Sunday, December 17, 2000, 10:16 a.m. Pacific

Power rates go higher as energy crisis grows

by Jacqui Banaszynski Seattle Times staff The Seattle Times The level of water behind Ross Lake is 25 feet lower than on the same day a year ago. Low water has contributed to rising power rates in the Pacific Northwest. As panic over the California energy crisis spreads to the Northwest, prompting some utilities to warn of doubling electricity bills, managers at Seattle City Light offer this duet of money-saving advice:

Pray for rain.

And light a few candles for California.

A return of Seattle's defining winter rains is the best defense against the skyrocketing utility rates that have crippled California and are creeping into bills in Snohomish County and Tacoma.

"Sometimes we get rained out of these hummers," said Bob Royer, spokesman for Seattle City Light. "And sometimes we don't."

But even if rains come to fill the rivers that power the turbines that fuel the lights, the strain on the West Coast energy grid, and the vagaries of California's experiment with deregulation, are likely to push up electricity prices for several months to come.

Throughout the Puget Sound, residents are seeing California's crisis reflected in their utility bills. Commercial and industrial ratepayers are facing even bigger increases.

The Snohomish County Public Utility District last week announced a rate increase of 35 percent, the second-highest increase in the utility's 51-year history.

Judy Swearengin, co-owner of the California Burger Company in Lynnwood, says the increase will slash her restaurant's narrow profit margin. She estimates her utility bill will go from $1,100 every two months to $1,400.

"We're small, so any increase is going to hit us," Swearengin said. "I could cry."

To the south, Tacoma Power tomorrow will request an immediate and dramatic surcharge, less than a week after ratepayers revolted over hints that bills could go up as much as $100 a month.

"It would hurt us very much," said Charles Ward, 66, a retired electrical engineer. "If we spent (money) on that increase we wouldn't be able to spend it on medical care."

He fears his electricity bill of about $86 every two months could almost double, for as long as nine months. He thinks the utility should give a discount to customers who conserve, and reconsider the surcharge every month, eliminating it when the market stabilizes.

Seattle City Light customers have been buffered from the worst of the rate storm by the utility's massive generation system and zealous conservation programs. But a 10 percent surcharge will begin next month and last at least two years. If the chaos in California doesn't ease, or City Light's power supplies aren't boosted by heavy winter rains, the surcharge could be a mere hint of things to come.

"It's phenomenal, the amount of money you pay out for utilities," lamented Jim Scott of North Seattle.

Scott, an unemployed computer engineer, figures he pays $220 a month for power at the home he shares with his wife, daughter and a grandchild. Any increases in that bill will cut into other essentials.

"Everybody thinks everybody makes a lot around here because of computer money," Scott said. "Let me tell you, that's not the case."

Although electricity prices are grabbing the headlines, they aren't the only things on the rise.

Pressure to push up natural-gas rates, long considered the clean and thrifty darling of home heating, is expected to intensify.

Puget Sound Energy, which sells both electricity and gas, has made only minimal increases in its electricity rates in recent years. But the private utility has asked state regulators to OK a 25 percent rate adjustment for natural gas starting in January. If approved, it would be the third increase in 15 months, totaling 85 percent.

No one culprit to blame

There are multiple culprits behind rising electricity prices.

Weatherization measures have been abandoned in some areas, and maxed out in others, making them a less valuable tool against rising consumption and cost. Efforts to save salmon have limited what utilities can do to draw hydropower from rivers. New technology sucks energy to run everything from wired office buildings to personal computers.

Meanwhile, an unseasonably sunny, cold fall has made for glorious sunrises but weakened the region's power-rich rivers. Northwesterners dodged brownouts last week when a cold snap proved shorter and less severe than predicted.

Beyond that, blame California.

The Golden State's move to deregulate is regarded by critics as dangerous folly. While federal officials rush to the aid of California, other states on the West Coast grid are whiplashed by the whims of profiteering and hoarding that, in some cases, have run up raw power prices 10,000 percent.

