November 2000

Toy Drive Drop Site
Electric Industry Restructuring
Convenient Payment Options

News & Views from Your Elected Representatives

Minutes of the Meeting Held on:

September 19, 2000

The meeting was called to order by President Nancy Horn. Board members present were Murray McCreary, Curt Culver, Alicia Bonesteele, Jim Dyer and John Elliott. Leadership Youth representative, Natalie Reding, was also present.
     Administrative Services Manager Jack Belleque reported that by the end of this year the loan for remodeling the building will be paid off. The remaining long-term debt of $1.8 million for the purchase of the substations will be paid off by January 2005.
     Engineering & Operations Manager Roger Kuhlman reviewed the company’s apprenticeship program through which journeyman lineman positions are filled. The three-year program includes a final written test to complete certification. Their education is ongoing as they must be certified in 24 areas annually, as required by OSHA.
     General Manager Bob Speckman reported that ORECA is continuing in its efforts to protect local control during the next legislative session. The 1999 legislature passed SB 1149 which provides for deregulation of the investor-owned utilities (PGE & PP&L) in Oregon. Speckman also reported that the proposed 2001 budget will be presented to the board at the October meeting, with an opportunity for individual review and questions, pending final action at the November meeting.
     Belleque presented a budget line item for revolvement of the 1979-1980 capital credits in the amount of $1.11 million. The board voted unanimously in favor of revolving these credits as requested.
     Meeting adjourned at 7:57 p.m.

Curt Culver

Secretary/Treasurer

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     For more information, please contact Merrie Schopfer, Salem Police Department Community Support Unit, at 503-588-6499.

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Another Look at
Restructuring of the Electric Industry

Two years ago the legislature passed a law (SB 1149) to begin an Oregon version of electric utility restructuring. Implementation of the law will begin October 1, 2001. The law requires large customers of investor-owned utilities (PGE and PP&L) to purchase power on the open market. Consumer-owned utilities, like Salem Electric, are not required to participate. It is very likely that the law will again be brought before the legislature for some retooling or additions. The Salem Electric Board of Directors was unanimous in expressing opposition to the 1999 legislation and to deregulation of the utility industry in general. Our opposition was based on the firm belief that restructuring would not be in the best interest of residential and small business consumers or any of our other customers for that matter. Our concern was not limited to just our own members. We were concerned for electricity consumers throughout the Northwest. We think that it is timely to again take a look at restructuring (deregulation) prior to the convening of the 2001 legislature. 
     Prediction of success, or failure, of electric utility restructuring in Oregon can be based to some degree on what has happened where electricity has been opened up to the "market" in other states. Californians have been struggling with restructuring for the past two years. The assumption always is that the market will function competitively, but several fundamental problems occurred in California. 
     First, there simply was not enough generating capacity (supply) to permit the wholesale market to function competitively. Second, market power is being exercised. During peak periods there is no way to control just how high prices can go. Third, the importance of serving customer needs had not been taken into consideration. This is anticipating and meeting the electrical needs of the customers. 
     These three problems can affect Oregon’s electric customers. 
     The problems created by restructuring in California have been severe in many areas. In some cases the results of these problems have been devastating. Retail prices in San Diego reached wild extremes. Rates have more than doubled this summer and remain extreme. Electricity had to be purchased for prices set by absolute need and very low availability. This created a near perfect situation for the owners of any excess power to place it on the market and receive market rates that were phenomenally high. One example was the Los Angeles Department of Water and Power (LADWP). The city owns three mothballed plants. These were started up and power was sold outside the city. The excess power earned $45 million in surplus revenue. The only challenge was that the plants were old and had no scrubbers. LADWP was fined $14 million for exceeding emission standards. The fine and environmental impacts were acceptable to the utility because the price received for the surplus electricity still created large surplus revenue. LADWP said the plants "will be modernized over the next several years".

