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BPA to Raise Wholesale Rates 3 Percent by Staff Puget Sound Business Journal, September 26, 2002

The Portland-based Bonneville Power Administration will raise wholesale electric power rates 3 percent when its new fiscal year begins Oct. 1, the agency announced Wednesday.

BPA adjusts its rates twice a year if necessary to respond to volatility in the energy market and other factors. The 3 percent hike reflects lower-than-expected revenues from surplus power sales for fiscal year 2002. Last April, on the other hand, BPA reduced rates when purchases needed to supply power for utility and industrial customers declined.

"The Northwest has entered a new era when electricity costs will fluctuate with supply and demand in the electricity market," said Steve Wright, BPA administrator, in a prepared statement. "After several adjustments up and down, the net effect of the change we are making Oct. 1 is that rates should remain at about this year's average for another six months."

Because BPA sells only wholesale power, individual utilities will have to determine whether or not to pass the increase along to their customers.

BPA markets 41 percent of the electric supply for the region, and 80 percent of that power comes from hydroelectric resources in the Columbia River Basin. The federal agency is working with the Northwest's utilities on a restructuring plan. Decisions from that process are expected in November.

Under a plan proposed by utilities, which could be implemented in 2006, utilities would sign contracts for 20 years, essentially locking up the 8,000 or so megawatts BPA generates each year. BPA would no longer have excess power to sell, but instead would have a steady, predictable revenue stream to meet its federal Treasury payment.

In what's called the Post-2006 Strategy, public utilities would be responsible for meeting any future load growth, while receiving a much larger slice of BPA power. Investor-owned utilities would also get a larger slice of BPA power, or a cash compensation, something they have been trying to achieve for years.

The utilities' proposal would in effect return BPA to its historic roots of managing power produced from the Columbia and Snake rivers, while continuing its role as a steward for conservation and salmon restoration projects along both rivers.

No longer would BPA be buying and selling huge amounts of power on the wholesale markets, a strategy that has left the power administration projecting an $860 million shortfall over the next five years and has brought a looming threat of greater rate hikes.

BPA is assessing whether its financial situation will require another wholesale rate adjustment next spring.