State Opts To Review Power Deal Regulators Keep Jurisdiction Over Wwp-Kaiser Contract

Washington regulators have rejected a suggestion by Washington Water Power Co. and Kaiser Aluminum & Chemical Corp. that they waive authority over a proposed power contract.

But officials of the two companies said they do not expect the position taken by the staff of the Washington Utilities and Transportation Commission to block the deal, the first between two of Spokane’s biggest employers.

With competition in regional energy markets increasing, whatever action the commission takes could affect a myriad of other potential deals in the making.

The utility and aluminum company announced the transaction last month. WWP will sell up to 50 megawatts of electricity to Kaiser over a five-year period at an undisclosed price, with deliveries to start October 1.

Kaiser, whose Tacoma and Mead smelters consume vast quantities of energy, has never before purchased electricity directly from any source besides the Bonneville Power Administration.

In a June 26 letter to the Washington commission, WWP rates manager Tom Dukich noted the unique characteristics of Kaiser as a customer, and the utility’s ability to provide the electricity without adding expensive generating resources.

Also, he said, WWP efforts to compete for more contracts like that with Kaiser would be frustrated if the company were subject to regulations that did not apply to some competitors.

In a separate letter, Kaiser attorney Michael Early said the aluminum producer, unlike other WWP customers, could shop around for power and therefore does not need protection from state regulators.

He said a commission decision to assert jurisdiction could punish WWP and all its customers by putting the utility at a disadvantage as it bids for more contracts.

WWP officials believe deregulated wholesale markets offer a potentially lucrative source of new business.

Commission Secretary Steve McClellan responded Monday with a letter that said a decision to forgo jurisdiction could be far-reaching.

“The commission,” he writes, “continues to bear the responsibility to determine that charges for electricity service are sufficient to ensure that other ratepayers are not harmed, and the responsibility to ensure that such changes do not constitute unreasonable discrimination among customers.”

But he concluded by noting the existence of a special contracting rule that may accommodate the WWP-Kaiser arrangement.

Dukich said Tuesday WWP would likely pursue that avenue.

“We think we can work with the commission on this,” he said. “This is new ground for everyone.”

“It’s probably the anticipated sorting-out, learning period,” added Kaiser Vice President Pete Forsyth.

He said commission officials want competition to work, but without harming other utility customers.

“We’re not fearful,” Forsyth said. “There are a variety of ways to put this deal together.”

, DataTimes