The Bonneville Power Administration is tempering its request for higher electric rates next year.
BPA officials had considered asking for a 12 to 20 percent rate hike, but opted instead for a 6 to 10 percent hike, given the ongoing weakness in the Northwest’s economy, said Steve Wright, BPA administrator.
“We knew what the reaction (to the bigger rate hike) would be, and we didn’t feel good about it ourselves,” Wright said Monday during an interview in Spokane. “We struggle with should we be doing this?”
After two money-losing years, however, Wright said that some level of rate increase is needed in 2011. BPA drew down its cash reserves over the past two years, when drought reduced hydropower generation and wholesale power sales dropped. BPA is also facing expensive upgrades to aging dams and transmission equipment, he said.
BPA sells the power from federal hydropower dams on the Columbia and Snake rivers. The agency’s prices for electricity affect consumer-owned utilities such as Inland Power and Light and Kootenai Electric Cooperative, which purchase all or most of their electricity from BPA.
Wright makes the decision on the size of the final rate hike. His decision is reviewed by the Federal Energy Regulatory Commission, a process that takes about six months.
In opting for the smaller rate hike this time around, BPA will assume more financial risk, Wright said. That means rates could go up again “if things go bad,” he said. “The financial cushion we had before is gone.”
When BPA raises its rates, Inland Power and Light customers typically see some type of rate increase as well, said Jennifer Lutz, a spokeswoman for the utility.
BPA’s last rate hike took effect on Oct. 1, 2009. The increase averaged 7 percent.