May 2010

Costs to Generate and Deliver Future Energy Sources

Dear Member

In the not-too-distant past, it was straightforward planning power purchases for Midstate Electric. Historically, the Bonneville Power Administration (BPA), our wholesale power supplier, provided our cooperative with all the energy that we needed to purchase to serve our members with reliable, affordable electricity.

The BPA blended a diverse mix of energy resources and sold it to our electric cooperative at a cost-based rate. The BPA’s primary resource (approximately 80%) has always been hydropower – clean, renewable, low-cost hydropower - with a mix of wind, nuclear, natural gas and a small portion of coal. As the hydropower system in the Northwest has reached capacity, the BPA can no longer meet the future load growth of our region with existing resources.

Therefore, in 2011 preference utilities, like Midstate Electric, that purchase their power from the BPA will have tiered rates. BPA’s Tier I will primarily meet the current load (demand) for power at our co-op with the existing hydropower generated on the federal system. BPA’s Tier II rates will be similar to purchasing power on the open market. Co-ops served by BPA have the option to secure their own resources to meet their future energy demand, in place of buying power at Tier II rates.

The cost of different energy resources vary and on the open market can fluctuate with market conditions and demand. Included in the purchase of energy is the cost of generation, transmission, and storage of that resource. Not all energy is created equal.

The Northwest Power and Conservation Council prepares a 20-year electric power plan for the Northwest; chapter 6 of the 2010 Power Plan forecasts the costs for generating resources over the next 20 years. As you can see in the chart below, the forecast prices of these power resources vary greatly from 6.7 cents per kWh to 30 cents. For comparison sake, currently Midstate Electric buys power from the BPA at 3.035 cents per kWh.

It is a known fact that power is going to cost more in the future as existing resources are at capacity and new resources are being developed. For this reason, Midstate Electric is taking steps to reduce energy use and stabilize rates through energy-efficiency and conservation programs. We are proud of our record of providing reliable, affordable electricity to our members and are committed to continue this tradition.

Bill A Kopacz
General Manager


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