CWEB.035/November.25.1998
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Bonneville Power Administration is leaning toward a $30 million annual cap for its proposed wholesale rate discount for energy conservation and renewable energy initiatives. This prospective limit echoes a Public Power Council recommendation, but falls short for public-interest groups and others, including Seattle City Light.
On another contentious issue, BPA tentatively favors offering a dollar of discount for every dollar of public-purposes spending by its customers. Some energy interests want a higher ratio of utility spending to discount dollars, but BPA questions whether that would lead to more public-purposes activity.
These are not final Bonneville positions, emphasized BPA vice president for energy efficiency Terry Esvelt. "Our leanings indicate a direction, but it's not like we've closed the door," he said. BPA administrator Judi Johansen, speaking at Energy NewsData's "Leaders and Strategies in the New Western Energy Market" conference Nov. 19, also described the conservation/renewables rate discount as "still under development."
Outlining the $30 million figure Nov. 12 for the rate discount working group, Esvelt noted the discount will affect BPA firm power rates, and Johansen wants the agency to offer rates below the prevailing wholesale market for the post-2001 period. Esvelt said Bonneville made "a judgment call" to limit the conservation/renewables discount's annual rate impact to about .05 cents per kilowatt-hour, which translates to about $30 million.
Seattle City Light disparaged this figure in a Nov. 2 formal written comment to BPA. "This is substantially less than three percent [of retail revenues suggested for public-purposes spending by the Regional Review] and, in our view, is no more than a token amount." BPA's annual power sales bring in nearly $2 billion, City Light noted, although Esvelt told the working group the annual firm-power revenue to which the discount would apply is around $1.2 billion. In other formal comments the Northwest Energy Coalition called for an annual discount of $60 million to $90 million, available only for utilities meeting the Review's 3-percent recommendation.
BPA tentatively opposes a minimum discount eligibility, Esvelt told the working group. "Our leanings are, we're inclined to not worry about leveraging. Keep it simple, a dollar for a dollar . . . and without a threshold, starting with the first dollar." Bonneville worries that if the spending-to-discount ratio is higher, say 2-to-1, many utilities will fail to participate. "You think you're getting double [the public-purposes investments], but you're not," he said later. Large conservation-minded public-power utilities that buy only some wholesale power from BPA--Seattle, Snohomish PUD, Tacoma Power and Eugene Water and Electric Board--would only be eligible for a small percentage of the conservation/renewables discount, an estimated $3.5 million based on 1997 figures. "I don't think $3.5 million will be very influential on those big four," Esvelt said. "I think our opportunity to influence is in the vast middle ground of public utilities . . . Attempts to leverage may backfire."
BPA also doesn't believe it should be solely responsible for meeting the Regional Review public-purposes guidelines. "We want to be a complement to whatever states want to do at a policy level," Esvelt told the working group.
Still, some energy-interest representatives at the working group meeting think Bonneville should up the discount ante. "In our minds, $30 million is not achieving much," said Liz Klumpp of the Washington Department of Community, Trade and Economic Development. "We'd like to see more leverage." NWEC's Steve Weiss suggested Bonneville could provide $50 million or $60 million when BPA rates are well below market levels, and drop to $30 million when BPA is close to market. Esvelt later said BPA is "willing to consider" scaling the discount amount, although not necessarily on NWEC's scale.
The Public Power Council, meanwhile, has formally endorsed a $30 million conservation/renewables discount. Jim Sherrill of Parkland Light and Water said Bonneville has started to add new costs now that market pressures have eased, casting doubt on the agency's commitment to reach 2 cent/KWh power by 2000. "Remember the credibility in the long term of what Bonneville has to maintain with customers, especially small . . . 100-percent requirements customers," Sherrill said. "We will have in 2006 another choice to make."
Other BPA Discount Leanings
Esvelt described for the working group other BPA discount inclinations:
In addition to the full working group, Bonneville has established six discount subcommittees: renewable energy, tradable credits/pooling, rate design, value vs. cost, role of the Regional Technical Forum, and small utility issues. The full working group is scheduled to meet again Dec. 15 in Portland.
Bonneville wants to create as much discount consensus as possible before the next BPA rate case, tentatively scheduled to begin next spring. "I think we can get enough progress to have the details fleshed out for an initial rate proposal," he said.
The Northwest Power Planning Council, meanwhile, has yet to officially form the RTF. One reason, according to Council member Tom Karier, speaking at a recent NWEC conference in Seattle, is to "try to coordinate development of [the BPA] discount with design of the RTF so the two will fit together."--Mark Ohrenschall
More Information:Bonneville Power Administration's proposed wholesale rate discount for energy conservation and renewable energy initiatives has generated formal written comments largely supportive of the concept, although some hesitancy and outright opposition is also apparent.
Beyond the concept itself, regional energy interests differ on such key rate discount details as amount and leveraging, although broad consensus forms on other issues such as qualifications, administration, utility participation and collaborative approaches.
Concept Comments
BPA received 68 written comments addressing the conservation/renewables rate discount as part of formal responses to BPA's proposal for federal power subscription beginning in 2001. Of those 68 responses, 43 supported the discount, 12 opposed it and 13 were non-committal, according to BPA's tally.
