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BPA Puts Squeeze on Utilities by Chris Mulick Tri-City Herald, July 9, 2000

Some electric utilities believe the Bonneville Power Administration is trying to squeeze them out of the agency's most popular contract offer.

Wholesale power contracts are scheduled to expire next year, and utilities are negotiating new agreements with Bonneville that would take effect Oct. 1, 2001.

As the deadlines approach, utilities are swarming to the agency's so-called "Slice of the System" offer, allowing them to purchase a percentage of the power produced by the Northwest's nuclear plant and system of federal hydroelectric dams.

Though a bit risky -- forcing utilities to buy and sell more power on the volatile spot market -- the slice contract offer gives utilities the most flexibility, officials say.

Bonneville's more traditional offers include higher penalty fees when utilities shop around for a better deal.

But Bonneville, unsure of its own ability to operate under the slice contracts, have added new stipulations in negotiations.

Utilities, many of which have done business with the BPA for 60 years, now must extend Bonneville a line of credit and submit a legal opinion from a recognized law firm, indicating the authority to sign such contracts. The BPA also is reserving the right to cancel contracts if utilities don't pay their bills on time.

"That's fairly heavy-handed," said Gary Saleba, a Bellevue-based power consultant.

For its part, Bonneville says it is not trying to deter utilities from pursuing slice contracts. The agency is simply trying to ensure it can handle the ups and downs of the spot market when it needs to make purchases.

Ultimately, the BPA may end up selling as much as 30 percent of its power through slice contracts.

"To step off the dock in times like these, that's a big step," said John Elizalde, the agency's manager of Western power sales and customer service.

Besides, it was tough enough late last month when the agency had to scramble to replace the 1,150 megawatts produced by the Columbia Generating Station, Elizalde said.

The nuclear plant north of Richland tripped off line unexpectedly at a time when Bonneville already was buying power off the spot market to meet demand.

"This was pretty much a Bonneville crisis," Elizalde said. "There were a lot of decisions that had to be made very quickly. Go out two years and it's the same scenario and you've got 30 new players. How smoothly and efficiently will we be able to deal with those new parties?"

Though Elizalde insists Bonneville is not trying to steer customers away from slice, others say it couldn't be more clear. "It's not a feeling, that's a fact," said Jerry Garman, a power consultant representing Richland's electric utility and the Benton and Franklin public utility districts.

Despite the new hurdles, area utilities still plan to pursue slice contracts.

"It's a nuisance and a slap in the face but we'll deal with it," said Benton PUD Manager Jim Sanders.

But that's only if the utility can have access to enough power under a slice contract to make it worthwhile.

To limit risk, Bonneville will allow only 1,150 megawatts to 2,000 megawatts of power to be sold under slice contracts, even though demand has soared above 3,000 megawatts.

The agency is expected to announce this week how much each utility would get if they agree to the new contracts. The deadline for signing is Sept. 30. But if the amount of slice power isn't large enough, smaller utilities may not find it worthwhile to participate at all.

Every slice participant, no matter how small, will have new expenses associated with power scheduling, including staff to constantly monitor changes in the power market.

"A lot of costs go into scheduling with that much detail," said Chuck Dawsey, manager of the Benton REA.

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