Pend Oreille Pud Seeks Its Freedom Transmission Line Project Could Untether Utility From Bonneville

The Bonneville Power Administration has Larry Weis boxed in. The feeling is familiar.

The general manager of the Pend Oreille County Public Utility District has faced challenges from several quarters since moving over from the Snohomish County PUD in 1991.

Now, he and other district officials are on the threshold of committing the utility district to the biggest expenditure in its 60-year history - $22.5 million for a new power line and substations that will largely wean the system from what Weis calls “Mother Bonneville.”

The cost will eclipse that spent in the mid-1950s to build the district’s crown jewel, the dam at Box Canyon.

That project has allowed the district to keep consumer rates near 2 cents per kilowatt-hour, half the level charged by neighboring utilities, by dampening rate hikes Bonneville was imposing on utilities that rely on federal projects for all their energy.

Box Canyon produces all but about 25 percent of the district’s energy requirements.

But Box Canyon is just a dam, and a dam does not a utility make. The electricity its generators produce would go nowhere without Bonneville’s transmission system, which connects the project to substations up and down the county.

Bonneville also controls delivery of the power along the district’s system. When Box Canyon produces more energy than needed, the federal agency delivers the excess kilowatts to other utilities in the West.

If there’s a shortage, Bonneville sells the district some of its energy.

The district, unlike the overwhelming majority of utility districts and cooperatives in the Northwest, has always been billed separately by Bonneville for power and transmission.

That split has worked to the district’s disadvantage in the last two Bonneville rate cases because hikes for transmission have been particularly sharp - $1 million in both 1993 and 1995.

The federal agency’s preliminary proposal for next fall pushes transmission costs still higher, and for the first time adds charges for system control.

Weis estimates the Bonneville change will add another $500,000 to the $9 million the district paid for services last year.

Only a few other publicly owned utilities - notably those in Grant, Douglas and Chelan counties - that generate their own power get hit by the transmission increases.

And just two based in Everett and Eugene do not control their own power systems.

Adding to the degree of difficulty managing the district: Although the utility serves 7,000 customers, the Pend Oreille Newsprint Co. plant at Usk takes 80 percent of its power.

“Pend Oreille PUD is a very complicated utility for its size,” Weis observed.

He said most county residents are unfamiliar with the intricacies of the district’s relationship with Bonneville.

“It’s hard for my customers to understand ‘Where’s the increase,”’ he said.

And because Pend Oreille is so unique, Weis said, the district has few allies when arguing its case before Bonneville.

“Pend Oreille’s view of Bonneville is very different from other PUDs,” agreed Steve Johnson, executive director of the Washington PUD Association.

He said Bonneville has “unbundled” its services to eliminate pricing that obscured the true cost of transmission and control services.

“You can’t have cross-subsidies,” he said.

Ken Hustad, Bonneville’s district sales manager in Spokane, said unbundling enables the agency to tailor its services to each customers needs.

Coupled with improved financial performance, he said, Bonneville has been able to rebuild customer confidence in the face of competition from an army of newcomers in the Northwest.

“A year ago customers weren’t certain what we were going to do,” Hustad said.

Weis said Bonneville has indeed become a better business partner. But escalating prices in the last two years have helped build a case for a project that has been under study for some time.

A power line from Box Canyon would eventually save ratepayers money, he said, and shore up a system subject to some of the cruelest weather in the region.

“I’m uncomfortable with the level of reliability we can provide folks in this harshest of conditions this country can dish out,” Weis said.

Cusick in particular has been subject to outages, he said. Last winter, the school district had to close for a day because there was no power available.

And a few miles away, the newsprint plant has clamored for a backup to the Bonneville line that now supplies its energy.

Weis said extending the line south from Usk to Newport would also allow the district to tie into Washington Water Power Co.’s system.

The Spokane utility has agreed to beef up a district substation at the Boundary Dam near Metaline Falls in return for access to the new line when there is excess capacity available, he said.

Also, he said, the linkage at the south end of the line would enable WWP to provide control services to the district if officials want an alternative to Bonneville.

Weis said the district considered $6 million in modifications that would solve the Cusick-area problems.

But the changes would add no customers, nor whittle away at the district’s Bonneville charges. The result would be higher costs for all ratepayers while bonds issued to finance the project were paid off, he said.

Although the power line and substations are far more expensive, Weis said, they rid the district of a substantial portion of its Bonneville obligations.

And a consultant hired by the district urged officials to look to other service providers for some of its needs, he said.

Financial projections prepared for the power line project indicate that, worst case, the newsprint plant would start saving money by around the year 2007. Best case, the savings start in the year 1999, just two years after the line’s completion.

Residential customers would not realize any savings until 2013 worst case, 2003 best case.

The major variables are construction cost underruns or overruns and how far Bonneville moves its own rates in the future.

The federal agency released some modifications to its rate plan Friday. Weis said those will be plugged into the financial model the district is using to figure the project’s benefits.

“We have taken a very conservative projection,” Weis said, noting that the last computer run does not reflect the favorable trend in interest rates.

He said project bonds should be on the market next month, with power line construction to start in the spring. Preliminary work at Box Canyon has already started, he said.

Except for an upgrade of the line and substation serving the southern end of the county, Weis said the Box Canyon line should take care of the district’s needs for years to come.

But officials did take a tentative step in August to bulk up the district’s generating capability by purchasing a 54-acre site near Newport that could accommodate a natural gas-fired turbine.

The site is directly below an existing power line, and Pacific Gas Transmission Co. has agreed to build a 10-mile-long extension to a potential plant in return for a guaranteed gas-purchase contract, Weis said.

That project is probably 10 years in the future, if it happens at all, he added.

“It’s a long-term issue,” Weis said.

Although new customer signups have set a record for the fourth straight year, he said, the closure in recent years of the cement plant at Metaline Falls and sawmill at Ione are troubling.

The district is also in the process of renewing the federal license on Box Canyon, and resolving a dispute with the Kootenai Tribe over lands the project flooded.

, DataTimes