Another jolt looms for power customers

Rate hikes likely unless winter gets wetter, BPA says

By KATHY DAY Herald Writer

EVERETT -- The likelihood of another significant hike in electricity rates later this year has taken on new weight.

On Monday, the top official at the Bonneville Power Administration estimated it would have to charge its customers 30 percent more this fall if the Pacific Northwest winter stays abnormally dry.

The federal BPA, which markets power from the region's hydroelectric dams, is the major supplier for the Snohomish County PUD, which raised rates 33 percent on Jan. 1.

"Obviously, this is not good news when your primary source of power is talking about hikes like this," assistant general manager John White said Tuesday.

He said the BPA announcement did not come as a surprise.

The district has been bracing for the increase because it will affect its new BPA contract, which takes effect Oct. 1. As recently as last week, White presented updated projections to the board that factored in at least a 30 percent BPA hike.

A 30 percent BPA hike does not automatically mean PUD rates will increase by the same amount. In the past, the agency has used budget cuts, dipped into now depleted reserve funds and stressed conservation to moderate rate hikes.

The district is looking at long-term "shock-absorbing" strategies, White said.

The rate hike earlier this month resulted from a combination of factors, including a water shortage, demand that has outpaced generating capacity, a lack of new plant construction and serious problems with energy deregulation in California.

The estimated 30 percent hike by BPA is double what the agency predicted in November, when it said rates were likely to increase by about 15 percent.

"We're looking at a substantial increase," Wright said during a Monday meeting with energy experts and Sen. Ron Wyden, D-Ore., at the senator's office in Portland.

But until BPA completes the hearing process and gets approval from the Federal Energy Regulatory Commission for its rate structure in late June, the actual numbers are up in the air.

BPA spokesman Mike Hansen said Wright's comments regarding the size of the increase involve two different parts of the rate proposal. Under its contracts, the agency can invoke varying levels of a "cost recovery adjustment clause"

The first, a load-based adjustment that would be enacted for five years, is allowed to accommodate increasing demand for power. With all of the pending contracts, BPA is facing a shortage of about 1,500 megawatts of power and will be forced to make up the shortage by buying in the open market, where prices are at least 10 times higher than a year ago.

The second hike, called a "financial CRAC," can be requested on a year-to-year basis if BPA's reserves fall below $300 million, Hansen added, noting that what Wright said Monday was that the second adjustment could be equal to the first, for a total of about 30 percent.

"It could be higher and it could be lower," Hansen said. Factors like rainfall, snowpack and market prices will influence the final numbers.

Wyden, a senior member of the Senate Energy and Natural Resources Committee, reacted quickly to the threat of higher prices.

He said an increase of that size would be devastating to the people and businesses of the Northwest. He said he would use all of his political powers to bring electricity prices down, promote conservation and increase generation.

"We're going to pull out all the stops to prevent these kinds of things from happening," Wyden said.

Wyden followed up Monday's discussion with a phone call to Spencer Abraham, President-elect Bush's choice to run the Energy Department.

Wyden said he urged Abraham to carefully evaluate the Western energy crisis and to steer clear of policies that might endanger the Northwest and its low-cost hydropower.

The Associated Press contributed to this report.

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-- Martin Thompson (mthom1927@aol.com), January 17, 2001