Is Public Power Better?

Several weeks ago, the normally quiet world of utilities vaulted onto the front page of our local paper. The issue is whether our Public Utility District, currently only providing water, should get into the electricity business. One article in the Skagit Valley Herald, "Public or Private", mainly contrasted the local governance of the Skagit PUD with the international ownership of Puget Sound Energy, an investor-owned utility that is being taken private by the Macquarie Group. Macquarie hails from Australia, and its acquisitive desire is apparently driven by compulsory pension investment laws Down Under. Beneath the ownership issue simmers general unhappiness with recent PSE rate increases and--very likely--the impression that public power provides better service at a better price.

Puget Sound Energy's territory wraps around two major publicly-owned utilities: Snohomish County PUD and Seattle City Light. Both of these provide electricity for less than PSE--SnoPUD's rates are about half a cent less on average, while City Light saves its customers almost two cents per kWh. Why is this? In short, public utilities have better access to heritage electrical resources. Heritage resources consist mainly of hydroelectric dams, ridiculously inexpensive sources of power constructed during a mid-century building boom which will never be repeated. The Bonneville Power Administration, a federal agency, controls half of the Northwest's hydroelectric dams; federal law requires the BPA to give priority to public utilities and cooperatives.

For many years, the BPA produced so much power that it could supply the PUDs and have plenty left over for investor-owned utilities. However, hydroelectric assets remained finite while the Northwest's population grew. Competition for the power increased, and last year public utilities even took the BPA to court to force it to charge higher rates on some power it sells to its private customers. Unfortunately, most public utilities have done little to develop their own generating capacity as power demand crept up towards their BPA allotments, and no amount of court rulings will conjure up this capacity.

Seattle City Light will be able to weather the upcoming power crunch for a while, since the utility gets half of its power from its own heritage hydro projects. However, this security also means that City Light hasn't pursued new renewable capacity with much vigor.

Snohomish County PUD is in worse shape than Seattle City Light; SnoPUD gets 80% of its power from the BPA, and neither of the generating stations it actually owns have much flexibility to adjust to future loads. Faced with dependency on the open power market, SnoPUD finally decided to try acquiring renewable energy with a Request For Proposal in the fall of 2007. The RFP disappeared off their website several months later, and it remains to be seen whether the PUD's late arrival to the power acquisition party made the proposals too tough to swallow.

In comparison, Puget Sound Energy has been aggressively purchasing both renewable and gas-fired capacity. During the past three years, two new wind farms have added almost 400MW of capacity and two gently-used combined-cycle gas turbines added another 400MW. PSE also began buying the output of the pioneering VanderHaak anaerobic digester, while SnoPUD resisted making a deal for a similar facility proposed by Qualco Energy.

We at Farm Power have developed a great working relationship with Puget Sound Energy; trends at nearby PUDs suggest that enthusiasm for projects like ours would probably decrease if Skagit County's electrical network was publicly owned. Since PSE will be heavily regulated by the Washington Utilities and Transportation Commission even under new ownership, we prefer staying with our current cow-power-friendly utility.