BPA Fixes Contracts
by Jonathan Brinckman
A paper mill and three aluminum companies
are guaranteed discounted rates from 2006 to 2011
The Bonneville Power Administration has agreed to provide 577 megawatts of electric power at a discounted rate to three Northwest aluminum companies and one paper mill from 2006 to 2011, the federal agency announced this week.
The 31 federal dams and one nuclear power plant that supply Bonneville produce about 73 percent of the electricity the agency is obligated to provide electrical cooperatives, municipalities, manufacturers and others. The agency buys the remainder of the power it needs on wholesale electricity markets.
"This was a very difficult decision," said Steve Wright, BPA's administrator. "On the one hand, low-cost federal power keeps important jobs in the region and helps support the economy of many Northwest communities. On the other hand, we have a responsibility to the rest of the region's ratepayers not to inappropriately shift costs to them."
Providing low-cost power to manufacturers translates into higher costs for other users of BPA electricity. Under the decision, BPA will provide 577 annual megawatts of benefits to the four companies, but at a cost capped at $59 million a year. The cost to consumers will depend on how much BPA power their utility takes. If the companies use their full allocation of 577 average megawatts of benefits, BPA's public utility customers will see about a $1 per megawatt-hour increase over what their costs would have been absent the benefit. The current BPA wholesale rate for utilities is approximately $30 per megawatt-hour.
Alcoa Inc. will receive the value of up to 320 megawatts; Columbia Falls Aluminum Company will receive up to 140 megawatts; Golden Northwest Aluminum Company will receive up to 100 megawatts; and Port Townsend Paper Company will receive the remaining 17 megawatts.
The decision continues a trend of BPA ramping down power supplies to its industrial customers, called direct service industries or DSIs. Electricity provided to DSIs has been declining since before 1995, when contracts totaled over 3,000 average megawatts. In 1995, contracts were reduced to 2,000 average megawatts, and in 2002 contracts were reduced to 1,500 average megawatts.
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