BPA sees more deals to stabilize NW power prices
By Spencer Swartz
SAN FRANCISCO, June 15 (Reuters) - The federal Bonneville Power Administration (BPA) said on Friday it was confident more deals will be signed in the next week with its customers to reduce their energy use and to keep imminent power price increases from going a lot higher.
Portland, Ore.-based BPA, which supplies almost half the Northwest's power needs, projected last week that wholesale power prices it charges beginning in October would rise around 150 percent or more -- well below the 250 to 300 percent it forecast in April -- after getting several customers to sign agreements to reduce their energy demand.
The agency, however, warned that power prices could go a lot higher than 150 percent in October when current contracts expire if more customers in the region do not sign deals to reduce their energy use.
That outlook now appears to be improving after more customers recently signed agreements, including one of BPA's largest customers, a private utility that serves Seattle. In addition, other deals are close to being signed with many other customers.
``There will be a flood of deals coming in over the next week. We're very optimistic of reaching our goal and we may even go over our goal,'' Mike Hanson, a BPA spokesman told Reuters on Friday.
Hanson said negotiations with power-thirsty aluminum companies Kaiser Aluminum Corp. (NYSE:KLU - news) and privately held Golden Northwest Aluminum were ``still ongoing'' and said he believed if deals are reached with the companies they would likely come right before a June 22 deadline.
Kaiser and Golden Northwest are the only aluminum companies in the Northwest region that have not reduced or stopped operating to comply with BPA's request.
BPA has said it will pay employee wages and benefits for the aluminum smelters.
MORE DEALS
Hanson said four more of the 129 public utilities BPA serves had signed agreements to reduce their power demand, bringing to nine the total number of public utilities that have entered into deals.
The agency, which manages the 29 federal dams strung along the massive Columbia and Snake Rivers in the Northwest, said on Thursday that an agreement had been reached with its one of largest customers, Puget Energy Inc. (NYSE:PSD - news) unit Puget Sound Energy (PSE), which serves Seattle.
Under this deal, the second reached with BPA's six investor-owned utility customers, PSE will exchange 368 average megawatts for a year for monetary benefits for 820,000 PSE customers, BPA said.
BPA said last week utilities and companies that have signed agreements were likely to back out of their deals if others also do not sign up - a scenario that would force BPA to buy more power in the costly and volatile open market.
Most of the public utilities that have signed deals have contingencies that allow them to get out of their agreements if others do not sign deals.
With the latest agreements, BPA has a little more than half of the 2,400-megawatt load reduction it needs to ease exposure to the spot market.
Last week, BPA said power rates it charges would likely rise to nearly $60 a megawatt hour, more than double the $23 a megawatt hour paid in recent years, if no more deals were signed and if no companies backed out of their agreements.
BPA customers have until June 22 to complete their negotiations for new contracts.
On June 29, the agency will submit power rates to the Federal Energy Regulatory Commission for approval, and they would be in effect for six months beginning October 1.