Utility considers discount power
The South Tahoe Public Utility District is considering switching its electricity provider, a move that could save the district up to $85,000 a year in energy costs.
On Thursday, the district’s board of directors postponed for 30 days an agreement with New Energy Ventures to see if the company can overcome obstacles to delivering the electricity through the power grid of Sierra Pacific Power Co.
New Energy Ventures is promising to provide electricity to the district at 5 percent below its current costs, regardless of what distribution fees Sierra Pacific would receive as part of the agreement. Because the district buys an average of $1.26 million a year from Sierra Pacific, the saving would approach $84,000 a year, said Ross Johnson, the district’s wastewater operations manager.
Whether the district approves the deal or not, the proposal is the kind that residential customers across California will have to evaluate when electricity wholesalers begin competing with regulated utilities on Jan. 1.
Electricity providers have stepped up efforts to appeal to consumers since the California Legislature approved price deregulation last year. Some advertise low prices and others market the desirability of renewable energy.
Duane Wallace, a district board member, compared the coming market in electricity to the competition that has occurred with phone service.
“We may all get a call at night saying, “We have an exciting new offer in energy,'” Wallace said.
On Thursday, though, the district board agreed to table the proposal from Los Angeles-based New Energy Ventures for 30 days until it can iron out an agreement with Sierra Pacific to deliver the electricity to South Lake Tahoe.
The Tahoe district is one of 80 members of the Association of California Water Agencies to enter into a joint powers agreement to seek a low-cost electricity provider. New Energy Ventures, which has no generation plants or transmission lines of its own, submitted the winning bid to the state water association.
Rather than produce electricity on its own, New Energy Ventures will scour the country for low-cost electricity, and then pay others to transmit and deliver the power.
On Thursday, representatives of Sierra Pacific said the regulated utility is unable to lower its prices to compete with the wholesaler.
“Sierra Pacific Power Company cannot go out and bid, because we’re regulated,” said Wes Weins. “We can’t offer you a better deal right now.”
But Weins told the district board that the utility is scrambling to enter the deregulated electricity market by setting up an affiliated company that would be free to cut deals of its own.
“We’re putting together a service provider, but it hasn’t happened yet,” Weins said. “We hope to have it up and running by the first of January.”
If Sierra Pacific loses the district’s $1.26 million in revenues, the 1 percent franchise fee charged by the city of South Lake Tahoe would decline by $12,600, Weins said. He added that the utility’s schedule of capital construction projects could be slowed too, if its overall revenues slump.
In the new California energy market, electric service will be divided into generation, transmission and distribution services. Consumers would be free to select a new provider of electricity generation, group together with other consumers to buy from a new provider, or elect to stay with their current utility.
An independent organization called the Power Exchange will be created to set market rates on electricity, while the Independent System Operator will oversee long-distance transmission of power.
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