CWEB.009/September.27.1996

SCHOOL IS back in session now, so we thought it appropriate to provide some learning opportunities. In this issue we take a look at Washington Water Power's distribution charge, which has earned considerable acclaim as a utility DSM method for the competitive era. We also report on a stimulating conference in which the future of energy services and efficiency is explored, from global, regional and very local perspectives. And for those interested in continuing education, our Briefs section lists a number of upcoming conferences and programs.

On the renewables side, the news this month from Oregon is decidedly mixed. Portland General Electric proposes to offer renewable resource power options for its largest customers, while a grid-connected solar photovoltaic system in central Oregon continues to churn out reliable--if pricey--electrons. However, we also bring you the demise of proposed geothermal and biomass energy projects.

Finally, although not covered in this issue, the proposed regional market transformation collaborative is aiming for an Oct. 30 official debut in Seattle. Look for coverage in our October issue (scheduled to go on-line Oct. 24). And, the long-running Regional Review process continues with public hearings around the region in October and November. We'll check in on those later this fall.

In the meantime, we hope you enjoy this issue, and if you're so inclined, share any thoughts with us via [marko@newsdata.com] e-mail.

In Con.WEB this month. . .

UTILITY SPOTLIGHT

Water Power's DSM Distribution Charge Earns Rave Reviews

ENERGY SERVICES

Future of Energy Services, Efficiency Explored at BPA Conference

BPA's Energy Services Business Survives Congressional Scrutiny

RENEWABLES

PGE Proposes Renewables Option for Large Customers

Central Oregon PV System Produces Reliable, Expensive Power

Geothermal Project Runs Out of Steam

Forest Biomass Energy Project Topples

BRIEFS

More Northwest Conservation/Renewables News

Washington Water Power's Unique Distribution Charge
Finances DSM with Market Transformation Emphasis

While many Pacific Northwest utilities ponder their demand-side futures in the competitive electric world, Washington Water Power has chosen its direction: a unique systemwide distribution charge for demand-side management, which the utility uses to finance programs with an increasing emphasis on transforming energy efficiency markets.

This strategy won't reap huge kilowatt-hour savings by historical standards, but Water Power officials and many others believe the Spokane-based investor-owned utility has developed a superior DSM approach for the competitive electricity marketplace. Its goal is to balance the interests of customers, the utility, shareholders and the larger society, in the context of a rapidly changing industry--and in the service territory of a utility with abundant energy resources and extremely low rates.

The program's centerpiece is a small fee, first established in early 1995, applied to all retail energy sales (with two minor exceptions) over Water Power's distribution system in the utility's service territory in eastern Washington and northern Idaho. Money collected funds demand-side management, which for Water Power now means "relying less on incentives and rebates and more on market transformation and education," according to a recent report by The Results Center.

This is believed to be the first electric-system fee to specifically provide conservation funding in the Northwest, and is "clearly the most advanced of any form of [DSM] distribution charge" in the nation, TRC reported. As such, it has generated considerable interest and support, including from other Northwest investor-owned utilities in the Regional Review.

John Etchart, chairman of the Northwest Power Planning Council, early this year described Water Power's program as "the utility DSM strategy that I hear most frequently mentioned as our region addresses restructuring issues and opportunities . . . Washington Water Power's array of market-moving programs and services is at the leading edge of new ways to effectively deliver efficiency into the marketplace. [It] materially contributes to the advancement of the electric industry by demonstrating how a utility with both low costs and low rates can meet the energy service needs of its customers and the clear wishes of its regulators without placing the utility's future competitiveness at risk."

The Results Center named it one of the top 10 energy services programs in North America, calling the distribution charge "the most sophisticated model of its kind and a powerful harbinger of what may well become the future predominant energy efficiency services funding mechanism in a competitive utility environment."

Meanwhile, Water Power officials are sufficiently pleased with their DSM blueprint that they plan in October to ask Washington and Idaho regulators for an extension through 1999.

Some Numbers and History

By the numbers, Water Power's distribution charge has increased electric rates 1.55 percent. Specific rate impacts vary among customer classes; in Washington they range from .047 cents per kilowatt-hour to .103 cents/KWh, and in Idaho from .046 cents/KWh to .108 cents/KWh, according to The Results Center report. The typical monthly residential bill has risen 81 cents. (The charge also is applied to WWP natural gas retail customers, raising their rates .52 percent.)

For 1995 and 1996, the TRC report projects the electric distribution charge will raise a total of $8.7 million and result in electric energy savings of 11 average megawatts. Proportionally, that's about 50 percent less than the efficiencies gained from 1992 through 1994, when Water Power emphasized fuel-switching from electricity to gas and recorded 34 aMW of energy savings. WWP also spent $58 million on DSM during those three years.

Of course, the times have changed, too.

"By the close of its 1992-94 plan," the TRC report said, "WWP realized that large DSM expenditures were neither compatible with WWP's resource needs nor the electric industry's newly competitive environment."

Water Power figured it had sufficient capacity to meet electric demand projections through 2006 and energy demands through 2010, according to the report. Thus, it had no real need for DSM resources. In addition, WWP officials wanted to trim costs and minimize DSM rate impacts, to better position the utility for the emerging electric marketplace.

Instead of jettisoning DSM, however, Water Power devised what it considered a sustainable solution.

Balancing Interests

First, the utility listened to its customers. "Our customers tell us through all of our surveys that they want us to be pursuing energy efficiency," said DSM opportunities group coordinator Bruce Folsom. A 1994 survey of residential customers found 95 percent believed WWP should continue to offer DSM even if Water Power had plenty of energy resources for the foreseeable future; 61 percent thought such programs should be partially financed by all customers through a rate increase. And 83 percent said they would be willing to pay a $1 monthly surcharge for DSM. More recently, a 1996 corporate social responsibility survey of 400 community stakeholders identified DSM as among the top five of 34 potential issues WWP should focus on over the next five years.