Favoring the rate discount notion are many public-power utilities (including Seattle City Light, Snohomish County PUD and Eugene Water & Electric Board), Portland General Electric, Montana Power, the Washington Department of Community, Trade and Economic Development, Oregon Gov. John Kitzhaber, environmental/conservation/renewables advocacy groups, Northwest Energy Efficiency Alliance, League of Oregon Cities and Northwest Energy Efficiency Council.
Lining up against the rate discount are industrial customer groups, Puget Sound Energy and a few smaller publicly owned utilities. Many other public-power utilities, meanwhile, express reservation over the rate discount, depending on its form and structure.
Many supporters view the discount as a promising means for Bonneville to support regional conservation and renewables, after a period of retrenchment. The Northwest Energy Efficiency Council, a trade group of efficiency businesses, describes the discount as "an important first step in reinvigorating the critical role the region's electric utilities play in realizing the full potential of the cost-effective energy efficiency resource in the Pacific Northwest." Snohomish County PUD "strongly endorses" the discount and finds it "perfectly consonant with the role of BPA to offer encouragement in the form of a rate discount to foster a more aggressive local funding of public purposes activities."
A number of commenters cited the agency's role in helping to meet the Regional Review's public-purposes goals, which call for spending 3 percent of retail electric revenues regionwide on conservation and renewables initiatives. Environmental benefits of "clean" energy also are mentioned.
From a different vantage, Industrial Customers of Northwest Utilities notes the Review linked public-purposes funding to other issues, including power allocations and open retail access. Among Northwest states only Montana has acted on restructuring, including a 2.4-percent public-purposes charge. "The other three Northwest states have had the opportunity to decide this issue and have not. We will continue to oppose the imposition of any energy services tax which has not been thoroughly debated and implemented within the context of open access for end-use customers," ICNU said. A group of aluminum companies make a similar point: "In light of the states' apparent decision to defer public purposes legislation at least until retail access is addressed, it is inappropriate for BPA to include the conservation and renewables incentive."
Northwest Requirements Utilities said a discount at the Regional Review-recommended level amounts to a 6-percent surcharge on BPA wholesale power, which could contribute to "making the BPA resource unaffordable for some of BPA's historical smaller customers."
Puget Sound Energy believes the proposed discount is not competitively neutral, penalizing utilities that have already gained considerable energy efficiencies and that buy only some wholesale power from BPA. Many smaller public-power utilities also think the discount could be unfair. The city of Port Angeles, for example, report it has already weatherized more than 80 percent of its housing stock and upgraded motor, HVAC and lighting systems for most commercial and industrial customers. "It makes no sense to us to have money flowing out of our community for some other utility to use when it is likely that utility is either fast growing with a sound economy or is a utility that has not strongly supported conservation in the past and has an abundance of savings potential," the city said.
Some Key Discount Issues
Amount: Some opponents said zero is the right number. The Public Power Council advocates an annual $30 million discount limit from BPA's firm wholesale rates. Several public-power utilities recommended the allowable discount reflect a percentage of a utility's BPA wholesale power bill, not total retail sales. Benton Rural Electric Association opposes the credit, adding that any BPA program spending by utilities should apply toward any state-mandated public-purposes requirements.
The Northwest Energy Coalition suggests $60 million to $90 million annually, available only for customers that meet or exceed the Review's 3-percent spending recommendation. "Customers expressing concern about a negative rate impact are clearly not intending to make public purpose investments and should not influence the debate," said NWEC. "The environmental and economic benefits from promoting the development of conservation and renewables in the Northwest should motivate BPA."
A related point of contention is the discount's proportion. A common public-power position suggests a dollar of discount for a dollar of public-purposes spending. Snohomish PUD and EWEB, however, call for a 2-to-1 ratio of spending to discount, to foster more public-purposes activities. Clark Public Utilities offers an entirely different approach: " . . . any discount program must focus on rewarding tangible accomplishments, and steer clear of measuring success by the amount of dollars spent." The Conservation and Renewable Energy System (CARES) makes a similar point.
Accountability: Bonneville's public-power customers strongly unite on the principle of local control over conservation and renewables initiatives. Although many acknowledge a need for some oversight, PPC said the proposed Regional Technical Forum should "not assume a policing or policy-making role regarding the discount."
Other energy interests, notably advocacy groups, emphasize regional consistency. "It is vital that BPA adopt accountability and performance standards that are sufficiently strong to make sure the money is put toward its intended purposes," said Citizens Utility Board of Oregon, urging "a tough definition for qualifying conservation investments and a correspondingly tough criteria for new renewable resource projects."
Qualifications: Many commenters favored a broad approach to eligible conservation and renewables initiatives. "Qualification standards for the rate discount should be somewhat flexible for individual utilities," said Washington's Department of Community, Trade and Economic Development. "This will make it more likely that the region as a whole will achieve the Comprehensive Review's objectives while enabling individual utilities, especially small ones, to design programs in accordance with local needs. Flexibility should be applied in a way that supports achievement of the Comprehensive Review's goals in the aggregate."
Among commenter suggestions for eligible initiatives are low-income bill assistance, distribution and transmission system efficiencies, and electric vehicles. Renewables ideas include existing hydropower, no hydropower, biomass, and wind, solar and geothermal only.
