BPA, utilities sign contract to lower rates

PORTLAND — Some Northwest utilities can expect a 6 percent cut in wholesale electricity rates after settling a nearly 4-year-old contract dispute with the Bonneville Power Administration on Tuesday.

It is too early to say whether residential rates would be affected, utility officials said.

Public utilities had claimed that Bonneville made excessive payments to a handful of private, investor-owned utilities when electricity prices soared in 2001.

The public utilities argued the private companies should return hundreds of millions of dollars in BPA payments for electricity needed to supply the region during the 2001 Western energy crisis.

Demand for electricity increased sharply in 2001 just as the region was hit by drought that limited hydropower production, failed utility deregulation in California and Enron Corp. market manipulation.

Bonneville Administrator Steven Wright spent months negotiating a settlement that was rejected last January by public utilities despite the endorsement of the governors of Oregon, Washington, Idaho and Montana, along with the congressional delegation from the four Northwest states.

The bulk of the money covered by the agreements was from the 2001 crisis, when BPA had to buy power on the open market to meet demand or pay the utilities to replace unavailable BPA power.

Avista Corp., Portland General Electric, Idaho Power Co. and NorthWestern Energy signed settlement agreements that give up some of benefits under contracts signed in 2000 in return for guaranteed benefits to residential and small-farm customers in 2007-2011.

Such benefits could include cash payments to the utilities that would lower rates for their customers, along with a more predictable power supply.

Avista Corp. will be giving up $430,000 in benefits in return for a slight increase in payments from 2007 to 2011, said company spokesman Hugh Imhof. “We still don’t know what impact it will have on customers, but we do know it will be very minor,” he said. However, the reduction in Bonneville’s rates will be good for everyone in the region, Imhof said.

Some local public utilities, such as Inland Power and Light, which locked in rates with Bonneville until 2006, will not be immediately affected by this settlement. Inland, however, will see slight increase in rates following 2006. Utilities that did not lock in rates, such as Vera Water and Power in Spokane Valley, will see a rate reduction in 2005 and 2006 as a result of this agreement.

Despite the slight increase in rates following 2006, Inland CEO Kris Mikkelsen said the agreement is valuable because it caps the amount of financial benefits the investor-owned utilities can receive from Bonneville. It also provides more certainty about Bonneville’s rate structure, she said.