Low oil, natural gas prices bring challenges to energy producers
The recent idling of five coal-fired generating units – including two in Emery County – have nothing to do with environmental regulations, Rocky Mountain Power President and Chief Executive Officer Cindy Crane told listeners in Price Friday.
The decision has everything to do with an “unprecedented” situation in Western energy markets, she explained. Natural gas, an alternative to coal for electric generation, is at levels not seen since 2002. This is not likely to turn around overnight.
“We can buy it seven years forward at 2016 prices,” she said.
Meanwhile, the utility’s wide-ranging transmission system can access cheap energy – around $20 per megawatt hour – from other sources.
‘Pregant with coal’
Crane, who managed the company’s mining operations from 2009 to 2014, said people will notice growing stockpiles at the Hunter and Hunting power plants. “We’re pregnant with coal – nine months worth,” she quipped. “With twins!” added a member of the audience, probably someone involved at the plants.
That’s because RMP has minimum purchase commitments with its suppliers and will continue to buy coal even though demand has dropped.
The low prices for commodities, including metals as well as fossil fuels, “has put our customers under tremendous economic strain,” she told the audience of Carbon-Emery business and civic leaders. RMP has seen a drop in demand of 1 percent across its western region over the past year.
While this puts her company under some strain itself, “The days of slapping our tariff on the table and saying, here’s our tariff, are gone,” she said. “We’ve been holding our costs flat for four years and we plan to absorb inflation through efficiency,” she stated.
No problem with renewables, if…
In response to several questions from audience members, Crane said that the company does not oppose adding renewable energy sources to is generating mix.
There’s a caveat, though: “We have no problem buying at the lowest cost,” she added.
Current rate design was implemented in a world where large-scale wind, solar and biofuels did not exist. For example, the Public Utility Regulatory Policies Act of 1978 was intended to reduce imports and stimulate alternative energy sources by mandating that electric utilities purchase power from independent generators. RMP has wind operation of its own in Wyoming, but still must purchase from other providers, large and small.
The problem with that arrangement, in the company’s view, is that it must pay the full retail rate for the net generation it purchases, even though the wind and solar generators only offset fuel consumption (a variable cost) and not any of the infrastructure required to get electricity to customers (fixed costs).
RMP has implemented a purchase plan that gives customers the option of buying solar-generated electricity at cost-of-service.
The company is also backing a policy for greater use of electric vehicles. There is a limiting factor in this relatively new market: “range anxiety,” she called it. It arises from uncertainty about where recharging stations are.