California Energy Crisis Starting to Roil Other Western States Wednesday, January 24, 2001 02:09 AM ET

California's energy crisis is spilling over into other Western states, driving up their power bills, throwing people out of work and threatening to ruin one of the region's economic advantages: low energy costs, Wednesday's Wall Street Journal reported.

Western states buy power from the same wholesale electricity market as California, and utilities from the Canadian to the Mexican borders are buying power, albeit in smaller amounts, at the same prices that have pushed their California counterparts toward bankruptcy.

Tuesday, Idaho Power Co., a Boise, Idaho, utility, became the latest example of how the market has gone haywire, announcing that power purchases since April have exceeded projections by $121 million, and it may require a 24% rate increase from its 395,000 customers in Idaho and Eastern Oregon.

Tacoma Power, a municipal utility in Tacoma, Wash., says it will burn through a $130 million reserve and run out of cash by spring, despite a 50% rate surcharge it imposed on its 150,000 customers last month. Tillamook People's Utility District, a small utility on the Oregon coast that buys about 20% of its power on the wholesale market, estimates it will spend an amount equal to its annual revenue on those purchases.

The Tohono O'odham Utility Authority, which serves the Tohono O'odham Indian reservation along Arizona's border with Mexico, says it will have to recover an additional $1 million -- on top of a 30% rate increase last summer -- from its 13,000 customers to cover the California-driven price spikes, though unemployment on the reservation is estimated at more than 20%. "It's just obscene," Charles Wiese, the utility's general manager, says of the power prices.

Meanwhile, industrial customers with contracts tied to the wholesale market have been hit even harder. Across the Northwest, smelters, paper mills, chemicals makers and mines are slashing production and idling their workers rather than pay prices that at times have soared to $5,000 a megawatt hour -- more than 100 times the historical highs.

"What's at stake is the economic competitiveness of the West," says Gov. Mike Leavitt of Utah, where the state's largest utility, Utah Power & Light, a subsidiary of PacifiCorp, of Portland, Ore., is proposing a 19% rate increase. "There are only a few things that can shut an economy down and one of them is lack of electric supply."

Many utility officials fear the worst is yet to come. An unusually dry winter in the Northwest -- November and December were the third driest on record -- has significantly reduced water flow over hydroelectric dams, and thus the production of electricity. Hydroelectric generation typically accounts for about 70% of the Northwest's power, and this winter's shortfall of electricity has sent utilities such as Tacoma Power to the spot market to meet demand.

Tuesday, Moody's Investors Service warned that municpal utilities who have had to buy power on the wholesale market are potential credit risks because of the market's volatility. The rating service changed the credit outlook of Seattle City Light, Seattle's municipal utility, to negative because of concerns that low water at its hydroelectric dams will force more purchases on a spot market that is described as "unmerciful" by Dan Aschenbach, a senior vice president at Moody's.

http://www.quicken.com/small_business/news/index-article.dcg?story=/news/stories/dj/20010124/on20010124000050.htm&department=1

-- Martin Thompson (mthom1927@aol.com), January 24, 2001