Guest Opinion: The OPALCO Plan Road Map Defined

— by Tom Owens —

Where is the OPALCO Board Taking Us? Part 2

Does the Draft OPALCO Integrated Plan Road Map result in safe, reliable and affordable energy for its customers? Where is the affordable part?

In the first article (tpublished on March 5) we reviewed the Integrated Resource Plan done by OPALCO’s consultant EES. BPA predicts that load growth will be near zero, good news ! Also I tried to determine where OPALCO was going in relation to the four scenarios that EES presented. I was unable to tell what OPALCO’s future power costs would be given OPALCO’s Road Map.

Now we need to look at the direction the Board might be headed as summarized in the Road Map (page 81 of the Draft OPALCO IRP). Both the EES IRP and the Draft OPALCO IRP can be found on the OPALCO website (www.opalco.com/Integrated-Resource-Plan-IRP.pdf). Examining the Road Map raises some important questions.

Now let’s have a look at the Road Map (page 81 in the Draft OPALCO IRP) as it outlines a number of proposed OPALCO action areas. I have tried to put them into summary form below:

• Fuel Switching (this requires keeping OPALCO’s usage charge low enough to encourage members to switch to electricity (adding load to the system) from other fuels).
• Energy Efficiency (this includes conservation and seems to be aimed at offsetting the load increases that fuel switching will create).
• Demand Management (starting in 2019 deploying devices to shut off loads during peaks; like your electric water heater and electric space heaters).
• Renewables (A Community Solar Project plus energy storage for peak shaving is what is going on here).
• Utility Scale Renewables (evaluation seems to be about all that is in the works).
• Time of Generation Rates (introduce in 2018 to set purchase prices for local generated energy by time of day).
• BPA (try to get as many conservation rebates as possible).
• Strategic Partners (commit to doing this in 2016)
• Grid Distribution (continue upgrading, ¨heavy up¨ to decrease losses and fortify feeders for future local distributed generation).
• Grid submarine cables (Complete the Lopez to San Juan project).
• Grid Transmission (tap the BPA cable that delivers power to OPALCO on Lopez as it crosses Decatur, perhaps to increase the transmission path north to the east side of Orcas).
• Grid Control Backbone (fill wireless blackholes, integrate smart inverters).

Now let’s have a closer look at each area of OPALCO’s IRP Road Map. The Road Map cannot explain everything that the OPALCO Board is considering, as it is only a summary. However, the Board would be or has been considering all of the issues below. So, let’s pose some questions in the hopes of getting some clear and direct answers.

Fuel Switching – OPALCO wants to add load to better utilize its system (a good thing as that should increase revenue (OPALCO’s usage charge rate(0.085) less BPA’s variable rate (0.035) times new energy sales) with little additional fixed costs, which revenue might be spent to lowering rates). But the lower cost EES scenarios all call for no growth. Can the conservation efforts reduce loads enough to maintain little or no growth? If conservation efforts offset the fuel switching load increases, does OPALCO get any increased revenue at the end of the day as the net energy sales would be zero? Fuel switching for heating needs will increase loads in the winter and that is the time OPALCO is experiencing its peak loads. Conservation would seem to have a more year round impact. What steps will and can be taken to manage this and what will be the costs of those actions?

Energy Efficiency – Conservation is vital to our future if OPALCO is to stay out of the expensive new generation market necessary to meet new loads. OPALCO has a number of programs aimed at conserving energy, funded by BPA (which BPA customers (that’s us) pay for in the BPA portion of their OPALCO bills). These programs are working and loads have stopped growing! It is important that these efforts keep working! Conservation here in San Juan County reduces fossil fuel fired generation and that reduces CO2 a lot. More energy useage means more pollution and more conservation means less pollution.

Demand Management – As this effort progresses, it is designed to give OPALCO a means to manage a portion of its total demand on BPA. Demand charges are significant. This works by having a device (a demand management unit, DMU) on your electric water heater and/or electric space heaters that OPALCO can remotely shut off during periods of peak loads. Theoretically, this would be for only a short time. According to EES, a trial water heater program (with 400 DMU’s) was put in place a number of years ago, so the Smart Grid may not be necessary for this new effort to work. If successful, demand management could reduce OPALCO’s dema,d charges, and depending on the investment in the DMU’s, contribute to reducing OPALCO’s rates. How does the cost/benefit analysis come out on this project?

Renewables – Local renewable generation figures into the OPALCO IRP Road Map to the tune of 20 percent of loads in 20 years. EES seems to believe that large scale renewable generation projects increase power costs. However, since the local renewable energy systems are paid for by their owners, not OPALCO, perhaps they represent a low cost resource for OPALCO. But is OPALCO discouraging local renewables by keeping the usage rate low as it promotes fuel switching? A solar system would make a lot more economic sense for the system owner with a higher OPALCO usage rate (and lower fixed charge). Local renewable generation seems to be a reason that makes the ¨Smart Grid¨ necessary. Will OPALCO (and that is really us customers) come out ahead given the loss in revenue represented by these renewable energy systems? Does OPALCO’s community solar project make sense from an economic point of view or are we paying for this just to be politically correct?

