Climate Change and Energy Program - Part 4

Tuesday 2nd November

On Tuesday we spent a day at Tacoma Power (TP), a municipal (public) owned energy company established in1893. TP serves 160,000 customers and proved to be an interesting model to explore what we previously learned at FERC.

TP is a very low carbon company, deriving the majority of their energy from hydro power - a commodity that Washington State is blessed with. TP only produces half the energy it requires, the rest it buys from Bonneville Power Administration - a large DoE agency based in the Pacific North West that runs a number of Federal hydro dams and also a nuclear power plant.

Stepping back for a minute, it is clear that Washington State is a good example of the complexity of the US electricity system. It has numerous Public Owned Utilities (POUs) and Investor Owned Utilities (IOUs) and also Rural Cooperatives. The T&D infrastructure is owned by numerous players (including all of the above) and there is significant inter-company energy trading. As we have heard previously there is a Renewable Power Standard (RPS) in place in the State, which requires 15% electricity to be derived from Renewables by 2020_on top_ of what is already produced. Energy efficiency measures do count toward this, although as discussed below, some measures do not.

As already noted, TP portfolio is almost exclusively hydro power and already they have a surplus, so building additional renewable power is uneconomical. Therefore TP propose, in the most part, to achieve the RES through efficiency measures, which they call conservation. They also see this strategy as a means to avoid building significant new power in the future. They noted that current demand grows about 2% per year.

A quick aside here - Washington State has considerable wind resources and these are being exploited by other companies to meet RES. Already this has resulted, on windy days, in an excess if power on the market. Hydro companies must generate to moderate river flow, and in this situation it has resulted in them paying customers to accept power that they need to dump on the system. This is something that we might expect to see in the UK as wind power levels come up.

Returning to conservation, TP has a conservation pathway to meet their RPS obligation which boils down to monthly aspirations. They have three broad initiatives ongoing which are industrial, domestic and NEEA. Broadly speaking the first two include efficiency measures we have previously heard about such as low energy lights, reduced cost for efficient HVAC equipment, work with large companies on efficiency projects and preferential customer rates on energy star whites goods. NEEA (the North West Energy Alliance) is a Trade Association that numerous energy utilities pay fees to in return for a share of their large energy efficiency projects (such as hospital energy efficiency). Broadly speaking it seemed that TP were on track to meet the RPS. A good job as there is a $50 per MW fine for missing the target! They were aware that they are hitting the low hanging fruit and that more difficult things will have to be examined in the future.

Curiously, behavioural measures, such as advertising campaigns, even if they result in lower energy usage, do not count toward the RES target, which to me seemed completely perverse. I’ve asked a few people about this and it turns out that this is a consequence of the poorly written Public Bill that passed into legislation. It appears that Bills can only be changed after two years, and the first time they tried to change this bill in the State it failed to pass through the legislative process (in other words it didn’t get the majority vote). This means it’ll have to wait until next year.

TP have a smart meter project ongoing and have rolled it out to 16,000 customers. Communication is based on fibre optics and they have actually started a cable and broadband company to take advantage of the fact they are laying the cable anyway. This system has enabled a pay as you go tariff for customers on the poverty line (which comprise 40% of their customer base!). The system allows customers to buy credit (as little as $5 at a time) and then warns them when it's time to top up (they will be cut of off if they don't pay). In contrast to the UK system, this system works out cheaper for customers, as service charges are based on how much power is used.

We also had the opportunity to visit one of TPs hydro projects, which was great fun. We learned that in some of the dam systems where you might have five dams in a cascade on one river, it may be the case that each project is owned by a different company, meaning that there has to be close collaboration to regulate river flow (e.g. one company cannot generate flat out if others don't want the flow).

A final point - as a POU, TP are not supposed to make a profit. It's OK for them to have a surplus as long as the money is reinvested into necessary projects. This means that potentially investment in infrastructure is possible, albeit at a slow rate. Obviously this isn't necessarily the case for IOUs.