Power Surge

Avista Corp. is planning on investing $125 million in its first wind farm in eastern Washington.

Two local power providers that have played a key role in
promoting the generation of clean energy as part of an earlier state-sponsored
initiative now stand to benefit from stimulus spending by the federal
government. Both plan to continue their surge in investments in electricity
generation and transmission.

During the next five to seven years, Spokane-based Avista
Corp. and Bonneville Power Administration (BPA) of Portland will invest upward
of $2 billion combined in energy-infrastructure improvements throughout
Washington. Much of the work centers on adding and improving environmentally
friendly energy generation, in part to meet the requirements of Initiative 937.
To meet that voter-approved resolution, large power companies statewide must
obtain 15 percent of their energy from renewable resources by 2020.

Avista has nearly doubled its annual infrastructure
investment to $200 million in 2008 from $108 million in 2003. CEO Scott Morris
says projects the company has in the pipeline will ensure continued
expenditures at that elevated level for several more years.

With [hydroelectric dam] upgrades and new wind energy,
well be able to meet the initiatives requirements easily, Morris says.

Avistas most imminent projects involve upgrades at its
hydroelectricity dams, both along the Spokane River in Washington and the Clark
Fork River in northern Idaho and western Montana. All of those dams have
turbines that are decades old. Those will be replaced with new turbines that
are more efficient and can generate more power.

The incremental increases in hydropower production count as
green energy under I-937, Morris says. In general, hydroelectricity is
considered renewable in its own right, and Avistas dams account for about 50
percent of all of the companys energy production. As the law is presently
written, however, Avistas existing hydropower wont count toward the 15
percent minimum, only increases in production from those facilities will.

Regardless, Morris contends that Avistanamed Washington
Water Power Co. for most of its 110-year historycan make the transition to
green-energy sources smoothly because of its hydropower roots.

Were very comfortable operating in this new green world
because weve always been green, he says.

Avista also plans to invest about $125 million in its first
wind-energy facility in eastern Washington. The company initially had intended
to have that 50-megawatt project on line by the end of 2011 but decided last
year to push back the timetable to 2014 with the expectation that the
construction costs will decrease as the wind-energy market matures. During the
next 20 years, Avista expects to build or acquire some 350 megawatts of wind
energy in its service territory.

The firm, however, is examining closely wind-energy tax
credits included in the American Recovery and Reinvestment Act that President
Barack Obama signed into law in February. Avista might move forward with its
wind project sooner than expected to take advantage of the stimulus bills tax
credits. It also is looking into other tax credits, grants and loan guarantees
included in the bill.

Meantime, the Bonneville Power Administration, which
generates power for utilities throughout the Pacific Northwest, has four
expansion projects proposed for the next seven years that will cost nearly $1
billion.

The stimulus act is one major reason the nonprofit federal
electric utility can confidently move forward with its planned
power-transmission expansions, BPA spokesman Doug Johnson says.

The act gives BPA an additional $3.25 billion in borrowing
authority. Consequently, BPA plans to start work this July on its $246-million
McNary-John Day project, which involves extending a transmission line for 75
miles along the Columbia River. A large portion of the new line, which is
scheduled to be completed in 2012, will be on the Washington side of the
border. That new line is expected to transmit 870 megawatts of energy. Of that,
700 megawatts will be new wind energy.

Three other proposed BPA transmission projects are slated
for completion between 2012 and 2015, Johnson adds. They include a transmission
line from The Dalles, Ore., to Goldendale, Wash.; the Little Goose line located
east of the Tri-Cities, north of Walla Walla and west of Clarkston in
southeastern Washington; and the Interstate 5 line, which will extend from
Portland, Ore., to Castle Rock, Wash., roughly along the same route as I-5.
These are the lines we know we need to provide service to the customers who have
requested it, Johnson says.

Both Avista and BPA have proposed rate increases. Avista has
said the price hikes will help the company pay for infrastructure improvements;
BPA noted a higher rate is necessary for a number of reasons, including
increased maintenance costs.