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Wholesale-rate Cut Wouldn't Help PUD

by Christopher Schwarzen
Seattle Times, July 26, 2006

Despite a likely decrease in the Bonneville Power Administration's wholesale power rate, the Snohomish County Public Utility District and its residential and business customers aren't expected to pay less for electricity.

Bonneville, which supplies about 80 percent of the PUD's electricity, announced last week that it plans to drop its wholesale energy rate by about 3 percent, to $27.33 per megawatt-hour, during the three-year period beginning Oct. 1. The current rate is between $28 and $29 per megawatt-hour.

Earlier in the year, Bonneville had hinted an increase to $30 a megawatt-hour might occur, but sales of surplus energy and cuts in expenses, along with some inventive payment plans, should allow for the decrease, Bonneville spokesman Mike Hansen said.

Tied to other fees associated with the base rate, however, the PUD doesn't expect to save money, utility General Manager Steve Klein said.

"What happened is the base rate went down, but the way it's applied through [the program] design, it caused our costs to go up an equal amount," he said.

In addition, the PUD's transmission costs and its need for infrastructure expansion likely will prohibit a rate decrease for the utility's customers.

"We're getting rate pressures in a lot of areas, so any [Bonneville] rate decrease is a good thing," Klein said, adding that the PUD is not considering a rate increase.

Part of the PUD's thinking comes from the fact Bonneville can raise the rate periodically to offset increased expenses. Though Bonneville says the proposed $27.33 rate is for three years, it's possible that would hold for only a year.

"We feel pretty confident that nothing's going to cause us to raise or lower that $27.33 rate for 2007," Hansen said.

Potential fee increases could come from Bonneville's costs to maintain salmon numbers in the Columbia River basin, where it operates a number of hydropower projects. A continuing environmental lawsuit could lead to more money spent on fish protection. Such expenses could cause Bonneville to add new fees to the $27.33 base rate, Hansen said.

Still, the PUD and others say they're pleased Bonneville has worked out a way to cut the base rate. The PUD, other utilities, governments and businesses joined forces this year to create the Northwest Coalition for Affordable Power. The coalition's goal is to reach a $27-per-megawatt-hour base rate.

Though Bonneville hasn't quite achieved that, coalition members say Bonneville worked hard enough to merit praise.

"We think it [the $27.33 rate] is a great place to start," said Jake Johnston, a spokesman for the coalition. "We're hopeful we'll eventually get down to the goal of $27."

With a drought and market manipulation in the past, West Coast energy prices should continue dropping, Johnston said. Leading that charge should be Bonneville, the biggest wholesale energy producer in the region.

The PUD, which has just begun crunching numbers for its 2007 budget, which will begin Jan. 1, also is working to keep expenses in check, Klein said. He hopes to avoid a mistake the PUD made last year, which was to consider a rate decrease early in the budget cycle, then leave it out when the budget was approved.

"We start from the perspective that we don't want to raise rates," he said. "But there's not enough information yet to say what will happen."

Christopher Schwarzen, Times Snohomish County Bureau
Wholesale-rate Cut Wouldn't Help PUD
Seattle Times, July 26, 2006

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