Utility Scale Renewables – OPALCO’s Road Map keeps this category of resource in the evaluation mode. If load can be kept flat, OPALCO will not need to venture into this expensive arena. The wild card is the BPA contract renegotiation in 2028. Things could change and a local utility scale renewable project could make sense in combination with continued heavy dependence on the BPA mainland supply of energy and BPA’s load management capabilities. Having some knowledge in this area would seem to me to be important.

Time of Day Generation Rates – The value to OPALCO of local generated energy changes with the time of day, so paying the generation owner more in line with value should be possible. For example, wind generation during the winter, when OPALCO sees peak loads, could be of more value than solar generation in the summer when load are low. However, solar, when available, would be on-line during the day, when loads tend to be higher. This is another item that promotes the ¨Smart Grid. What happens to the 200 or so ¨net billing¨ customers (who depend on selling excess electricity to OPALCO at OPALCO’s usage rate) with existing solar systems when Time of Generation Rates go into effect?

BPA – BPA is our lifeline! BPA provides OPALCO with very cheap energy (delivered to Lopez Island) and also managers a vast power system to meet our changing loads. This relationship means OPALCO must only manage its distribution system, as it has no control area responsibilites and very little generation. In 2028, the current contract expires and a new one must be negotiated. Could OPALCO be doing a whole lot more than just trying to get additional conservation rebates from BPA ? And we may be, see the Strategic Partnership section below.

Strategic Partnerships – The concept of joining strategic partnerships (with the Pacific Northwest Generating Company(PNGC) and one other) seems to be preparing for the 2028 BPA contract expiration and the follow-on negotiations for a new contract. This negotiation will be region wide, including all of BPA’s ¨preference¨ customers (the public utilities, like us, in the Pacific Northwest), the private utilities (PSE, PGE, Avista, Pacificorp) for the ¨residential exchange¨ rights (access to low cost BPA energy at the expense of the public utilities, yes, that’s us again folks) and large industrial customers (if there are any left). EES describes the potential relationship with PNGC and does not make a case that this would lower OPALCO’s current costs. This seems like a good strategic direction but what will be the costs that will flow through to OPALCO customers for such strategic partnerships? Will the benefits exceed the costs? Is now the time?

Grid Distribution – Is OPALCO continuing to improve the already ¨in great condition¨ OPALCO gird that ¨will last for decades to come¨? Are we upgrading circuits when we have no load growth? Will the ¨heavy up¨ feeders see enough reduction in losses to justify the capital costs ? Are we spending capital now on upgrades that may not be needed for years or become technologically obsolete? Making these investments is a very typical reaction for distribution system managers (and OPALCO (on the electric side) is only a distribution company). They all want the best possible system to provide the best possible product (reliable and safe electricity) to their customers. Affordability is the real question here! Where is the OPALCO balance?

Grid Submarine Cables – OPALCO is planning to complete the replacement of the cable system from Lopez to San Juan Island. Bravo! While I have asked for, but not yet been granted access to, information on OPALCO’s submarine cable system and records, everyone should understand how important these cables are to all of us. To the best of my limited knowledge, our electricity is delivered by BPA to OPALCO on Lopez Island after crossing Decatur Island (with a bit to Decatur). OPALCO takes over from there. From Lopez it goes to San Juan and from San Juan it crosses Shaw to Orcas. (there are other cables that serve smaller islands). Some power seems to be flowing north from Decatur to the east side of Orcas. The vital submarine cables are actually doubled. If one cable fails, we are in trouble. But OPALCO may be able to keep the power flowing on the second cable while a replacement cable is installed (and that would take quite a while). Hence the importance of this investment. Having these main cables in good shape would seem very prudent.

Grid Transmssion – Here OPALCO is planning to tap (or increase the capacity of an existing tap) of the BPA cable as it crosses Decatur on its way to Lopez Island. This could give OPALCO the ability to feed more power north to Orcas in the event of an outage like the 30 hour one on Shaw last winter. Reliabilty would be increased. Does the reliablity increase value exceed the cost of this project ?

Grid Control Back Bone – The Grid will continue to be improved, ¨supporting improved communication, ramping up for local renewable generation, two way markets and increased efficiency¨ (the justification for the Smart Grid again?). This is so OPALCO customers ¨can be buying and selling electricity to and from OPALCO¨ (personally, all I want is for the lights to go on when I throw the switch). OPALCO has spent something over 10 million dollars on this effort before the cost of new smart meters, (our current ones are not smart enough), created Rock Island Communications (with a 7.5 million dollar loan using OPALCO’s credit) and has entered into a no net-cost deal with T-Mobile. I would hope this effort, paid for by the electric side, would be winding down and revenue would, as promised, begin to flow back to the electric customers to reduce rates. When will this really happen ? Are the costs of using OPALCO’s credit, OPALCO’s labor, and fiber investment being fairly charged to Rockisland Communications customers? If Rockisland does not do well, who picks up the tab?

Our elected, six member OPALCO Board, gives a lot of time and energy to their roles as the decision makers. This is no easy job! The outcomes of these decisions will drive our co-operative into the future and determine what we all pay for electricity. These people are directly responsible (they would certainly have Directors and Officers Insurance to cover this liability) for the outcomes we will see in the future, not OPALCO’s management. This is a great opportunity for the Board to address the above questions in a clear and understandable manner. We could all wind up understanding a lot more about what the Board does and why they take the decisions that they do.

I have no affiliation with OPALCO other than being a customer/owner of the Co-op.