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BPA to Drop Price of Power it Sells Utilities

by Bill Virgin
Seattle Post-Intelligencer, July 18, 2006

Coalition lobbied for the 3 percent rate reduction

They asked for it and they got it -- give or take 33 cents -- a $27- a-megawatt-hour wholesale power rate from the Bonneville Power Administration.

BPA, the government agency that markets electricity from Columbia and Snake river dams and one nuclear plant to the region's utilities, said Monday that it likely will cut rates on the power it sells to the region's utilities by 3 percent from present prices, starting Oct. 1.

The new rate will be $27.33 per megawatt-hour, down 10 percent from what BPA had initially proposed earlier this year.

That's good news for utilities such as Seattle City Light and the Snohomish County Public Utility District that buy power from BPA for resale to their residential, business and industrial customers.

The Northwest Coalition for Affordable Power, made up of utilities, businesses, labor unions, associations and county and municipal governments, had been publicly lobbying BPA to set a rate of $27 a megawatt-hour. The coalition said BPA could cut spending to get to $27 and warned that keeping rates at present levels or raising them would hurt the Pacific Northwest's economy.

"The coalition thanks BPA for its willingness to break new ground to return the region to the days of affordable energy rates," the group said in a statement Monday (Snohomish PUD was part of the coalition's membership; City Light was not).

Exactly how that 3 percent cut will translate into changes on customers' bills depends on a multitude of factors, including how much of its power the local utility buys from BPA, under what plan, and what's happening with prices on other sources of electricity the utility draws upon.

On Wednesday, Mayor Greg Nickels is expected to announce Seattle City Light's proposed rates for Jan. 1 through Dec. 31, 2008 (they'd then go to City Council for review). City Light gets 36 percent of its overall retail electricity from BPA. "Any rate reduction is welcome," said Suzanne Hartman, the utility's director of communications and public affairs.

Snohomish PUD spokesman Neil Neroutsos said the utility is just beginning its budgeting and rate setting for next year, and the BPA rate reduction, although good news, may be countered by the need for increased spending on infrastructure to handle growth in its service territory.

BPA said it was able to recommend a cut in wholesale power rates because of spending cuts, better than expected sales of surplus electricity because of more normal water levels on the Columbia-Snake system and some arrangements allowing it to operate with lower financial reserves.

The new Bonneville rates reflect an average of what the agency expects in the period from Oct. 1, 2007, through Sept. 30, 2009. They can be adjusted annually to reflect changes in water conditions or spending on salmon programs.

The good news BPA released Monday was tempered by another proposal that Bonneville made last week: Starting in 2011, when current contracts expire, it will sell at basic rates only as much power as it gets off the federal system -- about 7,100 average megawatts.

BPA said it will sell a defined amount of power to the 130 municipal utilities, cooperatives and PUDs defined as preference customers. If utilities want more than that, BPA will acquire it for them -- but at whatever it costs BPA to buy that additional electricity, which could be more expensive than hydropower.

In the past, BPA said, it had melded the price of its own power with that of bought power. That led to soaring rates when California's power crunch hit in 2000 and 2001. The proposed arrangement would leave it to utilities to decide whether they want to go with BPA and take a chance on what market prices will be in the coming years, or build or sign contracts for new generating supplies on their own.

Investor-owned utilities such as Puget Sound Energy don't buy power from BPA, although they receive some financial benefits for their residential and small-farm customers; that program and the level of payments has been the subject of a long-running legal challenge from some public utilities.

Bill Virgin
BPA to Drop Price of Power it Sells Utilities
Seattle Post-Intelligencer, July 18, 2006

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