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Bonneville Power Administration Officials
Discuss Rate Hikes in Heyburn

by Laurie Welch and Laura Lundquist
Times News, November 10, 2010

HEYBURN -- About three dozen city officials and power company representatives met Tuesday evening with Bonneville Power Administration officials to go over possible hikes in the price of electricity.

The nonprofit federal utility has power contracts with 11 Idaho towns. Due to a variety of factors, including an aging hydropower system and the volatility of wind energy, its managers have predicted rates may have to increase at least 6 percent in both the 2012 and 2013 fiscal years.

Speaking earlier in the day to the Times-News, Larry King, BPA customer account executive, pointed to three factors leading to the increases that will be proposed Nov. 17: an aging hydropower system that needs upgrades, a court case over a residential exchange program, and the continued federal litigation over endangered salmon species in the Columbia and Snake rivers.

At the meeting at United Electric in Heyburn, BPA officials also fielded questions ranging from the volatility of wind generation in BPA's transmission system to whether BPA would consider using natural gas power plants.

BPA Administrator Steve Wright said the amount of wind generation on the agency's system has grown from 250 megawatts five years ago to 3,000 MW today. Most is actually sold to California, with BPA's transmission system used like a highway.

Because the wind is so variable, BPA has to maintain other reliable base generation to handle energy fluctuations, which also adds to its financial pressures.

"If the wind is ramping up or ramping down we have to be doing something in our system to make other generations go in the opposite direction and that has a cost," Wright said.

Right now, that base generation comes from hydropower. But that system is facing its own challenges. King said 10 out of the past 11 years have been poor water years. And, many of BPA's hydropower facilities need expensive upgrades, with 20 to 25 percent of components past their recommended design life. The agency was able to borrow $3.25 billion from the U.S. Treasury through the stimulus for capital investments, but will still have to repay that sum.

"When they set the current rates a year ago, they thought the economy would improve," King said. "Aging assets translates to more failures if we don't have the money to do the necessary upgrades."

The new rate proposal will also come out before final briefings in the federal case over salmon management, a final decision in which isn't expected until February. "The court either accepts what we propose or rejects," King said. "At which point, we go into more litigation, which increases our cost."

BPA has put together a wind integration rate and identified about 10 other options to pursue -- including changes to federal law -- to avoid shifting the costs of wind power to Pacific Northwest customers, Wright said.

"We will be aggressive about it," he said.

Tuesday evening's discussion focused heavily on the wind issue.

United Electric General Manager Ralph Williams spoke of the need for BPA customers to speak at pending rate-case hearings to balance out influence from wind developers.

And Burley City Councilman Vaughn Egan asked if BPA would consider other power sources such as natural gas to help fill in fluctuation.

Wright said BPA has enough generated power already to serve the load and gas prices are just too volatile.

"We're very leery of making any commitments and buying any generated resources unless we know there is somebody there that's going to pay for them," Wright said.

Several speakers commended BPA for its approach to the hikes, saying they believed the agency would keep them as low as possible and that infrastructure does need to be cared for.

"I don't think anyone in the room would disagree with that and I want that heard loud and clear," Williams said of the latter.

The cities and BPA do have one new tool for handling rates. A constitutional amendment approved by Idaho voters just last week allows city-run electric utilities to set multi-year contracts rather than have to renew them every year. BPA can now seal 20-year contracts begun in 2008, officials said.

Once proposed, a federal hearing will be held on the new BPA rates. King said he expects the 2012 and 2013 rates to be finalized in August 2011.

Laurie Welch and Laura Lundquist
Bonneville Power Administration Officials Discuss Rate Hikes in Heyburn
Times News, November 10, 2010

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