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BPA Signs Utility Agreement

by Chris Mulick, Herald staff writer
Tri-City Herald, June 2, 2004

The Bonneville Power Administration has signed agreements with private utilities that will help the federal power marketer cut short-term costs.

But it's unclear whether that will reduce electric rates this fall.

The deal, introduced in April and floated for public comment since, stretches out $200 million in payments due to PacifiCorp and Puget Sound Energy that previously had been due by Sept. 30, 2006. Half will be due by then, and the remainder will now be paid in the five-year rate period that follows.

In exchange, the private utilities will be guaranteed power sales contracts in that rate period with terms outlining benefits that are nearly identical to the ones they now receive.

The short-term savings to Bonneville will allow it to trim its wholesale power rates by 6 percent from what they otherwise would have been. The agency also is hoping to announce this week its final plan to curtail summer spill programs for fish at hydroelectric dams, creating more savings.

What isn't known is whether those savings will be enough to offset other budget pressures that otherwise could be driving rates up. The key variable is how much money Bonneville makes selling surplus power on the market this summer to the energy-thirsty Southwest.

Such revenues are now "more uncertain than ever," said BPA spokesman Ed Mosey.

Hydropower production figures to be below normal for the fifth straight year. Though the recent wet spell has provided a slight boost, the most recent January through July runoff forecast measured at The Dalles is just 78 percent of normal.

It's safe to say surplus power sale revenues will be below projections, Mosey said.

"But by how much is anybody's guess," he said.

The end result to the retail customer will be more muted, because wholesale power costs are but one of several components that drive electric rates. Regardless, it's too early to say whether Bonneville's deal with the private utilities will allow its customer utilities to cut rates or simply stabilize them.

"At this point we don't know," said Benton PUD spokeswoman Karen Miller.

The $200 million in question was wrapped up in a lawsuit filed against Bonneville by about 70 public utilities and rural electric cooperatives in 2001. They argued the agency gave private utilities more benefits in the last rate-setting process than they are legally entitled to at their expense. Public utilities and rural co-ops by law have first rights to Bonneville power.

PacifiCorp and Puget Sound Energy signed their power purchase contracts only after Bonneville offered them $200 million in contingency payments if those contracts were challenged in court.

Bonneville's new deal with the investor-owned utilities does not alter the status of the lawsuit.

"At this time, I don't believe there are any plans to withdraw the lawsuit, with emphasis on 'at this time,' " said Jean Ryckman, Franklin PUD manager.

Chris Mulick
BPA Signs Utility Agreement
Tri-City Herald, June 2, 2004

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