July 2001 issue

 NWCouncil.org NeWs    July 2001 index

Reducing the demand for power

How have we been able to get through this year’s energy shortage? One strategy used by the Bonneville Power Administration, and other utilities in the Northwest, has been to buy back electricity from customers, essentially paying them to shut down their operations.

Electricity prices have risen so high this year, that it often costs less to buy back the energy than to purchase it on the wholesale market. The Council estimates that load reductions from buy-backs for summer 2001 will reach approximately 2,800 megawatts (MW).

Besides Bonneville, Portland General Electric and PacificCorp made similar arrangements, as has Idaho Power. Other utilities achieved load reductions when some of their industrial customers decided to cut back production in response to high market prices for power. Although the largest amount of energy has been acquired from aluminum companies, about 1,000 megawatts, Ken Corum, economic analyst for the Council, estimates that around 100 MW has also been purchased from irrigators in Central Washington.

In Idaho, the three largest privately owned electric utilities – Idaho Power, PacifiCorp and Avista – all arranged to pay irrigators to cut back usage this summer. And there are cases where some customers have closed down indefinitely, which Corum estimates amounts to about 270 MW.

Besides the significant amount of energy that has been acquired through buy-backs, Corum believes that the impact of higher prices, where they are evident, has also made a difference.

"Even though most retail prices have not gone up, Seattle City Light, Tacoma Power and Snohomish PUD did raise prices earlier this year up to between 40 - 50 percent," he said.

The response this spring from customers was a cut back in electricity use of between 4 and 5 percent. The energy gained from this reduction in customer use is around 200 MW.

Corum feels that there have been recent developments to how we manage electricity demand in two areas: 1) The buy-backs that cover a period of time over weeks and months; and 2) A development that began about a year ago where utilities buy back electricity a few hours at a time.

Several utilities, including Bonneville, Portland General Electric, Snohomish PUD,

PacifiCorp and Idaho Power, have begun what are called "demand exchange" programs.

A utility identifies customers who are willing and able to interrupt their service during peak times. They must also have the right kind of metering that shows when they are using electricity. The utility, looking ahead to the next day, will make an offer to buy back the electricity over the Internet to customers, and if the offer is accepted, a reduction in demand can be achieved the following day. This represents a refinement of the older existing practice of the "interruptible rate," in which utilities compensate a customer for allowing the utility to interrupt their service during peak demand periods.

Managing demand and giving people information about their electricity consumption and its time-of-day cost is the other side of the coin. That knowledge gives people the chance to make better decisions, both for themselves and for the benefit of the power system’s reliability.