Faced with aging assets, rising operating costs, growing regulatory risks, and flat demand growth, utilities are challenged to remain competitive in an evolving energy market. The answer might be...
Electric Executives' Forum - Summer 2001: Are You Ready?
of, we think they are going to be in the news frequently from California, and people are going to wonder what the prospect is and how it would play out here. So we want to just use the opportunity to engage people in the conversation and make sure that we're communicating well and that they're prepared.
Are you mainly speaking with your larger customers?
The larger customers, yes we are. ... I think our biggest concern is not so much this summer, but later in the year. The winter may be a bigger issue for us. ... We're having dialogue with elected officials and with the press. ... Some of the larger customers, we have account executives who are working them about interruptibility. And we need to do some community forums and further informational sessions for commercial and residential customers, so that's going to play out over the course of the summer. ...
What mix of wholesale power purchases and your own generation do you have?
In a normal year, we're maybe 10-15 percent on market, and the rest comes from our own resources and long-term contracts. Our own resources are largely hydro resources, and they're about 70-75 percent in a normal year. Because of the severe drought, we're probably down at least 10 percent in our own hydro generation, and that's going to have to come from market resources for the year.
Thinking longer-term, are you comfortable with that mix?
I think we know we want to diversify our portfolio a bit. We have output from a new combustion turbine that's coming online in July; we're one of the purchasers out of that. We're moving very aggressively on wind generation in our state. There's quite a lot of that coming online. And there may be some additional gas-fired combustion turbines in our future. So some further diversification, I think, does make sense. We're pretty careful about the environmental implications of the portfolio we have. We believe we have one of the cleanest portfolios anywhere, and our customers expect it.
How much can you count on from new wind farms?
The capacity is probably somewhere in the low hundreds [MW], [but] what it actually produces in terms of average energy, I don't know yet. I think we're saying it's about a third. I think the people who are selling these wind farms have pretty high expectations for what they're actually going to produce. I'm not going to count on it until we have a little more track record.
Is it wise to enter into long-term contracts now, or is that a bad idea because prices are high?
We have a variety [of contracts], and I would do it again today. Longer-term contracts give you up-front hedge against the kind of power prices we're seeing here right now. ... Our history has always been to have some combination of owned resources and longer-term contracts. There was a time when most of our long-term contracts looked horrible, and today we're pleased as punch that we have them, so I don't know that there's an