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PUD Considers Ways to Keep Power Rates Stable by Jim Haley, Herald Writer The Herald, August 18, 2005

EVERETT - With the prospect of a small customer rate decrease in the offing next year, Snohomish County PUD officials Monday took a look at a long-term strategy to keep power costs in check and predictable.

The session took the form of a management briefing for the PUD's three governing board members, some big power customers and staff members for the state's congressional delegation.

Success hinges on prodding a huge federal power wholesaler, the Bonneville Power Administration, to cut its costs and settle on long-term power contracts.

The work is starting now, as BPA suggests a 1 percent reduction in charges to the local utility beginning in October and as work begins on a three-year power contract that would go into effect in 2007.

By 2011, the utility hopes to negotiate even longer contracts, perhaps 20-year power deals that could avoid spikes, such as those in the 2000-01 energy crunch.

In the short term, the possible 1 percent BPA rate reduction will have only a minuscule effect on local rates next year, although the reduction should be more, said Steve Marshall, PUD assistant general manager.

Marshall told the gathering that large industrial customers such as Everett's Kimberly-Clark and other public utilities believe BPA could cut 2006 rates by 2.5 percent.

He called a 1 percent reduction symbolic in the development of a budget for next year.

If there is a rate reduction, it would come mainly from trimming done locally by general manager Ed Hansen and his staff.

Earlier this month, PUD commissioners asked Hansen to try to reduce rates in the 2006 budget. The panel didn't specify an amount.

"That's a work in progress, and I'm going to do the best I can to carry out that direction," Hansen said Monday.

Pushing for more reductions from BPA is a daunting task. That's partly because of the complexity of producing mainly hydroelectric power, transmitting it over a series of power lines and abiding by regulations and court orders pertaining to fish and wildlife concerns.

In addition, low-water years reduce power production on the dams along the Columbia and Snake rivers, Marshall said.

There's already a basic disagreement on the three-year contract beginning in 2007, Marshall said.

For example, while BPA costs were $23 a megawatt hour in 2000, they had jumped to $31 by this year.

The BPA is examining raising the rates to between $33 and $39 a megawatt hour in 2007. At the same time, Marshall said, the PUD and other customers say BPA could drop that rate to just $27, nearly a 13 percent decrease.

The PUD is BPA's biggest customer. Its 300,000 customers consume about 10 percent of the wholesaler's power, and it is in a position to lead the more than 100 public utilities and other users clamoring for lower power costs.

The real relief could come by the start of the next decade if the drive is successful, said Dennis Parrish, the PUD's senior manager for power supply.

Twenty-year contracts will allow the Northwest to retain the benefits of low-cost and renewable federal hydropower, and reduce uncertainty for both utilities and BPA, he said.