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Bad News for PUD may Mean Higher Rates by Don Jenkins The Daily News of Longview,WA, December 6, 2005

Cowlitz PUD General Manager Brian Skeahan said Monday he may ask commissioners to raise power rates by 3 to 4 percent effective March 1 and warned a second increase, possibly a larger one, was likely in October.

"Rather than one big step, we're looking at two smaller steps," he said.

PUD officials had hoped to avoid raising rates in early 2006, but received three pieces of bad financial news in November:

• Premiums to insure the rebuilt Swift powerhouse and provide health coverage to PUD employees rose by a total of $2 million for 2006.

• The Bonneville Power Administration proposed policy changes that would raise the cost of electricity Cowlitz PUD buys by 11 percent beginning Oct. 1. The PUD had expected a 3 or 4 percent hike. The higher rate would cost another $7.6 million in 2006.

• Leaks in the concrete-lined canal that channels water to turbines delayed restarting the Swift powerhouse on the Lewis River.

"We're now to the point where there's a delay, and it's going to cost us money," Skeahan said.

Ratepayers already may face a big bill for fixing the powerhouse, which was wiped out by a landslide in 2002.

The project faces construction cost overruns, and insurance companies have gone to court, arguing their policies didn't cover the damage. A trial in federal court is scheduled for September.

Plus, the PUD expects to spend $2 million more in 2006 to replace low-cost hydropower it once could buy from Grant PUD, which cut back Cowlitz's allotment to meet its own needs and serve other customers.

Hiking rates by 3.2 percent on March 1 would raise about $2 million in 2006 --- just enough to pay the higher insurance bill.

Skeahan said he planned to wait before asking for a larger rate increase to cover other rising costs. He said it was too early to speculate about how steep an October rate increase would be.

"We have so much uncertainty about what will happen in the fall," he said. "When all is said and done, the board may decide we need to go up now."

PUD Commissioner Buz Ketcham said Monday he believes a rate increase is inevitable, but said he favors settling for a small one now.

"I think it would be imprudent to pick a larger number than we absolutely need for a wintertime increase," he said.

In the last rate change, commissioners decreased rates 3 percent in October 2004 after BPA, the county's main source of electricity, cut its rates.

Although a decision on raising rates may not come until February, commissioners will have a public hearing on the PUD's 2006 budget 2 p.m. Tuesday at the PUD office, 961 12th Ave., in Longview.