Puget Sound Energy

Puget Sound Energy

File:PSE logo.gif
Company type	Private
Industry	Energy, Utility
Founded	1873
Headquarters	Bellevue, Washington (Founded: Seattle, Washington)
Key people	Kimberly J. Harris, President and CEO
Products	Electricity and natural gas
Revenue	$3.23 billion. (2009 Energy Sales)
Owner	Macquarie Consortium
Number of employees	3,000
Website	www.pse.com

Puget Sound Energy (PSE) is Washington state's oldest local energy utility providing electrical power and natural gas primarily in the Puget Sound region of the northwest United States. The utility serves electricity to more than 1.1 million customers in Island, Jefferson, King, Kitsap, Kittitas, Pierce, Skagit, Thurston, and Whatcom counties; and provides natural gas to 750,000 customers in King, Kittitas, Lewis, Pierce, Snohomish and Thurston counties. PSE’s 6,000-square-mile (16,000 km²) electric and natural gas service area covers the largest metropolitan region north of San Francisco and west of Chicago. This area includes much of the more developed areas of western Washington State, excluding electrical service to the major cities of Seattle, Tacoma, and Everett, which are served by Seattle City Light, Tacoma Power, and Snohomish County PUD respectively. PSE shares effective control over electric transmission in the region with Bonneville Power Administration, which owns or controls much of the state's large transmission lines and hydro generation.

Facilities

PSE’s electric supplies include utility-owned resources as well as those under long-term contract, for a total capacity of 5,044 megawatts (MW).

PSE owns coal, hydroelectric, natural gas and wind power-generating facilities, with more than 2,900 MW of capacity. Roughly one-third each of PSE generation comes from coal, hydroelectric, and natural gas facilities, with a small remainder coming from wind and energy efficiency programs.

Coal accounts for 36% of PSE’s electricity fuel mix. PSE's partial ownership of Eastern Montana's Colstrip Generating Station represents the single largest power-generating facility PSE owns, approximately 700 MW of generating capacity. In 2010, the Colstrip Generating station was the 8th largest greenhouse gas emitter among power plants in the United States.

Hydroelectricity generates 33% of PSE’s power supply. The company operates these hydroelectric facilities:

• The Baker River Hydroelectric Project on the Baker River, a tributary of the Skagit River in Skagit County. There are two dams on the river, Upper Baker Dam and Lower Baker Dam, generating 170 MW of electricity.
• Two power plants at Snoqualmie Falls Hydroelectric Project, on the Snoqualmie River in King County. The generating capacity of these two power plants, currently 44 MW, will increase to 54 MW following the completion of the Snoqualmie Falls redevelopment project currently underway.
• The Electron Hydroelectric Project on the Puyallup River in Pierce County generates 22 MW of electricity.

Natural gas-fired power generation accounts for 29% of the utility’s electricity fuel mix. The company operates these natural gas-fired facilities:

• The Sumas Generating Station in Whatcom County is a cogeneration natural gas–fired plant capable of generating 125 MW of electricity.
• The Encogen Generating Station in Whatcom County is a combined-cycle natural gas-fired plant capable of generating 167 MW of electricity.
• The Goldendale Generating Station in Klickitat County is a combined-cycle natural gas-fired plant capable of generating 277 MW of electricity.
• The Mint Farm Generating Station in Cowlitz County is a combined-cycle natural-gas-fired plant capable of generating 310 MW of electricity.
• The Fredonia Generating Station in Skagit County is a simple-cycle natural gas-fired plant capable of generating 314 MW of electricity.
• The Frederickson Generating Station in Pierce County is a simple-cycle natural gas-fired plant capable of generating 147 MW of electricity; the nearby Frederickson 1 Generating Station is a combined-cycle natural gas-fired plant capable of generating 137 MW of electricity.
• The Whitehorn Generating Station in Whatcom County is a simple-cycle natural gas-fired plant capable of generating 147 MW of electricity.