Touting the notion of prospective collaboration are, among others, two entities very familiar with the practice: CARES and the Oregon Municipal Energy and Conservation Agency. Commenters also indicate some support for trading discount credits.--Mark Ohrenschall
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The Northwest Energy Coalition has endorsed partial removal of four lower Snake River dams to benefit salmon, but only if the dams' power is replaced with energy conservation and clean, new renewable resources.
NWEC members approved the resolution Nov. 8 by consensus vote at the conclusion of the coalition's fall meeting--and after considerable discussion. Executive director Sara Patton said it was important to board members that the resolution combine partial dam removal with having conservation and renewables replace the lost power. The two are "inextricably joined at the hip," she said. The four federally owned dams--Ice Harbor, Lower Monumental, Little Goose and Lower Granite--have a combined capacity of slightly more than 3,000 megawatts.
The NWEC resolution declares that "while habitat degradation and outdated harvest and hatchery practices" have contributed to the decline of Columbia River basin fish runs, "scientific evidence makes it clear that the dams and reservoirs are the single greatest human cause" of salmon mortality. Scientific studies have "produced extremely persuasive evidence that partial removal of the four lower Snake River dams is essential to restoration of Snake River salmon and steelhead," the resolution continues, and "economic studies show that the region can retain low cost electricity after the partial removal," while the energy they generate can be replaced "through an affordable combination of conservation and new renewable energy resources." The resolution also said the dams provide no flood control; agricultural and transportation benefits of the hydro system can be maintained or replaced; and other adverse effects of breaching can be mitigated.
Therefore, NWEC "endorses the partial removal of the four lower Snake dams to restore salmon and steelhead, and the replacement of power generated at these dams with energy conservation and clean, new renewable sources such as wind, solar and geothermal power." The coalition urges federal elected officials and the four Northwest governors to support partial dam removal and "ensure that the Pacific Northwest secures clean replacement power . . . "
Congress, however, is not currently inclined to support dam breaching on the lower Snake, according to U.S. Rep. Peter DeFazio. The Oregon Democrat, speaking at NWEC's Seattle conference prior to the coalition's vote, described himself as "a very outspoken advocate for salmon recovery" but said he doesn't believe the scientific evidence in support of dam breaching is yet conclusive. "Most of my colleagues in the Northwest [congressional] delegation . . . are going to require considerably more convincing than the current state of the science" offers. In addition, DeFazio said, "If we don't have regional agreement on a [salmon] recovery program, nothing is going to happen, absent some mandate from the courts."
Conservation, Renewable As Replacement Resources
To meet the terms of the dam-breaching resolution, Patton said the coalition plans a continued role in development of Bonneville Power Administration's proposed conservation and renewables wholesale rate discount, to make the discount "as effective a tool as possible." In addition, NWEC will work with state legislatures on measures to establish public-purposes funds and use all avenues to increase investment in renewables.
"Energy conservation is first and foremost," Patton said. According to the Northwest Power Planning Council's most recent conservation and power plan, more than 1,500 average megawatts of conservation could be obtained over the next 20 years at an average levelized cost of 1.7 cents per kilowatt-hour. Patton said about 500 aMW of that is forecast to come from "utility legacy programs" or the market, leaving 1,000 aMW, still to gain. In addition, NWEC believes significant industrial energy savings haven't been incorporated into the Power Council's figures.
At the same time, the coalition is working with the Natural Resources Defense Council on an analysis of the cost of replacing the Snake River power with conservation and renewables. Preliminary results indicate that in a medium energy-price scenario, this would cost no more than the market alternative.
After conservation comes renewable energy to replace the lower Snake power, Patton said. Although the cost of renewables is somewhat higher--in the 4 cents/KWh to 7 cents/KWh range--Patton said combining them with conservation leads to a mix below the market price of power. "We're confident we have a clean package of conservation and renewables that [approximates] the market."
The environmental community had to be pushed by the science to this position, Patton added. 
She said NWEC had supported the Power Council's suggestion that flow augmentation would help restore salmon runs, "but now it doesn't look like that's going to do it." Salmon have been called a Northwest icon, Patton said, but the dams are icons as well, and "we wouldn't take them on if we didn't think we had to."
At the same time, Patton said there are treaty obligations to Canada and sovereign Indian tribes that are affected if salmon runs aren't restored. Another political issue is regional control of the Columbia River and BPA, which have already been threatened in Congress. "We want this to work here," Patton said. "We don't want the Northeast-Midwest cabal to use this as a way to take BPA away."
Both Patton and Jeff Shields, general manager of Emerald PUD and a NWEC board member, agree the NWEC's resolution will be hardest on its utility members. "Part of the concern with several of us was that dam breaching wasn't an option without replacement of the power with non-carbon resources," said Shields. "We must have a responsible alternative for meeting the power supply."
Shields also said he was impressed the coalition didn't endorse dam breaching six months ago, when most members were "emotionally" ready to support it. "The significance of the action caused them to put it off and look at the issue in more detail," Shields said. He added that some Coalition members wanted the resolution to go further--to include lowering John Day reservoir--but "some of us are not convinced that there are enough resources for that."
Shields also said he expects gaining broad public support for the resolution will be a long battle, but none of the options facing the region "are very pretty economically." Both partial dam removal and additional barging of fish have huge costs, Shields said.
