Eugene Oregon Electrical rates could skyrocket

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January 27, 2001

Electrical rates could skyrocket By JOE MOSLEY The Register-Guard

The outlook for electrical power customers has gone from unattractive to downright ugly: Wholesale electricity prices are now expected to as much as double next fall, causing local utilities to raise rates even higher than expected.

Residential and business consumers could see their current bills jump by up to two-thirds.

In real numbers, the average residential Eugene Water & Electric Board bill of $60 per month is now expected to increase to about $67.50 in March, then to somewhere between $85 and $100 in October.

"The latest information ... is shocking, to say the least," EWEB power marketing manager Scott Spettel said Friday.

The Bonneville Power Administration projected this week that wholesale prices it charges to utilities may double next fall, and average 60 percent higher than current rates during the next five years.

Even before the latest BPA bombshell, EWEB had warned its customers to expect bills to increase by an average of 15 percent in March, with an additional 25 percent hike in October.

Accounting for the BPA's latest projections, the fall rate increase for EWEB customers now could range from 30 percent to 50 percent - on top of this spring's 15 percent jump.

Earlier this month, the Springfield Utility Board set a March rate increase averaging 9.7 percent, and said at the time that an additional 25 percent bump in rates was likely in October. On Friday, the utility's officials were just hoping that the latest BPA figures will fail to materialize.

"It would be real hard to conjecture what that's going to mean to our rates," said SUB customer services Director Mary Ann Rhodes. "We've heard so many numbers over the last few weeks ... we'd kind of like to wait till the fall, when we're closer to the real event, rather than hazard a guess."

The Springfield utility buys most of its electricity from Bonneville, along with small amounts through other power suppliers on the open market. But because open market prices for electricity have soared during the West Coast energy shortage, SUB will enter a contract next fall to buy all of its electricity from the BPA at relatively stable rates.

Likewise, EWEB now produces about a third of its own electrical power, contracts with the BPA for another third and shops the open market for the final third. The utility plans to leave the open market next fall in favor of a two-thirds share from Bonneville.

Because demand for electricity has outpaced supply in recent months, prices charged by private energy producers - for both current and future supplies - have increased geometrically.

For instance, Spettel said EWEB recently contracted with an open market supplier to buy a small amount of electricity to cover the needs of residential customers this summer at an unheard-of price of $400 per megawatt hour - 10 times the typical current rate.

One of the main reasons that Bonneville's prices are also undergoing dramatic increases is that the agency is contractually bound to sell more electricity to its customer utilities than is produced by the facilities it manages for the U.S. Department of Energy. Therefore, Bonneville must buy electricity itself on the open market, then charge utilities enough to recoup its costs.

The BPA sells power from 29 federal dams and one nuclear power plant to more than 130 retail utilities and large industrial customers in the Northwest.

In announcing the wholesale rate increase projections, BPA Acting Administrator Steve Wright said energy supply is expected to stabilize over the next five years and rates should even out by 2004 at a level about 40 percent higher than current energy prices.

"If we meet the challenge now, the region will continue to reap the advantages of a power supply that is one of the lowest-cost, most-reliable in the nation for many years to come," Wright said in his written announcement.

Power supply is expected to catch up with demand as new energy conservation efforts take hold and as a variety of planned power generation facilities - mostly wind farms and natural gas-powered generators - come on line over the next few years in Washington and Oregon.

But the factor that has most magnified the effects of over-demand - and offers a glimmer of hope for rate-hike redemption - is the Northwest's dry winter. A lack of steady rainfall and resulting low snowpack has brought projections of reduced energy production this summer at the region's hydroelectric dams, and has contributed greatly to soaring prices.

But officials at area utilities remember a similar start to the winter of 1992, when above-average precipitation from February through April ultimately salvaged a snowpack that was 90 percent to 95 percent of normal, and resulted in near-normal hydroelectric production through the summer.

"Definitely, prayers for rain would be helpful," said Frank Lamb, general manager of the Emerald People's Utility District.

EPUD relies almost entirely on Bonneville for its electrical power and will work with its customers to mitigate the increases.

All local utilities are encouraging customers to be aware of their energy consumption habits and change them as necessary - turn off lights when leaving rooms, turn thermostats down a few degrees at night and even turn off computers when not in use. Most public utilities also offer rebate or low-cost loan programs for weatherization and replacement of inefficient windows and doors.

Lamb said EPUD is even looking into the possibility of borrowing money for scheduled capital improvement projects, then diverting operating revenue that had been budgeted for the projects to instead absorb a portion of the steepest rate increases over the next couple years.

"We have to see if we can't flatten out the spike ... and we do have the option of borrowing," Lamb said. "We've got to come up with some way to flatten it out."

http://www.registerguard.com/news/20010127/1a.ratehike.0127.html

-- Martin Thompson (mthom1927@aol.com), January 27, 2001


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