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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Even the best BPA rates may be painful

Bert Caldwell The Spokesman-Review

There’s nothing routine about a Bonneville Power Administration electricity rate case anymore.

For decades, the federal agency that sells 40 percent of all power consumed in the Northwest rolled through the months-long process of setting its price without much fanfare. Abundant hydro-electricity from federal dams on the Snake and Columbia rivers assured low rates for residents and businesses alike. The Washington Public Power Supply System fiasco of the late 1970s put an end to that pleasant routine. The supply crisis of 2000-2001 blew it up entirely.

So, by recent standards, Monday’s announcement Bonneville wants to adjust rates for the next three-year rate period by about one-tenth of a cent seemed tame. But a vocal coalition that includes public utilities serving Kootenai, Pend Oreille and Okanogan counties, and the Ponderay Newsprint Co. has already organized behind the motto “$27 in ‘07,” the price per megawatt-hour they want from Bonneville within the near future.

A bipartisan group of Northwest senators and representatives sent Bonneville a letter last week supporting the coalition’s position.

Bonneville has proposed an adjustable rate that will probably fall closer to $30 per megawatt, the equivalent of three cents per kilowatt-hour. That’s wholesale. As a rule of thumb, the retail utilities that buy that power and deliver it to homes and businesses charge approximately double that amount. Bonneville’s price now is about $29 per megawatt, up from $23 before a shortage, exploited by Enron Corp. and others, devastated the Northwest at the turn of the millennium.

Avista Utilities does not get any electricity from Bonneville, but it does get cash that lowers rates to residential and small business customers by four-tenths of a cent per kilowatt-hour, of slightly less than 10 percent. Those so-called exchange payments to investor-owned utilities like Avista will come under fire during the rate-setting process. Many public utilities say they are too generous.

But the exchange payments are just one of several issues Bonneville and its customers will debate during the rate-setting process, which concludes next July. The new rates will take effect Oct. 1, 2006.

The major rate drivers are debt payment and the costs of preserving fish runs in the Columbia Basin. Last month, Bonneville wrote a check to the U.S. Treasury for slightly more than $1 billion. That’s about one-third its annual budget. The timing of that payment, and others to operators of the region’s lone nuclear power plant, create a cash flow problem Bonneville Administrator Steve Wright says adds as much as $3 to the price of a megawatt.

The agency’s direct and indirect fish and wildlife costs amount to about $500 million. Those expenses could increase considerably, however, depending on the outcome of a case that challenges Bonneville’s fish conservation efforts. Last month, a U.S. District Court judge in Portland ruled that the measures Bonneville has taken, or proposed, are inadequate. His decision, if its stands, could mean the removal of the four federal dams on the lower Snake. And much higher power costs.

That’s a worst-case scenario. But for thousands of Inland Northwest consumers, even the best case will be painful. Members of the Inland Power & Light, Kootenai Electric and Modern Electric cooperatives have enjoyed the benefits of low-cost supply contracts leadership signed with Bonneville prior to the supply crisis. Their utility bills have changed little, if at all, while most everyone else’s jumped 20 percent or more. Alas for them, the contracts expire next year, and whatever wholesale rate Bonneville sets could be as much as 50 percent higher than the one the cooperatives are paying now.

Inland Chief Executive Officer Kris Mikkelsen says the result will probably a rate increase to members of around 20 percent.

“We’ve been planning for this for three or four years,” she says, but preparing its 35,000 members for the impact remains a challenge.

At Kootenai Electric, General Manager Bob Crump says the utility may make some rate adjustment after the higher Bonneville prices kick in next year, but how and how much the board of directors has not yet decided.

Ponderay Newsprint Manager Paul Machtolf says any increase, no matter how small, tightens the squeeze on a mill that sells its product at prices below those of a decade ago. In the meantime, power costs have climbed 31 percent. Ongoing improvements in efficiency can only do so much to offset the effect of those bills.

“Even though we are one of the most efficient newsprint mills in North America, without an affordable price of power, we can’t compete,” Machtolf says. Those same dynamics killed off most of the Northwest’s aluminum smelters.

Bonneville rate cases have become forums for debates over natural resources, the economy, and other issues. This go-round will be no different.

A Spokane hearing on the rate case will be held 6 p.m. Dec. 1 at the Red Lion Inn at the Park.