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BPA Plan Called a Job-Killer by Lukas Velush, Herald Writer The Herald, February 24, 2005

60,000 jobs could be lost to rate increases, analyst says

Washington and Oregon could lose 40,000 to 60,000 jobs if a proposal by President Bush increases the region's electricity prices, a Portland energy economist said.

Job losses would rival the 70,000 jobs lost in the two states during the record electricity price run-ups during the 2000-2001 West Coast energy crisis, said economist Robert McCullough, managing partner of Portland-based McCullough Research.

McCullough used federal data on electricity rates, economic activity and jobs to estimate the region's potential job losses.

Bush's 2006 budget proposes to as much as double the electricity rates the Bonneville Power Administration charges to utilities, including the Snohomish County PUD. The change is intended to help pay down the national debt.

If the change is made, it would squeeze Snohomish County's economy, which is just now starting to rebound from the recession and the energy crisis.

McCullough estimates that Washington state would lose 21,000 to 32,000 jobs. It's unknown how many jobs would be lost in Snohomish County, he said.

The county was hit hard by the recession and energy crisis. The PUD's rates went up more than 50 percent in 2001, and its rates are still among the state's highest.

"Our recovery is just now beginning," Snohomish County Executive Aaron Reardon said. The proposal would "have an adverse impact on our recovery, if not wipe it out entirely," he said.

Revenue could double

The Bush proposal estimates that the government could collect $12 billion by making federal energy wholesalers such as BPA charge market rates for electricity that has been sold at cost for decades.

Based on today's market rates, the $2.4 billion that BPA now takes in each year could increase to nearly $5 billion in five years.

Bush's plan calls for gradually raising power prices to market rates, which now are 4 cents to 6 cents per kilowatt-hour. Currently, BPA sells its electricity for 3.1 cents per kilowatt-hour.

If the market rate were 5 cents per kilowatt-hour, BPA's rates would go up by 66 percent. BPA raised its rates by 46 percent in 2001.

It's too early to estimate what such a rate hike would do to PUD rates. Because the PUD buys 80 percent of its electricity from BPA, it's guaranteed that rates would increase, said Dave Aldrich, president of the PUD's governing commission.

"If Bonneville does have to raise its rates, it's going to be difficult for everyone," he said.

The PUD has 295,000 customers, many of whom have struggled to keep up with the skyrocketing rates. A worst-case planning projection the PUD recently did offers some insight.

In the scenario, the PUD estimated it would cost an extra $400 million over the next 20 years just to replace the electricity it gets from BPA's lone nuclear power plant, the Columbia Generation Station near Richland.

That means that going to the open market to replace just 10 percent of the electricity the PUD needs for customers would push its projected electricity bill over the next 20 years from $2.5 billion to $2.9 billion.

Effect on industry

Such scenarios aren't necessary for figuring out what effect a 66 percent rate hike would have on energy-intensive businesses such as Kimberly-Clark Corp.'s Everett paper and tissue mill and the Boeing Co. assembly plant, Aldrich said.

Kimberly-Clark spent $16 million on electricity in 2004, and the company has struggled to pay the PUD's rates for the past three-plus years.

"This business was founded on low-cost electricity," mill manager Scott Helker said recently. "This is extremely frightening for our operation."

Boeing is more insulated from electricity prices than Kimberly-Clark. Even so, rising rates would hurt, said Keith Warner, Boeing's utilities manager.

"Before the energy crisis, the Pacific Northwest had the lowest electricity prices anywhere we operate," Warner said. "That has flipped."

Boeing is in no danger of relocating if electricity prices go up, he said.

"Our congressional delegation knows very well about what industry is going to feel about raising rates again after what we went through a couple of years ago," he said.

Snohomish County lost 13,000 jobs from 2001 to 2004.

"The last thing we want to encourage is a huge spike in energy costs," said Diana Dollar, vice president of community development for the Economic Development Council of Snohomish County.

"That (could) translate into jobs not coming into Snohomish County or jobs leaving Snohomish County."