WHO IS AT FAULT?
     State policy makers did a poor job of designing the restructured market starting with the failure to make sure there would be a sufficient number of suppliers. S. David Freeman, General Manager, LADWP, said the state’s restructuring program went awry because regulators took the lid off electricity prices before assuring that supplies were sufficient to drive down prices. Experts attest that some of the problems were created by a tightening power supply. Some felt that the California legislature and those pushing deregulation had not thought through the obligation to serve the customer. They assumed the market would automatically meet the need. However, supply follows demand and there was not enough supply. The market is now so volatile that there are few utilities or investors willing to build new generation. Building more generation is difficult in the Northwest because of environmental constraints and tightly regulated construction and licensing. Demand can be predicted to far exceed supply for some time.

WHAT DOES CALIFORNIA FACE NOW?
     California may face federal regulation to help resolve their problems. A commodity was deregulated that has limited production capacity. Some experts are suggesting that there needs to be some middle ground between regulated rates and market based rates. A solution that is being offered now is for the Federal Energy Regulatory Commission (FERC) to perhaps set some form of price caps. Strong suggestions have been proposed that would limit any further implementation of unregulated retail prices until the wholesale market can be more fully developed. FERC Chairman James Hoecker appeared before the House Government Reform Committee asking for greater authority to "retroactively correct extraordinary wealth transfers". He said FERC may revoke or modify market-based rates or may reassess the basis on which they are granted. California appears to be facing a long hard road to undo the effects of their restructuring legislation and market problems.

HOW DOES THIS AFFECT OREGON?
     Legislative leaders and others have claimed that the Oregon legislature "did it right." They are confident that the effects restructuring had in California will not happen here. A primary cause of California’s problems was lack of generation. It has already been predicted that lack of generation will cause "black outs" in the Northwest in the next five years. The Oregon legislation has no effect on increasing generation, in fact it may further scare away such investment. Another cause of California’s problems was "market power." When a commodity is scarce, demand will set the stage for higher prices. This is particularly true where the product is essential to the buyer. Obviously electricity is that kind of product. It is unlikely that Oregon’s law can overcome the basic concept of supply and demand. Oregon’s law has made some effort to assure the importance of customer needs. This was overlooked in California. However, high demand and low generation may cause customer needs to be viewed very selectively. It seems that Oregon will be affected much the same as California in these critical areas. Certainly the cost of electricity, which has always been low in the Northwest, will not go down.

     We provided this brief overview of deregulation so that you can be well informed. Candidates are now campaigning for office. Soon some will enter the legislature. It is in all of our best interests to assure that there is careful consideration of the current law. The question is, can our law assure that the problems discussed here will not occur in Oregon? The board of directors of Salem Electric continues, unanimously, to oppose the deregulation of the electric utility industry. At the same time, we continue to look for opportunities in restructuring that might provide benefits to our members, but, so far, none have been discovered.

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Payment Options:
Convenient Ways to Pay Your Bill

We can’t promise to make bill paying fun… but we can make it easier!

Average Pay
Your electric bill is averaged over the last year, or whatever is available, and you are billed approximately the same amount each month. The actual kWh usage is indicated on your monthly bill. This program is only available to residential customers.

Auto Pay
This program allows you to pay your bill automatically — no stamps, checks or envelopes. You simply provide a voided blank check and sign our authorization form, we’ll do the rest. Your payment is automatically deducted on the due date about two weeks after you receive your printed bill. Proof of payment will appear on your bank statement. The date your payment is deducted may be adjusted upon your request. All customers are eligible for the program.

Payment Plans
If you are having difficulty making your monthly payment, contact our Credit Department to arrange a payment plan. We’ll work with you to keep your account current.

Office Payment
In addition to paying in person at our office, at 633 Seventh Street NW, we also have a drive-through drop box and a payment slot for after-hours payments.

Credit Cards
Not only can you use your Visa or MasterCard for your payment at our office, but you can also use it to pay over the phone or automatically each month.

Pay Stations
Your payment can be left at these drop box locations:

•           Salemtowne Association Office
            2900 Oakcrest Dr. NW
            (West Salem)

•           Roth’s, 5013 River Rd. N
            (Keizer)

•           Roth’s, 1130 Wallace Rd. NW
            (West Salem)

•           Salem Senior Center
            1055 Erixon St. NE
            (Northeast Salem)

These are drop box sites only. No transactions can be made. Please allow five working days for your payment to be delivered to Salem Electric. No cash payments please.

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