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Adjustable Rates a Hedge Against Major Hikes by William McCall, Associated Press Daily Herald, November 9, 2005

PORTLAND, Ore. -- The Bonneville Power Administration on Tuesday proposed adjustable wholesale power rates for the next three years as a way to protect against the risk of major price increases and power shortages. Steve Wright, chief of the Portland-based federal power marketing agency, predicted it would lower the average rates from 2007 through 2009.

But the proposal drew immediate criticism from some government officials, business leaders and public utility district managers, who said it could slow the economic recovery across the West.

Melody Thompson, the mayor of Canby, Ore., noted the Western energy crisis of 2001 pushed prices to record highs as Bonneville struggled with drought reductions in hydroelectric capacity, energy market manipulation by bankrupt Enron Corp. and failed deregulation in California.

She said Bonneville raised its wholesale rates by about 50 percent after the crisis, which translated to a 60 percent rate increase for her small town at the edge of Portland's southern suburbs.

"The crisis is over," Thompson said. "It's time for rates to come down from these record highs."

Canby is a member of the Northwest Coalition for Affordable Power which launched a campaign last week to urge Bonneville to reduce rates rather than increase them over the next three-year rate period.

The coalition has nearly 200 members representing cities, counties, school districts, businesses, public utilities and other groups in Washington, Oregon, Idaho and Montana.

It was formed just two months ago to promote regional economic stability in the Northwest, which was hit hard by the recession that followed the energy crisis and still suffers from some of the highest jobless rates in the nation.

"Our customers expect rates to come down now that BPA is done paying the extraordinary power costs from the energy crisis," said Kathy Vaughn, a Snohomish County Public Utility District commissioner. The district just north of Seattle is the BPA's largest customer.

Wright, however, warned that lawsuits over salmon conservation programs will affect the operation of federal hydroelectric dams in the Columbia River Basin that supply the bulk of the power generated by Bonneville.

U.S. District Judge James Redden in Portland has already warned federal agencies that four dams on the Lower Snake River could be breached if the government cannot find a way to improve salmon runs.

Last month, Redden ordered the federal government to rewrite its salmon protection plan for the Columbia and Snake rivers. Wright said that the average rate for the next three years, based on estimates of salmon conservation costs and other factors, would be about $30 per megawatt-hour. The Northwest Coalition is recommending an average rate of $27 per megawatt-hour beginning in 2007.

By comparison, Bonneville wholesale rates were about $23 per megawatt-hour before the 2001 energy crisis.

Wright noted the BPA has reduced its projected operating costs by about $100 million after an extensive six-month review. "We will continue to work hard to keep our costs down," said Wright, noting the wholesale rate will be adjusted for future weather and market conditions. Paul Machtolf, manager of the Ponderay Newsprint Co. in northeastern Washington, said the mill's average monthly power bill has increased by $400,000 a month -- 31 percent -- since 1995.

But he sells his newsprint for less today than he did 10 years ago. "This trend of increasing rates must stop," said Machtolf. "Even though we are one of the most efficient newsprint mills in North America, without an inexpensive source of power, we can't compete."

BPA is beginning its first full wholesale power rate case in five years. The agency is scheduled to adopt rates next July that will take effect Oct. 1, 2006, and remain in effect until Sept. 30, 2009.