Patton said the NWEC resolution is "a chance to have a real restoration of salmon and push our clean energy, too. It's a nice combination."--Jude Noland and Mark Ohrenschall
In a ringing endorsement of energy efficiency and renewable energy, Washington's chief electric industry regulator believes the Northwest should be "reinvigorating our regional commitment to maximizing efficient, environmentally sound power."
Anne Levinson, chairwoman of the Washington Utilities & Transportation Commission, outlined regional circumstances and values supporting efficiency and renewables, along with regulatory and market-oriented strategies to promote them. This is imperative regardless of the electric market's future structure, Levinson said in a Nov. 20 luncheon address at Energy NewsData's "Leaders and Strategies in the New Western Energy Market" conference in Seattle.
Ralph Cavanagh of the Natural Resources Defense Council, a conference panelist, predicted Levinson's speech would be viewed as "a turning point" in Northwest energy history. "After five years of fear, uncertainty and doubt the sun began to break through for energy efficiency, renewable energy and sustainable energy investment in this region"--as, ironically, a late-autumn storm raged outside the Bell Harbor International Conference Center on Seattle's waterfront.
Levinson acknowledged that abundant and low-priced energy have undercut the conservation rationale developed after the energy crises of the 1970s. But she cited "other critically important reasons that should motivate us," including climate change, competing resource demands in the Northwest, and the prospect that public-sector energy efficiencies can free up government funds for other pressing needs.
Northwest policies and programs over the past 20 years demonstrated leadership "in developing an energy system that was least cost over the long term," Levinson said. This collaborative effort among policy-makers, utilities, trade allies and others also spawned "a large and growing clean energy industry," estimated in Washington to employ nearly 4,000 people and bring in annual revenues approaching $1 billion.
Despite these accomplishments, she said "today we seem paralyzed by the dreaded FUD: fear, uncertainty and doubt." There are valid reasons: restructuring, competition, new technologies. "And none of them are a sufficient excuse to pull back from our regional commitment to an energy system that is least cost and environmentally sound over the long term," Levinson declared. Competition, decentralization and volatility will be hallmarks of any energy future. Recognizing the certainty of uncertainty, "We need to harness market forces to serve the long-term public interest and not sit idly by as the free market drives prices to the lowest level at the expense of us all."
Levinson described three essential values to maintain in this unknown energy future: consumer choice, environmental stewardship and affordability. She mentioned Washington's 1992 state energy strategy and its calls to pursue all cost-effective conservation, minimize environmental damage, cultivate energy diversity and lead by example through public-sector efficiencies. "I think these principles are still sound and broadly supported by the public."
Market transformation represents a "very promising tool" to promote energy efficiency, said Levinson, a former top city of Seattle official who has seen it work in recycling. She called the Northwest Energy Efficiency Alliance "very important," and urged utilities to continue their support. The Alliance should "think broadly about what market transformation means," such as commercializing new technologies and incorporating building efficiencies in the planning stages. Levinson also praised Bonneville Power Administration, for its Bonneville Environmental Foundation and its proposed conservation/renewables wholesale rate discount. Federal standards, upgraded building codes and utility programs represent other important avenues to enhance energy efficiency. She also stressed limits to public investments: "We must constantly focus on building markets that can ultimately operate without ongoing subsidy."
Regulators, meanwhile, can contribute to clean energy and other public interests while avoiding competitive disadvantages to utilities and their competitors, Levinson said. One specific tool is rate design; Washington Water Power and Puget Sound Energy already have demand-side management surcharges in their rates. Another is performance-based ratemaking. Customer choice could be advanced with consumer disclosure and product labeling for energy resources, and "direct access to environmentally preferred resources." Levinson also noted the WUTC's plans to revamp integrated resource planning. And, she said, "regulators need to reclaim their historic role in state, regional, and federal policy arenas as advocates for broader public policies that are essential to a clean and affordable energy system, but beyond the scope of any single commission." Siting laws and tax codes could be revised to promote commercial-scale renewables, as an example.
"Strong growth in our region gives us a unique opportunity to 'grow green,'" Levinson concluded. "In so doing, whether through efficiency or renewables investment, we can stretch the value of our current energy system, build a hedge against future instability in energy markets, and build on the substantial economic benefits that the 'clean energy' industry already provides the state."
Market Transformation Panel
Levinson's speech was enthusiastically received by Cavanagh and his colleagues on a conference panel titled "Market Transformation: Strategies and Achievements."
Stan Price, executive director of the Northwest Energy Efficiency Council and an Alliance board member, noted the importance of a reinvigorated regional commitment to efficiency, for his member businesses as well as the broader Northwest economy. "There are a host of opportunities to employ energy efficiency technologies and practices still in the Northwest, despite our prodigious efforts of the last 15 years." NEEC endorses a two-prong coordinated strategy of utility programs and market transformation to achieve cost-effective efficiencies. He and Cavanagh both urged continued funding for the Alliance beyond its current charter; Price said the Alliance is taking "an ever more sophisticated view of what market transformation can be," going beyond individual measures into market development projects and the interrelationship of products and services for energy-using equipment.
Mike Weedall, energy services manager for the Sacramento Municipal Utility District, offered examples of market transformation at work. SMUD leveraged a national effort to bring efficient apartment-sized refrigerators to low-income Sacramento households. The utility also sponsored a recent event in which more than 2,000 customers exchanged "energy-guzzling, unsafe halogen torchieres" for compact fluorescent torchieres at a discount price of $14.95. Despite rainy weather it was so successful "we ran out of nickels," Weedall reported. SMUD also is collaborating with local smaller hardware stores on distribution of small CF bulbs through a Pacific Northwest National Laboratory manufacturers' buydown initiative.
