OPALCOGRAM 120
7/21/94

Doug Bechtel
I enjoy the cartoons in the Islands’ Weekly. It seems like we have had our share of attention recently. This week’s cartoon urging OPALCO to look at Canadian power struck home. There is a lot happening that will enable us to look seriously at that alternative in the future. Let me explain.

Today we buy all of our power from BPA. BPA also owns all of the transmission system (which includes three submarine cables) to deliver power to us on Lopez Island. BPA loves to tell us that it costs them 3 cents per kWh just to deliver power to us (which they sell to us at 2.8 cents). Today, if we buy power from someone other than BPA, we have to pay for the power (maybe 3.5 cents) plus 3 cents for transmission. We are now up to 6.5 cents. Beyond this, the situation becomes very complicated. And here is where we can use BC Hydro as an example. To get the 3.5 cent rate, we need to take the same amount of power 24 hours a day, 365 days per year. This obviously doesn’t meet our needs. The amount of power we need varies by the hour (night vs. day) and even more by the season (summer vs. winter). The ability to meet our loads on a minute-by-minute basis is called load following. BC Hydro does not offer load following as a wholesale power transaction. To get load following, we would have to pay BC Hydro retail rates - far more than 3.5 cents per kWh.

What is changing? Basically, the BPA reinvention process is changing all of the rules as we know them. Right now, BPA’s rates have two parts - energy and capacity (demand). When you turn on a light, BPA will generate more power somewhere on their system to provide electricity to power the light. BPA is unbundling their rates from two parts to more than 80! Of course, we won’t need to buy all 80 elements, but, for example, load following will be an extra cost option - we can buy it or not. More to the point: we can buy load following without buying energy or capacity. Even more to the point, OPALCO (and others) have been pressing BPA to “postage stamp” transmission prices. (This means that, like a postage stamp, everyone pays the same no matter how far the energy is transmitted). If we are successful, the cost to wheel power across BPA’s system to OPALCO will drop from 3 cents per kWh to as little as _ cent per kWh. For the first time, we will be able to afford to buy power from someone other than BPA - possibly even Canada. Do I think we will do this? Probably not. The wholesale electric market will become more competitive and BPA will be forced to keep their prices at or below the competition or they will lose customers.

This leads us to an even more exciting possibility - if competition at the wholesale level makes power cheaper, what about competition at the retail level? MCI and Sprint have given AT&T a run for their money, why can’t the same thing happen in the electric business? It will. More next time.

Doug Bechtel