While recognizing the customer value of DSM, Water Power officials also needed to consider financial and resource issues for the utility, as well as regulatory and shareholder perspectives. They settled on the distribution charge as a financing means. "WWP concluded that $5 million in Distribution Charge revenues annually would allow the utility to create a respectable level of savings and keep the average rate impact under a dollar a month for residential customers," the TRC report said.

Benefits to Water Power

The DSM distribution charge suits Water Power in a number of ways. For one, since it is levied on virtually all retail sales, it won't disadvantage the utility in an open-access marketplace.

It also affords what Folsom called "a stable and predictable source of funding" from outside the utility, so DSM no longer competes for money with other internal WWP needs in a time of decreasing capital budgets.

It also provides up-front revenues for DSM programs, which in turn has led to a beneficial change in the utility's financial accounting for demand-side spending, according to the TRC report. Previously, the utility capitalized DSM costs and amortized them over a period of years. DSM thus became a so-called regulatory asset. "When you capitalize an expense such as DSM, it has value on your books because of the regulatory order supporting it," explained Folsom. These regulatory assets, however, are considered less attractive in the emerging competitive era. So Water Power switched to expensing its DSM costs in the same year they are incurred. "While a shift from capitalizing DSM to expensing may seem to be a subtle accounting change, we have found that it is a significant improvement in the eyes of financial analysts," WWP energy services manager Roger Curtis wrote in The Results Center report.

This accounting change also "reduces [DSM] program costs by at least 15 % by eliminating the income tax effects and shareholder returns associated with capitalizing DSM over time," TRC reported. What do Water Power shareholders now get from DSM? "Staff and management agreed that providing customer value in a time of increased competition--essential to retaining customers in the future--was enough of a shareholder incentive for DSM," said the report.

Already, Water Power has substantially lowered its DSM costs. If it reaches its 1995-96 goals, the utility's overall cost of saved energy will be .64 cents/KWh, according to The Results Center--about half the 1.44 cents/KWh cost from 1992-94.

Market Transformation Emphasis

Water Power DSM is cheaper now, but also different. "A hallmark of our [19]95-96 programs is a focus on market transformation," said Folsom. "The programs have worked as planned, and we will expand on market transformation," both locally and as part of the proposed regional market transformation collaborative.

To date, about two-thirds of the distribution charge revenue has been applied to direct financial grants and engineering studies for various programs in the residential, commercial and industrial sectors, according to a WWP report. The remaining third has gone to specific market transformation programs "designed to reduce market barriers to DSM so that customers will make energy efficiency choices without the need for direct financial intervention." Market-transforming examples include pilot programs for resource conservation managers in schools, building commissioning and commercial/industrial trade allies. Water Power also participates in the regional LightSaver compact fluorescent lighting program. Many current WWP programs include cash incentives, but these are diminishing in importance.

And, not least, WWP has been promoting natural gas as a residential heating fuel while offering attractive financing rates for residential gas installations. "This new program stands as a strong example of how WWP's program shift has worked," TRC reported. The previous fuel-switching campaign drew 3,000 to 5,000 participants a year, with incentives of between $2,700 and $3,300 per household. Its discontinuation angered some demand-side advocates. "However," TRC noted, "the Natural Gas Awareness campaign succeeded in drawing 1,300 participants in 1995 while eliminating the cash incentive and replacing it with attractive financing using no incentive at all." This program to date has accounted for more than half of WWP's 1995-96 electric energy savings, according to TRC.

Despite its many real and potential benefits, the distribution charge does have an Achilles heel in its resemblance to a tax. "While distribution charges explicitly reflect the true costs of beneficial programs, their perception as 'taxes' could potentially spell the kiss of death for this mechanism," TRC noted. Water Power officials respond by labeling their distribution charge as an accounting change, not a tax.

One also might wonder whether Water Power would embrace the distribution charge if it didn't have among the lowest rates of all investor-owned utilities in the nation--a recent Edison Electric Insitute survey showed a WWP customer in Spokane paid $46.52 per 1,000 KWh, the lowest charge of 39 cities surveyed, according to news reports. But Folsom said the answer would still be yes. "To the extent there is public policy to offer energy efficiency programs, one would need a regulatory accounting mechanism and this would be a superior mechanism. Just look at California. California [regulators and legislators] with the higher rates are proposing something virtually identical" to fund DSM--Mark Ohrenschall

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Destiny of Energy Services, Efficiency
Explored at BPA Conference

As Yogi Berra might have said, the future ain't what it used to be. And so it is for energy efficiency and energy services, as the electric industry evolves from monopoly toward open-market competition where low-cost electrons seem to reign supreme.

Or do they?

From the global perspective of author Paul Hawken, energy efficiency dovetails with a larger worldwide imperative of resource efficiency.

From the more regional view of Bill Drummond, manager of the Western Montana Electric Generating and Transmission Cooperative, the big-money players in the competitive electric market may lead many of the Northwest's publicly owned utilities to abandon energy efficiency services. Other people, however, see a continuing--if changing--role for utilities in conservation, as well as opportunities in many other energy and even non-energy services.

And the perspectives of energy customers are as diverse as the customers themselves, although a desire for choices in electricity and energy services seems to be pervasive.

These were among the opinions circulating Sept. 11 near Portland at a Bonneville Power Administration-sponsored conference entitled "Energy Innovations for Tomorrow's Marketplace."

The big-picture view came from Hawken, author of the popular book, The Ecology of Commerce, a manifesto for environmentally sustainable business practices around the globe. Hawken described the present as a period of "great discontinuity" brought about by two interrelated global trends: booming population growth and a decline in "living systems" such as forests, seas, topsoil, climate and riparian environments. The world can't possibly accommodate an anticipated doubling of its human population in the next 50 or 60 years, Hawken argued--at least not within the current industrialized model of the developed world.