In an example of long-term market transformation Cavanagh displayed a mountain-shaped graph illustrating the rise and fall of average U.S. refrigerator energy consumption since 1947. It went up during an "unfettered market," and went down thanks to utility investments and minimum efficiency standards, despite the development of much bigger models with added features. "Careful, targeted effective investments literally changed the technological profile of what was physically possible," he said.--Mark Ohrenschall
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The Vansycle Ridge wind-energy project in northeastern Oregon began operating Nov. 2, becoming the first commercial-scale wind farm in the Pacific Northwest to produce electrons for the regional grid.
For short periods the new renewable-energy venture north of Pendleton has generated its rated capacity of 24.9 megawatts, according to project manager Collie Powell. "We are still tweaking the machines so we have them off from time to time for fine-tuning and minor software modifications as we watch the performance and attempt to maximize it under different wind scenarios," Powell said in a Nov. 11 e-mail. He noted in another e-mail that Vansycle Ridge went into commercial operation two months earlier than scheduled.
An official dedication ceremony is planned for Thursday, Dec. 3 in Pendleton and at the project site. Among the speakers will be Rachel Shimshak of Renewable Northwest Project, who said she is "thrilled that the first commercial wind project is now serving the Northwest."
ESI Energy, an affiliate of a subsidiary of the holding company that owns Florida Power & Light, is the developer of Vansycle Ridge. Portland General Electric will purchase the entire energy output of the 38-turbine project.
Meanwhile, construction has finished and testing continues on the Wyoming Wind Energy Project, a 41.4 MW-capacity joint venture of two Pacific Northwest utilities, PacifiCorp and Eugene Water & Electric Board. PacifiCorp project manager Gail Miller said developer SeaWest Energy anticipates beginning commercial operation Dec. 15. Wyoming weather has posed some challenges, she noted, as when winds approaching 60 miles per hour prevented workers from climbing towers for maintenance. A dedication ceremony is planned for June--when Wyoming weather is apt to be more benign.--Mark Ohrenschall
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An affiliate of Washington Water Power has developed a new fuel cell that could serve as a highly efficient and reliable source of primary or backup power, potentially using renewable fuels.
Avista Labs in October announced its first manufacturing prototype for the fuel cell, which uses proton exchange membrane, or PEM, technology to produce power. Avista's PEM Generator differs from other PEM fuel cells in that it uses commonly available materials that make it "low cost, reliable and simple to operate," according to Avista Labs president Kim Zentz.
PEM technology converts hydrogen-rich fuel into energy by using an anode and cathode to separate protons from electrons, Zentz said. The protons go through the membrane, while the electrons are used for the electrical load. At the center of a typical PEM fuel cell lies a series of stacked, tightly connected graphite plates, with a PEM between each plate. The plates are held together with tension rods, Zentz said, so they can't be "disassembled and reassembled in your garage." Traditional PEM fuel cells need compressors and pumps to keep the cells moist.
Avista's fuel cell, by contrast, takes a modular approach. The manufacturing prototype has 12 60-watt power modules about the size of VCR cassettes, weighs less than 100 pounds and is roughly the size of a small air-conditioning system. Each power module is individually monitored through an embedded control system. The modular design allows "hot swapping" of power modules, which Zentz said means an individual power module can be taken out of service while the rest of the modules continue to produce electricity. In addition, the PEM generator is "self-hydrating"--it balances the amount of water needed by using a high-efficiency fan to move additional air through the unit to evaporate extra water.
Zentz said Avista Labs already has two customers signed up for the prototype and is building a list of potential other customers. The company hopes to have its PEM generators available for testing by mid-1999, and it intends to place the prototypes in all market segments and various climate zones.
Zentz said Avista views the PEM generator as an enhancement to the existing grid system, not a replacement. The fuel cells could be used in new construction, for example, to relieve transmission and distribution bottlenecks that might otherwise require expensive system expansions. The technology could also provide an alternative method to supply electricity to emerging economies of the world, where utility infrastructures have not been developed. "Our objective is to produce a fuel cell power system that is reliable, easy to operate and easy on the environment," Zentz said.
Cost remains a big concern, however. Avista is moving into the final design for manufacturing, and the company's goal is to enter the manufacturing cost curve "at a place where we can still drive costs down." Zentz said Avista wants "to come to market at a cost equal to what [end-users] pay now . . . We must make this technology as good or better than what's available."
Avista Labs has also received a $2 million technology development award from the National Institute of Standards and Technology Advanced Technology Program, operated by the U.S. Department of Commerce. Avista said it will use this partnership to work on technology to "increase the energy density of its fuel cell design, providing more power in the same footprint." Zentz said the ATP award will help Avista Labs meet its goal of commercializing fuel cells by 2001.
The company also intends to develop multiple fuel processing approaches using propane, methane and methanol as base fuels for its fuel cell subsystem.
Avista Labs parent Washington Water Power will add another $1.22 million to the effort over the next two years. --Jude Noland
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The Northwest Energy Efficiency Alliance has earmarked virtually all of its $65 million budget, with more than a year remaining on its original three-year charter to transform regional energy efficiency markets.
