Proposals Could Require Utilities to Use Green Power

Proposals Could Require Utilities to Use Green Power

By Chris Mulick, Tri-City Herald, Kennewick, Wash. -- June 22

Green power could increase your electric bills in more ways than one, analysts from three major bond-rating agencies told public utility representatives meeting at a national conference Monday.

Proposals to require utilities to purchase prescribed amounts from environmentally friendly generators such as wind farms and solar stations could inflate costs, drive down credit ratings and increase interest rates for utilities borrowing money to buy power poles and build power plants, they said.

"How cost-effective are most of these?" asked Alan Spen, managing director for Fitch Ratings' Global Power Group. "I'm not sure they are. If you don't get subsidies, they really don't make sense."

The panel of anyalysts spoke at the American Public Power Association's annual conference, which is being held this week in Seattle for the first time since 1995 and drawn 1,800 utility officials, consultants, exhibitors and others. The analysts gave public power a stable bill of health, but "there are clouds on the horizon," said Dan Aschenbach, senior vice president for Moodys Investors Service.

The thirst for deregulation has waned, preserving public utilities' monopolies and providing stability. But surging natural gas prices, potential initiatives to expand and reinforce transmission grids, post-election attempts to restructure U.S. markets and the prospect of prolonged periods of drought in regions dependent on hydropower are among a series of risks facing utilities.

Analysts also emphasized that utilities be prepared to raise electric rates when needed, as unpopular as it may be with ratepayers, to avoid financial peril later.

And though they didn't firmly land on one side of the fence or the other, they also appeared to indicate now might be a good time for public utilities to consider building their own power plants to meet future needs rather than contracting with third-party generators.

"The merchant sector is not prepared now," said Peter Murphy, director for corporate and government ratings for Standard and Poors. "They've done their bit."

The analysts frowned upon proposals pressed by environmental lobbies across the country, including in Washington, to require utilities to meet a certain percentage of their electric demand with green power sources. Sixteen states already have approved such plans, with some eventually requiring utilities to get 20 percent of their power from green resources.

Such mandates could be difficult to meet and fatten utility portfolios with uneconomic power, the analysts warned.

"It probably is a positive thing for many communities, but if you can't get (revenues) increased because there's no wind or the sun doesn't come out it becomes a real issue," Aschenbach said.

Sara Patton, director of the green-leaning Northwest Energy Coalition, said in an interview that such analysis doesn't jibe with the renewed push in the region for more wind power. Large investor-owned utilities, including Pacific Power, Avista and Puget Sound Energy, all are seeking new wind resources.

Besides, since wind farm operators don't have to mitigate for carbon emissions or worry about volatile fuel prices, wind should be considered anything but risky, Patton said.

As for the analysts, "they're not in it on a day-to-day basis," she said. "All this has been changing dramatically in the past three years. I thought all the word had gotten out."

For far more extensive news on the energy/power visit: http://www.energycentral.com .