Nature compounds the chaos. California's dry, hot summer overtaxed the generating system there, leaving it unable to provide the usual surplus it sells to the Northwest come winter. Now, with the Northwest strapped to keep its own residents warm, national Energy Secretary Bill Richardson has ordered utilities to send any extra to California to alleviate blackouts.

It's a "Perfect Storm" scenario, says Royer, of Seattle City Light.

The grid could withstand a problem or two. But a series of exacerbating events has forced shortages, and brought some utilities to the edge of panic, prompting them to pass along massive rate increases to remain solvent.

So far, the problems are tame compared with the dark days of the 1970s, when conservation was in its infancy and the nation's oil supplies were threatened by Middle East turmoil. Drought was so severe through the late 1970s that, in 1981, streetlights in Seattle were turned off to save electricity.

In the two decades since, ratepayers got lulled by ample supply and stable bills. The nation's economy was in an historic boom, and even utility officials were questioning the need for peak power provided by four of the Columbia River system's dams.

Now economists are talking recession, weather forecasters refuse to guarantee an energy-friendly winter, and officials at the four major utilities in the Puget Sound area are preparing ratepayers for two years of rising bills.

Seattle City Light

Residential customers are facing a 9 percent surcharge beginning next month, on top of the typical winter rates about 40 percent higher than in non-winter.

Even at that, the bill for a well-insulated, modest home is expected to go up only $3. And adjusted for inflation, City Light customers are paying less for energy now than they did in 1995, according to senior economist Paula Laschober.

The surcharge is on top of a 5.6 percent rate increase this year and a 6.2 percent increase approved for 2002.

The utility boasts it still offers the lowest rates of 25 of the nation's largest cities. A typical $71 residential bill in Seattle would be $131 in Portland, Royer says.

Even so, utility officials and customers are nervous.

"Something has got to get better in California," said Royer. "And something has got to get better with the weather."

Buoyed by massive generation at dams in Pend Oreille County and the North Cascades, and by a 25-year investment in conservation, Seattle City Light typically only has to buy 20 percent of its winter power on the volatile wholesale market.

But this winter's drought has forced the utility to go to the market for twice that much. A batch of power that cost $70 a year ago now is deemed a bargain at $900.

"It is preposterous," Royer said. "The disaster in California is really affecting everybody."

At her home in North Seattle, Ursula is accustomed to conserving. She heats her living room and one of her three bedrooms, closing off the rest of the house, where she has lived for 52 years.

"I feel like I can put on an extra sweater if I have to," said Ursula, 79, who lives alone and asked that her last name not be published.

Her income is fixed at about $1,000 a month, a combination of Social Security and a small pension. She takes advantage of City Light's budget plan, which averages her monthly costs over 12 months, allowing her to keep her bills manageable in the winter.

Her November bill was $25. This month, with winter rates in effect and temperatures dipping below freezing, it went up to $35.

Ursula is OK for now. But she's been watching the news to the north, where residents in neighboring Snohomish County are paying an average of $63 a month, and will pay $22 more next month.

"I feel I'm very fortunate just to pay this," she said. "If it goes higher, I don't know."

Puget Sound Energy

Customers opened their electricity bills last month to notices warning of a modest 1.5 percent increase, effective Jan. 1.

The single-digit increases are largely thanks to state regulation and to what one utility official calls a "mixed portfolio" of energy sources.

The largest of three investor-owned utilities operating in Washington, PSE is regulated by the state, through the Washington Utilities and Transportation Commission (WUTC).

In 1997, PSE was created by merging Puget Sound Power & Light and Washington Energy, parent of Washington Natural Gas. The new company agreed to keep electricity rates stable through 2001, capping increases at 1.5 percent a year, said PSE spokesperson Dorothy Bracken.

PSE provides gas, electricity or both to more than a million customers in Western Washington.The company generates about a quarter of its own electricity, mostly at four hydroelectric power projects and seven gas- or oil-fired turbine plants. It buys much of its remaining power through long-term contracts with mid-Columbia River dams owned by public utilities. Some of those contracts will last another 18 years or more.

The result: Electricity rates that are relatively stable and predictable.