The Alliance board of directors, meeting Oct. 29-30 in Portland, approved two new market transformation initiatives, targeting industrial compressed-air systems and wastewater treatment facilities. Both came to the Alliance through an open solicitation for market transformation proposals earlier this year.
In other actions the board endorsed a revised premium-efficient motors venture, reserved future funding for three current initiatives and the expansion of a fourth, and officially declined seven of 
the remaining proposals from the solicitation. The board also turned down future reserved budgets for two current programs, added money to two others and endorsed continued membership in two national organizations.
The Alliance now has spent and/or specifically budgeted more than $60 million of its 1997-1999 funding from Northwest utilities, although some money will carry over beyond 1999.
The Alliance board also elected Carol Brown of Portland General Electric as the new Alliance chairperson, succeeding Jake Fey of Tacoma Power.
Two New Projects
The Alliance, which sought industrial air compressor and distribution system market transformation projects through its 1998 request for proposals, adopted one in October.
This venture focuses on energy-efficiency services for compressed air, a commonly used industrial commodity. An innovative measurement and reporting system is intended to help identify inefficiencies in industrial compressed-air systems, and spur cost-effective efficiencies that also benefit industrial processes. The Alliance staff anticipates this project will expand the market for industrial compressed-air efficiency services. The project contractor--SAV-AIR, a Portland-based joint venture of Air Logic and Century West Engineering--will develop and implement services at three Northwest industrial sites, as a demonstration of market viability, according to an Alliance staff recommendation memo.
Despite some concern over cost, the Alliance board voted 12-3 to approve a maximum of $1.94 million over two years for this venture. Potential regional energy savings are substantial, up to 63 average megawatts over 10 years at a cost less than 2 cents per kilowatt-hour.
The other new project adopted at the October meeting addresses another market targeted in the RFP, wastewater treatment. This venture relies on biology to advance energy efficiency in municipal, industrial and agricultural sewage facilities.
BacGen Technologies, the project contractor, has developed a proprietary method of producing micronutrients that allow certain types of bacteria to flourish under low oxygen conditions in sewage ponds, according to Alliance staffer Tom Eckman. These prolific bacteria populations decompose waste and consequently reduce electric motor-driven aeration by as much as 75 percent. The regionwide energy-saving potential is huge, estimated by Alliance staff at between 54 aMW and 155 aMW by 2011. Meanwhile, prospective non-energy benefits include odor reductions, lower solid-waste removal and chlorine expenses, pollution decreases and improved facility performance. These non-energy features are "really critical to selling this technology to other [wastewater plant] users," said Eckman. They also drop the projected total resource cost of the BacGen technology to minus 1.2 cents/KWh.
Bac-Gen will survey and categorize the Northwest wastewater facility market, establish demonstrations in up to 24 facilities and spread the results to an industry generally reluctant to adopt new technologies without extensive testing.
Alliance staff strongly supported the project but acknowledged a slight risk about the range of Bac-Gen economic applications, along with market and regulatory acceptance. A couple of Alliance board members questioned funding (up to $2.1 million) a single company with a single proprietary product yet to attract substantial venture capital. Bac-Gen president Martin Shain said teaming with the Alliance will provide a greater opportunity to showcase the benefits of the company's technology, which has already been successfully demonstrated at several wastewater facilities.
The board voted 15-2 to adopt this novel market transformation approach, with various milestones before the full budget is spent. Bac-Gen also plans to share a percentage of any profits with the Alliance.
Premium Efficient Motors
The Alliance through experience has changed its approach to transforming the market for premium efficient motors. It's an important goal: motors are ubiquitous within industries, and motor-driven loads consume more than half the electricity used in the region's industrial sector, according to estimates cited by Alliance staff.
In late 1996 the Alliance board approved a program designed to expand the manufacture, retail availability and sales of efficient motors. It primarily relied on education and financial incentives for motor dealers. The Alliance eventually found this strategy ineffective, and a new concept emerged to target end-use customers with high-horsepower motors that buy motors in large volumes. Subsequent market research concluded the Alliance should focus its work on motor inventory management and motor repair quality issues.
At the October meeting the Alliance board adopted a revised program that "seeks to improve the average 'fleet efficiency' of the entire motor population in the Pacific Northwest," according to an Alliance staff memo. The program incorporates three complementary elements focused on motor reconditioning, motor management services and education. This new two-year venture has a budget of $804,250, virtually all of which was previously allocated for motors. Over time the Alliance wants customers to consider their entire drive-power systems as opportunities for increased efficiency and profitability.
Reserved Funding
The Alliance has put highest priority on its current portfolio of projects. Consequently the board in October reserved additional future funding for National Standards, Residential Duct Systems and Northwest Lighting On-line, along with expansion of the Building Operators Certification program into Montana. The $715,000 reserved for these four ventures was not officially allocated.
The board, meanwhile, narrowly voted down future reserved money for the LightWise compact fluorescent program and the Architecture + Energy: Building Excellence in the Northwest initiative. For LightWise, several board members were hesitant to commit an additional $500,000 for 2000, preferring to wait on deciding the program's post-1999 future. The board did endorse a switch to normal power factor specifications for qualifying LightWise bulbs--acknowledging a lost cause to promote high power factor--and increased emphasis on expanding the Northwest CF market east of the Cascades. These votes do not constitute a final decision on the futures of LightWise and Architecture + Energy as Alliance ventures.
