news
BY NILS HOLST
Risky Business
Problems in the ’PUD, Part II
I
n the last couple months the Emerald
People’s Utility District (EPUD)
has gotten quite a bit of news
coverage, most of it bad. The utility that
for many years ranked among Oregon’s
top 100 workplaces is now embroiled
in controversy, beset on all sides by
disgruntled former employees, claims
of managerial incompetence, political
intrigue, and allegations of shady fi nancial
dealings; the most recent of which was
EPUD’s decision to sue Symbiotics, a
Utah-based fi rm that bought the utility’s
interest in two local hydroelectric projects.
In December of 2007 the EPUD board
voted to move ahead on two hydroelectric
projects, Dorena and Fall Creek. Partnering
with Symbiotics, the plan was to diversify the
utility’s power portfolio, meeting the utility’s
increased electricity demands locally, rather
than relying on outside sources. The initial
cost estimate was $22 million — $8 million
for Dorena and $14 million for Fall Creek.
According to the minutes from that initial
meeting, General Manager Frank Lambe
admitted there were several unknowns in the
project, but that it was worth pursuing.
As time went on though it quickly
became apparent that a mere $22 million
wasn’t going to cut it. Filtration systems,
fi sh screens, and a lack of government
grants pushed the price through the roof.
By 2010 the best estimates were around
$45 million — $20 million for Dorena and
$24.5 million for Fall Creek, far more than
the small local utility could handle.
“I remember when they fi rst proposed
the Dorena project,” said Ron Davis, one of
Emerald’s founding members and a former
board member. “I fi gured somebody must
have done the math, but I guess not.”
“The gut feeling that I have is that this
has been mismanaged,” he added. “But I
don’t know.”
On Dec. 14, 2010 the board voted
unanimously to sell EPUD’s interest in the
projects to Symbiotics, which had since
been acquired by Toronto-based Riverbank
Power, for $2.47 million. This would
recoup all the money EPUD had spent on
the projects to date and allow it the right of
fi rst refusal to purchase the facilities or the
power it generates in the future.
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Symbiotics managed to scratch together
about $1.8 million for the July 1 payment
deadline, enough to purchase the Dorena
project, but was still short the $664,000 for
Fall Creek. On Aug. 4, Emerald announced
it was suing Symbiotics for failing to meet
the deadline.
“I didn’t believe that this was a good
investment for a utility of this size,” said
Pam Hewitt, a former employee who
had been responsible for overseeing the
projects during her time at the utility. She
said there were “huge expenses, huge
overhead … we’re one fi fth the size of
EWEB. It’s just not sustainable.”
Lambe “kept contending me and
questioning me and working behind my
back to get this thing through,” she added.
A brief review of the board meeting
minutes over the past four years does,
however, show Lambe informing board
members on numerous occasions of
continuing complications with the projects,
and increasing costs due to varying reasons. In
late 2009 there was discussion between Lambe
and the board over whether or not the projects
were even viable, with him commenting at a
Nov. 5 meeting that the cost of the projects “is
going out of sight for Emerald.”
The hydro facilities aren’t the only
controversial projects at EPUD. According
to the utility, in October the Bonneville
Power Administration is changing the
way they provide power to all of their
customers. Lambe explained that the
BPA is now making its customers choose
between a “load following” product and
a “slice of the system” product, or Slice.
While previously Emerald was guaranteed
a set amount of power from Bonneville,
they now only receive a percentage of the
electricity on the grid at any given time. If
the utility has more power than it needs, it
can sell it. If the utility needs more power
than it has, however, it needs to buy it. The
difference between the two BPA products
is how this risk is managed.
Under a load-following product
Bonneville manages the account, providing
a buffer between the utility and the open
market. Under the Slice system however,
the utility is responsible for buying and
selling its own power. Emerald decided
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to go with Slice after researching both
options, opting for more local control in
the hopes of integrating their “non-federal”
(read: non-BPA) power resources.
“This is dangerous for a small little
utility,” said Jim Weaver, a former Oregon
congressman and one of Emerald’s
founders. “I’m supportive of Slice to begin
with, but not for a small utility like EPUD.”
“This little electric utility … has
to gamble 24 hours a day on the open
market,” he said. “They should be getting
a steady supply from Bonneville to meet
their needs.”
Weaver recalled the Western energy
crisis of 2000 and 2001, an artifi cial energy
shortage or “short squeeze” created to raise
prices that ended up nearly bankrupting the
state of California.
“You could have that today,” he said.
“Maybe not a short squeeze but a drought.
The dams wouldn’t produce, and EPUD
would lose their shirts.”
The utility points out that other utility
districts have gone with slice without
negative ramifi cations.
“We all have to sell and buy power as
our loads demand,” said Hillary McBride,
EPUD community relations offi cer, via
email. “It’s just some are having that done
by BPA and others are having it done by
other companies. In regards to utility size,
Franklin PUD is our size and went Slice,
Kickitat PUD is much smaller and are also
doing Slice. Their consumers are looking at
the local control as being a positive thing.”
EPUD has contracted with The Energy
Authority, a Washington-based fi rm that
specializes in handling Pacifi c Northwest
public utility Slice contracts, to manage its
account with BPA. While market research
conducted by the utility during a fi ve-
year period from 2002-2007 peg the Slice
product at about the same price as load
following, some contend that the risk is not
worth the potential benefi t.
“There is unnamed, unknown risk
associated with the Slice product,” said
Hewitt. “Because Bonneville is not taking
responsibility for the risk. EPUD and their
agent, The Energy Authority, are assuming
responsibility for the risk of going on the
market and having to buy and sell power.”
“The Slice and the buying and selling is
very dangerous and I’m entirely opposed,”
said Weaver. “The risks are too great; the
costs are too great.”
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EUGENE WEEKLY AUGUST 18, 2011 11