Industrialization since the early 1800s has led to a hundredfold increase in human productivity, driven by ever-increasing consumption of nature's bounty, Hawken said. But now, natural resources are becoming more and more scarce. Some economists argue that humankind has always found substitutes--coal for wood, oil for coal--but Hawken said, "There is no substitute for a living system." In relative economic terms, people will decline in value--wages have stagnated since the early 1970s--and natural resources will increase in value. Hawken emphasized the need for the industrial world to change its focus from human productivity to resource efficiency.

Inefficiencies pervade our economic system, he said. On the basis of energy in/energy out, the United States is 2 to 2.5-percent efficient, which means "98 percent of the material fruit of this economy is wasted within six months of production." Some European nations are slightly more efficient--Sweden and Germany stand at about 4 percent--while Russia and India hover around 1 percent.

"The next age is about efficiency in a way that is really a leapfrogging of what we see today," to the order of 15, 20, 25 percent efficiency, Hawken projected. Already there are some promising signs, particularly in Europe. Austrian government officials are talking about improving the country's efficiency by a factor of 20 by 2050. In Germany, laws modeled on the "Intelligent Product System" require manufacturers to either have their products completely break down or, in the case of durable goods, retain ownership. "Basically, you can't throw anything away," Hawken said, which leads to a more cyclical and less linear economy. As an example of the design creativity this has unleashed, automaker BMW has reduced the number of plastics it uses from 400 to 30. Meanwhile, the Swedish-based furniture company, IKEA, under pressure from environmentalists, has committed to using only sustainably produced lumber. "Resource productivity isn't just a good idea," said Hawken. "It's being taken up and embraced" by many corporations.

Although he offered no suggestions specific to the Northwest, Hawken intimated opportunities galore for energy efficiency and renewables, particularly if the public and businesses come to recognize the climate-altering dangers of a carbon dioxide-based energy system. "This is not a time for gloom," he said. "Never has there been more opportunity in a compressed time frame than there is now."

Most Utilities Will Bail out of Conservation, Drummond Believes

While Hawken thought globally, others spoke from more regional and local perspectives.

One of the most provocative presentations came from Western Montana's Bill Drummond, who also sits on the Regional Review Steering Committee. "What business are you in?" Drummond began. "It's a question every utility is going to have to answer. Energy efficiency can be part of that answer . . . [however] I would suggest the majority of utilities in the region will not be in the energy efficiency business in the future. You as public utilities are being asked to do a Houdini act and swim with the sharks of competition. There are a lot of sharks out there."

Look at Enron, he said, which makes billion-dollar energy deals with nations around the world and wants to merge with Portland General Electric. Look at PacifiCorp, with its global ambitions. Look at the "formidable competitor" created if Puget Sound Power & Light and Washington Natural Gas complete their planned merger. Look at Washington Water Power's Energy Solutions subsidiary and BPA's Energy Services Business. Look at Johnson Controls and its energy services subsidiary, which is already doing work in western Montana. And look at telephone giant AT&T, which Drummond said is interested in providing billing for utilities, "a very short step to providing electric service."

And now, consider the local public utility. It has, generally, only sold electricity (put on handcuffs). It has only served its local territory (leg irons). It's non-profit (lead weights). And it doesn't want to take risks, such as guaranteeing energy savings on a building for five or 10 years and potentially losing hundreds of thousands of dollars (blindfold). Now, Drummond said, jump in the shark-infested competitive waters. "Most public utilities . . . are going to end up in the wires-only business," he predicted. "Most public utilities in the region simply won't be able to compete in [the energy efficiency] arena."

In another presentation, John Shearer of John D. Shearer & Associates said he believes utilities will face competition as well as opportunities at every level of their business, from power supply to energy services to even distribution facilities. Electric bills in the "near future" are likely to specify such items as access charge, distribution facilities, power delivery, customer facilities, electric energy, energy services and other products and services. In this hyper-competitive environment, utilities "have to be careful about being a benevolent social entity and giving away your money," Shearer said later. At the same time, utilities bring to the open market a number of strengths: community presence, established links to customers, and reputations for quality, technical knowledge, responsive services, financial muscle, cost control, business acumen and innovation.

Examples of Innovative Services

Among those innovative utilities embracing opportunities in the new world is Plumas-Sierra Rural Electric Cooperative, which has about 5,500 members in sparsely populated northeastern California. Plumas-Sierra officials see open-market electric competition coming to their territory, and in response they have fashioned an array of uncommon customer services.

One of them is Internet access with a local phone call, a service that general manager Bob Marshall likened to the beginnings of rural electrification. "We wanted to make sure every single customer on our system had Internet access and local dial-up," he said after the conference. To date, 600 Plumas-Sierra members have signed up for Net access.

The cooperative also offers a combination loan/incentive geothermal heat pump program, which has already attracted 120 members. This very energy-efficient (350 percent net efficiency, according to PSREC) and environmentally benign heating source has an added benefit to the cooperative of reducing propane's local market share, Marshall said. "We're losing some load but we are gaining it all back from propane."

Additionally, Plumas-Sierra provides what Marshall called a "solar line extension" program, in which the cooperative offers to install and maintain--for a fee--solar photovoltaic systems for sites more than a mile from the nearest power line. Three such systems have been installed, and Marshall anticipates more as word-of-mouth spreads about the program. "They're used to generators [for off-grid electricity] . . . They love it and we love it because it's a way to promote solar energy that's not subsidized, that's simply cost-effective and a good service."

On the operations side, the cooperative has improved its cash flow by reselling wood gathered from its tree-trimming work. This has saved Plumas-Sierra $500,000 over two years, Marshall said.

