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Great Lakes Article:

Lower water may bring even higher power rates
By Jack Storey
Soo Evening News
Published February 14, 2007

EASTERN UPPER PENINSULA - Citing the precipitous drop in Lake Superior's water level, Edison Sault Electric Co. and Cloverland Electric Cooperative both indicated higher still electric rates may be the result.

In a joint statement issued Tuesday, the two electric utilities indicated lower Lake Superior water levels over the last several months exact a toll in significantly lower water flow through hydroelectric plants. The statement indicated Eastern Upper Peninsula electric customers are already paying higher rates because of the decline in cheap hydroelectric power.

The statement said the 38,000 customers of the two utilities paid $2.9 million in higher electric bills because a sharply higher percentage of electric power used last year was drawn from expensive purchased power.

“Severely reduced flows from Lake Superior allowed the Edison Sault (hydro) electric plant to produce only 156 million kilowatt hours in 2006,” the statement said.

That output was 72 million kilowatt hours lower than the 228 million kilowatt hours the Edison plant can produce in optimum water conditions. Since area utilities receive only about 40 percent of their power from the two hydroelectric plants at Sault Ste. Marie in the best of times, the “missing” 72 million kilowatts must all be made up from expensive purchased power.

While Edison customers are already paying part of the freight for lower water levels from a January purchased power rate increase, Edison official Lee Baatz said that increase may very well not be the last customers will feel from continuing low water conditions.

Relaying what he calls a “bleak” forecast for water conditions 2007, Baatz said when January rolls around once again, Edison bills may well climb considerably higher. Under Michigan's regulatory set-up, utilities like Edison can pass higher purchased power costs through directly to customers once yearly.

If the current Lake Superior water levels hold through 2007, Edison's hydroelectric plant may be cut to its lowest output on record this year. Company forecasts indicate that output could fall as low as 110 million kilowatts of less than half the plant's generating capacity.

Since part of both utilities' total product is drawn directly from the two hydroelectric plants at Sault Ste. Marie, all regional customers will likely feel the pinch. In cost terms, the lower hydroelectric output traceable to low water levels could produce an increase of as much as 12 percent on “passed through” customer bills.

That eventuality is many months away and may not come to pass if Lake Superior water levels rise appreciably over the spring and summer months. However, a return to “normal” water levels on Lake Superior grew more distant last fall, when continuing drought around the Big Lake caused a dramatic 12-inch drop in Superior's level.

Currently, Lake Superior is a full 17 inches below its average level at this time of year and lies very close to its record low, set in 1926. Prior to last fall's drop, Lake Superior's water level resisted the sharp declines experienced over the last several years on Lake Huron and Lake Michigan.

The lower two Lakes rose somewhat in recent months from wetter overall conditions and most recently stood 14 inches under their seasonal average.

Water level forecasts do not call for a rapid turnaround in those water levels, lending credence to worries of much-higher customer power costs by this time next year.

By state law, higher utility costs attributed to purchased electric power are passed onto customers at no profit to the utility.

If the day of reckoning for low hydroelectric water levels is nearly a year off, Baatz said Edison and Cloverland decided to warn customers now rather than wait until the year is nearly over. He said a recent Corps of Engineers report showing lower water levels than even Edison's conservative projection further supported a customer alert.

The Edison official said the utilities have virtually no “wiggle room” in the current hydroelectric situation. Standard practice has been to divert about 93 percent of Lake Superior's outfall to hydroelectric plants. The small remainder is allowed to flow over the St. Marys Rapids.

The power companies are hardly the only industrial interests affected by continuing lower water levels on the Upper Great Lakes. Shipping interests complained through the 2006 shipping season that vessel cargo capacity was cut as much as several thousand tons per trip by lighter channel draft limits.

A smattering of commercial fishermen on Lake Superior also found that last fall's water level decline also threatens the few sheltered harbors for smaller fishing craft on the Big Lake.

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