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BPA Expects Minimal Pain
by Jonathan Brinckman
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The agency projects a 75 percent utility rate spike this fall,
but many customers' bills might not soar
The Bonneville Power Administration, struggling against a power supply shortfall, will likely boost the rate it charges the region's utilities by about 75 percent so that it can buy extra electricity on the expensive wholesale market.
The rate hike, anticipated this fall, would mean an approximate 35 percent boost in monthly bills for customers of some 50 publicly owned utilities throughout the Pacific Northwest, including the utilities owned by McMinnville and Forest Grove.
Customers of utilities that get small amounts of power from Bonneville, including Portland General Electric and Pacific Power, would see little or no impact from the Bonneville rate hike, utility company officials said.
Despite the anticipated sharp increase, BPA officials and numerous heavy consumers of electricity expressed cautious relief that prices wouldn't skyrocket even higher. Steve Wright, the BPA's acting director who made the rate projection Wednesday in Portland, had said two months ago that wholesale prices could go up 300 percent.
He since has been in a furious effort to persuade large users -- aluminum smelters, in particular -- to halt operations to reduce load on the power system. The success of these efforts, he said Wednesday, coupled with more now being negotiated, would help to keep the rate hike at or below the 75 percent level.
Wright said the fall rate hike could be held to 75 percent if, in addition to the aluminum company cutbacks, utilities that get electricity from Bonneville cut their demand by 10 percent.
Wright said Wednesday that the electricity-cutting plan appeared to be on track.
"We have cause to believe we can be successful," Wright said. "We are involved with good discussions with all of our customers."
Kurt Zetzsche, president of Cascade Steel Mills in McMinnville, said he was relieved that the rate increase would not be as large as first thought. The company, with 500 employees, gets electricity for its furnaces from McMinnville Water and Light, which relies totally on Bonneville.
"I was expecting a much larger increase," Zetzsche said. "Even though it's high, it's much better than we anticipated. At this point in time, we're actually feeling really good about this."
Bonneville's customers face sharp rate increases because the federal power marketing agency -- which distributes electricity generated at 29 federal dams and one nuclear power agency -- is committed to selling more power than it produces.
The agency, which distributes about half the electricity used in the Northwest, is committed by contract to supply 11,300 average annual megawatts of electricity a year. The federal dams and nuclear plant do not produce that much electricity, leaving Bonneville about 3,700 megawatts short. One thousand megawatts is enough electricity to supply 650,000 homes.
Bonneville must make up the difference by buying electricity on wholesale electric markets, where prices have increased tenfold or more over the past year. The agency has long-term contracts to purchase 1,300 megawatts of power. That leaves a shortfall of 2,400 megawatts.
Wright said Wednesday that its customers have so far agreed to cut demand by 1,200 megawatts, reducing the shortage by half. He was optimistic that the remaining 1,200 megawatts of cutbacks will be agreed to by June 20, before Bonneville must submit its rate-increase proposal to the Federal Energy Regulatory Commission.
"I'm encouraged," he said. "We're further along than I thought we would be. I actually expected when we announced this in April that most of the deals would be signed at the last minute."
To date, the aluminum industry is leading the region in load-reduction. Major companies, including Alcoa, have agreed to suspend operations. So far, aluminum companies have agreed to cut 901 megawatts of their electricity demand, 75 percent of the 1,200-megawatt goal set by Wright.
The six investor-owned utilities have reached 25 percent of the goal to cut 100 megawatts of power use and 45 percent of a goal to accept cash payments instead of 500 megawatts of electricity.
A total of 129 publicly owned utilities get some or all of their electricity from Bonneville, and they are the farthest behind. They have agreed to cut demand by 68 megawatts, 11 percent of the 600-megawatt goal.
Wright said the cutbacks should lead wholesale electricity prices to fall. "The more BPA needs to buy, the higher market prices will be," he said. "On the other hand, less demand will ultimately cause prices to fall."
Separately, an analyst with the Northwest Power Planning Council said Wednesday that the chances of blackouts in the region are dropping because of demand reduction and because new power generation is scheduled to come on line.
The odds of wintertime blackouts, called "loss of load probability," are down from the 24 percent calculated in March to 17 percent, according to Dick Watson of the power council. "As far as the summer is concerned, we're pretty comfortable that we will get through without problems," Watson said.
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