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