Another example of innovative services was provided by Jon Athow of Tacoma Public Utilities, which is exploring the possibility of constructing a hybrid fiber coaxial telecommunications system in its service territory. Such a network--an expansion of the utility's existing internal telecommunications infrastructure--could enable the delivery of basic cable television to residential customers and assorted telephone and data services to businesses. It would be open and available to private third-party telecommunications service providers, Athow emphasized. "For business and residences being serviced, they get more choice, more competition, and for us, it helps us because our customers are better served . . . it makes the communities we serve more viable." And it would also improve the electric utility's internal telecommunications, while providing potential opportunities to provide services like automated meter reading, electronic bill payment and open-market power access for industrial customers. "It's an enabling infrastructure," he said.

What About Customers?

Now, what about all those customers out there, the ones for whom electric industry restructuring is presumably intended to benefit? Clearly they want choices, gathering from remarks by customer representatives at the conference. "We can buy electric motors, chemicals, natural gas, paper clips and thumb tacks" on the open market, said Dick Tyler, energy management director for the Weyerhaeuser Co. "It's critical that we also have a choice for electricity, and long before the 2001 date proposed in the Regional Review . . . Competition will drive efficiency improvements and result in lower rates for all consumers." This imperative runs the length of the entire supply chain, Tyler asserted: "Our customers and our customers' customers are simply demanding higher quality and lower prices for our products."

But low rates aren't the only desire of electric customers. Residential and small-business customers also want high-quality service, protection from free-market abuses, environmental protection and investments in energy conservation and renewable energy sources, according to policy director Nancy Hirsh of Northwest Conservation Act Coalition.

The bottom line for all businesses is money, said energy manager Hardy Laskey of Thrifty/Payless Corp. His chain of more than 1,000 stores has long pursued ways to reduce its energy consumption, and it saves $700,000 a year on energy costs because of extensive energy-efficient lighting retrofits. The big question he hears these days: Are you going to aggregate your stores to buy power on the open market? "I don't know," he told the conference. "I don't know that I want to buy outside the community my store serves . . . I still think I can get the same [electricity] price."

Laskey also wants a human connection with his energy provider(s). "We in the retail industry are looking more for a partnership, relationships, people we do business with that we can trust." He cited the aggravating example of one unnamed utility that turned off the power to a Thrifty/Payless store for 2-1/2 hours one afternoon because the store was 45 to 60 days late in paying a bill. "What did you think, we were going to hide?" he asked rhetorically.

As for specific energy services, Laskey thought summary billing would be helpful. He also mentioned technical energy expertise: "We don't want to have an engineering team [on staff]. We want to sell drugs [the legal variety] and diapers." Weyerhaeuser would like unbundled energy products along with load aggregation and continued reliable delivery. The biggest opportunities for energy savings, Tyler noted, lies in industrial processes. "It's huge capital and it's also advanced technology we may not have looked at," said Tyler. Hirsh, meanwhile, wants the chance to purchase "green" power and talk with energy service companies about energy-saving measures.

All customers can benefit from increasing their energy efficiency, but the conference highlighted different opinions as to how this can and should be accomplished. While Hirsh pushed for mandatory conservation spending by all retail electric providers, others suggested more market-oriented and customer-focused approaches on the demand side.

"In the past, the way we've done conservation is to bribe the customer to do conservation," said Ken Canon, executive director of Industrial Customers of Northwest Utilities. "We've trained a generation of consumers . . .to wait until the utility comes out with money. We're going to have to see that change because the money's not going to be there." Although dollars can help promote industrial energy efficiency--particularly in the form of loans for capital-short firms--education and energy expertise are critical, Canon said. Industrial customers want value from demand-side management, and value means saving money on energy bills, improving the quality of industrial processes, increasing productivity and improving environmental performance. "Those all mean something to industrial customers," he said.

The conference also included a presentation about electrotechnologies from Ernie Hayden of the Electric Power Research Institute, and displays of, among other things, electric vehicles and an electric bicycle.--Mark Ohrenschall

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Congress Lays Down the Law for Bonneville's ESB;
Regional Review to Consider Long-Term Future

Federal lawmakers have laid down the law on Bonneville Power Administration's controversial Energy Services Business, setting interim limits while the Regional Review considers the long-term future of this BPA venture into the energy marketplace.

Meanwhile, BPA and the Northwest Energy Efficiency Council (NEEC), a trade association of the region's energy efficiency industry, are hammering out joint principles and guidelines to address the contentious issue of potential BPA competition with the private sector.

For its part, BPA has narrowed the scope of its prospective energy services work to focus on energy efficiencies. And BPA officials continue to pledge their intention to expand the energy services marketplace for all participants.

Since its unveiling earlier this year, Bonneville's ESB has met with considerable skepticism from the likes of congresspeople (such as U.S. Rep. Peter DeFazio of Oregon), investor-owned utilities (such as Portland General Electric) and businesses already engaged in similar work. Their interests vary, but their concerns revolve around the idea of BPA as a government agency offering revenue-generating services in the energy marketplace; or, as PGE's Fred Miller described it in a July 17 letter, BPA's "unprecedented incursion into the private sector's business."

In response, a U.S. House-Senate conference committee in early September established ground rules for the ESB. Among them:

• A limit of $10 million on BPA's borrowing authority for the ESB, $10 million less than BPA sought, but $10 million more than the House had earlier proposed. And for the near future, the conference committee set a maximum of $3 million in borrowing authority "until the Regional Review has successfully developed clear parameters" for the ESB.

• Bonneville's ESB "should only be continued in the context of the historic energy efficiency services Bonneville has offered to existing customers."

• BPA will work with the region's energy efficiency industry "to reach agreement on principles which assure that Bonneville's activities are structured to enlarge the energy services market and do not compete with work that the private sector could reasonably perform."