The board also turned down a $280,000 proposal by the Oregon Office of Energy to join the Alliance's Super Good Cents Manufactured Housing initiative. The board did endorse $150,000 for increased SGC advertising in 1999 and 2000, particularly but not exclusively in areas under-served by previous such marketing. The Alliance board approved an additional $300,000 for the microelectronics efficiency initiative.
RFP Rejections:The Alliance board officially turned down seven proposals received through the RFP. These involved municipal water and wastewater treatment facilities, industrial energy efficiency opportunities, microelectronics clean-room filtration, software training for facility operators, skylighting in commercial, industrial and agricultural buildings, chiller system optimization and industrial pumps, fans and blowers. That leaves five of the original 45 submitted proposals still awaiting a final Alliance board decision.
Membership Extensions: Pleased with the Alliance's membership in two national organizations, the board voted to renew participation in the Lighting Research Center ($100,000 for two separate programs for one year) and the Consortium for Energy Efficiency ($100,000 total for 1999 and 2000).
Board Member Changes: In addition to Brown's election as the new chairperson, the October board meeting also ushered in Charlie Grist of the Oregon Office of Energy/Northwest Power Planning Council as Alliance treasurer and Ken Keating of Bonneville Power Administration as secretary. These three--along with Fey, Liz Klumpp of the Washington Department of Community, Trade and Economic Development and Jon Powell of Washington Water Power--form the Alliance board's executive committee.
Also changed are three public-power seats on the Alliance board. Larry Bryant of Kootenai Electric Cooperative, Gary Mahugh of Flathead Electric Cooperative and Jim Todd of Seattle City Light have ended their tenures. Joining the Alliance board are Van Ashton of the city of Idaho Falls, Roy Nollkamper of Glacier Electric Cooperative and Steve Ottenbreit of Snohomish County PUD.--Mark Ohrenschall
More Information:
A Washington state initiative to promote energy savings performance contracting among local governments is nearing the starting line.
The state Department of General Administration has chosen nine firms (including a two-firm partnership) for ESPC work with participating Washington cities, counties, school districts and special districts. Meanwhile, 46 local governments have expressed interest in taking part, although as of mid-November only eight had officially committed. Another two were expected to join soon. "We're probably going to be taking off around the first of December," GA's Ray Anderson said, explaining he wanted a critical mass of participating governments before launching the program.
Patterned after the U.S. Department of Energy's Super ESPC program, the Washington initiative seeks to streamline energy savings performance contracting for local governments. The state has established this group of pre-qualified firms. Local government entities can then select from among this group for ESPC projects, which could involve lighting retrofits, HVAC upgrades, control systems and other means of improving energy efficiency.
Energy savings performance contracting offers local governments a way to gain more efficient facilities without tapping precious capital budgets. Under ESPC, efficiency work is financed, and then repaid from the energy savings.
"Our philosophy is it's going to cost you less [over time] to make the improvement than if you do nothing," said Anderson. Energy-saving measures installed through the ESPC venture generally should pay off within 10 years.
"It's a fine opportunity for both the government institutions and the ESCOs [energy services companies]," said Dave Van Hersett of Northwest Energy Services, one of the selected firms for the Washington ESPC program. "The government facilities are usually willing to take a longer payback. With that, then you can make an upgrade to more facilities . . . without having to go to capital budgeting. That's really a good opportunity for everybody."
Dan Hegerhorst of Noresco, another selected contractor, said "the state has really taken an aggressive stance on doing conservation work and is trying to make it as easy as possible for local municipalities and school districts to do it without having to go through a competitive bid process."
The Washington Approach
Washington local governments have long been able to conduct energy savings performance contracting, Anderson explained in March (see Con.WEB, March 31, 1998). But, he said, "The process for most of them is probably pretty daunting . . . They don't do this on a day-to-day basis. We're trying to do the bureaucratic stuff and get that cleared away so they can jump right in and go ahead and hire an energy services company, get the audits done, negotiate, and get the work done."
A solicitation for ESPC contractors earlier this year brought in eight proposals--all of which were chosen. The eight proposals came from Abacus Engineered Systems, Emcor, Johnson Controls, McDonald-Miller/Honeywell, Siemens Building Technologies, Landis Division (formerly Landis & Staefa), Noresco, Viron and Northwest Energy Services. All have ready access to financing, and all have a presence established in Washington. "We decided what we would do is limit the number of projects to 55, and that would give everybody the chance for about seven or eight projects over a three-year period," Anderson said.
Meanwhile, 46 local government entities have expressed interest in participating: 30 school districts, 12 cities, two counties and two special districts. They are scattered statewide, according to Anderson.
Each participating government can decide how it proceeds with ESPC work. Anderson said the agencies will receive summaries about the participating firms and their previous projects. He recommends the local governments talk with at least three of the companies before making any selections. "I think they're all very capable firms, but what you really want is to pick somebody you can work with over a long period of time," Anderson said. The state will establish requirements such as maximum fees charged by the firms.
