By Kathy Day
Herald Writer
Increases in wholesale prices for electricity mean Snohomish County PUD customers could face a rate increase of as much as 80 percent this fall.
But PUD officials said Wednesday they’re hopeful that the increase will only be about half that amount when they get down to nitty-gritty rate setting this summer.
That’s because Steven Wright, acting administrator of the Bonneville Power Administration, said Wednesday that progress is being made to get BPA’s wholesale customers to reduce the amount of power they buy from the federal agency by 2,400 megawatts. That’s enough to serve the PUD’s customers for three years.
Reduced demand on the system would mean the federal agency would have to buy less power on the open market to meet its obligations.
"What we are doing is working," Wright said. The market has already responded, he said, because market prices are dropping in response to reduced demand.
So far, Wright said, the agency has agreements to cut about 1,200 megawatts, meaning the wholesale rate increase would be more than 150 percent in the first year of the new contracts that go into effect Oct. 1.
"On the other hand, if we push ahead and get another 1,200 megawatts, we can reduce the rate hike below 75 percent," he added.
The could bring the rate hike for PUD customers down to around 40 percent, because PUD officials are cutting expenses and dipping into reserves instead of simply passing along the higher wholesale costs.
BPA will issue its final decision on June 20, and must submit a rate proposal to the Federal Energy Regulatory Commission before July 1.
BPA has called for load reductions because it has more demand for power than the federal hydropower system can produce, in part because of growth and in part because some customers, including the PUD, are increasing the amount they are buying. The predicament has been complicated by higher market prices resulting from deregulation in California and a shortage of rain and snow in the Northwest.
In April, Wright asked public utilities to cut power purchases from BPA by 5 to 10 percent for each of the next two years. He also called on private utilities to cut back and on direct service industries, primarily aluminum companies, to shut down for two years in exchange for payments to help pay workers until the power crisis passes. The rationale is that if they don’t, the plants would likely close permanently because they could not afford to operate if power costs rise by 250 percent.
The last part of Wright’s request has proven controversial among a coalition of companies, individuals and organizations who formed the Northwest Power Alliance, protesting that the decision will kill the aluminum industry in the state.
Yet, of the 1,200 megawatts going directly to industry, companies have agreed to cut about 900 megawatts, Wright said.
Part of his message on Wednesday was to plead with those who haven’t committed to cutbacks to "step up to the plate."
"The way it works is collectively as a region. There will be lower rates or not," he added.
PUD commissioners haven’t committed to Wright’s request, but will take up the matter on Tuesday and also will look at a proposed schedule for setting rates.
They’re faced with reducing their BPA contract by 70 megawatts — more than any other public utility because the PUD is the agency’s largest public customer. Knowing that area residents and businesses can’t make up that difference by conservation alone, the alternative is to buy more expensive power on the open market.
PUD assistant general manager John White said the district is still negotiating with BPA on its reduction.
PUD officials calculate that for every 10 percent that BPA rates rise, local rates will go up about 4 percent. That figure includes estimates for BPA costs, as well as what it will cost to buy supplemental power.
You can call Herald Writer Kathy Day at 425-339-3453
or send e-mail to kday@heraldnet.com.
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