Smelters’ Decision Will Help Set Rates

Electricity rates for millions of Northwest residents may lie in the hands of the region’s aluminum smelters and a few other industrial customers.

Collectively known as the direct-service industries, the plants consume 20 percent of the electricity sold by the Bonneville Power Administration.

If they decide Bonneville is no longer the best energy source, public utilities and other customers will have to shoulder a greater share of the costs associated with fish recovery, debt payments and the operating cost of the Washington Public Power Supply System’s Plant No. 2.

As Bonneville’s highest-cost electricity source, No. 2 would be a so-called “stranded investment” - too costly to operate but one that still must be paid for.

But Bonneville spokeswoman Dulcy Mahar said rate reductions proposed last month are intended to keep not only the smelters content, but utility customers as well.

“We’re hoping that stranded investment becomes a moot point,” she said.

Mahar said Bonneville wants to retain at least 75 percent of the DSI’s electricity business. Failing that, the agency would develop a rate schedule that would offer utility customers three options:

Retaining the current contract.

Signing a new contract above a threshold level that absolved the utility of any charges for stranded investment.

Signing a contract below the threshold that would expose the utility to stranded investment rates.

Most existing contracts with both the DSIs and utilities have no provision for stranded investment rates or other forms of “exit” fees if they leave the Bonneville system.

DSI and utility representatives say the fees should not be necessary.

“If you meet the market, you shouldn’t have a problem,” said Ken Sugden, manager of the Franklin County Public Utility District.

Public utilities recognize Bonneville must meet its debt obligations, but believe everyone should contribute whether or not they leave the system, he said.

“Most of the folks I talk to think Bonneville is definitely on the right track,” said Inland Power & Light Co. Manager Dick Heitman.

He said Inland’s board was so pleased with the latest rate proposal they delayed implementation of an agreement with the Washington Water Power Co. that would have transferred more than 40 percent of its load to the Spokane utility.

Kaiser Aluminum & Chemical Corp. recently agreed to take a portion of its electricity from WWP.

Vice President Pete Forsyth said the company will likely split its purchases between Bonneville and other sources, but does not yet know how the percentages will work out.

While rejecting the idea of an exit fee, Forsyth said Kaiser expects any contract it signs will require the company to pay any supplier for the electricity whether it takes the power or not.

“That’s accepted marketplace risk,” he said.

John Carr, spokesman for the DSI trade group, said Bonneville will survive only by competing. Exit fees, he said, “are an attempt to hold on to the past.”

Northwest Conservation Act Coalition spokeswoman Sarah Patton said there are aspects of the past worth hanging on to, like conservation, alternative energy and salmon-recovery. Continued funding of those efforts may require exit fees.

, DataTimes