Spokane Journal of Business

Inland Northwest demand for electricity bucks national trend

Growth in usage, however, may slow in coming years

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-Katie Ross
Avista Corp., which operates the Upper Falls Power Plant in downtown Spokane, has demand for power that's on par with prerecession levels. Other Inland Northwest utilities have reported slight increases in demand.

The Inland Northwest is resisting a national trend of lagging electric utility sales, utility companies here say, with sales near—and in some cases, exceeding—pre-recession levels. 

Electricity sales nationwide are looking slow for the seventh year in a row, says a July 28 article in the Wall Street Journal. However, utility companies here are reporting steady, if slightly flattened, demand since before the recession. 

Jason Thackston, senior vice president of energy resources for Spokane-based utility company Avista Corp., says that Avista’s market contains fewer industrial and commercial clients than the areas discussed in the article. 

“When I compare our patterns to the ones in that article, in our service territory, we don’t have quite the same profile of commercial, industrial, and residential,” Thackston says. “That article had a higher percentage of industrial customers, which were impacted more by the recession. For our customers, in 2008 to 2009, we saw more of a flattening out for that period of time for our customers’ consumption.”

Avista, which recently filed its natural gas integrated resource plan (IRP) in Washington, Idaho, and Oregon (see story on page 3), filed an electric integrated resource plan in Washington and Idaho last August. The plans act as a long-range planning process and predictors of utility consumption.  

“If we go back to the 2011 electric IRP, we anticipated a higher rate of growth of consumption than what we filed in 2013,” he says. 

However, the 2013 electric IRP does indicate that Avista will need to find a new resource by 2019 to continue to meet the demand of its electric customers, Thackston says. 

“The conclusion was the most economic resource would be a natural gas generator,” he says. “Now we’re going through the next round of IRP… when we’ve finished, we may have the same conclusion, that we’ll need to procure a new natural gas generator in 2019, or we may say that’s not the timeline.”

Thackston says that the flattening seen during the recession has stopped. However, while electricity consumption is continuing to increase, Avista is predicting that it won’t rise post-recession at the same rate as it did before the downturn. The company is predicting a growth rate of about 1 percent annually for electric utilities, as well as for natural gas, he says. 

“If you go back to the 90s, it was a much higher rate for growth for both gas and electric,” he says. “We never saw a huge decline in consumption during the recession … but going forward, we’re predicting a much slower pace of growth.”

The factors behind the growth slowdown include customers trending toward energy conservation and more efficient appliances and building codes, Thackston says. 

“When customers build their homes and replace appliances, that will result in conservation,” he says. 

According to its annual reports, Avista sold about 8.89 percent retail kilowatt-hours of power last year, down slightly from just over 8.9 billion retail kilowatt-hours in 2007.  

Avista had just over 366,200 retail electric customers in 2013, compared with about 351,500 retail electric customers in 2007. 

Sandi McKee, chief operating officer of Spokane-based electric cooperative Inland Power & Light Co., says that co-op has seen its electric sales increase since before the recession. 

Inland Power’s yearly kilowatt-hours sold increased from 807.7 million in 2007 to 890.7 million in 2013, a rise of about 10 percent. While sales haven’t climbed every year, such as in 2010 when kilowatt hours dropped to 829.6 million, there are a number of factors that could be affecting demand, says McKee.

“Part of it is that we’ve got new members,” she says. “We’ve also seen some growth with our commercial members.”

In 2007, the co-op had about 37,000 members. Its membership numbers have risen every year, and it counted just over 39,000 members in 2013. 

McKee says that Inland Power sees the biggest jumps in electricity usage during the winter, especially when temperatures are very low for multiple days in a row. 

“We have a lot of rural members; there’s no natural gas out there,” she says. 

Hayden-based Kootenai Electric Cooperative Inc. also has seen kilowatt-hours sales and membership increases, says spokeswoman Erika Neff. 

The co-op’s kilowatt-hour sales last year were 425 million, up 5 percent from 405 million in 2007. Kootenai Electric had about 23,800 customers as of last year, up 7 percent from almost 22,250 members in 2007, Neff says.  

She also says that weather patterns can affect consumption.

“If we had a really cold winter and a really hot summer, that could increase sales,” she says. “If we had a warm winter and a cool summer, that could change sales also.”

Along with consumption, prices at the three utilities also have increased over the span of years. 

Avista saw the biggest jump in price, with customers in Washington and Idaho paying 8.3 cents per kilowatt-hour in 2013, up from 6.4 cents per kilowatt-hour in 2007. 

In 2007, Inland Power members were paying an average of 6.1 cents per kilowatt-hour for power. In 2013, the average was 7.1 cents per kilowatt-hour, McKee says. 

She says that Inland Power has had about three rate increases since 2007. Since it’s a co-op, Inland Power’s rates aren’t based on return on assets.

“We look at all our costs and basically charge our members what it costs to cover those charges,” she says. “Talking about profitability and growth, we have to make money, but it’s not like we say we have to have this much profit or we aren’t doing well.”

Inland Power buys its electricity from the Bonneville Power Administration, McKee says, and its power prices go up every two years. 

“We buy power from Bonneville at their cost,” she says. 

Neff says that at Kootenai Electric, prices have risen from 6.4 cents a kilowatt-hour for up to 2,500 kilowatt-hours, to 7.4 cents a kilowatt-hour today for up to 3,500 kilowatt-hours.

Mckee, like Avista’s Thackston, also says that an emphasis on conservation and more efficient technology has affected consumption. Consumers have more efficient options for appliances these days than a decade ago. According to the U.S. Energy Information Administration, the average refrigerator in 2005 used 840 kilowatt-hours of energy per year; by 2010, the average was 453 kilowatt-hours. 

However, consumers could be buying more appliances and electronics overall, McKee says. 

“We know that people have gotten more efficient TVs,” she says. “I think people have probably just purchased more TVs; instead of two, they have three. Adding those extra appliances does make a difference.”

However, it’s impossible to tell how much each factor specifically is affecting demand and usage, McKee says. 

According to the Wall Street Journal article, utility companies usually need to see sales growth of at least 1 percent a year to be able to maintain their power facilities.

“It’s got to be very close to that percentage,” Mckee says. “If you don’t keep growing … you don’t have enough people to contribute to fixed costs, and then you have to start charging people more and more.”

McKee predicts the demand for electricity in the area will keep rising. 

“We just have to keep adding members (to keep costs down), is what we need to do,” she says. 

Katie Ross
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Reporter Katie Ross covers manufacturing, hospitality, and government at the Journal of Business. An outdoor enthusiast and snowboard fanatic, Katie is a recent graduate of Gonzaga University.  

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