The PUD

‘Tis the stuff of democracy, right? People stand for election and we, the voters, decide who will represent us. In the larger races, say for U.S. Senate, we may simply choose our party’s candidate. In local elections most of us know little about the issues and even less about who should hold office.

I happen to be at the end of my second six-year term as an elected commissioner for a public utility district, Snohomish County PUD, specifically. Surveys suggest that many citizens of the county and Camano Island, which is also served by the utility, lack even a basic understanding of PUDs and how they are governed. They do know, more likely than not, that the utility delivers electricity. Fewer know that it also purveys water to particular areas.

PUDs, if you’re wondering, are unique institutions born of the New Deal as a reaction to large, privately owned and managed cartels, typically national holding companies, that confined service to urban centers. If you lived on a farm or in a rural area you, too, could have electricity—provided you were willing and able to pay for extending distribution lines from the city to the country. Way back in the 30s Washington state voters passed Initiative No. 1 that allowed for citizen-governed local utility districts. The legislature eventually heeded the wishes of the people, establishing the relevant laws and procedures under Title 54. Gradually, various counties throughout the state held votes to determine if their respective residents would be served by public or private power. Snohomish County said yes to a PUD.

Unlike investor-owned utilities, public utility districts are governed by a three-member board as determined by the people. Each of us serves a staggered six-year term. My position is up this year. Two years hence a colleague will also face re-election.

On occasion, the entire complexion of the board changes, generally in reaction to one or more crises. During the 70s the SnoPUD board at the time went all in for nuclear power. Many will recall “Whoops,” an apt sobriquet for the Washington Public Power Supply System, a truly off-the charts initiative to build and operate five or more nuclear power plants in the state of Washington. Dramatically escalating costs led to abandonment of all but one plant, which continues to operate east of the Cascades. Those costs raised local electricity rates five-fold along with citizens’ tempers. One by one, the board was replaced.

Then came the West Coast energy debacle at the turn of the century. It, too, caused rates to soar, leading to a change of board members, of which I was a part.

Since I assumed office in 2003, the PUD waters have calmed. Coincidence, perhaps, though I like to believe that I had something to do with moving the utility from crisis to stability. Along the way, I should add, the PUD has gained even international recognition for its pioneering efforts in tidal energy and, soon, electricity storage. That recognition also garnered significant financial support from the state and the federal government.

When I ran that first time in 2002, there were six candidates, including the incumbent. He lost out in the primary, a casualty of the Enron-dominated debacle. I won the general election in convincing fashion, despite well-funded opposition. Six years later, with the utility now set on a prudent course, I was challenged by an individual who admitted that he ran only that I should have an opponent. Again, I prevailed.

I filed for re-election this past Monday. I learned this morning that I will have at least one opponent, a person with whom I’m unfamiliar. I will likely discover his reasons for running in the near future.

I’ve suggested that board members are deposed in response to perceived crisis. One was WPPSS. A second was Enron. Both involved power supply, and both resulted in substantial rate hikes. There is nothing at all similar this time around. Indeed, by all accounts the utility is operating as well as any in the country.

Customer bills are lower in real dollars than they were over 20 years ago. The utility’s integrated resource plan charts a clear course for serving current and future customers. In addition to electricity supplied by the Bonneville Power Administration, the PUD relies on conservation, first and foremost, followed by renewable energy resources, including wind, solar, small hydro, and biomass. As I mentioned above, the utility is actively pursuing tidal energy, storage solutions, and geothermal. The PUD has established financial reserves to meet unforeseen circumstances, which the utility strives to eliminate in the first place. And we keep the lights on.

In short, the Snohomish County Public Utility District is doing extremely well, without issues. So, on what basis would someone challenge? As I said, we’re sure to find out soon enough.

Meanwhile, I have set up a campaign website to discuss the PUD in much more detail as we move closer to elections. I invite comments, questions, and suggestions.

Legislative herding

Legislators sponsor bills that prescribe certain behaviors. For example, when dealing with the environment or global warming, representatives propose legislation designed to induce the acquisition of renewable and efficiency resources over the bad stuff—anything with carbon or soot or toxins. I will assume that such bills result from the best of intentions. However, there is a simpler, more effective approach.

Let’s focus on climate change. If one is serious about preventing or mitigating global warming, then, by all means, dramatically reduce, if not eliminate, the combustion of carbon. A little bit of atmospheric carbon dioxide is a good thing; too much will certainly destroy the planet, one species at a time.