Natural-gas prices and rates are another story.

Under the 1997 agreement with the state, gas rates cannot be increased to boost the company's profits or support general operations, Bracken said.

But last week, PSE asked state regulators to trigger what's known as a purchased-gas adjustment, which allows the utility to pass increased prices for wholesale natural gas along to costumers.

The utility is seeking a 25 percent increase, or $16 for a typical $64 monthly gas bill.

Approval of the increase, expected Jan. 11, is "almost pro forma," said WUTC spokesman Tim Sweeney. "We look over their shoulder and check their math."

WUTC approved a pass-along increase of 16 percent in October 1999 and another of 27 percent last August. If the January increase is approved, PSE gas rates will have risen about 85 percent in 15 months.

According to PSE, the wholesale price of natural gas has quadrupled over the past year, translating into 50 percent increases in retail prices nationwide. Gas retailers in the West have been hit particularly hard because of a new pipeline that has diverted gas produced in Alberta, Canada, to the lucrative Midwest market.

"Before that, gas supplies were landlocked in our corridor, and that kept gas prices here low," Bracken said.

Since the energy crisis of the 1970s, and the failure of the WPPSS nuclear-power-plant installation in the early 1980s, escalating electricity prices prompted the region to push natural gas as a clean, cheap heating alternative. And even with the recent boosts, it remains cheaper than electricity. PSE says $1 worth of natural gas will give you the same amount of heat as $1.61 worth of electricity.

Snohomish County PUD

The district last week approved a 35 percent increase in its residential and commercial rates, the second-highest in the utility's 51-year history. The increase will take effect Jan.1.

The average PUD residential bill of $63 a month will increase by about 33 percent, or about $22, says spokesman Neil Neroutsos.

Commercial customers face a 38 percent increase.That means the average monthly commercial bill of $5,591 will be topped by an additional $2,294.

The public utility serves 260,000 customers in Snohomish County and Camano Island. The only time it raised rates more dramatically was in 1980, at the height of the energy crisis, when customers saw a 39 percent jump.

The utility generates power at its Jackson Hydroelectric Plant on the Sultan River and buys half of what it needs under contract from the Bonneville Power Administration. It typically buys only small amounts of power on the volatile open market.

But this year it has been forced to spend $20 million more than expected to buy wholesale electricity in November and December, Neroutsos said. That's a sizable chunk of the utility's annual $396 million budget.

The PUD also expects BPA to raise its price when it negotiates a new contract next October, when it will seek to purchase 85 percent of its supply from the federal power-marketing agency, Neroutsos said. While that contract should ensure some stability, it also means higher bills become the norm.

Tacoma Power

Tacoma Power last week shelved plans to ask residential customers to pay an 86 percent surcharge after some members of the City Council challenged the increase, which would have raised the average residential utility bill $70 to $100 a month.

A surcharge for commercial customers would have ranged from 80 to 150 percent, depending on the size of the business, said Tacoma Power spokeswoman Sue Veseth.

After being rebuffed by council members and outraged ratepayers, the utility is recalculating the surcharge. It will take a new request, expected to be somewhat lower, to the board tomorrow, and to the Tacoma City Council on Tuesday.

"I believe the direction is going down, not up," Veseth.

The surcharge would start immediately and run through September.

Tacoma Power is in much the same fix as the Snohomish County PUD.

In past years, the utility has generated power from three of its own hydroelectric plants, purchasing whatever else it needed from BPA and the open market.

For now, despite escalating prices, it is buying heavily off the market, hoping to reserve its own hydropower for the late winter months, when the crisis could be more severe, Veseth said.

Despite the pain to ratepayers, if Tacoma Power doesn't raise rates now, it will deplete its $100 million reserve account, putting the utility at risk, Veseth said. The utility is shopping for power at prices ranging from $1,000 to $5,000 per megawatt hour. Just last spring, the same megawatt hour cost $125.

Times staff editors John de Leon and TerryTazioli contributed to this report.

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-- Martin Thompson (mthom1927@aol.com), December 17, 2000