A representative from City Light is scheduled to present their proposed Risk Management Plan at an Energy and Technology Meeting in the near future. The Risk Management Plan is necessary because “City Light faces significant uncertainty regarding both the quantity of power available to the utility and the range of prices prevailing in the wholesale power market.”
In a typical year the supply of power inherent to City Light exceeds the demand of its customers, creating a surplus. This surplus power is then sold in the wholesale power market. The revenue generated by selling is “used to offset costs that would otherwise be borne by City Light’s retail rate payers.” City Light can sell its surplus power in two different manners. One is that they sell the power in the “spot market” as the power makes itself available, or it can sell the power in the “forward market” for delivery in the future. Both methods of selling involve risk.
If City Light chooses to sell the surplus in the spot market, it exposes the utility to the possibility of selling at a low rate “because the wholesale market is flush with power.” Selling projected surplus in the forward market reduces this risk, but then City Light is presented with the possibility of being forced to purchase power at higher prices “in order to meet those forward commitments (as well as retail demand) in the event actual supplies” are significantly less than estimated.
On May 13th Councilmember Harrell held a public comment session in respect to the proposed reconfirmation of Seattle City Light Superintendent Carrasco. Councilmember Harrell was joined by Councilmembers Richard Conlin, Jean Godden, Sally Clark, Richard McIver, and Tim Burgess. Employees, rate payers and concerned citizens attended the meeting with seventeen of them supplying meaningful testimony.
Councilmember Harrell started the session by encouraging all in attendance to testify and that people should make him aware of any concerns of retaliation resulting from critical comments because there are laws in place to deal with that issue, and he will continue to be a strong advocate for employee rights.
A significant majority of the people testifying were in favor of reconfirming. However, there were a few members who were opposed to the reconfirmation based on their personal observations.
The audience was filled with business leaders, union members, employees and members from the utility industry, all of whom cited various opinions. Many supported Carrasco for his efforts regarding improved customer service and for the type of visionary thinking and decisive leadership necessary to drive high performance. A small number of employees cited their criticisms of his leadership which includes his use of outside contractors and consultants and his personal style of leadership relative to, in their opinion, more effective styles based on their years of employment experience at City Light. Councilmember Harrell is continuing his extensive outreach in order to provide City Council with the necessary tools to make a full evaluation of Superintendent Carrasco.
The reconfirmation process continues on this week with Councilmember Harrell making trips out to City Light’s North and South Service Centers to engage employees at those facilities.
Council Bill 116194 was passed by the Energy and Technology Committee on May 7th, and by Full Council on May 12th. This is a bill that authorizes City Light to execute three agreements to provide for the transmission of power from the Summer Falls and Main Canal Hydroelectric Projects to the City of Seattle. This bill replaces an expired transmission agreement with the Avista Corporation for the transmission of power from the Summer Falls and Main Canal Hydroelectric Projects.
The agreements employ the services of both Avista and Public Utility District #2 of Grant County and will provide an efficient and cost-effective alternative to either interconnecting with the Bonneville Power Administration grid or continuing service under Avista’s previous contract. The execution of these contracts will result in a net savings of $46,100 in 2008.
A range of transmission options were considered by City Light. One option, a $28 million transmission contract with Avista was considerably more expensive, where an option of a $10.5 million proposal for the City to construct new facilities was less expensive. The proposed contracts are $11.3 million in net present value terms. Although the build option is marginally better on a straight present value basis, it exposes City Light to the cost risk and regulatory risk associated with building new transmission facilities. The contract option also resolves the dispute with the Grand Coulee Projects Hydroelectric Authority and results in a more efficient use of the region’s existing transmission facilities.
At the May 7th 2008 Energy and Technology Committee meeting Seattle City Light Superintendent Jorge Carrasco presented a briefing on the 2008 Integrated Resource Plan (IRP). The IRP is a long term plan that outlines how the utility will meet the projected needs of customers over the next twenty years. The IRP helps to ensure that City Light meets their responsibility to provide customers with reliable, reasonably priced electricity with an added focus of alternative forms of energy. Given the complex nature of generating and transmitting electricity IRP’s are usually based on “load forecasts and resource options that extend well into the future.” Being that the IRP focuses on the long term it must be flexible in order to respond “to changing market conditions and future uncertainties.”