• The Regional Review should consider such ESB issues as capitalization levels, competitive implications and the risk of cross-subsidies from BPA's power marketing and transmission customers. And if the Review or Congress ultimately concludes the ESB should not continue, Bonneville should bow out of the venture.

"I'm very comfortable with what the House-Senate conference committee did," said Terry Esvelt, BPA's energy services vice president. "It's become very apparent that Bonneville cannot and should not be perceived or certainly in reality to be in competition with anybody, and that's what Congress' main point was . . . They said, 'Thou shalt not compete' [and instead] try to find the niches to serve to enlarge the energy efficiency market. That's good . . . That's the direction we were moving in." For example, after hearing from private-sector people, BPA has abandoned earlier plans to offer various environmental services, laboratory work, engineering and construction services, mapping and other miscellaneous items. " . . . given the confusion and controversy that exists over these services, we have decided to dis[as]sociate them from our Energy Services activities, since they are largely unrelated to the central purpose of advancing energy efficiency opportunities," BPA administrator Randy Hardy wrote in a Sept. 6 letter to U.S. Sen. Patty Murray of Washington.

In energy efficiency, Bonneville's ESB is focusing on two primary markets: federal agencies and small and mid-sized Northwest public utilities. "Those are the two areas where we think we have opportunities to grow the pie," Esvelt said. Bonneville already has signed contracts with four federal agencies: the Bureau of Mines, General Services Administration, U.S. Postal Service and the Bureau of Indian Affairs. Some work already is under way with those agencies, said Esvelt, although he didn't provide details. Potential ESB demand-side services outlined in a BPA position paper include resource management, financial services, engineering analysis, savings verification, data analysis, power factor and power quality.

Many NEEC members already ply their trades with federal agencies and utilities, noted Stan Price, the association's administrative director. His group has two "bedrock" goals for Bonneville's ESB. "We do not want to have a situation where Bonneville is offering services that directly compete with viable and profitable services offered by the private sector," he said. In addition, NEEC wants to ensure that "the total market opportunities themselves for the private sector need to be enriched by what Bonneville does."

BPA and NEEC are working on specifics within those larger principles. One approach, Esvelt said, is to break down energy efficiency projects into various stages, from conception to installation to the end of an energy-saving measure's lifetime, and then figure out where Bonneville can help and where it can't, or shouldn't try. Already, Esvelt said, Bonneville has agreed it will not bid on requests for proposals issued by federal agencies for energy-services projects. "That's a classic example of competition," he said.

In other situations, Esvelt believes, as do some NEEC members, that Bonneville provides special opportunities to advance projects in tandem with the energy efficiency industry. For example, Esvelt said BPA hopes to "serve as a vehicle to facilitate third-party financing capabilities, when that works for the customers." If so, he noted, BPA will have less need to tap into its federal borrowing authority. Another example cited at a July 24 NEEC meeting: subcontracting with BPA on federal work might be simpler and require lower overhead for private energy-services firms than wending through the federal procurement process themselves.

NEEC, though, wants greater detail about the potential opportunities and about BPA's exact intentions with ESB, taking into account the swift-moving electricity and energy services marketplace. "It's a relatively complicated process," said Price, "and a significant challenge for Bonneville to be able to respond adequately."

A joint BPA/NEEC statement on principles should be ready by early October, Esvelt said. He also acknowledged BPA expects to officially change the ESB name, and to drop the "business" appellation. "We've not done ourselves a favor by calling it Energy Services Business."--Mark Ohrenschall (Pamela Russell and Ben Tansey also contributed to this story)

Attachments:

• The U.S. House/Senate conference committee's language on Bonneville's Energy Services Business
• Randy Hardy's letter to Sen. Patty Murray regarding BPA's ESB

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PGE Proposes Renewable Resource
Power Option for Large Customers

The proposal, filed Sept. 6 with the Oregon Public Utility Commission, would be available to industrial, commercial and general service customers, who could specify a percentage of their total monthly electricity demand--3 percent or more--to be supplied by renewables, or purchase monthly a set amount of renewable resource energy--not less than 20,000 kilowatt-hours. The minimum expected renewable energy component for any customer would be 240,000 KWh per year. The total power available under the new schedule would be 5 average megawatts.

Customers would pay a premium of about 1 cent/KWh for the green power, said PGE pricing analyst Doug Kuns. And while it might seem residential users would be more likely to agree to pay more for renewables, "They don't have the capacity to buy as much [power]," said PGE spokeswoman Roxanne Bailey. In addition, bigger customers often have green goals; meeting part of their electricity load with renewables would be one way to help fulfill them. "This is a group that sometimes gets ignored," Kuns said. PGE's tariff would "create a window for them to participate [in renewables], show some interest." Kuns added that if Schedule 54 is successful, it could be expanded to other customer groups as well. "This is a way to test the market, understand customer interest in [renewables]--and as the market develops, demonstrate there is a market for this."

While customers would have to sign up for at least a year of service under Schedule 54, PGE would not be required "to own such resources or acquire power simultaneously to customer usage." Under the proposal, the utility would have until 2001 to purchase or operate renewable resources "equal to or greater than the amount specified under the Renewable Energy Agreements of this tariff." If PGE failed to do so, customers who signed up would receive a refund of the difference between the rate schedule charges they would have paid and the prices in the renewables schedule.

"It's our sense that we need to have some time to develop or acquire the resources," Kuns said. "By a certain time we'll have the resource"--probably through purchase rather than acquisition, and, the utility hopes, before the 2001 deadline.

At the same time, Kuns acknowledged developers of renewable resources are free to approach PGE customers directly about purchasing their product. But "it's hard for developers to get a read on the interest" in renewables, Kuns said; PGE's filing, while "a modest proposal at best," is a way to find out which customers are interested and to develop some momentum for renewables. And there was sufficient interest already, Kuns said, for PGE to come forward with its proposal.

