Power Price Caps Knock Diesel Farm Off-Line

July 13, 2001 By KOMO Staff & News Services

WENATCHEE - Price caps imposed by the Federal Energy Regulatory Commission have pulled the plug on a public utility's dreams of profiting from sales of surplus electricity.

The Chelan County Public Utility District has taken 26 diesel generators off-line after prices for wholesale power fell below what it cost to produce.

Utility officials said Thursday they likely would not have rushed through the $34 million "diesel farm" project earlier this year had they known FERC's action last month would greatly change the economics.

"What I know now, I wouldn't do it," PUD Chief Operating Officer Charlie Hosken said.

PUD commissioners said they would have been less likely to authorize the project, which has been off line for most of the past two weeks because power prices are too low to cover the operating cost.

The current cap is just under $92 per megawatt-hour, and electricity was selling on the wholesale market Thursday for about $55 per megawatt-hour. It costs $70 to $80 per megawatt-hour to operate the diesel farm near Malaga, Hosken said.

Payback Has Been Slow

In late January and early February, when power prices had soared to more than $300 per megawatt-hour, PUD officials used estimates that projected the plants would pay for themselves within six months.

The payback has been slower to come.

In the first four months of operation, the publicly owned utility has recovered about one-quarter of its investment.

Despite the disappointing return, the diesels may yet prove to be a vital resource, officials say.

Price caps could discourage new generation and further diminish energy supplies, making power unavailable at any price, PUD spokesman Wayne Wright said. In that event, the diesel generators would be needed, he said.

District Commissioner Barbara Tilly said the price caps might not hold in a severe shortage.

Originally, the PUD proposed to operate the diesel farm for no more than a year because of concerns about air quality. But Hosken said this week the generators could operate for more than a year if needed to recoup the investment.

When all the generators are going, they produce about 43 megawatts of electricity, a little more than it takes to power the University of Washington campus in Seattle

http://www.komotv.com/news/story.asp?ID=12577

-- Martin Thompson (mthom1927@aol.com), July 14, 2001