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Power Rates Go Down, But Not for Users

by Ken Dey
Idaho Statesman, October 26, 2001

Customers may still have to pay for buybacks

Idaho Power customers still reeling from rate increases won't be getting relief any time soon -- even though the wholesale price of electricity has fallen from 30 cents a kilowatt hour last winter and spring to about 2 cents today.

Idaho Power Co. reported Thursday that it already has accrued more than $170 million in deferred power costs that probably will need to be charged to its customers.

The amount was revealed in the quarterly report for IdaCorp Inc., the parent company of Idaho Power.

The bulk of the charges, more than $100 million so far, come from power buyback programs that were supposed to save ratepayers money.

As of Sept. 30, Idaho Power Co. had recorded $173.3 million in deferred power costs in its Power Cost Adjustment account filed with the Idaho Public Utilities Commission.

The account will form the basis for the utility's rate requests in April 2002.

Even if no further unexpected costs are incurred, Idaho Power officials say it is too early to predict whether the company's 400,000 customers in southern Idaho will see their rates stay the same or go up next spring.

But Rick Gale, the company's vice-president of regulatory affairs, said there is no chance of a rate reduction until 2003 at the earliest.

With six months to go before they make an official request for a rate increase, Idaho Power officials said there's only a slight chance that their costs will go down. Gale said the final cost will depend on next year's water level.

"What precipitation we get can translate into surplus sales that will offset the $173 million and possibly work it down, but that's not probable," Gale said, adding that so far the company is predicting only an average water year.

Wholesale power prices have dropped to near normal levels, so the company doesn't expect to incur extra power costs, but the company still has payments remaining to make in the power buyback programs.

More than a $100 million of the costs so far come from the utility's irrigation buyback program and its power buyback program from Astaris, a Pocatello-based phosphorus chemical company that is Idaho's largest user of electricity.

Both programs were approved in March by the PUC as a way to save electricity, so Idaho Power wouldn't have to buy so much high-priced electricity on the wholesale market.

The irrigation buyback program agreed to pay more than 400 irrigators 15 cents per kilowatt hour to not use electricity.

The program, which ends in November, was expected to cost Idaho Power $75 million in payments. A similar arrangement also was approved with Astaris. The PUC approved a three-year contract with Astaris that would require Idaho Power to pay the company 15.9 cents for every kilowatt hour not used.

Idaho Power is expected to pay $140 million to Astaris over the three-year contract, which expires in March 2003.

When both contracts were approved, PUC commissioners unanimously agreed that the programs would benefit ratepayers because the 15-cent per kilowatt rate was significantly lower than the 30-cent per kilowatt hour being charged on the wholesale market.

The PUC also allowed Idaho Power to include the costs of the program in its annual power cost adjustment.

Not long after the programs were approved, however, the wholesale power market did the unexpected -- prices started to drop rapidly.

Prices fell to 25 cents a kilowatt hour in May; by June, they were down to about 7 cents a kilowatt hour, only a few months into Idaho Power's buyback contracts.

Today, rates are around 2 cents per kilowatt hour.

In retrospect, company officials say now that they would have been better off to not institute the buyback programs if they had known the price would drop so dramatically in the summer.

But Gale said that in the spring that they didn't believe it would be wise to delay a decision.

"In the spring when we made the decisions, every program saved money," Gale said.

After enduring spikes in prices the previous fall and winter and facing a power cost adjustment of more than $200 million, company officials said it didn't make sense to wait to see if prices would drop.

"At the time, who knew what would happen in the market?" Idaho Power spokesman Dennis Lopez said. "We were facing our worst water year since the 1920s, energy costs were astronomical, natural gas prices were out of sight.

"It was a prudent decision based on what was happening at the moment."

Ken Dey
Power Rates Go Down, But Not for Users
Idaho Statesman, October 26, 2001

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