Under the filing, customers already participating in PGE's Earth Smart commercial building program can waive the minimum load requirement and the minimum renewable energy component. "It's an interesting tie," Kuns said. "It gives those customers another option [for meeting Earth Smart program requirements]."

An Oregon PUC hearing on PGE's proposal has not yet been scheduled, Kuns said. He noted the utility filed the proposal on its own initiative, rather than at the directive of the PUC.--Jude Noland

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Solar Photovoltaic System at Central Oregon Museum
Produces Reliable--if Expensive--Electricity

Nearly two years after its installation, a distinctive solar photovoltaic system at a central Oregon museum is reliably converting sunlight directly into electricity--although, as expected, in small amounts at a high price.

The 5-kilowatt-capacity rooftop PV system at the High Desert Museum near Bend went up in December 1994 as a pioneering example in Oregon of grid-connected solar photovoltaic power in a commercial application. PacifiCorp, which funded the $100,000 system, wanted to learn more about this renewable energy technology and help the environment, according to utility engineer Dennis Hansen.

So far, the PV system has been most notable for its dependability. "It's got a very good record of performance reliability," said Dan Greenberg of Ascension Technology in Massachusetts, which is monitoring the system's operation and the available sunlight for PacifiCorp. "It's been a very trouble-free operation since its installation." Mike McKnight, the museum's facilities manager, concurred. Asked about any maintenance problems, he replied, "None. It's passive and there's an inverter that takes DC [electric current] and converts it to AC. Other than that, what can go wrong?"

From April 1995 through June 1996, the PV installation produced an average of 3.58 kilowatts, or 71.7 percent of capacity--enough electricity to power 35 100-watt light bulbs. PacifiCorp officials consider that a solid performance, although several factors have limited the system's potential output. One, according to Greenberg, is "substantial" shading of the 20 rooftop PV modules. Another is snow cover on those days [perhaps 20 or more a year, according to McKnight] when the Bend area is blanketed with the white stuff and so is the PV system. And finally, central Oregon was relatively sun-deprived in the first half of 1996.

In any case, PV power supplies only a tiny fraction of the museum's total electricity consumption. In August 1995, the museum's peak solar month that year, the system generated 904 kilowatt-hours, offsetting about 1 percent of the museum's 90,000 KWh total load. From April through December 1995, PV saved the museum $306 on its electric bills.

The solar-generated electricity costs PacifiCorp an estimated 25 cents for each kilowatt-hour, more than four times the utility's average residential rate and 10 times or more the current market price for Northwest wholesale electricity. "This is not cheap power," Greenberg acknowledged. "At this point, the [PV] technology is used primarily for research purposes or niche markets where the alternative is even more expensive." Hansen said PacifiCorp is not focusing on generating low-cost electrons in its photovoltaic demonstration projects, which include 5-KW-capacity sites in Moab, Utah and Green River, WY, as well as participation in a new 115-KW system for a remote marina at Lake Powell in Utah. "Our purpose in getting into this was really twofold. Number one was education, basically to stay up with the technology, and number two, it's important to us to do what we can to help the environment."

The educational aspect in Bend initially was intended to include the approximately 200,000 people who annually tour the living museum of natural and cultural history. However, the system's location in the administrative area has minimized the visiting public's exposure to PV. "They basically don't know about it, which is unfortunate," said McKnight. "We haven't made a big deal out of [the PV system]. The people who have seen it are people interested in solar energy and they've come to look at it." Most of those folks hail from Oregon, he noted.

McKnight said the museum is happy to have the PV system, which fits with its environmental mission, and would "look after it forever" if PacifiCorp so desires. He also appreciates more than the solar power. "From my own perspective . . . the best part is getting to know the Pacific Power guys better."--Mark Ohrenschall

ATTACHMENT

• Facts, Figures on the High Desert Museum's PV System

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Insufficient Geothermal Potential Makes
Newberry Project Uneconomic

The Newberry Crater geothermal project, one of the region's most promising geothermal resource developments, has been terminated. Developer CE Exploration has informed Eugene Water & Electric Board and BPA, which had contracts to buy power from the proposed 30-megawatt project, that it's decided not to pursue geothermal development at the site--near the Newberry National Volcanic Monument northeast of LaPine, OR--due to lack of sufficient geothermal resources.

"This has been a bit of a disappointment," said Ken Beeson, energy resource projects manager for EWEB, which had agreed to buy 10 MW of Newberry's output. "[Newberry] has been part of our long-term resource plan for several years. Our effort was to diversify our resource base and develop some renewables."

CE Exploration--a subsidiary of Nebraska-based Cal Energy--conducted tests at the site in 1995 and early 1996, Beeson said, drilling two core holes and two large production wells. The findings indicated that Newberry site development would not be economically viable. "What we found was high temperatures, but the permeability wasn't there," said Dale Schuster, vice president of administration for Cal Energy. The rock at the site wasn't porous enough to provide an adequate supply of steam. Cal Energy is now looking at another site, Glass Mountain in northern California, as a substitute for Newberry. Schuster said the company has already filed a project plan for the new site with the Bureau of Land Management and the U.S. Forest Service.

The Newberry project is one of three pilot geothermal energy projects BPA was undertaking in conjunction with the Northwest Power Planning Power Council's 1991 power plan. NWPPC senior resource analyst Jeff King said the purpose of the pilots was to determine the nature of the Northwest's geothermal resource--as well as the feasibility of development. The Council hoped the pilot projects would be developed at three different locations. But of the four sites explored so far, only Glass Mountain is still under consideration; in fact, EIS scoping has just been completed on a Glass Mountain site Calpine Corp. is developing as a BPA pilot.

