washingtonpost.com
NEWS | LOCAL | POLITICS | SPORTS | OPINIONS | BUSINESS | ARTS & LIVING | GOING OUT GUIDE | JOBS | CARS | REAL ESTATE |SHOPPING
'); } //-->
Tech Firms Go Mining for Megawatts
Companies Rush To Exploit Region's Cheap Electricity

By Blaine Harden
Washington Post Staff Writer
Sunday, July 9, 2006; A03

QUINCY, Wash. -- Microsoft is pouring concrete in a bean field on the west end of town. Yahoo is digging up a field of alfalfa out on the east end. Google, which declines to comment, is said to be sniffing around for its own field of dreams here in the semi-desert outback of eastern Washington.

This small farm town, population 5,300, has become the Klondike of the wildly competitive Internet era. The gold in Quincy is electricity, which technology heavyweights need to operate ever-larger data centers as they fight for world domination.

Their data centers -- air-conditioned warehouses filled with thousands upon thousands of computer servers that talk to Internet users around the globe -- are extraordinary power hogs. Microsoft says electricity consumption at its data centers doubled over the past four years and will triple over the next five.

There is cheap electricity here and lots of it. That is because the Columbia, the premier hydroelectric river in North America, flows nearby. Three publicly owned, local utilities own five large dams on the river, and they produce much more electricity than the sparse local population can use. With power prices soaring, the three utilities have become the hydroelectric emirates of the Pacific Northwest.

Until now, they have been obligated under 50-year-old contracts to sell about two-thirds of their power -- without profit -- to major utilities serving millions of people in Seattle, Tacoma and Portland. The arrangement helped keep monthly electric bills in the Northwest far below the national average.

Those old contracts, though, are expiring -- a development that will help push up residential electricity rates across the region. And the mid-Columbia utilities are scurrying to sell their newly unleashed power to the corporate giants of the Internet -- if they are willing to plant "server farms" in two-stop-light towns such as Quincy.

They do seem uncommonly eager.

Out in the bean field, Microsoft is rushing to complete what it says will be the largest data center it has ever built. It is scheduled to go online in February. Downstream in The Dalles, Ore., Google is building a data center that will go online within the next year and is reported by local officials to be scouring the region looking for other sites. Upstream in Wenatchee, Wash., Yahoo is expected to go online with another data center in the fall and is in negotiations for still others.

"They are salivating," said Rufus Woods, publisher of the Wenatchee World, the dominant newspaper in this part of the state.

It was his grandfather, also named Rufus Woods, who was the principal booster and relentless propagandist behind federal construction of Grand Coulee Dam, completed in 1942 as the world's largest dam. It is still the largest hydroelectric plant in North America.

Grand Coulee, by creating a 151-mile-long reservoir behind the dam, ironed out the violent flow of the Columbia, ending early-summer floods and making it easier for local utilities downstream to build much less expensive dams that could milk significant amounts of power from the river.

The first Rufus Woods boasted noisily in the pages of his newspaper that electricity from the dams would lure major industry to Wenatchee and the Columbia Basin. But the federal government broke his heart by stringing wires across the Northwest and setting up rules requiring dams to sell most electricity at a postage stamp rate, meaning that power had to cost the same in Wenatchee as it did hundreds of miles away in Seattle, Tacoma or Portland.

Although farming in the Columbia Basin boomed, thanks to irrigation water diverted by Grand Coulee, major industry, for the most part, ignored Wenatchee and towns such as Quincy for most of the past seven decades.

Companies could get plenty of cheap power in Seattle and Portland without having to build in the boondocks -- until now.

"Everything is finally coming together for us," said Curt Morris, a commissioner of the Port of Quincy. "By taking that calculated risk to build those dams years ago, we have an asset that is going to start performing for us."

He said that data-center investment by Microsoft and Yahoo would more than double the $300 million tax base in Quincy. The price of vacant lots in Quincy has jumped fourfold since word of Yahoo and Microsoft leaked early this year.

At the Wenatchee World, though, there are doubts about how many jobs will come with the server farms that are going to suck up the region's electricity. Yahoo has told planners it will have between 8 and 25 employees in Wenatchee, while Microsoft and Yahoo together have said they will employ about 150 in Quincy.

"The numbers of employees are so small," said Wilfred Woods, 86, chairman of the board at the newspaper and son of the late Rufus Woods. "We are not backing the coming of the data centers like we backed Grand Coulee."

The Woodses -- Wilfred and his own son Rufus, the current publisher -- say they are worried about the prudence and competence of the mid-Columbia utilities to manage the sale of power to the Internet behemoths in a way that maximizes local economic development and minimizes incompetence and waste.

The recent management history at Chelan County Public Utility District, which serves Wenatchee, and Grant County Public Utility District, which service Quincy, is checkered.

When power prices soared during the Western energy crisis of 2001, Chelan PUD paid two of its power traders $285,000 each. Salaries for several managers at the utility also rose to $100,000-plus levels, causing widespread irritation in a county where median family income is $38,000 a year. Top managers have since been replaced.

"They have money coming out their ears," Rufus Woods said. "There has been an attempt to take that money and put it into the hands of the people who work there."

Grant County PUD, too, has weathered management scandals and been forced to replace top managers. It is now being challenged by the Internal Revenue Service for issuing tax-free bonds to build a fiber-optic network that could benefit private business. The fiber-optic network has been a major selling point for Microsoft and Yahoo, whose server farms need redundant, high-speed data pipelines.

Managers at the two utilities say they, too, are worried about how much cheap power should be allocated to companies such as Microsoft and Yahoo -- and how many jobs are likely to come of it.

"It is a real concern of the commissioners," said Tim Culbertson, general manager at Grant County PUD, referring to the five elected local officials who make policy for the utility. "They don't necessarily like the low jobs and high megawatts situation that goes with the data centers. But the utility has an obligation to serve. It has no ability to require jobs."

For millions of electricity consumers in the Northwest, the unfolding power machinations in the mid-Columbia region are likely to create upward pressure on monthly electricity bills. As high-tech companies use more low-cost electricity in places such as Quincy, less will find its way to homes around the region.

"When I have to replace it in the marketplace, that power will be more costly," said Eric Markell, senior vice president for energy resources at Puget Sound Energy, the largest utility in Washington.

Markell said that while there are many other forces putting upward pressure on power costs, the loss of cheap power from the mid-Columbia dams "will be a factor in rising electricity bills."

© 2007 The Washington Post Company