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Economic and dam related articles

Power 'Glut' May Send Rates Up Again

by Lynda V. Mapes, staff reporter
Seattle Times - January 26, 2002

Northwest utilities, including the Bonneville Power Administration, could have to raise rates if power prices stay in the basement.

The BPA, which markets power from the federal hydropower dams and one nuclear plant, plans to deliver that financial news in a regularly scheduled meeting Monday with its retail customers.

Area utilities depend on the agency for some or all of their power. If the BPA raised its rates, a part of that increase would be passed on to the utilities, including Seattle City Light.

Bonneville forecast power prices between $30 to $60 a megawatt-hour when it put its budget and rate plan together last year. Instead, power prices have been in a steady dive and are about $20 a megawatt-hour.

"There is a glut of power; the economy is in the tank," said Ed Mosey, spokesman for the BPA. "We have power to sell, but we can't get anything for it. The assumptions utilities made when they set rates last year are no longer relevant. They are wrong."

Bonneville increased rates 46 percent in October when the agency signed five-year power contracts with its customers. Those deals allow the federal agency to raise rates if it suffers a revenue shortfall.

The revenues pay for the federal agency's fixed costs, including its debt to the U.S. Treasury for construction of the dams, and paying for programs intended to recover threatened and endangered salmon.

A rate increase is not on the table. But it's also not out of the question in the future.

"We are struggling, looking at the options," Mosey said. "It's grim."

The utility is far from alone.

Puget Sound Energy is seeking a 14.5 percent rate increase in part, the utility says, because of decreased power revenues due to lower wholesale power prices.

Seattle City Light is in the same boat, with revenue from power sales about $60 million below projections.

"We are awash in water, and that drives down prices," said Bob Royer, spokesman for the utility.

Seattle City Light had counted on selling surplus power at between $25 and $29 a megawatt-hour, but instead wholesale prices are about $20 a megawatt-hour.

Western wholesale power prices are down as much as 89 percent from year-ago crisis levels, from $172.66 a megawatt-hour in mid-January 2001 to $20.21 per megawatt-hour Jan. 15 this year, according to Mike Wilczek, a Western-power-markets expert for Platt's, an energy-information segment of McGraw Hill.

Wilczek attributed the drop to a crash in the price of natural gas used to fuel many power plants the construction of power plants, conservation and the weather.

The rain gauge at Seattle City Light's Diablo Dam is 4 inches above normal, and the 1,000-square-mile drainage basin of the Skagit River home to the utility's hydroelectric dams is stacked with snow.

Mother Nature has been fickle indeed, socking Northwest hydropower dams with a near-record drought last year and precipitation about 60 percent of average. Snowpack is at 107 percent of average in the Skagit River Basin so far this water year.

Seattle City Light faces the same choices as the BPA, although no rate increase is foreseen at the moment, according to Royer.

The utility has raised rates three times in the past year; the average residential customer now pays $23 a month more than last year.

City Light could leave a rate surcharge on longer than planned it is scheduled to come off next year or delay action and hope markets or weather changes.

An early, hot spring in California would drive up electricity demand and prices.

Lynda V. Mapes, staff reporter
Power 'Glut' May Send Rates Up Again
Seattle Times Company, January 26, 2002

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