The Bonneville Power Administration Monday announced the largest rate cut in its 58-year history, but the impact in the Inland Northwest may be minor.
Bonneville proposed an 8.2 percent price cut to the region’s 125 public utilities, most of which buy all their electricity from the federal power-marketing agency.
Kaiser Aluminum & Chemcial Corp and the region’s other aluminum smelters, consumers of vast quantities of electricity, would get a rate cut of almost 13 percent.
If approved by the Federal Energy Regulatory Commission, the reductions would take effect Oct. 1, 1996.
The BPA markets electricity generated at Columbia and Snake river hydroelectric dams, providing about half the electricity used in Oregon, Washington, Idaho and western Montana.
But Washington Water Power Co., supplier to most residents and businesses in the Spokane area, does not buy Bonneville’s energy.
In fact, the Spokane-based utility has become an aggressive competitor of Bonneville’s in the bidding for customers like the smelters.
Bonneville senior account executive Fred Rettenmund said the inroads made by WWP and others was one of two major factors in cutting rates.
“We think with these rates we will be able to maintain our pre-eminent position as the supplier of low-cost power in the region,” he said.
Rettenmund said the agency has also undergone a cost-cutting effort that will have eliminated 20 percent of payroll when completed next year.
He said the revenues lost because of the rate cut should not compromise Bonneville’s ability to rebuild salmon runs in the Columbia River Basin.
Future budgets still provide for fish expenditures of up to about $500 million a year, he said. Bonneville’s total annual budget currently is about $2 billion.
The agency’s customers responded positively to the rate announcement, but were cautious in assessing how they might respond.
The increasingly deregulated and competitive power market is moving fast, they said.
Inland Power & Light Co., which serves portions of the Spokane Valley, has absorbed recent Bonneville rate hikes, Assistant Manager Dave Clinton said. Directors will likely think twice before passing along rate rollbacks, he said.
Clinton noted that Inland General Manager Dick Heitman had told Inland members he would do everything possible to hold the line on rates through the year 2000.
The news from Bonneville will make fulfilling that pledge easier, he said.
At Kootenai Electric Cooperative Inc. in Coeur d’Alene, Marketing Director Larry Bryant said Bonneville has responded to customer demands for improved performance.
But Kootenai, which has retained a broker to help find less expensive power, will continue its search, he said. “We’re trying to look for the best deal for our customers.”
Payments to Bonneville represent about half the cost of doing business for most utilities that buy their power from the agency.
“Whether (the rate cut) will be enough to maintain a significant amount of Direct Service Industry load remains to be seen,” said John Carr, executive director of the trade group for smelters and other industries that buy direct from Bonneville.
He said smelters are reviewing offers from many potential suppliers who can undercut even the lower Bonneville price, which would be set at 2.59 cents per kilowatt-hour.
Kaiser Vice President Pete Forsyth said the proposed action will be enough to keep Bonneville in the ballgame, but doesn’t assure the agency will keep Kaiser’s business.
“There’s more to the story than the rate,” he said. “You have to have a contract to be sure that the rate is the rate, the deal is the deal.”
Smelter operators think they were treated unfairly when one-quarter of their power was cut off in 1992, he said, which is why they will insist any new contracts not allow for interruption of any part of their load.
Forsyth said the prolonged period necessary for Bonneville to adjust rates is indicative of the problems facing the agency.
The market is so dynamic, he said, competitors will likely undercut the rate before it can take effect.
And in the meantime, a one-year 4 percent rate hike is due to take effect Oct. 1 of this year.
Kaiser recently contracted with WWP for a portion of its load, as did Northwest Aluminum Co. in The Dalles, Ore.
Among the big losers if the proposed plan takes effect are Puget Sound Power & Light Co., PacifiCorp and Portland General Electric Co., all of which buy a portion of their electricity from Bonneville.
Under a residential exchange agreement, the three have received $175 million in subsidies from Bonneville. Those would be cut to about $50 million.
The result for residential customers of Portland General, for example, could be rate hikes of up to 12 percent.
, DataTimes ILLUSTRATION: Graphic: BPA rates fall