BPA plans 75 percent rate hike
Increase could double if utilities don't reduce consumption
Bert Caldwell - Staff writer
The Bonneville Power Administration will raise electricity rates at least 75 percent when new contracts take effect Oct. 1, the agency's acting administrator said Wednesday.
And the increase could range upward of 150 percent if the Northwest utilities that buy BPA's electricity do not reduce demand by at least 10 percent, Steve Wright said.
Local utility officials who buy from BPA said even a 75 percent hike will translate into steep customer rate increases.
"I feel like I'm standing on the track and the train's coming," said Tom Richardson, head of Cheney's municipal utility.
He said a 100 percent price hike by BPA, which supplies all the city's power, will bump rates from an average 5 cents per kilowatt-hour to 7.5 cents in October.
Wright said response to BPA's calls for conservation have been reassuring, but the utilities have only until June 22 to agree to cut their electricity usage.
And, he warned, some BPA customers that have already signed power-reduction agreements can cancel their deals if other customers don't sign on.
"Nobody wants to be a sucker," Wright said.
BPA, which sells power from 29 federal dams and one nuclear plant, had warned of rate increases as high as 250 percent as managers tried to cope with the challenges of low stream flows and sky-high prices in wholesale electricity markets.
Wright said the agency can stay out of those markets if customers commit to a total load reduction of 2,400 megawatts, more than twice the amount of power needed to energize Seattle.
So far, he said, customers have agreed to return 1,200 megawatts to BPA. Most have come from settlements with two smelter operators -- Alcoa and Columbia Falls Aluminum Co. -- and PacifiCorp, a large investor-owned utility based in Portland.
Public utilities, BPA's biggest customers, have submitted only 68 megawatts of the 680 megawatts the agency wants from them, Wright said.
"I'm a little discouraged with the publics," he said, adding that he expected those utilities to come along more slowly because their decision-making processes can be cumbersome.
Wright said recent softening of electricity prices in wholesale markets may have led some managers to conclude BPA can moderate the potential rate increases.
In reality, he said, lower prices reflect the market's expectation that BPA customers will need less electricity.
If the agency instead has to buy additional power, the rate increases could be even higher, Wright said. "We've got to keep moving," he said.
Wright continued to take a tough line against Kaiser Aluminum Corp., which has refused to return any revenues earned on its resale of federal power to wholesalers.
Estimates of Kaiser proceeds from those sales run as high as $500million.
Wright said BPA assumes Kaiser will not restart its smelters in Mead or Tacoma. If the company does want to restart the plants, he said, officials must resolve an impasse that has persisted since late last year.
Kaiser Vice President Scott Lamb said BPA has misconstrued the terms of its contract with the company.
If Kaiser is willing to spend power sale revenues on electricity to run the smelters, he said, then the company is entitled to the 290 megawatts provided for under a five-year contract that kicks in Oct. 1. "Our very strong preference is to operate our Northwest smelting capacity," Lamb said.
BPA spokesman Ed Mosey said Kaiser will have to outline its operating plans before the agency will buy power to supply the company's plants.
Wright said BPA's pacts with Alcoa and Columbia Falls are intended to compensate workers and communities, and to assure a trained work force is available when the smelters restart.
Mosey said the base 75 percent rate increase discussed by Wright will cover BPA payments to those customers that reduce their load.
Cheney residents will not be alone when higher utility bills arrive.
Vera Water and Power serves 8,000 Spokane Valley customers. The utility will buy all its power from BPA after Sept. 30.
General manager Kevin Wells said a 75 percent increase from BPA will kick rates for Vera residential customers up 50 percent to more than 6 cents per kilowatt-hour.
"That's a lifestyle change for some of our customers," he said.
Wells said Vera is working with BPA on conservation programs that will bring the load down close to 10 percent. The cooperative's board will review the proposals next week, he said.
Nespelem Valley Electric Cooperative Inc. serves much of the Colville Reservation west of Bridgeport.
General manager Bill Miller said many customers are elderly or living on fixed incomes. Many are orchardists struggling with low fruit prices.
Nespelem has only 1,550 active meters on its system, he said. This year the utility will spend $1 million buying BPA electricity, he said.
If the federal agency doubles its rates, and Nespelem faces an additional $1 million charge on its power bill, Miller said, the average customers faces a $700 increase in their annual utility bill.
Inland Power & Light Co., Kootenai Electric Cooperative Inc. and Modern Electric Water Co. will avoid BPA increases because their contracts lock in rates until 2006.
But Inland Power & Light General Manager Kris Mikkelsen said the cooperative will implement several conservation programs to help keep rate increases for other utilities to a minimum.
Avista Utilities will take only a small amount of power -- 49 megawatts -- from BPA come October, spokesman Hugh Imhoff said.
Returning 10 percent will have little effect on either Avista or the agency, he said.
BPA will submit its final rate plan to the Federal Energy Regulatory Commission for approval by the end of June. Despite the impacts of the pending rate hikes, Wright said, "We continue to have a system that is the envy of the rest of the country."