PacifiCorp representatives discuss the future
|Matthew Wright, executive vice president of power delivery for PacifiCorp, recently spoke with county and city officials.|
Representatives from PacifiCorp met briefly with city and county officials on Aug. 8 to discuss the future of PacifiCorp in Utah. Matthew Wright, executive vice president of power delivery PacifiCorp division of Scottish Power, accompanied by Dean Faust, a labor relations consultant and Deb Dull , PacifiCorp public relations department met in the commission chambers.
PacifiCorp gives Scottish Power a presence in the United States energy market. Scottish Power's core business is energy generation. According to Dull, Matthew understands the impact PacifiCorp has on the economy in Emery County and the state of Utah and while he was in the area visiting various plants and offices he wanted to tell the people in Emery County about the electrical business, Scottish Power and PacifiCorp.
Wright started out by telling the group he has been in the country about three and a half years, and then he told a little of the history of Scottish Power. He followed the history with a discussion of possible future plans for PacifiCorp.
Wright pointed out that he was responsible for the distribution of power, which is wires and customers, and not the generating plants or the mining operations. When he arrived he was in charge of working through the regulations of the six states PacifiCorp has a presence in. Scottish Power did not understand the regulation process when they arrived in the U.S., but now do. In the United Kingdom there is no regulation but a competitive market determines prices. The largest users of electricity can choose their own supplier. Scottish Power has 3.5 million customers in the United Kingdom. The company is focusing their attention on the core business of electricity generation and distribution.
Wright thought that deregulation in the U.S. is a dead issue for possibly the next 10 years. He was assigned to the corporate strategy group and involved in business planning and corporate planning for PacifiCorp. In January of this year he was assigned to run PacifiCorp's largest division, wires and customers. PacifiCorp is to be the platform for an increased presence in the U.S. by Scottish Power. Other power companies would have been purchased, but the power crisis of a year ago cost Scottish Power $300 million due to the high cost of electricity per kilowatt hour. Many electric companies are teetering on bankruptcy as a result of that crisis.
PacifiCorp is recovering from that loss slowly. PacifiCorp's plan at present is to focus on the core energy business and to get the earnings up to a level where PacifiCorp is earning their full authorized rate of return. The last three months have looked very good since they took the $300 million write off last year. PacifiCorp is in a much stronger position than many other energy companies. Wright believes that PacifiCorp is well positioned for the future with a great asset base and wonderful employees. But PacifiCorp still has a long way to go in doing the basics right and earning a full rate of return.
The last strategy is to improve relations with the different state regulating agencies to try and get their earnings up. "We have had some successes with that but still have some way to go. Investment is an important part of PacifiCorp's strategy, provided we can get regulatory recovery. We are interested in investing in our asset base, both the generating and the transmission side," said Wright.
The transmission side of the business offers a large number of opportunities to invest in the western U.S. because the system is under strain. On the distribution side of the business there has been a long period of under investment. The network is not as strong as it should be in some areas. Plans are in the works to improve those areas. On the electrical generating side in the next 10 years there will be a need to add a large plant of 400 or 500 megawatts. Wright indicated that they had a sophisticated process to determine what kind of plant this would be. They are looking at all the resources available including coal, gas, renewables and others. In addition they are looking at the future growth and energy requirements and trying to decide which will be the most economical investment.
A fourth power unit could be worked out today with some certainty, because fuel costs are known.
However, unknown is the future cost of coal, gas or renewables. Also no one can predict what the Environmental Protection Agency will decide to regulate in the future. From a risk perspective PacifiCorp, executives are deciding the most sensible investment strategy. There is also the problem of recovering the cost of generating electricity through the regulators. If regulators from six different states were to set one common set of regulations, the process would be somewhat less difficult to plan for the future. If there was a certainty of what the regulations would be across the six states it would be easier to consider a fourth generating power unit. Wright thought that by the end of this year PacifiCorp would know whether or not building a fourth unit would be profitable.
The EPA is looking to enforce stricter regulations with regards to emissions and this may cost up to a billion dollars to make the existing plants fully scrub the emissions. These issues will be dealt with over the next couple of years. A fourth unit is an option because the transmission lines are already in place. Since it takes five years to build a large coal fired power plant. The decision will have to be made in the next couple of years.
In Salt Lake City there were overloads on some substations that caused brownouts during the heat this summer. The water shortage may cause a unit in Huntington Canyon to close. There are negotiations ongoing with Skyline Mine about the possibility that Electric Lake may be leaking into the mine.
The company is looking at alternative sources of energy such as wind turbines. Coal is still the least expensive source and generates more power. But environmental regulations are raising the cost of using coal. The workforce as an issue was discussed and there are plans in the works to increase the apprenticeship program. The age of the employees indicates that in the next 10 years many will retire. Coal quality, burning ability and cost will continue to be examined to determine sources of coal for power generation.