Contract decisions by Bonneville Power Administration industrial customers could have far-reaching effects on electricity consumers around the Northwest, officials said Wednesday.
And a target rate announced earlier in the day by the federal power-marketing agency may not be enough to reverse a growing wave of defections by aluminum smelters and other large electricity users, they added.
Bonneville said the 15 large commercial customers collectively known as the direct service industries can buy power at 2.26 cents per kilowatt-hour beginning Oct. 1, 1996. The contracts would last five years.
Although cheaper than the price the DSIs now pay, the target rate is higher than the price of electricity available from other sources.
The DSIs, mostly smelters, have until next Wednesday to determine how much energy they will take at the new price.
The agency will have another week to accept the responses and sign contracts, which would be contingent on the outcome of a rate case that is emerging as one of the most contentious and critical in the history of the region.
A hearing on the issues is set for next Friday in Portland.
Some politicians are concerned that concessions granted to large commercial customers could lead to higher rates for others.
“A further - and disturbing - consequence of these contracts could be to shift the market risks and costs of salmon recovery and debt repayment to residential, small-farm and other customers in the Pacific Northwest,” said Washington Gov. Mike Lowry in a letter to President Bill Clinton.
He asks Clinton to direct Bonneville to suspend the contract negotiations.
The utility commissioners of Washington and Oregon wrote a joint letter to U.S. Energy Secretary Hazel O’Leary saying Bonneville was turning its back on such responsibilities as energy conservation.
“We are dismayed that BPA’s recent actions are too much focused on maintaining its ‘commercially competitive’ position, and too little focused on its public purposes,” they wrote.
But Geoff Carr, senior economist for the Public Power Council, said Bonneville must make an effort to retain as many industrial customers as possible.
“If they leave, the cost that they leave behind will be picked up by guess who,” he said, referring to the council’s 114 public utilities.
The region’s private utilities, with the exception of Washington Water Power Co., are already up in arms because their customers face rate increases of as much as 14 percent as part of the Bonneville rate proposal.
Carr said an announcement Tuesday by Columbia Falls Aluminum Co. that it would shift 70 percent of its load from Bonneville to two private suppliers bodes ill for deliberations by other companies.
The Columbia Falls decision was the fourth by aluminum companies that historically have purchased all of their power from Bonneville, providing about 30 percent of the agency’s revenue.
Kaiser Aluminum & Chemical Corp.’s Pete Forsyth said failure to offer the smelters contracts will only force them to look more aggressively for alternative sources.
“What’s in Bonneville’s interest is revenue certainty,” he said.
Forsyth said Bonneville’s target rate is about 5 percent higher than the market rate, a spread that would cost Kaiser about $5 million a year.
But, he added, “We value Bonneville as a business partner.”
Steve Waddington, deputy director of the DSI trade group, said members will not be impressed by the Bonneville target rate, which is unchanged from a preliminary figure disclosed in July.
“I’m disappointed,” he said. “I think Bonneville missed a real opportunity to make a more competitive move.”
Lower rates were not possible, said Chuck Meyer, Bonneville’s manager for industrial customers.
But the target rate should give Bonneville a “fair shot” at keeping some of the industrial load, he said, adding, “We’re aware that there are suppliers out there who are cheaper.”
Smelters now pay 2.6 cents per kilowatt-hour for electricity under a rate plan that adjusts prices up and down to track aluminum prices.