Facing a glut of cheap surplus electricity, the Eugene Water & Electric Board wants to sell its ownership stake in two wind farms the utility says it no longer needs.
EWEB’s five commissioners last week declared as surplus the utility’s ownership in the Harvest Wind and Foote Creek I wind farms, along the Columbia Gorge and in Wyoming, respectively.
The declaration is a precursor to EWEB selling its ownership in the wind farms. The utility said there are interested potential buyers for both farms but a sale could take at least a couple of years to finalize.
At this point, it is not known how much EWEB might net from any sale or how commissioners would use that money.
EWEB says it can dispose of the two wind farms without harming its Eugene customer base because it has an ample supply of electricity; Eugene-area demand for power will grow only very slowly in coming years; and market-rate power prices will likely remain low for years due to abundant low-cost electricity sources.
“Our (electricity) resources are substantial enough between the Bonneville Power Adminstration and our hydro sources, with the wind contracts we still have, that we anticipate being able to serve our customer needs,” utility spokesman Joe Harwood said.
A recent update to EWEB’s projections for its power needs over the next 20 years forecast the utility has ample supply to serve future growth in demand.
EWEB’s daily demand from customers is about 300 megawatts, and the utility forecasts it will remain at about that level for the next decade or so. EWEB’s generation assets, owned or contracted, will range between 350 and 400 megawatts daily during that period, the forecast found.
More than three-quarters of EWEB’s power comes from the BPA and the utility’s own generation at its Carmen-Smith, Leaburg and Walterville dams located east of Eugene.
About 6 percent of the utility’s power comes from wind power, including Harvest Wind and Foote Creek I. EWEB is also under contract to buy power from wind farms at another location along the Columbia Gorge and in north-central Oregon. Plus, it buys power under a long-term contract from the Seneca wood-burning plant north of Eugene.
The update forecasts an average annual increase in customer demand of 0.4 percent, before any conservation initiatives, for the next two decades, down from a previous forecast of 1 percent growth a year.
The update concludes it remains prudent for EWEB to encourage customers to conserve power, including by offering rebates and loans on energy-efficient heating and cooling systems, to make the most of its existing power sources rather than buying new power-generating assets. It recommends EWEB buy power on the open market to serve any large new business that requires a lot of power.
The utility bought its ownership stakes in Foote Creek I and Harvest Wind in 1997 and 2008, respectively.
At those times, EWEB invested in the wind farms both due to customer demand for clean energy and to generate revenue, Harwood said. The utility’s aim was to sell surplus power on the market and use that revenue to pay EWEB operating costs so it could hold down rates.
But market power prices have collapsed in recent years, knocking EWEB’s money-making power-sales strategy sideways.
EWEB now has more power than it needs, and sells the surplus, often at a loss.
Market power prices remain depressed as hydraulic fracking has provided huge quantities of natural gas to power electricity plants. Industry forecasts cited by EWEB show that trend holding steady over the next decade and beyond.
“The market in 2017 compared to 1997 couldn’t be more different,” Harwood said.
Harwood said EWEB’s wind farms produce the utility’s most expensive power. The power cost is high because it cost so much to build and run the farms.
It’s unclear whether EWEB’s investment in the two wind farms has been profitable for the utility and its customers.
EWEB has a 20 percent ownership stake in Harvest Wind, a partnership with three other Pacific Northwest utilities.
EWEB paid $42 million for its ownership stake in the wind farm. It received a federal grant of about $14 million to help with the cost and took on debt. EWEB used cash reserves to pay off the $28.8 million in remaining debt in 2015. The owners are reviewing initial proposals from bidders interested in buying the farm, according to a staff report.
The utility owns a 21 percent ownership stake in Foote Creek I, with PacifiCorp owning the remaining interest. EWEB has sold 26 percent of the generated power to BPA with the remaining sold as surplus. BPA provides EWEB a refund to help pay its operating costs.
PacifiCorp has expressed interest in taking over EWEB’s stake, the staff report said.
With the construction of Foote Creek I, EWEB became the first public utility in the Northwest to construct a wind farm and sell wind power on a large scale.
EWEB paid $13 million of the wind farm’s $60 million construction cost. The money came from part of the $150 million in bonds Eugene voters authorized the utility to sell in 1994.
EWEB has $5.3 milion in remaining debt on the project, Harwood said.
The utility spends $1.8 million and $880,900 a year to maintain and operate Harvest Wind and Foote Creek I, respectively.
Last year, in another move to sell off a generating asset it no longer needs, EWEB sold its hydroelectric project in Idaho for $22.1 million. It had owned the project since 1993. It used the sale proceeds to pay down debt.