While the region's power-supply situation is such that energy from the Newberry project--or its substitute--may no longer be needed, BPA geothermal projects manager George Darr said cancelling the project outright is not an option addressed in Bonneville's contract with Cal Energy. He added, however, that the company's decision to relocate the project "plainly creates some ambiguity about the situation." And according to King, "There's always an option for the Council to say we think this is no longer necessary." But King also said just because it isn't economical to develop the geothermal resource now, it's still worth it to determine if the resource exists.

For now, Cal Energy will proceed with its environmental assessment at Glass Mountain, and BPA will hire an independent consultant to report on prospects for development at the Newberry site. The decision for a third-party report came, in part, from concerns voiced by Council member Joyce Cohen of Oregon. Cohen said she wanted to know how thoroughly Cal Energy documented the resource at Newberry, to ensure the money already invested in the site isn't wasted by a premature relocation.--Jude Noland

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Plan to Thin Overgrown Forests, Generate
Biomass Energy Falls by The Wayside

An intriguing proposal to generate biomass energy while thinning overstocked forests east of the Cascades has been abandoned in the face of low wholesale electric prices and the disappearance of a would-be demonstration plant.

Wheelabrator Environmental Systems had proposed a 6-megawatt biomass demonstration project in northeastern Oregon, using non-marketable wood from overgrown forests as fuel (see Conservation Monitor, June 1995). The California-based company touted the plan as a way to improve forest health, produce renewable energy and eventually--with a series of such 30-MW biomass plants around the region--to benefit struggling timber-dependent local economies.

But the project lost its potential host site, a closed biomass plant between Pendleton and Burns that was sold for dismantling and reconstruction in Canada, according to Wheelabrator vice president Bill Carlson.

And the project also was unable to secure a power-purchase contract from Bonneville Power Administration or other Northwest utilities. Wheelabrator never got very far on power-sale discussions with BPA, according to Bonneville's Pat Fox. "We're not out thumping the ground for resources," Fox noted.

Carlson said Wheelabrator needed a price of 4 cents per kilowatt-hour to make the project viable--well above the going market rate for wholesale power in the range of 2.5 cents/KWh.

"It seems like an interesting idea, a semi-renewable form of energy generation, relatively clean," said Jeff King, senior resource analyst at the Northwest Power Planning Council. "Unfortunately, the economics weren't that attractive."

Wheelabrator had intended the demonstration project to establish the credibility of the forest thinning/biomass energy concept.

There is widespread agreement that considerable forest land east of the Cascades is in poor health, owing to such factors as fire suppression, selective logging, drought and insect infestations. Historically, periodic ground fires swept through these predominantly ponderosa pine forests, clearing out smaller brush and trees but largely retaining the big ponderosas. But with the advent of fire-suppression policies, Carlson said, "There's so much more fuel [for wildfires] now" than 100 years ago. "The fires are so much more damaging than they used to be."

Wheelabrator had hoped to work on selected lands approved by the U.S. Forest Service. The company proposed to seek out marketable timber, then logs that could be chipped for pulp. All other forest material gathered--such as branches--would have been sent to the biomass plant for burning and conversion to electricity. "Given the limited options we have, this thinning technique is the only one at the end of the day that will pass muster and restore the forest to what it used to be," said Carlson. It would improve growing conditions for remaining trees and reduce fire loads in the region, he and plant manager Jerry Duffy recently wrote to the NWPPC.

King said many foresters appeared to embrace this idea. In fact, according to Carlson and Duffy's letter, the Forest Service prepared a timber sale in eastern Oregon designed around Wheelabrator's thinning concept. However, many environmentalists were suspicious that this idea resembled salvage logging and was susceptible to abuse, according to King.

Although this particular proposal is dead, Wheelabrator remains on the lookout for 5- to 15-MW wood-fired plants, either with existing contracts or not in use today, near forested areas in the inland West. "It isn't the plant we're seeking to demonstrate, it's the concept," said Carlson. "We're really looking to tie this all together."

Carlson said Wheelabrator also is pushing in Congress for expansion of a federal biomass tax credit that now covers only fuels specifically grown for energy production. If this 1.5 cents/KWh tax credit were extended to forest byproducts, Wheelabrator could match the market rate for wholesale electricity. "Then there's no serious roadblocks for us," he said.--Mark Ohrenschall

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WWP Energy Solutions' Newest Customer:
SharePlus--and its 210 Member Hospitals

Washington Water Power's energy services subsidiary, WWP Energy Solutions, has added another customer: SharePlus Health Services Solutions, which has 210 member hospitals in northern and central California.

Since it was formed last spring, WWP Energy Solutions has attracted such customers as US Bank and the Northwest Mining Association. The company also has lighting contracts with Washington State University and the Spokane Softball Association.

Under a five-year agreement, WWP Energy Solutions will be SharePlus' "exclusive, preferred energy services vendor," said WWP spokesman Patrick Lynch. Shareplus Services has a list of preferred vendors for multiple services, Lynch said, and aggregates all of these services for its member hospitals. WWP Energy Solutions will be the only vendor on the list for energy services.

Initially, WWP Energy Solutions will provide energy consulting services, such as educational and informational programs designed to familiarize SharePlus members with the benefits and risks posed by deregulation in the emerging energy services market. Once the energy market opens to customer choice, SharePlus and its members will be able to take advantage of economies of scale by making aggregate purchases in the energy marketplace through WWP Energy Solutions. SharePlus members' average annual usage is about 200 megawatts, Lynch said. --Jude Noland

City Life Project Wins National Award
for Energy Efficiency from EEI

Portland General Electric has won the 1996 Common Goals Award for Energy Efficiency from the Edison Electric Institute for its role in the City Life housing project near downtown Portland.

In honoring PGE as one of 13 Common Goals Award winners among the nation's investor-owned utilities, EEI said: "In partnership with community leaders seeking to provide affordable urban housing, Portland General Electric Company helped create the City Life housing development using PGE's Earth Smart energy blueprint. Earth Smart takes a holistic, Oregon-inspired approach to construction, designing in energy-efficient and environmentally sensitive features." A PGE-certified Earth Smart duplex is one of 18 units in the City Life project, located in Portland's Brooklyn neighborhood.

