Power rate hike likely

By KATHY DAY

Herald Writer

EVERETT — Snohomish County PUD commissioners took a step Tuesday toward a rate hike for electricity customers.

But their decision to buy up to 85 percent of the county’s electricity from the Bonneville Power Administration is the safest choice, PUD General Manager Paul Elias said following Tuesday’s commission meeting.

Right now, the county gets less than half its power from the federal BPA. But increasing that amount should decrease the risk of dramatic price increases later.

"The BPA contract will be higher than our current rates, but still substantially lower than the market rates," Elias added. "We’re making every effort not to put pressure on rates."

The specifics of the contract, which will go into effect in October 2001, are still up in the air because BPA hasn’t determined its rates or allocated power to its customers, which include public and private utilities and industries such as aluminum manufacturing. Further complicating the picture is a cost adjustment rate hike the federal agency has requested to counter rising prices for the power it had to purchase on the open market during the summer to supplement its own resources.

PUD commissioners Tuesday gave Elias authority to negotiate a BPA contract for what is known as a "block-slice" pricing structure. Essentially, it means that the district will buy a portion — the "block" — of its power over five years at a set rate, with certain options for adjustments up or down based on changes in BPA’s costs.

The "slice" portion of the deal would be over 10 years at fluctuating rates. Its specifics are fraught with uncertainties, such as the availability and timing of water flow down the rivers to hydropower dams and how much power the district actually will require to serve customers in the county and on Camano Island. The upside is that the PUD could sell any excess power in high-water years to recoup some of its cost.

In detailing the contract options and ways to manage them, assistant general manager John White had told the three commissioners that "it’s the water and it’s the market" that are influencing the overall pricing. At one point, he even joked about having to "read political tea leaves" to determine which way to go.

He spent several hours Tuesday and all of a special meeting a week ago focusing on options for obtaining power at the lowest prices with the least risk. They ranged from the block-slice combination to another Bonneville package called "complex partial-complex" that is on the back burner as a fallback option.

Also explained were five ways to manage resources in the slice portion of the contract, ranging from having the PUD do it to giving up all control of how the slice works. A decision will be made later after more negotiations with prospective contractors, and once the district gets a firmer definition of the Bonneville deal.

Included in the analysis were a series of probability models that looked at the chances for low water supplies from lack of rain or the potential of lost capacity due to environmental impacts.