PUD prepares for second power auction
EPHRATA — In September Grant County Public Utility District opens bidding on a minimum 6 percent slice of the power output from Priest Rapids Dam for one year, following a similar and successful power auction in 2005.
Last year's unique auction was developed in response to a 1998 order from the Federal Energy Regulatory Commission requiring the district to sell a reasonable portion of power from Priest Rapids Dam according to market-based principles. The reasonable portion was fixed at 30 percent.
"The power auction was a simple idea, really," said Jeff Atkinson, the district's manager of power planning and marketing. "The FERC order required that the utility sell a reasonable portion of our power in a 'fair and equitable' manner. Once we reviewed our options, the idea of an auction seemed to fall into place."
The district anticipates having an auction on at least 6 percent of the dam's power output annually. The price set by the auction will determine the market price for the entire 30 percent sold that year, which is mostly purchased by Northwest utilities.
The FERC order and the marketing plan the district developed to comply with the order are both part of the utility's relicensing effort.
The district is currently in the process of relicensing Priest Rapids and Wanapum dams through FERC, hoping for a second 50-year license. The first 50-year license expired in October 2005.
In last year's auction, Constellation Energy Commodities Group, Inc. topped the bids submitted by 13 utilities and power-marketing firms.
Constellation Energy, with offices in Portland, Ore., describes itself as the nation's largest wholesale and retail power seller engaged in management of electrical energy and power plant fuel supplies.
They bid $21,051,369 for 6.52 percent of the power output at Priest Rapids Dam. Their 14-month contract period started Nov. 1, 2005, and continues through Dec. 31 of this year. The only significant difference, Atkinson said, between this year's power auction and the original held in July 2005, is the shorter 12-month power contract period beginning Jan. 1, 2007 through Dec. 31, 2007.
The amount of power Constellation Energy actually receives during the contract depends primarily upon Columbia River flows and water requirements for protected fish species.
"(The auction) really shifted a lot of the risk, because we don't know from year to year whether we're going to get high water or low water out of the (Columbia) River," Atkinson said. "This auction does a great job of shifting that risk away from Grant (County PUD) to whoever the ultimate purchaser is."
Despite the risk, Powerex Corp., a participant in the 2005 auction, announced they plan to participate again this year. Powerex is a leading buyer and seller of physical wholesale energy products and services in markets across North America. They have been in business since 1988 as a wholly-owned subsidiary of BC Hydro.
"Powerex does regular business with Grant PUD," said Lind Dong, Powerex marketing manager. "It's not just the product that is important, it's our business relationship with the utility that makes it easy for Powerex to participate."
Dong said the district's power auction was easy to participate in and was a great experience.
"Timelines were set well in advance, giving us time to obtain management approvals and respond to the schedule," Dong said.
Not only is the hydroelectricity flexible, renewable and reliable, district officials believe the power being auctioned is also valuable because of the location of Priest Rapids Dam.
Power is actively bought and sold in only a few locations in the western U.S. One of those locations is the Mid-Columbia trading hub. With the dam positioned within the heart of the hub, there are virtually no costs for transporting the electricity for trading.
Based on the assumed 6 percent slice of Priest Rapids Dam, the auctioned amount of power could be approximately 29 average megawatts. The highest bidder will receive approximately 40 megawatts of capacity and 532-megawatt hours of storage. The precise percentage to be auctioned, which may exceed 6 percent, will be announced by Aug. 21. The auction will be held Sept. 28.