"This award underscores the value of providing infill housing that is affordable, energy-efficient and environmentally responsible," said PGE project manager Don Nuttbrock.

B.C. Announces New Minimum Efficiency Standards
for Commercial Refrigeration, Fluorescent Lighting

British Columbia has expanded its minimum energy efficiency standards to include certain types of refrigeration and lighting, the Ministry of Employment and Investment announced in August. The new standards--which will be phased in by Jan. 1, 1999--cover commercial refrigerated display cabinets, which comprise a significant amount of energy consumption in supermarkets, and fluorescent lamps primarily used in general area lighting. These additions to the 1990 British Columbia Energy Efficiency Act are anticipated to save British Columbians $15 million annually by the year 2000, and conserve enough electricity to serve 10,000 homes for one year, according to employment and investment minister Dan Miller.

Green Building Catalog Available
from Iris Communications

A new mail-order catalog of books, videos and software on "green building" is now available from Iris Communications of Eugene. The catalog lists more than 75 titles focusing on practical information to help reduce the environmental impact of buildings. Topics covered include energy-efficient construction, passive solar heating, daylighting, material selection, ecological design and community planning.

For more information about the catalog, contact Iris: phone, 1-800-346-0104 or (541) 484-9353; fax, (541) 484-1645; mailing address, P.O. Box 5920, Eugene, OR 97405-0911, or check out the catalog on the World Wide Web.

Building Commissioning Conference
Scheduled Nov. 4-5 in Portland

The second Northwest Conference on Building Commissioning will take place Nov. 4 and 5 at the Hilton Hotel in Portland. It will cover the why, what, who, how and when of building commissioning, which is the process of ensuring a building performs according to the design intent and the owner's operational and business needs.

The gathering--which will include a conference, workshops and tours--is intended for building owners/developers, facility/energy managers, architects, engineers, utility technical staff and program managers, building operators, commissioning agents, HVAC and other equipment installers, lenders and insurers. Host co-sponsors are Bonneville Power Administration, the Northwest Power Planning Council and Portland General Electric, PacifiCorp is a sponsor.

For more information, contact Nancy Benner or Debby Dodds at Portland Energy Conservation Inc.: phone, (503) 248-4636, ext. 205; fax, (503) 295-0820; e-mail, peci@teleport.com; mailing address, 921 SW Washington, Suite 840, Portland OR 97205.

Daylighting Forum Set for Oct. 11 in Portland;
Other Fall Lighting Lab Events Announced

The sixth annual Northwest Daylighting Forum is scheduled for Friday, October 11, in the Portland area. Co-sponsored by the Lighting Design Lab and Portland General Electric's Lighting Demonstration Lab, the forum is designed to bring together architects, lighting designers, educators, product manufacturers and utility representatives to share experiences in daylighting design and evaluation. Presentations planned for Oct. 11 include new products and technologies; current research directions and funding; and new utility programs to assist with integrating daylighting and electric lighting into projects.

The Lighting Lab also has released its fall quarter 1996 schedule of events. The offerings include a retail lighting workshop, Wednesday, Oct. 2; annual utility programs update, Wednesday, Oct. 2; multifamily exterior lighting workshop, Wednesday, Oct. 9; dimming ballasts product knowledge day, Wednesday, Nov. 6; residential light sources, Wednesday, Nov. 20; and the lab's annual open house and new technology trade fair, Wednesday, Dec. 11, with guest speaker Don Aitken of the Union of Concerned Scientists.

For more information, call the Lighting Lab in Seattle at (206) 325-9711, or 1-800-354-3864 in Washington, Oregon, Idaho and British Columbia.

Solar Energy Association of Oregon's Oct. 5
Annual Conference Will Focus on Sustainability

Sustainability will be the focus of the Solar Energy Association of Oregon's annual fall conference, scheduled for Saturday, Oct. 5 in Portland. Participants "will learn how short-term, bottom-line-driven approaches have gotten us into the mess we're in, and what Northwesterners are doing to help us get out of it," according to SEAO.

Entitled "Acting Today, Respecting the Future," the all-day conference includes a morning session with talks by Gil Friend, a syndicated business and environmental columnist, and Sarah van Gelder, editor of Yes, an environmental magazine formerly known as In Context (van Gelder also is a former managing editor of NewsData Corp.'s Clearing Up newsletter). A panel discussion highlighting examples of "short-sighted planning" and how it can be improved will feature Tom Bender, Oregon futurist and co-founder of RAIN magazine; Jeff Shields, general manager of Emerald People's Utility District; and a representative of the Northwest Earth Institute.

In the afternoon, Northwesterners will discuss what they're doing in their homes, businesses and communities to "make life better now and in the future," according to SEAO. Seminars will focus on appropriate building designs, materials and constructions, sustainable community planning and personal responsibility.

The conference will be held at Portland State University's School of Business. Cost is $30 for SEAO members, $40 for non-members and $15 for students. For more information, contact SEAO, 418 SW Washington, Suite 306, Portland, OR 92704; phone, (503) 224-7867.

Conference to Highlight Sustainable Development
Technology, Trends and Markets

"Sustainable Development Technology, Trends and Markets" is the title of a conference Oct. 11 and 12 at the Sustainable Technology Center in Friday Harbor in the San Juan Islands of Washington.

The conference will feature keynote remarks by Dick Hobbs, vice president of the American Institute of Architects in Washington, D.C.; a panel discussion on emerging markets for sustainable design and development; case study presentations; and a tour of the STC.

Conference fee is $55. For more information, call Tom Harman of Seventh Generation Systems, (206) 285-4690, or send him an e-mail: tom.harman@sevengensys.com.

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