Bonneville Power announces rate increase Agency examining rate structures, contracts

Al Gibbs; The News Tribune

PORTLAND - The cost of flipping the light switch in your home is going to go up.

Bonneville Power Administration chief Judi Johansen wouldn't say when or how much during a meeting Monday on how the federal power marketing agency will structure its next rate contracts.

But the options its number-crunchers unveiled to utility and industry executives gathered near Portland's airport ranged from a few percentage points to a 40-percent increase.

"It could be a helluva a bargain," said Kevin Clark of Seattle City Light, "or it could be 40 percent."

With about a $2 billion-a-year budget, under the worst scenario Bonneville might have to buy $800 million of power a year.

"That'd make news," Clark said.

Seattle City Light is expected to raise its rates next year by as much as 14 percent.

Tacoma Power hasn't yet decided whether to raise its rates or wait for a year or two. It is scheduled to come up with an answer by late September.

Puget Sound Energy's rates are frozen until next year.

But Bonneville's usual lowest-in-the-land prices could be affected by 2002 by energy market prices that have soared this summer, and by the need to buy more than 1,000 megawatts of power in those markets.

It's all caused by a lack of electric energy capacity in the Northwest and California and the desert Southwest, and by dysfunctional energy markets all along the West Coast.

The Northwest and Southwest have long traded power, with high-voltage transmission lines moving thousands of megawatts south to cool California and Arizona in summer, then north to warm homes here in winter.

But both areas are short of power to meet the heavy demands of summer heat waves or winter blizzards.

And with California's newly deregulated energy markets, the lack of adequate supply has meant higher costs.

At the same time, utilities and industries that cut their use of Bonneville power when its costs soared in the mid-'90s, now want back in the fold when new BPA rates and supply contracts take effect in October of 2001.

But Bonneville's trying to figure out how to adjust its prices if the energy markets continue to swing wildly up and down - and more up than down.

"It's all a moving target," said Randy Hardy, the former Bonneville administrator who is now an industry consultant.

Johansen would only say that "all options are open except no action."

As usual among utilities and industries that haven't been able to agree on much for decades, there was no consensus on how Bonneville should use its incredibly arcane rate contracts to handle a situation that Seattle's Clark called "forensic economics - a crazy market."

Public utilities that under federal law have first call for Bonneville's cheap power don't want to give up that advantage.

Puget Sound Energy, an investor-owned utility that next year for the first time will get electricity from Bonneville - some 700 megawatts, or about the same amount as Tacoma Power's entire load - wants more of the federal agency's benefits, although it's not legally entitled to them.

And small utilities that have already signed contracts with Bonneville, don't want the agency to renege on their deals.

Johansen was scheduled to decide what to do by week's end, but now could delay into early September.

The pressure to give something to everyone will be enormous.

Said Tim Hogan, PSE's vice president for external affairs, Bonneville controls "an asset everybody in the world wants to get their hands on."

http://www.tribnet.com/frame.asp?/news/local/0822a12.html

-- Martin Thompson (mthom1927@aol.com), August 22, 2000