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BPA, Utilities Sign Agreement to Lower Rates by William McCall, Associated Press Democrat-Herald of Albany, Oregon, June 10, 2004

PORTLAND - Northwest utilities can expect a 6 percent cut in wholesale electricity rates after they settled a nearly four-year-old contract dispute with the Bonneville Power Administration on Tuesday.

It is too early to say whether residential rates would be affected, utility officials said.

Public utilities had claimed that Bonneville made excessive payments to a handful of private, investor-owned utilities when electricity prices soared in 2001.

The public utilities argued the private companies should return hundreds of millions of dollars in BPA payments for electricity needed to supply the region during the 2001 Western energy crisis.

Demand for electricity increased sharply in 2001 just as the region was hit by drought that limited hydropower production, failed utility deregulation in California and Enron Corp. market manipulation.

Bonneville Administrator Steven Wright spent months negotiating a settlement that was rejected last January by public utilities despite the endorsement of the governors of Oregon, Washington, Idaho and Montana, along with the congressional delegation from the four Northwest states.

"Many months of hard work by the parties and strong support of regional leaders for an agreement kept alive efforts to amend the contracts in mutually beneficial ways," Wright said.

Some of the public utilities threatened to take the dispute to a federal appeals court, claiming the private utilities could afford to return more money to Bonneville, shouldering more of the energy crisis costs.

The bulk of the money covered by the agreements was from the 2001 crisis, when BPA had to buy power on the open market to meet demand or pay the utilities to replace unavailable BPA power.

The original settlement would have reduced wholesale rates by about 7.4 percent.

Under the settlement announced Tuesday, two of the largest private utilities in the region will forego $100 million in payments from Bonneville.

Puget Sound Energy, based in Bellevue, Wash., and PacifiCorp, a ScottishPower subsidiary based in Portland, will defer another $100 million due from the BPA until 2007-2011.

Four other major utilities - Avista Corp., Portland General Electric, Idaho Power Co. and NorthWestern Energy - signed settlement agreements that give up some of benefits under contracts signed in 2000 in return for guaranteed benefits to residential and small-farm customers in 2007-2011.

Such benefits could include cash payments to the utilities that would lower rates for their customers, along with a more predictable power supply.

Sen. Ron Wyden, D-Ore., said he was disappointed when the original settlement was rejected, but he called the agreement announced Tuesday "a step in the right direction."

"Now BPA should keep working to lower costs and further ease financial pressures," Wyden said.

David Kvamme, a spokesman for PacifiCorp, also praised the agreement.

"The energy crisis was hard on virtually every utility in the region, and a financially healthy BPA that fairly allocates the benefits of the federal power system is in the best interest of all the region's electrical consumers," he said.

Bonneville is scheduled to make wholesale rate adjustments in October for the 135 utilities and several industries it serves. The federal power marketing agency based in Portland sells electricity generated at a system of 31 dams and one nuclear plant.