A proposal by the Bonneville Power Administration to lower its electricity rates by 7.4 percent is officially dead.

The federal power marketing agency had offered to reduce the rates it charges Snohomish County PUD and other public utilities if they would agree to drop a lawsuit against the BPA.

The number of utilities willing to settle surged from about a dozen to at least 32 in the last days before the deadline, but it was too little too late. All 72 utilities involved had to agree to settle by Wednesday.

Utilities had until midnight to accept the settlement, but the proposal was already dead by Wednesday afternoon because five utilities had voted no, including Snohomish County PUD.

"It’s time to move on," BPA spokesman Ed Mosey said.

The BPA will now focus on setting rates for the 2006-11 rate period, a process that starts in earnest at the end of the year. It also wants to focus on transmission line, fish and maintenance issues.

Snohomish County PUD commissioner Dave Aldrich said the PUD will continue to pursue the lawsuit, which claims that BPA’s current rate structure favors private utilities such as Puget Sound Energy, creating a windfall for them at the expense of the public utilities.

Aldrich said the PUD already has launched a bid to rebuild its relationship with BPA, a process he hopes will force the region’s largest energy supplier to do some in-house belt tightening.

"We believe that Bonneville has the resources and the tools to actually lower rates immediately," he said, pointing to BPA’s $500 million in reserves.

Aldrich said he realizes PUD customers are struggling to pay some of the highest electricity rates in the state, but said the benefits of a short-term reduction would last less than a year, and by deferring costs would only push a rate hike into the future.

Managers of utilities that approved the settlement said they were disappointed by the failure to settle.

Rick Crinklaw, general manager of Lane Electric Cooperative in Eugene, Ore., said he understands that Snohomish County PUD and others believe they can get a better settlement in court.

"But from our standpoint, the benefits of a settlement would be certain if approved, and for us not markedly different than a litigated solution would be," he said.

"Favorable rulings by the courts are by no means certain, so for us it was only a 50-50 chance, and a settlement makes much more sense."

For Lane Electric, the settlement would have saved about $500,000 a year over several years, Crinklaw said.

Gov. Gary Locke and much of the Northwest’s congressional delegation pushed for the settlement, including U.S. Rep. Rick Larsen, D-Wash.

"I’m going to continue to work with BPA, the PUD and other utilities to try to see if we can find short-term rate relief," Larsen said. "It’s fair to say the relationship between the players is pretty sour."

If that’s unsuccessful, he said, his only choice would be to push for lower rates when BPA establishes its 2006-11 rates.

U.S. Sen. Maria Cantwell, D-Wash., also said she was disappointed.

"Stakeholders need to roll up their sleeves and get back to work on a solution equitable for all of Washington state’s ratepayers," she said. "Until rates in the Northwest go down, the job isn’t done. I ask that everyone go back to the drawing board."

The Associated Press contributed to this report.

Reporter Lukas Velush: 425-339-3449 or lvelush@heraldnet.com.