End near for BPA buyback deals

This story was published 6/15/2001

By Chris Mulick
Herald Olympia Bureau

OLYMPIA -- It appears the Bonneville Power Administration's wholesale electric rate increase will be at least 75 percent, administrator Steve Wright said earlier this week.

The federal power marketer has a week left to secure agreements from its utility customers to shave their purchases by
10 percent for one year. The BPA also hopes Kaiser Aluminum and Golden Northwest will agree to suspend operations for two years, as the rest of the agency's industrial customers have.

Earlier this spring, Wright announced that rates would have to increase by at least 250 percent without the buyback agreements. That figure was whittled to 150 percent a week ago after some of the agreements had begun trickling in.

Though more have come in since, the agency needs even more buy-back agreements still to reach targets that will cement the deals. Otherwise, they could unravel, causing rate projections to climb again.

"We can still end up on the high end of this range," Wright said, adding that he is optimistic though nervous about the prospects of meeting the threshold.

It won't be clear what kind of retail rate increases consumers can expect until late summer, after the utilities have a chance to conduct cost-of-service studies. Typically, wholesale power purchases make up a little less than half the average residential bill.

Bonneville is hoping its utility and industrial customers will agree to sell back 2,400 megawatts of the more than 11,000 it agreed to sell to them beginning Oct. 1.

That would limit the amount of electricity it would have to buy for them on expensive wholesale markets, reducing the amount the agency has to increase rates. As of Tuesday, the agency was barely more than halfway there.

"We're getting closer, but we're not there yet," Wright said after he and utility representatives met with Gov. Gary Locke to discuss a myriad of energy issues.

Though it's possible Oct. 1 increases would be less than 75 percent, it could be difficult to attain. There will have to be at least a 50 percent increase just to pay for all the financial incentives Bonneville is offering customers to participate.

Bonneville is hoping to get 600 megawatts out of its preference customers, the public utilities and rural electric co-ops. The more that join, the lower the rate increase for everybody.

That's been a tough sell so far as only about a quarter of the goal had been met as of Tuesday. At that point, Bonneville was still about 1,100 megawatts short of its 2,400 megawatt goal.

The Benton Public Utility District chipped in this week, agreeing to sell back 21 megawatts, or 10 percent, of its Bonneville take for a year. The Franklin Public Utility District was one of the first and the Benton Rural Electric Association not only has sold back 10 percent but is considering selling back more.

Richland's electric utility hasn't signed on yet and still is reviewing the agreement.

"We're trying," said power analyst Jim Cherry.

For some utilities, agreeing to sell back 10 percent of their Bonneville power is no easy decision. Though Tri-City utilities say they have or are making arrangements to replace that electricity, some utilities have little experience acquiring new resources.

There is some sympathy for utilities, including the Columbia REA, that reached agreement with Bonneville to buy all their power from the agency at existing rates. Those deals, largely only accepted by the smallest utilities, were being offered three years ago before wholesale markets turned upside down.

But otherwise, there will be hard feelings among utilities that agree to the buyback deals if their rates are higher than need be only because other utilities didn't.

"The free-riders will be the ones that will be a disappointment," Benton PUD Manager Jim Sanders said. "I'll be really disappointed if (others) don't step up."