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Floating-Rate Proposal by BPA Launches Regionwide Battle

by Bill Virgin
Seattle Post-Intelligencer - November 9, 2005

The Bonneville Power Administration on Tuesday proposed a floating wholesale price for the electricity it sells to Northwest utilities through 2009, launching a regionwide battle over whether the agency should raise, hold the line on or lower the rates it charges.

In fact, the BPA had been criticized even before its announcement by a coalition of utilities and customer groups who argue that it should set a firm price lower than what it is charging now.

Portland-based BPA is a federal power marketing agency that sells electricity generated at dams along the Columbia and Snake rivers, as well as a nuclear plant at Hanford, to utilities such as Seattle City Light, Tacoma Power and Snohomish County Public Utility District. It supplies about 40 percent of the electricity used in the Northwest.

The effect of Bonneville's rates on consumers and businesses varies depending on how much electricity a customer's utility buys from the BPA under what sort of rate plan and what other sources of electricity the utility has.

Bonneville said a host of uncertainties, ranging from price swings in spot electrical markets to water conditions on the Columbia and Snake river hydroelectric system and obligations for salmon-recovery projects, makes it difficult to establish a firm rate. The BPA also said its customers would prefer the agency to have the flexibility to adjust rates for contingencies, rather than charge higher rates and build up reserves in advance.

The BPA offered a target of $30 per megawatt-hour, but spokesman Ed Mosey noted "$30 is just a rough average. You won't see that rate, probably."

The coalition has summarized its goal in the slogan "$27 in '07," meaning a rate of $27 a megawatt-hour for rates starting Oct. 1, 2006, and lasting through Sept. 30, 2009.

BPA rates rode a roller coaster in the first half of this decade because of the West Coast energy crunch, which sent prices soaring. The BPA was also hit by a series of low-water years that curtailed surplus sales of electricity. Before the crisis, its average rates were about $23 a megawatt-hour; they surged to $32 during the crunch before settling at the current average of $29.

Neil Neroutsos, a spokesman for Snohomish County Public Utility District, said coalition members believe rates can come down because some expensive purchased-power contracts that Bonneville signed during the energy crisis are expiring.

The coalition also believes Bonneville is being too cautious in its estimates of the revenue it will reap from surplus sales, especially given the rising price of natural gas which will make the BPA's energy more attractive.

Coalition members also want the BPA to open up its rate review process to consider its costs as well as its charges. The coalition contends that continued high BPA rates will hurt the Northwest's economic recovery.

Mosey said the BPA's average rate could wind up being $27, or "it could be lower; it could be higher than that." As for the budget review, he said, "we welcome them in. Bring your ideas."

The BPA plans to hold a series of hearings around the Northwest, including one Dec. 6 in Tacoma, with the final decision on rates to be made July 7.

P-I reporter Bill Virgin
Floating-Rate Proposal by BPA Launches Regionwide Battle
Seattle Post-Intelligencer, November 9, 2005

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