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Economic and dam related articles

BPA Cuts Wholesale Power Rates to Region

by William McCall, Associated Press
The Dalles Chronicle, October 3, 2006

Reduction is fourth in 4 years

PORTLAND - The Bonneville Power Administration said Monday it has cut wholesale power rates by about 3 percent, the fourth straight year the federal power marketing agency has reduced its rates.

The announcement at the beginning of the federal fiscal year drew a mixed response from BPA customers, which are divided mostly between publicly owned and investor-owned utilities.

"We're grateful to Bonneville for getting down, substantially down, to the rate we thought was appropriate in the beginning," said Rick Lovely, general manager for the Grays Harbor Public Utility District in Washington state, and a member of the Northwest Coalition for Affordable Power.

But Bob Jenks, executive director of the Citizens' Utility Board of Oregon, warned it could mean higher rates for customers of the investor-owned utilities that provide the majority of the power in Oregon.

"Washington state does a little better, Oregon a little worse," Jenks said. The BPA serves about 140 utilities, providing about 40 percent of the electricity in the Pacific Northwest from a system of 31 federal dams and one nuclear plant.

The bulk of those utilities are small, publicly owned utilities which serve about 40 percent of the customers in the Northwest, while a handful of large, investor-owned utilities - Avista Corp., Idaho Power, NorthWestern Energy, PacifiCorp, Portland General Electric and Puget Sound Energy - supply most of the rest.

Congress established a program called the "residential exchange" with the Northwest Power Act to balance the value of the federal hydroelectric system between small public utilities - which typically rely on Bonneville and do not generate their own power - and the investor-owned utilities that build their own electric plants.

The residential program, originally planned as a way to exchange actual electricity, has been in practice largely as a financial program to help balance rates across the region with BPA payments to investor-owned utilities. Jenks said the public utilities stand to benefit more from the lower BPA rates, especially because Bonneville has proposed reducing the value of the residential exchange program as it approaches its next major contract renewal period with utilities in 2011.

Bonneville officials say the goal is to provide power from the federal system at the lowest possible rate while encouraging utilities to develop their own generating plants or increase energy conservation to meet future growth in demand.

"The utilities are looking forward now, expecting they'll probably have to make decisions on how they provide electricity for load growth in the future," said Terry Morlan, power division director for the Northwest Power and Conservation Council, the four-state agency established by Congress to balance the Northwest energy supply with fish and wildlife conservation. The rate decrease announced Monday was made possible largely by two new agreements with utility customers, said Bonneville chief Steve Wright.

He said 33 utilities have signed up since July for a new flexible rate program to reduce the amount of cash reserves the BPA needs on hand to manage potential or unexpected financial problems.

The program enables Bonneville, on short notice, to increase the amount paid by participating customers for a month's power service and decrease the amount paid for service in subsequent months.

"For example, what if Bonneville found itself short for fish conservation funding - how can the customer take the risk off the agency and keep the money in our pockets so we give it to Bonneville only if they need it?" said Lovely, of the Grays Harbor PUD.

"So we've agreed to take a substantial portion of their risk, and that worked out really well," Lovely said.

Bonneville said it also reached a financial arrangement with Energy Northwest, which operates the region's only nuclear power plant, in Washington state.

The agency said the deal eliminates an annual BPA cash-flow problem that required Bonneville to maintain higher financial reserves - reducing wholesale power rates by about $1.50 per megawatt-hour.

Bonneville also cited better-than-expected surplus power sales due to a normal water year for the hydroelectric system.

The agency said the new rates are adjustable and can go up or down annually to reflect things such as water conditions, BPA's financial performance, and fish and wildlife conservation costs.

Bonneville said it has saved an estimated $122 million over the past 18 months through an extensive review of its costs with customers.

But the agency noted the wholesale power rate decrease does not apply equally to all of its public utility customers. About 10 percent of BPA sales go to customers who had fixed-price contracts for the past five years, also known as "pre-subscription contracts." They will see a rate increase as those contracts expire and they begin to pay the same rates as BPA's other customers, officials said.

Bonneville also operates a high-voltage transmission grid with more than 15,000 miles of lines in Washington, Oregon, Idaho and Montana.

William McCall, Associated Press
BPA Cuts Wholesale Power Rates to Region
The Dalles Chronicle, October 3, 2006

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