Cheney loads demand additional power

Cheney needs more power - and is in the market to purchase it.

The Light Department is forecasting the need for more power in 2019 beyond what it currently buys from the Bonneville Power Administration, a byproduct of development taking place in the city, especially residential. Therefore, the City Council gave its approval to Light Director Steve Boorman to purchase an additional megawatt of what is called Tier 2 power from Northern Wasco County Public Utility District near The Dalles, Ore.

Boorman said Cheney's price would be $24.49 per megawatt hour, which is splitting the difference between what Northern Wasco bought the power for and retail market costs. The PUD is selling the megawatt block to Cheney at a loss, but not nearly as much if it sold it on the open power market.

Northern Wasco determined it was not going to need all of the Tier 2 power it was currently purchasing through NIES - the Northwest Intergovernmental Energy Supply. Both Cheney and Northern Wasco, along with other municipal entities that purchase power, are members of NIES, which is a subsidiary of NEMS, the Northwest Energy Management Services, which is in turn a branch of NRU - Northwest Requirements Utility.

According to its website, NRU was founded in 2002 as a non-profit organization that provides power advocacy for 52 members in seven states served by BPA. NEMS was formed among 21 NRU members with the goal "to achieve economies of scale and efficiencies in operation in securing non-federal power supply and transmission services while accommodating each member's unique characteristics."

When Northern Wasco determined it was not going to need all of its Tier 2 power, it went to NRU, who in turn went to Shell Energy, a large supplier of non-federal based system power to find out how much it would cost to buy a megawatt of power in 2019 and how much it would be to sell the same.

If it sounds like power purchasing is much like a speculative, futures market, you're pretty close to the truth, and Boorman would agree. And, it's complicated.

Cheney purchases its power, known as Tier 1, from BPA. BPA handles the daily peaks and valleys of its users demand, and Cheney's share of this is called the High Water Mark.

But the output of the federal-based system can change over time for many reasons, which gives Cheney and other users a second benchmark known as the Rated Period High Water Mark (RHWM). After the preliminary RHWM was released in July 2016, Cheney load forecasts indicated it would need 1.924 megawatts additional in 2018, and 2.143 megawatts in 2019.

Cheney has contracts with Shell to purchase Tier 2 power in 2018 and 2019. Council gave Boorman authorization to work through NIES to find another megawatt block for 2019, which it has through Northern Wasco.

Cheney's current contract with Shell for 2019 is $35 per megawatt hour.

"We're going to have one megawatt at one price, and one megawatt at another price," Boorman said.

As for what this will mean for Cheney power customers, it's difficult to quantify. While Tier 2 power is purchased in blocks at a fixed price, Tier 1 power from Bonneville is different, using 18 different determinants such as base price, transmission costs, load shaping and demand.

Initially, Boorman said Cheney should see a $92,000 savings between the two Tier 2 megawatt blocks to be purchased in 2019. Cheney doesn't differentiate between the various power sources with its billing, using just three determinants - base rate, energy use and peak demand.

While Cheney's load is growing overall, usage - as with other utilities - is dropping due to many factors. Boorman said this makes power predictions difficult, including impacts to customers.

"It (Northern Wasco purchase) might help make it maybe three years between rate increases instead of two," he added.

John McCallum can be reached at [email protected].