Companies cut energy use as rate hikes loom

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Hydropower meant cheap power for the Northwest.

The Pacific Northwest’s industrial base was forged on the promise of cheap power. But the region’s 60-year hold on the cheapest electricity in the nation is about to weaken.

Many big power users are spending millions now to make themselves more efficient so that rates do not become a burden later. For those that don’t prepare, the future holds a host of higher costs.

Pacific Power wants to raise rates 20 percent in 2011 and Portland General Electric Co. is seeking a 7.4 percent hike at the same time.

Oregonians and their neighbors across the West face years of rising power prices — prices affected by renewable energy standards, carbon emissions regulation, salmon recovery efforts and population growth.

This mix of factors makes it difficult to estimate just how much electric rates will ultimately rise, but early signs are ominous:

• √ The federal government will soon start regulating greenhouse gases, which may push up the price of natural gas and coal, eventually restricting the use of these fossil fuels. Gas- and coal-fired plants generate more than half of the electricity PGE and Pacific Power sell.
• √ Even without new regulation, coal prices are up more than 50 percent in the past year. Some analysts fear that coal — the nation’s largest source of power — could double in price again in 2010.
• √ The Bonneville Power Administration, which markets 35 percent of the region’s power, must raise rates to fund salmon habitat restoration and new transmission lines for wind and solar energy projects. New contracts that go into effect in 2012 could raise rates by 15 percent or more for some utilities.
• √ By 2025, Oregon’s largest utilities must get 25 percent of their electricity from renewable sources, as required by the 2007 Oregon Renewable Energy Act. California and Washington face similar deadlines. Wind and solar power cost more than most other options.

Though price pressures are mounting after years of relative stability, the upward march of power bills should come as little surprise to major electricity consumers.

In 1937, when the Bonneville Power Administration was established to harness cheap hydro dams and transmit electricity across Oregon, Idaho and Washington, electricity was so abundant that utilities practically gave it away.

That cheap power fueled business growth in the region, drawing aluminum smelters and semiconductor manufacturers like Intel Corp. as the century progressed.

Rates began edging up in the 1980s.

They rose again in 2000 and 2001. Over that two-year period, power prices climbed from $25 per megawatt hour to $200 per megawatt hour, spiking as high as $1,000 per megawatt hour at times.

A number of the region’s aluminum smelters shut down, shedding thousands of jobs.

Today’s rates are below those crisis-era highs, but are well above earlier levels. Bonneville Power Administration wholesale rates vary by buyer, season and time of day, but now typically range from $35 to $50 per megawatt hour.

Businesses have been forced to adapt. Some have even come to embrace higher energy costs as part of the region’s “green” ethos.

Intel Corp., for example, has volunteered to pay more for some of its electricity to fund alternative power development. At the same time, the company is aggressively striving to cut its electricity consumption.

Intel spends about $55 million annually on electricity across its Oregon campuses.

In 2008, the company launched a Green Buildings Policy and started investing in energy conservation projects at sites across the globe, said Intel spokesman Bill MacKenzie. It has spent millions of dollars to improve the efficiency of lighting systems, upgrade air handling, and develop energy efficient manufacturing processes.

MacKenzie estimates that consolidating and upgrading several computer server rooms into a single, more efficient location will cut Intel’s power consumption by 9.9 million kilowatt-hours per year, an annual savings of $651,000 at current rates.

Lorie Wigle, general manager for eco-technology at Intel, said the company also intends to make products that consume less power. Business buyers increasingly use energy efficiency as a metric when evaluating purchases, Wigle said.

With rate hikes inevitable, that focus on efficiency is the best way for businesses and homeowners to keep power costs under control, said Jim Lobdell, vice president of power operations and resource strategy at PGE.

Lobdell is lobbying hard for PGE customers to take advantage of energy-efficiency programs.

Energy Trust of Oregon, for example, offers technical assistance, cash incentives, advice and referrals to help businesses reduce power consumption.

The nonprofit estimates that its programs have saved Oregon households and businesses $440 million since 2002.

It aims to reduce power consumption by 430 average megawatts by 2013. By contrast, PGE expects its major wind generating project, Bigelow Canyon, will average 150 megawatts in new power upon final completion.

“I can’t force you to wrap your water heater, insulate your home, replace your windows,” Lobdell said. “Those are decisions you have to make, capital investments you have to make. … But when you look at the energy resources we have available, you’re moving up the cost curve. Energy efficiency is the low-hanging fruit.”