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Bonneville Will Cut Wholesale Electricity Rates by Bill Virgin Seattle Post-Intelligencer - September 17, 2004

The Bonneville Power Administration yesterday said its own cost-cutting efforts and prospects for increased power sales outside the region will allow it to cut wholesale electricity rates by 7.5 percent starting Oct. 1.

That 7.5 percent is at the high end of the 5-to-7.5 percent range BPA had announced in August, and comes despite the fifth straight year of below-average water levels on the Columbia River hydroelectric system. Lower water levels reduce the amount of surplus power that BPA can sell to out-of-the-region markets such as California.

Bonneville, based in Portland, is a federal agency that markets electricity from dams and one nuclear plant.

BPA Administrator Steve Wright said in a telephone conference call yesterday the cost reductions came from "lots of little pieces that add up," including interest rates that "stayed lower longer than we thought they would."

BPA is also removing from rates a charge it can add if there is some uncertainty about making its debt payments to the U.S. Treasury.

While lower water levels have hurt surplus sales, BPA has made some of that back because high natural gas rates have pushed up market prices for the electricity it does have to sell.

Wright said BPA is banking on higher revenue from power sales; although it is forecasting that gas prices will drop from current levels, water levels are expected to be higher.

How much of a reduction consumers and businesses get on their bills will depend on how much their local utility buys from BPA and under what program.

Rick Lovely, general manager of Grays Harbor Public Utility District, called the 7.5 percent reduction "a good start." He applauded Wright's decision not to trigger the Treasury repayment provision, saying there was "no justification" for it given BPA's financial condition and reserves.

But Lovely and others contend BPA could cut rates even more. Public utility districts have sued BPA over the residential and small-farm credit program, which is designed to share the low-cost benefits of the hydro system with customers of investor-owned utilities such as Puget Sound Energy.

The PUDs contend BPA has paid far more than is allowed under the program and say rates for their customers could drop considerably if they win the case.

The 7.5 percent reduction follows a 2.2 percent increase last year. BPA hit the region's utilities with a 46 percent increase in 2001 in the midst of the West Coast power crisis.

Wright said BPA hopes the lower rates will mean a $123 million boost to the region's economy, but added that it's not likely to make much of an impact on the struggling aluminum industry because of current metal prices.