Economists have known for some time now, probably for centuries and before ‘economist’ joined the dictionary, that raising the price of a good or service will reduce demand for the item. If we want less carbon, we need to make it more expensive.

There are many ways to do this. But surely the simplest and most effective is by taxing it. 

But legislators in Olympia and D.C. can hardly even say the word ‘tax,’ let alone establish one. Instead, they attempt to herd us all into metaphorical pastures.

The Snohomish County PUD, of which I am a board member, tracks legislation introduced in both Washington state and Washington, D.C.. Typically, we commissioners receive updates, which are ranked by topic and priority. The latest Olympia update was sent at the end of last week. I’ll mention a few legislative titles:

  • Modifying the renewable energy and cost recovery program
  • Regarding net metering of electricity
  • Regarding the use of an energy storage facility to meet annual targets under RCW…
  • Requiring integrated resource plans developed by electric utilities include an assessment of energy storage systems

Implicit in these bills is an underlying concern for climate change. But they are all prescriptive or proscriptive, another way of “herding” utilities, in this case. So, we at the PUD pay attention on behalf of our customers. If we believe that a bill’s passage will harm ratepayers, we speak against and otherwise try to modify or even “kill” it. On the other hand, some legislation we deem beneficial, in which case we actively support. In most instances the PUD “monitors” or perhaps expresses “concern.” Since legislators are in session for months at a time, the process is long and occasionally tedious. At the end, dozens, if not hundreds, of bills “die,” with only a handful landing on the governor’s desk for signature.

Suppose the legislators imposed a carbon tax. Oregon has one. California established a cap-and-trade regime (a form of taxation). Ireland recently instituted a stiff carbon tax. Wherever taxes or caps have been imposed, consumption of carbon has fallen. What would happen if Olympia did?

Rather quickly, if international examples attest, those subject to a tax would take steps to avoid them. Electric utilities would pursue non-carbon strategies. These would include more conservation and renewable resources. If the tax were high enough, more utilities would have an incentive to pursue such initiatives as energy storage, which has proven costly, given its infancy. (The noble Snohomish County PUD does all this good stuff in the absence of a tax. We board members recognize that carbon will become more expensive; it’s just a matter of time. As always, the PUD is ahead of the curve.)

However, utilities do not hold a monopoly on innovation. A carbon tax would encourage utilities to serve as a conduit between third parties (the entrepreneurs and innovators) and their customers, who, after all, would ultimately pay the tax in the form of higher electricity rates. The higher the tax, the wider the conduit and the greater the opportunity.

Another thing would happen. Legislators could busy themselves with other pressing matters, like education and transportation, confident that the tax would do the herding, like Adam Smith’s “invisible hand.” 

If any legislators are reading this, why not start the conversation among your colleagues? Hey. We’re only trying to save the earth.

Back in the news

I understand that being an elected official invites criticism, especially on the eve of elections. This year’s PUD race seems more voluble than most. Judging by letters in the Everett Herald, the issue generating the lion’s share of rhetoric is the utility’s exploration of a potential small-hydro project on the Skykomish River.

I weighed in a couple of weeks ago on the Herald‘s pages, responding to what I believed to have been an unfair and inaccurate disparagement of Commissioner Vaughn, who is running for a fourth term on the board. In turn, my letter generated at least two followup replies thus far. The latest appeared this morning. Once again I feel compelled to correct a couple of points made by the writer.

There appears to be come confusion about Initiative 937. While it certainly identifies resources that will be counted against a utility’s portfolio standard, it does not “disqualify” other resources. That is, utilities, as always, have authority to develop an array of new resources, whether or not they “qualify” under I-937. Indeed, Puget Sound Energy, the state’s largest, is reportedly matching on a one-to-one basis fossil fuel resources with renewable resources so as to firm the latter.

For its part, the PUD has enhanced existing small-hydro projects. In so doing, the utility can count the incremental output toward meeting its I-937 obligations. Moreover, the PUD board’s policy, expressed in the utility’s Integrated Resource Plan, avoids development of fossil fuel resources. So, unlike PSE, the Snohomish County PUD has no plans or intentions to build or acquire the energy generated by coal or natural gas plants.