Promising Opportunity, But Not Yet
Chuck Strand of Viron initially worried the Washington ESPC program would be too state government-directed. But he has since changed his mind. "Now what I see is that this has opened the door for . . . the private sector in public-sector business opportunities. It simplified the selection process," Strand said. "Ray's insight into getting projects moving on a faster-than-normal basis has been kind of a bright spot. He's really dedicated himself to making these projects happen. The only thing at this point in time is that the opportunity hasn't really reared its head yet from actual projects." The firms are selected, government entities are interested, "but nothing has transpired as yet." Local governments still need to go through their own time-consuming internal processes to join the ESPC program, he noted, and they have many other pressing priorities.
"GA has taken a step and has gone beyond the normal application of what I see their role would be," said Strand. "Whether that's positive or negative I don't know yet . . . If we can deliver energy services to municipal customers in the state of Washington as a result of this, that's when it's going to tell the tale, but I think we've got a step to go."
Educational, Energy-Saving Opportunity
The state's initiative educates local governments about ESPC and also provides more private-sector opportunities, said Ash Awad of Siemens Building Technologies, Landis Division.
Awad believes education is vital. The notion of performance contracting is well-known, but so are "horror stories" about its actual practice--such as anticipated savings failing to materialize. "A lot of people are not really understanding how to protect themselves and still do the right job for their constituents using performance contracting," Awad said. The state's involvement as a third party is helpful, he added. "[ESPC] can work; there's checks and balances. That's the message that needs to be sent." He sees performance contracting as a long-term partnership, and the relationship should begin with a mutually positive understanding. "If it's not a good fit, things will fall apart in the future. And one bad story about performance contracting ruins it for everybody."
Awad encourages local governments to look beyond energy-saving measures with the shortest paybacks, such as lighting retrofits, even though those are beneficial on their face in reduced energy costs and better lighting. He suggested blending projects with varying payback periods, which could expand such opportunities as improving heating systems.
The Northwest's relatively low electric rates play a significant role in performance contracting projects, according to Hegerhorst. "Because of our energy rates, a lot of the projects are driven by economics, and lighting is a real good payback item. The next items would be either boilers or chillers." Yet if, for example, teachers and students are physically uncomfortable in school buildings, economics won't be the sole consideration in project selection.
Hegerhorst sees "a wide variety of opportunities" available for efficiency upgrades in local government facilities. His firm is working on Seattle public schools: "Some you walk in and they're pretty energy-efficient. Then you've got another with 500-watt incandescent light bulbs. Every district is going to be different."
Awad has found that performance contracting typically results in savings ranging from 7 percent to 30 percent for all utilities (water, sewer, natural gas, fuel oil and electricity).--Mark Ohrenschall
Industrial Customers of Idaho Power and Micron Technology want the Idaho Supreme Court's opinion on whether the Idaho Public Utilities Commission erred in granting Idaho Power accelerated recovery of its demand-side management program investments.
ICIP and Micron on Oct. 20 filed a Supreme Court appeal seeking reconsideration of the IPUC's July ruling that shortened Idaho Power's recovery period for DSM investments from 24 years to 12 years.
ICIP attorney Peter Richardson said the ruling represents a "premature recovery of stranded costs," when it's undetermined whether Idaho Power will have stranded costs, and "violates single-issue rate case conventions."
The appeal stems from Idaho Power's November 1997 filing requesting IPUC permission to change the amortization schedule for DSM expenses from 24 years to five years. Under the proposal, DSM expenses the utility had already included in rates would have been recovered more quickly, while DSM costs the utility had incurred since 1994--which hadn't received PUC approval for inclusion in rates--would also be recovered on a five-year amortization schedule. In July the commission agreed to shorten the recovery period, but to 12 years rather than five years.
At the time of the original filing, Richardson said, electric industry restructuring was expected to occur more quickly than it has, and Idaho Power may have had reason to request speedier recovery to avoid future stranded costs. But it now appears restructuring will come late to Idaho, so in ICIP's view it's premature to take on stranded costs. In any case, "We don't think there will be any stranded costs," Richardson said.
The industrial customers also point out that none of the parties in the case asked for a 12-year recovery period, and nothing in the record supports such an amortization schedule. Without a record, the customers contend the IPUC acted "arbitrarily, unreasonably and in violation of Idaho law."
In addition, the customers believe this is a single-issue rate case, because the IPUC didn't consider the impact of the shortened amortization period on other aspects of the utility's cost of doing business--such as increasing Idaho Power's cash flow, which puts the company in a better economic position that might offset the need for the rate increase for shortened amortization. Other states in the region don't allow single-issue rate cases, said Micron attorney Alan Richey, and the Idaho Supreme Court has never ruled on the question.
IPUC attorney Brad Purdy countered that "this is exactly the kind of decision the PUC is authorized to make." While hesitant to comment because the case is pending, Purdy said the IPUC believes the "order is defensible and the commission acted within its discretion."
Idaho Power attorney Larry Ripley said he was very surprised by the appeal of the commission's order. "I don't think their appeal is well-founded." Idaho Power will file briefs in the case, he added.
Both Micron attorney Richey and ICIP's Richardson said they aren't opposed to the utility's recovery of its investment in DSM. And it isn't the rate increase, either, that's the issue--Richey said Micron's costs increased by about $5,600 per month. Rather, the customers don't want this case to set a precedent that would allow a future single-issue decision with potentially more impact. "It would be difficult to go to the PUC [then] and say it's wrong if we hadn't gone to them this time," Richey said.--Jude Noland
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