Wind power and other generation sources, such as biomass and landfill gas, account for 1% of the utility’s electricity fuel mix. PSE is the second-largest utility owner of wind energy facilities in the United States. The company owns and operates these wind-power facilities:

• The Hopkins Ridge Wind Facility in southeast Washington’s Columbia County began commercial production in 2005. Hopkins Ridge’s 87 wind turbines have the capacity to generate 157 MW of electricity.
• The Wild Horse Wind and Solar Facility in central Washington’s Kittitas County began production in 2006 and was expanded to include 22 turbines in 2009. Wild Horse’s 149 wind turbines have the capacity to generate 273 MW of electricity.
• In 2012, the first phase of the Lower Snake River Wind Project begins in Southeast Washington's Garfield County. Lower Snaker River Phase 1's 149 turbines have the capacity to generate 343 MW of electricity.

Wild Horse also includes the region’s largest utility-owned solar array, a 500-kilowatt demonstration project (0.01% of total PSE generating capacity), and the Renewable Energy Center, which is open to visitors from April through November.

Due to fluctuating wind speeds, actual wind generation averages about one third of these stated "nameplate" capacities. Much of this wind generation capacity is currently under contract to Californian utilities. Washington State's I-937 law phases in the requirement that large utilities obtain at least some of their electricity from new renewable resources such as solar and wind (but excluding hydro) with incremental steps of 3% by 2012 and 9% by 2016 and 15% by 2020. As these requirements kick in PSE will retain more of this "green electricity" within their system. However, while I-937 requires a utility to generate at least three percent of its load from renewables by January 1, 2012, and to publicly report these renewables, Puget Sound Energy's I-937 Report shows 0% of Puget Sound Energy's power as coming from renewables.

Within the PSE region more than 1,000 residential and business customers have installed small-scale, customer-owned renewable energy projects including solar and wind projects. Customers with solar projects are generating at least part of their electric needs through their solar array. A net-metering program allows these customers to return extra solar power to the grid, draw power when the customer needs more than is generated, with the metering program calculating the difference.

Washington State law RCW 19.29A.090 requires electric utilities to offer their customers renewable "green" power options. Customers can voluntarily support biomass generation with the utility’s Green Power Program, supporting “dairy digester” power-generating projects in Whatcom and Skagit counties, as well those involving the use of wood and paper manufacturing by-products and methane extracted from area landfills. This voluntary customer choice to purchase "green electricity" costs the customer about an additional 10% on their utility bill.

An additional approximately 1% per year of generation comes from—or actually is reduced by—state mandated I-937 energy efficiency programs, adding an average 25 additional "Negawatts" generation capacity per year. Since 1978 the program has recorded 363 cumulative average negawatts on incentives paid of $650 million—representing an attractive (virtual) resource acquisition at less that $2 a watt. These energy savings programs work by PSE offering (typically partial) financial incentives for customers to voluntarily choose to install more energy efficient products. These incentive costs in turn are charged back to all customers, whether or not they choose to use these incentives. PSE is required, and limited-to, incentive programs that in the end cost all customers less money than if PSE were to install the otherwise required additional generating facilities. Examples of these energy efficiency programs include discounts on CFL and LED light bulbs, additional home insulation and duct sealing, free home energy use evaluations, converting from baseboard electric heating to natural gas or ductless heat pumps, more efficient windows, and flow-reducing shower heads.

For its natural gas service to customers, PSE purchases a portfolio of natural gas supplies originating in western Canada and the U.S. Rocky Mountains states. Most of this natural gas reaches PSE’s customers through a network of underground interstate pipelines and local natural gas mains. On cold winter days, PSE withdraws natural gas supplies from the Jackson Prairie Natural Gas Storage Facility, which is located near Chehalis, Wash. Jackson Prairie, the Pacific Northwest’s largest underground natural gas storage facility, is operated and co-owned by PSE.

History

Through mergers and acquisitions, dozens of small utility companies gradually evolved into today’s Puget Sound Energy. The oldest of these – the Seattle Gas Light Company – introduced Washington Territory to manufactured-gas lighting on New Year’s Eve, 1873. A dozen years later, another PSE ancestor – the Seattle Electric Light Company – gave the region its first electric service from a central power plant. Yet another of PSE’s predecessor companies, the Snoqualmie Falls Power Company, built the region’s first large hydroelectric plant—the first ever to have completely underground generators, at Snoqualmie Falls, in 1898.

