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Possible Bonneville Power Price Rise Not Chief Electric Power Worry Here from Joel Gallob of the News-Times News-Times - March 16, 2005

The possibility of an increase in the cost that Bonneville Power Administration charges local utilities such as the Central Lincoln People's Utility District is not the chief worry at the local utility, according to PUD Spokesperson Gary Cockrum. "The President's proposal for BPA to charge market-level power prices is dead or dying," he said recently.

What is very much alive, though, is the ever-nearing October 2006 date, when the PUD's current power purchase agreement with BPA runs out, and newer, higher rates will go into effect. Exactly how much higher rates will go is uncertain; that they will go up is virtually guaranteed.

Still, if BPA - under pressure from the White House and the Energy Department - were to raise the price it charges for power, that increase would have a big effect locally.

"They're talking about a 20 percent per year rise to BPA customers," Cockrum said, until BPA's customers are no longer paying the "cost of power" fees now in place but fees equal to the regional market cost of power. That would mean a 10-percent rate rise for PUD customers, Cockrum said. About half the utility's costs are the cost of power it buys from BPA. The other half, he explained, are for system maintenance, salaries, buildings, vehicles, and the other costs of doing business.

More broadly, Cockrum said, a recent article in Public Power Weekly estimated the three-year cost of the proposed rise to market level prices at $2.5 billion to BPA's customers in the Northwest. That is defined, for the agency, as including Northern California and parts of Montana and Idaho, as well as Oregon and Washington.

"But that seems dying or dead," Cockrum said. The new Secretary of Energy, Sam Bodman, is "getting hammered a lot by a lot of political people who are telling him, basically, that it's dead and to quit wasting their time."

President Bush's budget included the proposal for a rise to market rates not just for the BPA, but for three other federal power marketing entities - the Southeastern, Southwestern and Western Area power marketing agencies. A rise in the cost of power for each of them would do for those other regions what a price rise for electricity would do for the Pacific Northwest - cause widespread economic problems.

Senator Gordon Smith, a Republican who has on selective occasions parted company with Republican President Bush, promptly came out against Bush's proposal. So, too, has Oregon's Democratic senator, Ron Wyden.

"Several other powerful senators have also come out against the idea," noted Cockrum, "including Senator (Pete) Domenici." Domenici is the chairman of the Senate Energy and Natural Resources Committee and is also on the Senate Appropriations Committee. That pair of posts makes him central to any big changes at the BPA.

Also, Sen. Judd Gregg (R-N.H.) who chairs the Senate Budget Committee, has stated he will not include such a proposal in his committee's budget bill.

In Washington DC, Cockrum continued, "every few years they try to raise the rates at BPA, whenever they get their budget in a difficulty. It's been tried before, and it's been defeated every time."

The rate rise that is out there, on the horizon, comes not from the Bush budget proposal, but from the fact the PUD's contract with BPA will expire in a year and a half. When many other utilities rushed to sign variable-rate contracts with BPA several years ago, Central Lincoln took a more cautious route and locked in what soon turned out to be very favorable rates. As the cost of energy rose for various reasons, the PUD's fixed rates came to seem better and better. But they won't last forever, and when that contract expires, BPA will raise the rates it charges Central Lincoln.

"We have tried to prepare for it, tried to minimize the impact to our customers," said Cockrum. The utility has twice raised rates recently, he said, by 5 percent in October 2004 and 6 percent in October 2001. "We're trying to pilot this to maintain some comfort for our customers," he said. Much of the money from those two rate rises went into a "mitigation fund," he added, that will be used to cushion the shock after Oct. 2006, and allow the PUD to phase in for its customers whatever increase it is hit with by BPA.

But that cushion will be used up at some point, and the price rise from BPA could be 60 to 80 percent, according to Cockrum. That will likely produce rate rises of half that amount to PUD customers.