That said, the PUD is not prohibited from exploring resources that do not qualify under the initiative. Among these is the Sunset Falls project. Both the board and staff recognize that should the proposed small-hydro facility be completed it will not count against the utility’s I-937 requirement. When the board eventually decides the project’s fate, it will do so consistent with financial feasibility and environmental soundness.

The writer says that the PUD “abandoned” its geothermal project. Well, the utility did indeed shut down the Garland site, because the PUD, after an initially promising drilling phase, unexpectedly encountered impermeable layers of rock, which prompted me to observe at a board meeting that Garland had more “geo” and less “thermal” than we had hoped. However, the PUD has certainly not abandoned geothermal altogether. While we would prefer to develop resources within our own service territory, there are attractive geothermal sites within other parts of the state that the utility is exploring. Geothermal, in addition to being renewable, is also a firm, or base load, resource, making it an ideal adjunct to intermittent wind, solar, and tidal.

And speaking of tidal, the utility, contrary to the writer’s implication, has not halted its exploration. To be sure, the pilot project has been challenged by a telecommunications firm with a submarine cable some distance removed from our preferred turbine locations. We are working on all fronts to surmount the challenge, and we have reason to believe that we will ultimately prevail.

Now, I applaud Eric Teegarden’s genuine commitment to conservation and renewable resources. Should he be elected, I’m certain that the utility will continue with its progressive resource strategy, including a principal focus on energy efficiency. Yet, to the writer’s point about Mr. Teegarden’s being the author of a loan-based solar program, I have my doubts. The board and staff decided some time ago to extend its conservation loan program to solar acquisition. I would judge it a mere coincidence that the utility is doing what Mr. Teegarden recommended. Nevertheless, I applaud Mr. Teegarden’s personal commitment to solar energy, having installed panels on his own home and business.

PUD clarifications

I generally avoid publicly taking sides in my colleagues’ re-election campaigns. Who wins or loses is a matter for PUD customers. Besides, I would have to work with whomever sits on the board, incumbent or successful challenger.

When I penned my response to a Herald letter, my wife suggested upon reading it in the paper that I appeared to be supporting Commissioner Vaughn. While that was not my intention, I understand how one would could make that interpretation. After all, I did mention her name on several occasions, but only because of the writer’s direct accusations against her.

The writer chose to make the Sunset Falls project decision a referendum on the PUD race, alleging that Ms. Vaughn was an affirmative vote. As I stated in my reply, the decision has yet to come before the board, so it is at least premature to cast judgments. Utility staff continues to investigate the feasibility of the project, both economically and environmentally. Only after it concludes its work will it present the commissioners with a recommendation for or against. Then, and only then, will the board decide.

In addition to disparaging Ms. Vaughn for lacking the appropriate “skill sets” to do her job—which is odd since she was first elected in 1994 and been re-elected for two additional terms, suggesting that the voters have disagreed with that assessment—the letter writer included erroneous claims about the Sunset Falls project itself, that it was hugely expensive and would drain the river to a trickle. I felt compelled to set the record straight.

Of course, I had no pretense that my reply to the Herald would be the final word until next month’s election. So I was not surprised to read a rebuttal of sorts in this morning’s edition.

The writer:

Mr. Aldrich tried to hide his involvement in the upcoming election by taking a broad swipe at how Mr. Teegarden might vote on one of the current projects being considered by the PUD.

Well, there was no swipe and nothing broad about it. I had written that Mr. Teegarden opposes the Sunset Falls project. What was my evidence? The Herald:

The PUD has been studying building a micro-dam at Sunset Falls on the Skykomish River. Teegarden said he’s strongly opposed to the idea.

The recent writer, a former PUD employee, accuses the board of spending dollars on projects with “dubious benefit to the average customer.” He was following up on his previous letter to the Herald, in which he excoriated the utility for exploring geothermal and tidal power. Both ongoing projects fall under the PUD board’s stated energy policy, which is to maximize cost-effective conservation and pursue only renewable resources, preferably those in our own service territory so as to minimize transmission challenges and retain dollars within the local economy.

Preliminary data from a potential geothermal site suggested that we explore further. Unfortunately, the utility ultimately and unexpectedly encountered impermeable rock strata forcing the PUD to cease operations. Utility staff are now looking elsewhere, because geothermal is a firm resource emitting no carbons.