PSE was formed in 1997 when two of its largest ancestral companies – Puget Sound Power & Light Company and Washington Energy Company – merged.

In 2009 Puget Sound Energy was sold to foreign investors, Macquarie Group, in a leveraged private equity buyout. Puget Holdings, the US title of this group of long-term infrastructure investors, merged with Puget Energy, PSE’s parent company to form the current business structure. Puget Energy is a holding company incorporated in the State of Washington. All of its operations are conducted through its utility subsidiary, PSE, which is regulated by Washington State’s Utilities and Transportation Commission.

Rates and emissions

Puget Sound Energy rates show a typical residential electrical bill (at 1000 kwh per month) of $102.56 and typical a gas bill (at 68 therms per month) of $86. This compares somewhat higher than EIA reported Washington State average prices (at 1000 kwh and 68 therms) of $83 per month electrical and $80 per month gas, but somewhat lower than national household averages of $115 electrical and higher than national gas averages of $64.

PSE reports 2010 household emissions (per household at 1000 kwh per month) of 1500 pounds CO2, comparing somewhat higher than EIA reported average US electricity monthly average household emissions (at 1000 kwh per month) of 1300 pounds CO2, and much higher than Washington State averages of 360 pounds CO2, and much higher than the neighboring utilities' emissions from Seattle City Light of 0 pounds CO2 [net] and Tacoma Power of 62 pounds CO2.

Regulatory environment

While a private business, PSE's activities are heavily regulated directly, and indirectly, formally and informally, by a large number of governmental and non-governmental entities intending that PSE "play fair" with ratepayers and other interconnected utilities. The company is required to operate in a "safe and sane" manner such that their facilities and transmission lines do not endanger human life and safety. They are also required to operate at the "lowest reasonable cost" where "lowest reasonable cost" is defined in law to include resource cost, market-volatility risks, demand-side resource uncertainties, resource dispatchability, resource effect on system operation, the risks imposed on ratepayers, public policies regarding resource preference adopted by Washington state or the federal government and the cost of risks associated with environmental effects including emissions of carbon dioxide. This "lowest reasonable cost" must be consider from the point of view of both PSE and of their ratepayers. New power plants are required by I-937 to be at least as clean as a natural gas turbine plant, and incremental amounts of non-hydro renewable energy generation must be added resulting in 15% by 2020.

The primary regulator of PSE is Washington Utility and Transportation Commission who effectively permits or denies PSE actions including rate changes, new facilities built, and old facilities surplused. Additional federal regulation of transmission and sales is added by NERC and FERC. BPA controls integration of PSE wind power facilities within BPA's area, including forcing shutdown of those wind turbines during spring high water events, when there is more electricity than consumers who want it -- Oversupply—and where BPA prefers to generate power from their hydroelectric dams. BPA control interacts with Northwest Power and Conservation Council control over BPA, which sets regional goals for conservation (salmon recovery) and long-term planning, and in turn non-profit public interest and environmental groups including Northwest Energy Coalition and Sierra Club weigh in to represent their view of the general public's (ratepayer's) interests.

Controversies

Areas of controversy within PSE's operations include the following. PSE acknowledges the reality of global warming but has stated that they will not change operations until the Federal Government implements a carbon tax, even though state law requires PSE to incorporate the costs of environmental carbon damages when evaluating the "lowest cost" mix of facilities used to generate power, and state law requires "safe and sane" operation. PSE continues to operate a coal-power plant, stating they have no plans to close that plant, while other Pacific Northwest utilities are phasing out and closing down their coal power plants. The cost-effectiveness of this plant in the face of increasing regulatory requirements, including potentially selective catalytic reduction, is being questioned by IRP (Integrated Resource Plan) participants, but PSE refuses to perform the required IRP public accountability of this plant, cited confidentiality. Many customers complain of frequent and long-duration power outages after wind storms. WUTC, the Washington State regulating commission, has taken action against PSE for failing to adequately implement their energy efficiency program. When PSE was sold into private ownership a WUTC commissioner and public counsel questioned whether the new owners were adequately funded to meet regulator requirements, and whether or not the company would remain transparent-enough to allow adequate public regulation. Customers can comment on PSE actions at the state-required bi-annual Integrated Resource Plan's IRP Planning Group.