July 28, 2008

Idaho Power Chief Discusses Energy Challenges and Plans

By Hagadone, Zach

Overcoming the obstacles of future demands on energy are only part of the challenges facing energy providers, IDACORP President and CEO LaMont Keen told some of the state's biggest economic movers.

"We are in some interesting times in the energy sector in this country," he said. "Energy is the oxygen of the economy - no energy, no economy."

Keen, who as IDACORP CEO also runs Idaho Power Co., addressed the group as part of the Boise Metro Chamber of Commerce's 19th annual CEO Speaker Series. His talk, which lasted about 45 minutes, focused on four primary challenges facing energy providers across the country: growing demand, rising costs and prices, increasingly expensive and numerous capital expenditures and climate change.

Ironically, a key theme of the presentation was the effect that the energy crunch is having on energy production itself. Keen pointed to the spike in crude oil prices; a radical upswing in the price of copper; and steady increases in aluminum, cement, iron and steel as factors responsible for raising costs of equipment needed for power production by between 40 and 70 percent in the past four years.

"[We've seen] staggering increases in the prices of the things we use to provide you with services," he said.

And the problem is only going to get worse. The U.S. population is expected to grow by 45 million before 2026, and Idaho's population grew about 13 percent in the first six years of the century. In the past three years alone Idaho Power added over 40,000 new customers.

That's all added up to the need for more generating capacity and transmission, and Keen said it's going to cost a bundle - about $300 million a year from now till 2010.

"Those are the prices we're seeing and that's why we're going back and trying to change your prices," he said.

To solve these problems, while recognizing the need to cut down on greenhouse gas emissions, Keen said a few things need to happen:

First, Idaho Power must preserve its base of hydroelectric. Keen said even though in low water years - as the last six to seven have been - hydro power is less reliable, it offers Idaho customers some of the lowest rates in the country and should be preserved as a base for as long as possible.

Second, energy efficiency and demand side management efforts need to be ramped up. Keen said Idaho Power is offering energy saving incentives and programs for all its customer classes because "the cheapest plant is the one you don't have to build."

Third, Idaho needs to look at alternative resources to augment the state's base. Keen said Idaho Power will buy about 190 megawatts (MW) of wind energy by the end of this year and 370MW by 2012. Additionally, the utility wants 100MW of geothermal energy on the grid by 2012.

Fourth, recognizing that many renewable sources of energy don't produce power at a constant rate, Keen said new conventional resources must be sought out and expanded, including coal, natural gas, hydroelectric and nuclear power.

"Nuclear has to be a part of the solution long-run if we want to reduce our carbon footprint," he said.

Keen rounded out the presentation by saying that to secure energy supplies for the future, utilities must be financially healthy. While Idaho Power is allowed roughly 10 percent return on equity, it's only come within one percent of that one time since 2003. Last year it fell to between 6 and 7 percent. Coming into the 2000s with one of the highest-rated credit ratings among utilities in the western states, Idaho Power has fallen to one step above the level at which it becomes all but unable to secure a loan. And the way to shore up those profits is to produce more energy in-state and import less.

"We buy that from others and import that from others," he said. "It's time for us to expand our system."

Credit: Zach Hagadone

(Copyright 2008 Dolan Media Newswires)

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