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Northwest Near-Term Energy Supplies Adequate, PSE Says

In the Pacific Northwest, the near-term energy supply picture is adequate and wholesale power prices are moderated by a combination of factors including abundant natural gas supplies. This was the essence of a revised draft Integrated Resources Plan (IRP) released Friday by Puget Sound Energy (PSE).

PSE released the draft IRP for stakeholder comments prior to filing a revised plan with the Washington Utilities and Transportation Commission on May 31. Revised every two years, the IRP is supposed to provide an energy resource blueprint for the next 20 years for the utility to follow.

Added pipeline and storage capacity may be needed by PSE to keep up with growth in natural gas demand for both domestic space and water heating and added gas-fired electric generation, the draft plan showed. It did not rule out storage for liquefied natural gas (LNG).

IRP estimates that PSE gas customer demand will increase 23% in the next 10 years and 46% over the next two decades. "The utility energy efficiency programs can fulfill more than one-fifth (86 million therms) over the 20-year period," the report noted, citing average residential gas use at 68 th/month.

"Obtaining additional natural gas supply -- both to serve customers' rising demand and potentially to fuel more gas-fired power generation -- may require PSE to acquire additional capacity on the West Coast's pipeline transmission grid. The operational requirements of expanded gas-fired power generation also could drive the need for more local storage capacity in coming years, including storage for LNG.

"Natural gas has become an increasingly important resource for PSE. Not only do we supply it for end use to more than 750,000 gas sales customers, we also use it as fuel to generate electricity."

The region is looking at a near-term surplus of power supplies in certain seasons, resulting from what the report characterized as "robust conservation and the region's recessionary drop in energy demand, along with increased production of renewable energy, primarily wind power." It is these factors, along with what PSE called "abundant natural gas supplies," that have helped moderate wholesale power prices in a region heavily dependent on electricity.

PSE CEO Kimberly Harris attributed the low market prices to what she called "a special dividend coming from all the new wind power in the region and advances in natural gas exploration technology." Harris predicted that these two sources would continue to provide benefits to customers of the combination Puget Energy utility.

In the latest IRP draft, PSE identified a need to obtain 1,400 MW of capacity by 2016 to meet its customers' peak winter needs. That need is being driven primarily by expiring power supply contracts that must be renewed or replaced with alternative resources.

"That need will continue to grow in later years as additional purchased-power contracts expire and aging power pants potentially are retired," a PSE spokesperson said.

Harris said the utility has to stay nimble to capitalize on what she called "the best resource opportunities and best prices that present themselves in the market." PSE plans to be ready for when the economy in the Northwest rebounds. "That could mean building or acquiring new power transmission...building peaking power plants, if we're not able to find attractive supplies from other market participants," she said.

PSE is anticipating meeting 80% of its projected additional power demand through energy efficiency programs, and the rest with natural gas-fired peaking power plants acquired or built, or purchased peaking power. "The deciding factor will be cost and risk," said Harris, noting that the best deal for retail utility consumers will determine which option is pursued.

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