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West's Power Issues Linger by Chris Mulick, Herald staff writer Tri-City Herald, May 4, 2004

OLYMPIA -- Average electricity rates in Washington fell by just 1 percent last year, an indicator the effects of the West Coast energy crisis are lingering.

"They haven't been fully digested yet," said Dick Watson, power planning director at the Northwest Power and Conservation Council, an agency responsible for balancing regional fish and power priorities.

Worse, there's little expectation rates will ever return to the low levels Northwest consumers once enjoyed.

Preliminary figures released recently by the U.S. Energy Information Administration indicate the average electric rate in Washington dropped to 5.72 cents per kilowatt hour last year from 5.8 cents in 2002. That boosted Washington's rank among states with the cheapest electric rates from 14th to ninth.

But that's a far cry from the state's superior status before the onset of the crisis in 2000, which didn't begin slamming many Northwest ratepayers until October 2001. Retail rates, on average, are more than 40 percent above 1999.

Kentucky had the nation's cheapest rates on average last year. Idaho was third, Oregon 17th and Montana 18th.

Washington's residential sector, which had the third-cheapest rates compared with other states last year, and commercial sector, ranked 12th, saw virtually no change over 2002. The industrial sector saw its average rates fall by about 6 percent, boosting its nationwide rank from 28th to 16th.

But if there was improvement, it sure didn't seem like it, said Ken Canon, executive director of the Industrial Customers of Northwest Utilities. Though energy costs are just part of the economic equation for industry, many are simply waiting it out in the short term, hoping rates will ease.

"People understand we're swallowing the California energy crisis probably for the next year or two," Canon said. "People are hanging on for something better."

Otherwise, "I question whether we'll have a robust industrial base if these rates continue," he said.

Though other regions as a whole still may have higher industrial rates in the long term, Canon said he is finding more individual East Coast utilities with cheaper rates than those in the Northwest, making them more competitive.

"There are a lot more than there used to be," he said.

It's widely expected Northwest rates ultimately will slide, particularly after some high-priced power purchase contracts owned by the Bonneville Power Administration expire in the fall of 2006. But in an interview last month, BPA Administrator Steve Wright said he doesn't expect the agency, responsible for selling almost half the kilowatts consumed in the Northwest, to be able to roll back rates anywhere close to former levels.

"I'd be surprised if we get all the way back," said Tony Usibelli, assistant director for energy at the state Office of Trade and Economic Development. "In my opinion, it's a pipe dream."

Disappearance of the aluminum industry
Though the virtual disappearance of the aluminum industry frees up extra BPA power generated cheaply at federal dams on the Snake and Columbia rivers, new power needs ultimately will have to be met by higher-priced alternatives.

Power plants fueled by natural gas had been the preferred alternative. But gas prices have risen as western Canadian gas wells have become less productive. A new pipeline to the Midwest also brought new competition.

Imported liquefied natural gas is believed to be the wave of the future, but more terminals to convert it to a gas would need to be built, Watson said. Few communities have embraced the idea.

And, of course, how low utilities can set rates also is affected by how much water runs through turbines at hydroelectric dams. That determines whether utilities are buying extra supplies on the market or selling surplus.

With the latest forecast projecting January through July runoff at The Dalles Dam to be just 76 percent of normal, 2003 is near certain to be the Northwest's fifth straight below-average water year.