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Power Rate Reduction Unlikely by Chris Mulick, Herald staff writer Tri-City Herald, July 14, 2005

A senior Bonneville Power Administration official told the Northwest Power and Conservation Council on Wednesday that the electric rate reduction target demanded by public utilities is "a big stretch."

The federal power marketer begins a lengthy rate-setting process this fall to determine its wholesale electric rates for a three-year period beginning in October 2006. With many of its energy-crisis era power purchase contracts set to expire, customer utilities expected Bonneville to be able to lower rates.

They believe the agency can cut costs and get by charging a rate of $27 per megawatt hour, a large enough reduction that could allow utilities to (lower) their retail rates by as much as 15 percent or so.

"We think it's doable," Benton PUD Manager Jim Sanders recently told the Herald.

But Paul Norman, senior vice president for Bonneville's Power Business Line, said Wednesday that the prospects of achieving that are iffy.

"I accept that as a target," Norman told the council, responsible for balancing the needs of fish and power in the region. "I understand that's something they want us to shoot for. It's a big stretch obviously."

Though the agency anticipates saving $500 million a year on its power costs, growing expenses in other parts of its near-$3 billion budget, fish costs most notably, at least partially offset that. Numbers being floated suggest agency rates won't change much.

Franklin PUD Manager Jean Ryckman said utilities will continue to press for their $27 per megawatt hour demand.

"We know they're capable of stretching that far," she said. "We have faith they can do it."

The agency recently completed a lengthy review of its costs and identified $96 million in savings, up from $80 million in a draft report. But many of those cuts come out of projected budgets, not current expenses.

Energy Northwest, which has eliminated 157 positions this year at the nuclear power plant north of Richland, is an exception even though its costs still are expected to grow by 6 percent per year.

"They're very aggressive about cost management," Norman said.

Not yet accounted for is an estimated $67 million annual hit from a recent court ruling that would require dam operators to spill more water for fish rather than sending it through power generating turbines. That decision is on appeal.

But the single largest variable that will determine how close Bonneville gets to the utilities' rate target is what the agency does to manage risk, Norman said. Some believe the agency should carry large reserves to better weather changes in a more volatile energy market while others argue the agency should only charge utilities enough to get by, then hit them up all at once for large increases when BPA finances sour.

"I don't know how close we'll get," Norman said.

Council members, meeting in Portland, offered limited comment on BPA's figures.

Washington member Larry Cassidy asked the agency not to slash the fish program the council oversees if dam operators are required to spill more water for fish.

And Tom Karier, Washington's other representative on the council, asked the agency to maintain spending for conservation programs, something many utilities oppose.