With federal grant money the PUD is indeed pioneering the investigation of tidal power on the West Coast. Tidal power holds much promise, given its predictability and sustainability. Moreover, Puget Sound lies adjacent to and within the utility’s service territory. It makes sense to explore its vast potential for PUD customers. Yet, even a minimal pilot project faces significant challenges that have delayed the deployment of two experimental underwater turbines and added costs.

And speaking of costs, the letter writer failed to note that the PUD is funding these explorations from the aforementioned grants and the utility’s resource reinvestment reserve, dollars acquired through the sale of the Centralia coal plant several years ago. Neither strategy imposes additional rate pressure.

But it’s not easy being green. Developing new renewable resources comes with risks, most of which relate to pushing the envelop beyond the status quo. Fortunately, the PUD has prudently set aside dollars to execute the board’s strategy while pursuing available grant money.

Nevertheless, PUD customers may prefer a different resource strategy. Mr. Teegarden, for example, would evidently nix small-hydro projects in favor of more solar power. Having talked with him in the past, I believe he would continue to support the PUD’s very successful conservation programs.

So, whomever the voters elect next month, I don’t expect to see coal or gas plants in our future, which is a good thing.

Sunset Falls and the PUD race

The current PUD board campaign features a contest between incumbent Kathy Vaughn and challenger Eric Teegarden. Both favor energy conservation and renewable resources, topics that often differentiate candidates, but not this year.

What may divide November’s competitors, judging by this letter to the editor, is the future decision on the Sunset Falls small hydro project, which the PUD is exploring. The writer appears to be sorely mistaken on key factors.

The writer:

Ms. Vaughn supports the Sunset Falls Dam because she has neither the skill set nor the drive to set the PUD on a course of sustainability.

There has been no decision by Ms. Vaughn, Ms. Olson, or myself. But what does one’s ultimate preference for or against the project have to do with a commissioner’s “skill set”?

And the writer has clearly not been paying attention to what the PUD has been doing for, say, the last half-dozen years. We’ve established annual records for energy conservation acquisition and pioneered development of solar energy, tidal power, and geothermal. The utility recently completed two small hydroelectric facilities that will bring sustainable power for years to come.

As for the Sunset Falls project, the writer commits egregious or misleading errors. Let’s see.

…it will reduce the river to a trickle, destroying one of the last wild rivers in North America…

I have no idea as to the source of this ridiculous notion. But it’s spectacularly wrong. If the project is approved then completed, I would defy anyone to visibly notice its effects on river flows. The falls themselves will remain as they always have—with the proposed weir located far upstream and out of view to the camera perspective below.

The writer claims that the proposed project “is hugely expensive.” Well, one must ask, Compared to what? The board has been apprised of the site’s preliminary economics: the levelized cost of the project’s output would range between $65 and $80 a megawatt-hour. Here’s a list of PUD supply resources and their nominal costs:

 

Small hydro, including the proposed Sunset Falls project, costs a bit over $60/MWH, which is much less than the other renewable resources listed. The PUD has explored utility-scale solar, which has an estimated cost of about $150/MWH. The tidal power estimates have been consistently higher than other resources, but we expect those costs to decline with further research and development. The point here, is that small hydro is economically competitive and, pace the writer, not “hugely expensive.”

While I have no doubt, based on both Mr. Teegarden’s declarations and the sentiments of his supporters, that he would vote against the project should he be elected, it is at least unfair, and certainly premature, to cast Ms. Vaughn as a supporter. I should add that however the board eventually decides, it will do so on the basis of actual facts and figures and not on unfounded hyperbole.

Wasting electricity

The New York Times is running a series on data servers, the massive centers that house bits and bytes generated by millions of Internet users. They started out small a few decades ago; today, they are massive and proliferating.

Though I am intimately engaged in energy issues from my perch on a utility board, I was unaware that, according to the Times, these data centers waste more than 90 percent of the electricity they consume to perform their intended function. Worse, they rely on dirty diesel backup generators, which themselves are giant and plentiful. And we should use “backup” advisedly. The Times:

Energy efficiency varies widely from company to company. But at the request of The Times, the consulting firm McKinsey & Company analyzed energy use by data centers and found that, on average, they were using only 6 percent to 12 percent of the electricity powering their servers to perform computations. The rest was essentially used to keep servers idling and ready in case of a surge in activity that could slow or crash their operations.

Microsoft has built huge server farms in Quincy, Wash., to take advantage of cheap electrical power provided by Grant County Public Utility District, which owns two of its own dams on the Columbia River that generate nearly 8.5 million megawatt-hours a year. The town is small, with fewer than 7,000 residents. It’s a farming community, both traditionally and technologically.

