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Utilities Follow PUD, Say No to Settlement by Christopher Schwarzen, Times Snohomish County bureau Seattle Times - December 3, 2003

Public utilities across the Northwest are backing the Snohomish County Public Utility District after it rejected a settlement offer last month from the Bonneville Power Administration that could have resulted in customer rate reductions.

The Snohomish County PUD, the largest in Washington with 290,000 customers, adopted a resolution Nov. 18 rejecting a settlement offer from Bonneville, also known as the BPA. The federal agency provides 80 percent of the PUD's electricity.

The PUD and more than 70 other public utilities sued the BPA in 2001 over claims the agency illegally offered energy and monetary rebates to private utilities such as Puget Sound Energy. The public utilities, which have first crack at Bonneville's electricity, say the costs of energy and rebates during the 2001 energy crisis forced Bonneville to raise its wholesale rates.

Those rate increases were passed on to consumers.

In exchange for signing the settlement, the BPA said, it would provide the public utilities with $500 million in rate reductions immediately and find $100 million in expense cuts next year. The reductions would have meant a refund of the 2.2 percent rate increase Bonneville approved in October and an additional 7.4 percent cut in wholesale rates.

But for the settlement to be binding, all 72 utilities have to sign by Jan. 24.

Most PUDs against the settlement have argued that the rate reduction of almost 10 percent could easily be added back beginning in 2006, when contracts with Bonneville are renegotiated.

"A rate decrease now would have helped our customers, but we believe that would have been short-lived," said Dennis Bickford, the Clallam County PUD's general manager.

The Clallam County PUD, on the Olympic Peninsula, rejected the settlement Nov. 24. The Grays Harbor PUD, which has 39,000 customers, plans to ignore the settlement offer altogether, according to Rick Lovely, the general manager there.

Lovely said he expects more utilities in Washington, Oregon, Idaho and Montana to follow suit and create a unified front against Bonneville.

"I think what Snohomish County (PUD) did was a brave thing to do," Lovely said, referring to the fact that Snohomish County PUD ended settlement chances for all utilities involved. "They put a huge target on their chest, but I honestly think it gave courage to other public utilities."

Governors and legislators in each state, including Washington Gov. Gary Locke, had urged the public utilities to sign the agreement for the sake of improving the economy, and public utilities such as Tacoma Power supported the settlement.

Snohomish County PUD leaders met several times with Bickford and his staff before his board voted against the settlement.

Bickford acknowledged that the settlement's rate reduction would have been passed on to customers.

Bickford said the Snohomish County PUD had asked the Clallam County PUD, with 25,000 customers, to adopt a similar resolution urging the BPA to make more cuts and find ways to reduce and stabilize rates.

"I don't think (Snohomish County PUD's interaction) was the deciding factor, but when they met, they talked over a lot of information regarding the settlement," Bickford said.

Lovely said his commissioners are looking for new ways to settle the lawsuit and no longer want to discuss the offer that Bonneville and private and public utilities talked about for six months.

"It's dead in the corner," he said. "We're very encouraged to see the actions other PUDs are now taking."

Snohomish County PUD Commissioner Dave Aldrich said he expects the fallout from other public utilities to continue. Lovely agreed that more commissions will show support for the Snohomish County PUD in coming weeks.

But Bonneville officials, who have expressed disappointment over the failed negotiations, say there won't be new discussions.

"If what is happening is some kind of strategy to reopen negotiations, it's not going to happen," Bonneville spokesman Ed Mosey said.

Much of what the public utilities are suggesting in terms of a new settlement was discussed during previous meetings, Mosey said. Private utilities involved also have said they no longer want to negotiate a settlement.

Still, PUDs across the region say they are hopeful a deal can be reached. Otherwise the lawsuit will be decided in federal court.

"I don't know what form things will take, but during a meeting a few weeks ago with the PUDs, the consensus around the table was to reject the settlement agreement," Aldrich said. "This one (from Bonneville) was dead on arrival."