BPA chief warns of higher rates

By WILLIAM McCALL The Associated Press 1/25/01 7:40 PM

PORTLAND, Ore. (AP) -- The acting chief of the Bonneville Power Administration warned Thursday that wholesale power rates could jump 60 percent over the next five years unless the region can reduce skyrocketing electricity prices.

"We are making this announcement today to alert the region to the challenges we face," said BPA acting administrator Steve Wright.

Bonneville power, generated mostly by the 29 hydroelectric dams on the Columbia and Snake rivers, remains fairly cheap. But demand is increasing faster than supply, regionally and nationally, officials say.

"The fundamental problem is unprecedented high market prices," Wright said. "Unless the region finds ways to bring costs down, steep rate increases are unavoidable."

John Savage, director of the state Office of Energy, said the Bonneville announcement shows the federal power marketing agency is facing steep prices for electricity it buys on the spot market to supplement hydro power and other sources.

"Clearly, they are hemorrhaging badly by buying in the open market," Savage said.

He warned Oregon lawmakers on Wednesday that the state faces an "extremely tight" power supply outlook through next year. But he offered hope the situation could ease by the winter of 2002-03 as new generating plants now under construction come into service.

Still, the size of the potential BPA hike surprised him.

"Sixty percent is going to have a huge impact on Oregonians," Savage said.

The state's chief economist, Tom Potiowsky, said the entire region must face the reality of higher prices due to increased energy costs.

Aluminum and high-tech companies, in particular, will be hard hit, he said.

Intel Corp., based in Santa Clara, Calif., announced Thursday it is taking energy conservation measures at its Oregon operation -- its biggest division in the nation -- in an effort to trim its power consumption by 10 percent.

Potioswky said the Northwest -- especially the Portland and Seattle areas -- have grown enormously in the past decade but the power supply growth has not kept pace, partly because investors have shown caution under utility deregulation.

But high electricity prices in the short term will definitely spur investment in new generating capacity, he said.

"The incentive is sure there now," Potiowsky said.

Meanwhile, Northwest businesses and consumers will have to prepare for bigger electric bills.

"Over time, those price rises should soften, but I don't think there's any way out today," Potiowsky said. "It's going to have to be something we'll have to live with."

Wright has warned just last week that wholesale prices could climb by 30 percent, more than doubling earlier estimates that prices could jump 15 percent when new long-term contracts go into effect Oct. 1.

Wright said hard decisions must be made quickly to avoid threatening the financial stability of the federal Columbia River Power System and the economic benefits the region enjoys.

"Recent events in California demonstrate the consequences of failing to take decisive action," Wright said. "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."

Even though Bonneville's hydro power will remain cheap compared to other sources, Wright said the agency must generate enough income to ensure U.S. Treasury payments while funding fish programs and meeting other obligations. If BPA were to collect more revenue than needed, the agency would return the extra to ratepayers.

BPA provides just under half of the electric energy consumed in the Pacific Northwest, selling to more than 130 retail utilities and large industrial customers. The remainder of the region's power is provided by individual utilities, which are also facing higher power costs. Many have already announced their own rate increases.

http://www.oregonlive.com/newsflash/index.ssf?/cgi-free/getstory_ssf.cgi?o0083_BC_OR--BonnevilleRates&&news&newsflash-financial

-- Martin Thompson (mthom1927@aol.com), January 25, 2001