Idaho is an "energy island"
- Idaho is a net importer of power.
- Hydroelectric power covers only two-thirds of our needs in the best water years.
- Every utility buys some power because building enough power plants to meet all customer needs all the time would be too expensive. It makes little sense to spend millions to build a plant you only need for a few peak hours each year!
- Idaho utilities purchase power from the west-wide wholesale market, where, on average, prices are around $50/Mwh but are subject to fluctuation given time of day and fuel prices, such as natural gas.
Timing doesn’t matter
- Electricity does not cost the same at all times of day and times of year: it costs more during times of peak demand. Utilities run their cheapest plants as much as possible, turning to their most expensive plants only for short periods when nothing else is available.
- Customer demand for electricity peaks seasonally during the coldest and hottest weather of the year, usually in January and July.
- Demand also peaks within the day. On a daily basis, customer demand peaks on weekdays from 6 AM to 8 AM and from 4 PM to 8 PM, when most consumers are at home.
- When water levels are adequate or high, more cheap hydroelectric power is available and more water can easily be released through dams to meet peaks
- The cost of power depends on which plants are available to supply customer demands.
- The power your utility purchases to satisfy peak demand is the most expensive.
My own conservation efforts are so small they won’t matter.
- Customers now benefit from conservation through lower bills now. Use less and pay less.
- Every kilowatt hour saved counts. Conservation can be as easy as turning down the thermostat to 65 degrees or turning off lights, computers, and TVs when you leave the room.
- Customers benefit later from shifting their usage off the peak times because utilities can purchase less of this most expensive power, which means the costs they seek to recover through rates will be lower.
- Shifting customer usage off the peak can be as easy as turning on Christmas lights or running major appliances (dishwasher, clothes washer, and clothes dryer) a little later in the evening.
- A recent study estimates that customers conserving as little as 5% at peak times can result in power market price reductions of 25% to 50%. When all the plants are running to meet demand, every little increment of added power becomes more expensive. Cutting only a little bit can have a dramatic impact in reducing price spikes.
High market prices don’t affect Idaho’s regulated rates
- Rates you pay are based on your utility’s average cost for power and service delivery, as determined by the Public Utilities Commission.
- The wholesale power market was deregulated by federal law in 1992.
- When your utility purchases power on your behalf, it must pay deregulated market prices.
- Your utility is obligated to provide enough power to serve all customers’ needs – no matter how high the price!
- Your utility will eventually seek recovery for this purchased power in your rates
Not to worry, because I use natural gas
- Same price volatility exists for natural gas, which is a price-deregulated commodity.
- Gas demand is very weather-sensitive.
- Gas supply is very price-sensitive.
- Recent high natural gas prices have spurred new exploration and production, but it will take at least 18 months to affect the market.
- Most new electric power plants are fired by gas, which puts additional demands on the natural gas supply.
- Gas utilities will seek to recover their purchased gas costs through rates.