Before the arrival of Microsoft and Dell and other Internet behemoths the town’s residents and agricultural enterprises consumed about 9.5 MWa, or about 83,000 MWH. Last year Microsoft and Yahoo combined to consume 41.8 MWa, or roughly 366,000 MWH.

If the Times‘ article is correct on the waste numbers, and if Microsoft et al. continue adding capacity, then there could be implications for the region down the road, especially if the economy recovers and demand for all things increases. At the moment, we may be collectively unmoved, because there is so much supply of electricity amidst stagnant consumption. But if demand rises, those waste figures could loom large.

Right now, the electricity is cheap. The Times‘ article says that the technology giants pay between 2.5 and 3.8 cents per kilowatt-hour. Yet, even at those low rates, there’s got to be opportunity for efficiency measures that are much less expensive than the power.

I predict, then, that sooner or later a niche of energy conservation firms will step in to sharply diminish wasteful consumption and reliance on dirty diesel backup. The region, certainly, would be better off.

Tax the things you loathe

America’s love affair with all things fossil comes with inconvenient consequences. I’ll list a few:

  • carbon dioxide emissions
  • dirty air and water
  • cars
  • roads
  • sprawl

One could add to this list obesity and other health assaults, since spending so much time behind the wheel (rather than walking or bicycling) contributes to expanded waistlines and lousy circulatory systems. Add in the mobile Mickey D with fries and you’ve laid out a path to an early grave.

Economists, for the most part, recommend that we tax carbon. But Americans, for the most part, hate taxes, despite our paying fewer than our European counterparts. So, whenever a well-intentioned politician (small in number, certainly) proposes a carbon tax, he or she invites failure; colleagues won’t touch it.

However, we do love our subsidies and expect our own politicians to deliver them in support of local industries. Should we live in coal states like Virginia we appreciate whatever help the federal government can provide, whether in tax relief, subsidies, or fewer environmental regulations.

So, let’s take a look at energy subsidies over time (source).

 

Oil, natural gas, and coal receive the most help from Congress, with oil the runaway winner. It should not surprise us, then, that we use more of these resources than we would without the subsidies. Similarly, if subsidies increased for the green resources, we’d expect greater development of renewables.*

It makes economic and environmental sense to both eliminate all energy subsidies and impose a carbon tax. From the sourced article:

We can either tax carbon or incentivize non-carbon. Debate rages about which is better, but it has always been more effective to tax what you don’t want, rather than to pretend to know what will work in the future.

If Congress imposed an effective carbon tax, we’d see much more innovation in alternative fuels (e.g., geothermal and solar) and greater investments in demand-side resources, including conservation and distributed generation. But I said “effective” tax. It must be high enough to approximate the (negative) value of carbon’s pernicious consequences. (I’ve written about his here.)

I am not hopeful of seeing either a carbon tax or some cap-and-trade scheme in my future, which gets shorter by the year. Fossil-fuel interests are huge and politically well-connected. Moreover, we don’t like taxes. We’re suspicious of government. We’re dangerously ignorant. This unholy combination yields a toxic business-as-usual strategy that promises profits for the few and catastrophe for the many.

Got to go. Time for my walk.

___________

* I am forced to quibble with the “market activity” subsidy for hydro. That’s a euphemism for a controversial, yet longstanding function of federal marketing agencies like BPA. By law, and this goes back to the New Deal, the output from federal systems (in our case, the nearly two-dozen dams along the Columbia and Snake rivers) must go first to public utilities (e.g., Snohomish County PUD) at cost (technically, enough to recover Bonneville’s financial obligations—its revenue requirements). For years, politicians not served by the FMAs have demanded that the FMAs charge market-based rates. Not only would such a policy-shift (requiring a change in the law, by the way) jump up electricity rates in Washington and other states receiving preference power from the FMAs, it would generate more revenues for the federal government—a wealth transfer representing billions of dollars. We should keep in mind that Bonneville’s customers have fully funded the FMA’s statutory obligations over seven decades. To those who might argue that having to pay market-based rates (higher the current preference rates) would spur more conservation, please understand that the Pacific Northwest, along with California, leads the nation in conservation acquisitions. The Snohomish County PUD, for one, has set annual records over the last several years.