CEO’s Message — October 2019
What would you do if your electricity bill suddenly went up 2,831%? Fortunately, the decision you made to vote no on Question 3 last November ensured that this is only a rhetorical question, at least for you.
But that question is all too real for consumers in Texas. In mid August, several days of temperatures over 100 degrees Fahrenheit pushed electricity demand to a new record of 74,531 megaWatts (MW), which left a razor-thin 3% power reserve. To make matters worse, weak breezes sidelined hundreds of wind turbines. Texas usually relies on wind
generation for about one-fourth of its electricity supply. As a result, wholesale power market prices in Texas crushed a $9,000 per MW regulatory price cap. To put such a whopping price in perspective, Wells Rural Electric Company (WREC) could purchase wholesale electricity from the open market in the Pacific Northwest during that same time period for $31.80 per MW. Record electricity usage also forced the Electric Reliability Council of Texas (ERCOT) to declare an emergency. ERCOT pled with every available power plant to ramp up and every consumer to conserve.
A long-time friend of mine says that his name, Doug, is actually an acronym. Doug stands for Dumb Old Utility Guy. During the battle over Question 3, the advocates often painted the opponents as dumb old utility guys. They claimed that utilities were stuck in the past and that there was a much cheaper way to buy electricity. Texas was often cited as a shining example of the success of deregulation. To be fair, some Texans have benefited from energy choice over the past decade. This summer, however, was a horrific failure.
As we met with members throughout 2018, it was often difficult to warn of the potential dangers of Question 3 with little evidence to show that markets could go crazy. What the dumb old utility guys knew for certain was that no one had made any significant investment in base load generation or transmission in Texas since deregulation was implemented. We also knew that growth would eventually gobble up the available capacity and lead to higher prices and reduced reliability. We didn’t know that available capacity would be consumed so quickly or that markets would shoot through the stratosphere.
These unprecedented prices and slim reserves illustrate how the early retirement of large conventional power plants is straining the ability of utilities across the nation to integrate unpredictable renewable resources like wind and solar. Fortunately, dumb old utility guys even older than me made the very wise decision to invest in clean, renewable, reliable, predictable hydro electricity.
Last month, this page featured a guest editorial from Jo Elg on the numerous issues affecting salmon and steelhead populations. It was written in response to a conference focused on removing dams on the Snake River. One of the justifications for removing the dams is that they are no longer necessary because the electricity they produce can easily be replaced by wind and solar generation. If there is a lesson to be learned from Texas, it is that the hydroelectric dams are absolutely essential if society wants to successfully integrate increasing amounts of wind and solar generation.
Clay R. Fitch
Chief Executive Officer