HERMISTON — As industrial development drives growth around Hermiston and Boardman, Umatilla Electric Cooperative is experiencing rapid growth of its own.
It took the Hermiston-based, consumer-owned cooperative 77 years to sell its first billion kilowatt hours. This year alone it expects to provide customers just shy of 3 billion KWH.
“Our average growth has been close to 20% per year in the last eight years,” Umatilla Electric CEO Robert Echenrode said, noting that the increased volume comes despite advances in energy efficiency causing individual customers to decrease their usage.
UEC has a policy against discussing specific customers. But anyone paying attention to Hermiston, Umatilla and the Port of Morrow can guess that much of UEC’s growth is likely driven by new Amazon data centers springing up around Umatilla and Morrow counties, as well as a few other major industrial projects such as the new Lamb Weston expansion in Hermiston.
In its 2008 annual report, UEC reported that industrial customers made up 24.7% of its revenue. In 2018, that number was up to 64.2%.
Echenrode said residential sales in the past eight years have increased 2.5%. Irrigation sales have increased 19%, small commercial sales are up 27%, and large commercial/industrial sales are up 500%.
Such a large increase in industrial use to UEC’s system naturally brings up questions about who is paying for that growth. Echenrode said while many cooperatives build some money for growth into everyone’s fees, UEC’s philosophy is that if it needs to build new lines or other infrastructure to accommodate a specific customer, it is that customer that should foot the bill instead of all UEC’s customers.
“Those who trigger the growth, pay for the growth,” he said.
While equipment, infrastructure and personnel to serve customers are a part of UEC’s costs, purchasing electricity from suppliers takes up most of the cooperative’s budget. In 2018, 76.6% of UEC’s expenditures were for wholesale power.
Much of that power comes from the federally owned Bonneville Power Administration, which sells electricity from 31 dams, a nuclear power plant and several small nonfederal power plants.
In 2011, UEC signed a 20-year purchasing contract with BPA, after BPA changed its rate structure. Demand for BPA’s power was outstripping supply, and so BPA calculated a “high water mark” for utilities. The complicated formula used the amount of power BPA was able to produce in its lowest-performing years (when dry weather meant low stream flows through hydroelectric dams) and the utilities’ usage in recent years.
Each utility was then assigned an amount of power it could purchase from BPA at “Tier 1” rates, which BPA would set at cost. Any power the utility needed beyond that amount would be considered “Tier 2” power, to be purchased at market rates. In high-water years, BPA would sell its excess power into the market and use the profits to keep Tier 1 prices low.
“The assumption at the time was that power costs were going up,” Echenrode said.
Power costs in the market didn’t go up, however. Instead they dropped, due to a confluence of factors that included fracking causing natural gas to drop to a fraction of its previous price.
Rapid growth in Hermiston and surrounding areas has pushed UEC well into needing Tier 2 power for its newer customers each year, but Echenrode said it so far hasn’t hurt them — the market price is actually lower than BPA’s Tier 1 prices.
“Nobody would have ever thought of that when the contracts were signed in (2011),” he said.
UEC’s contract with BPA is up in 2028, but Echenrode said that he expected they would be purchasing power from BPA well beyond that.
“They’ve been very good to us, and very good to our customers,” he said.
Echenrode said it was hard to know what market rates for power would do in the future, particularly as more states enact laws around renewable energy and cap and trade.
Oregon Democrats are trying to pass cap-and-trade legislation of their own, which Echenrode said will “likely have a cost.”
In 2016 the legislature passed a law requiring investor-owned utilities to get at least 50% of their power from renewable sources by 2040, and consumer-owned utilities such as UEC to must get to at least 25%. The law does not include existing hydropower from dams as a renewable source, because lawmakers stated the intent was to encourage creation of new renewable energy sources.
Echenrode said the market “may demonstrate renewables are less expensive over time,” or the law may force UEC to purchase more expensive electricity.
Compliance is shown through Renewable Energy Certificates, and Echenrode said UEC has been building those up now to protect it from spikes in the market.
Despite some uncertainty about the future of the market, Echenrode said UEC is bound to serve all customers in its service area, and he believes that overall the area’s growth is good for residents. The growth, for example, has helped pay for new equipment to serve customers, and enabled improvements such as UEC burying miles of lines on Weston Mountain to decrease fire hazards.
After BPA recently announced an increase in its prices, UEC will be adjusting its rates by about 2% in 2020, Echenrode said — something the utility will send more information to customers about in December.
For customers worried about their personal or business electric bill, he said, UEC works hard to help people increase their energy efficiency through free home energy audits, low-cost loans, cash rebates, weatherization and more. Information about those programs can be found at www.umatillaelectric.com/energy-efficiency.
“The cheapest kilowatt hour is the kilowatt hour you save,” Echenrode said.