Fee Dispute Triggers Suit Against Pud Bpa Contends Utility Won’t Cover Conservation Payments

The Bonneville Power Administration, in a case that could affect millions of dollars in conservation payments to Northwest utilities, has sued Chelan County Public Utility District No. 1 for more than $400,000.

Documents filed last week in U.S. District Court allege the PUD refuses to compensate the federal power-marketing agency for its payments to makers of manufactured homes.

According to an agreement signed in April 1992, the PUD was to cover 25 percent of the $2,500 Bonneville spent on better insulation, windows and other upgrades to the manufactured homes.

A new contract signed a year later relieved the PUD of that obligation. In return, according to the court complaint, Bonneville could charge a termination fee if the conservation measures no longer reduced the amount of federal power taken by the PUD.

Randy Lowe, a power resource analyst for Chelan, said 157 upgraded manufactured homes were placed in the county while the pacts with Bonneville were in effect.

Chelan, which generates much of its own electricity, never bought more than a small amount of power from Bonneville.

Lowe said the federal resources became completely unnecessary with the expiration of contracts Chelan signed to supply other utilities - including Washington Water Power Co. - freeing that power for its own use.

Chelan severed ties with Bonneville in August 1994. The agency, invoking the termination clause, sought a refund of its conservation investments.

Tom Hannon, Bonneville’s conservation and energy services manager for the Northeast District, said the agency and PUD negotiated settlements of claims related to Bonneville weatherization and Super Good Cents building programs.

But $381,000 due for the manufactured home improvements remains unpaid. Interest since the bill was submitted in March 1995 has lifted the claim to more than $400,000.

Roger Purdom, a managing director at Chelan, said PUD officials think Bonneville should recover its investment from the home manufacturers, not from the PUD.

“Do we or do we not have an obligation to repay funds that were not paid to us,” he asked.

And with the slowdown in the growth of energy demand, Purdom said, conservation has cost the PUD additional load just as it enters a period of surplus.

But Bonneville spokesman Perry Gruber said minimizing demand for power was the acknowledged rationale for funding conservation measures during the 1980s and early 1990s.

“That was the benefit utilities saw going into this thing,” he said.

Although Chelan was not paid directly for the manufactured home upgrades, he said, payments to the factories were made on the PUD’s behalf.

Implications of the PUD’s action are far-reaching, Hannon said.

Chelan is the first utility to halt completely its electricity purchases from Bonneville. In an increasingly deregulated electricity market, many more are shopping for suppliers who can undercut the federal agency’s prices.

As long as a customer takes a minimal amount of energy from Bonneville, Hannon said, the contracts assume the agency continues to benefit from its investment in conservation and is not entitled to compensation from its customers.

Hannon noted that one Oregon town, Canby, reduced demand on Bonneville to 1 percent of its total requirements to avoid getting hit with the termination charge.

If other utilities followed suit, the already hard-pressed agency could conceivably have to shoulder a significant portion of the $1 billion it invested in conservation over the last 15 years, he said.

Gruber said the problem should be eliminated by the court. “We expect to prevail,” he said.

, DataTimes