BPA rates to rise 46%; City Light users will pay 15% more
Saturday, June 30, 2001
By BILL VIRGIN AND PAUL NYHAN
SEATTLE POST-INTELLIGENCER REPORTERS
The Bonneville Power Administration said yesterday that the Pacific Northwest's wholesale electrical rates will rise 46 percent in October, a considerably brighter prospect than the tripling of prices the agency had warned of just a few weeks ago.
The 46 percent increase will still take a bite out of business and household budgets in the region, and it's a stark contrast to the situation of a year and a half ago when Bonneville thought it might not have any rate increase for the five-year contracts that take effect in October.
But since then, chaos in the West Coast power markets has driven spot-market prices to 10 times their historical levels, and sometimes more.
How much of a bite consumers face will depend on how much electricity local utilities such as Seattle City Light take from Bonneville. In fact, for some utility customers, such as those in Tacoma, the new rates will represent a reduction from current surcharges imposed in the midst of the West Coast energy mess.
Tacoma Power Superintendent Steve Klein said the BPA increase will translate into a 20 percent average increase for its customers. Tacoma Power is likely to increase rates on top of that because of the borrowing costs it incurred to buy electricity and because it hasn't had a general rate increase in more than five years.
But Klein said the increase still would be less than the 50 percent average surcharge imposed in January; that surcharge is set to expire Oct. 1.
Seattle City Light customers can expect the BPA increase to boost rates by roughly 15 percent, according to Bob Royer, the public agency's communications director.
An increase that kicks in tomorrow already will raise the average monthly bill for City Light customers to an average of about $57. A 15 percent increase would raise it to about $65.
Even at its most optimistic, City Light was hoping BPA's increase would be no more than 100 percent, which would have meant passing on a 22 percent increase to its customers. Even so, by the end of the year, City Light rates will be roughly 60 percent higher than they were Jan. 1, according to the agency.
"It says something about the energy crisis we've been dealing with that a 46 percent increase would be good news," said City Councilwoman Heidi Wills, chairwoman of the council's energy committee.
Snohomish County Public Utility District customers will face increases of 20 percent to 25 percent on top of increases already imposed, spokesman Mike Thorne said.
Puget Sound Energy ratepayers won't be affected because the Bellevue-based utility had already agreed to a buyback plan with BPA in which it receives cash payments for the electricity it was to receive from Bonneville.
Federal energy officials yesterday defended the 46 percent rate increase, saying it could have been far higher. Thanks to load reductions, Bonneville will now take $4 billion less from the Pacific Northwest economy, according to acting BPA administrator Steve Wright.
"We believe we have preserved approximately 25,000 jobs that otherwise would have been lost," Wright said at a news conference in Seattle yesterday.
Bonneville is a federal power marketing agency that sells electricity generated at dams on the Columbia-Snake river system and a single nuclear plant to utilities and aluminum smelters. BPA has a little more than 8,000 average megawatts of power to sell. In the latest round of negotiating contracts, BPA's customers signed up for more than 11,000 megawatts.
BPA expected to buy power on the open market to fill the gap. That became a problem when a series of factors -- a botched deregulation effort in California, growth in electrical demand without growth in generating capacity, a slackening conservation effort, a low water year for hydropower in the Northwest and, some say, an effort by generators to manipulate the market -- sent West Coast prices skyrocketing.
Wright several times raised estimates of how much BPA would have to increase wholesale rates, warning recently the increase could be more than 250 percent if it had to fill the entire amount with market purchases.
As an alternative, BPA proposed buying back some of the power its customers expected to take. Aluminum concerns generated the largest savings, as Northwest producers, with the exception of Kaiser Aluminum, agreed to shut down for various periods after Oct. 1, Wright said.
While the plants are idle, aluminum workers will continue to receive wages and benefits.
Kaiser and federal regulators, however, have not yet agreed on a long-term plan to shutter its Northwest facilities.
"We're going to go to work to evaluate this rate and will make a decision in due course. But clearly, we have a strong preference to restart and operate our Northwest capacity," Kaiser spokesman Scott Lamb said.
The BPA had criticized Kaiser for closing its smelters and selling power last year, choosing to keep the profits rather than use them to build alternate power generating plants or to pay more to its laid-off employees.
Kaiser responded that its BPA contract allowed the electrical resale. The new contracts do not contain a resale clause.
Both sides, however, say they are willing to talk.
The announcement did not leave everyone pleased. The Northwest Energy Alliance, which represents major industrial users, complained that its members paid for Bonneville's planning mistake, and said the reduction of proposed rate increases was achieved by targeting the industry.
Environmentalists, too, weren't happy. The Northwest Energy Coalition said the new rate plan allows BPA to stop water-spilling operations to help fish migration if there's a 20 percent chance of a future cash or water shortage. It would take a 50 percent chance of such shortages to trigger a rate increase. The environmental and conservation group said fish protection should get equal weighting. "Raising rates would allow the agency to buy additional power rather than put salmon at risk," the organization said.
The Bonneville Power Administration stressed the region's energy problems are far from solved, calling on its customers to continue conserving power.
"These commitments must be followed through to build a bridge to the long-term (energy) strategy," Wright said.
That strategy calls for improvements in energy transmission, generation, efficiency and gas-pipeline capacity and storage, Wright said.
The short-term steps, however, cut the risk of a major power outage next year from about 25 percent to 12 percent, Wright said.
BPA said it will review and can adjust rates every six months.