PUD won’t lower rates

Snohomish County PUD’s largest electricity supplier will lower its rates by 7.5 percent on Oct. 1, ensuring that local power rates won’t go up next year.

They won’t be going down in 2005, either.

Ed Hansen, the PUD’s general manager, said there’s some hope that rates can be lowered in 2006.

Steve Wright, Bonneville Power Administration administrator, announced the rate reduction in Portland, Ore., on Thursday, saying it would stimulate the Pacific Northwest economy.

Wright estimated that lowering rates would keep $125 million in the pockets of Northwest power customers.

“We’re here today to announce what I believe to be some good news for the region,” Wright said in a conference call. “We believe our rates have a big impact on the Northwest economy.”

The PUD is the federal energy wholesaler’s largest customer, so the news of a rate reduction is particularly welcome here, Hansen said.

While some Northwest utilities said they will pass the rate reduction directly to their customers, the PUD will not.

The reason?

Lower BPA rates will save the PUD $8 million, but the savings only applies to half the electricity the PUD buys from the federal energy wholesaler. The price for the other half will ironically go up by the same $8 million on Oct. 1.

“I think it’s coincidental that these two numbers are the same,” Hansen said, but “for Snohomish PUD, it’s about a wash as far as our power costs are concerned.”

Still, saving $8 million whittles the PUD’s preliminary 2005 budget shortfall from $13 million to $5 million. Hansen said the utility would use cost-cutting and reserves to make up the shortfall.

“Our board has given me strong direction as general manager that there won’t be a rate increase,” he said. “We’re aware that our customers are being impacted by our high rates.”

The PUD’s rates have been among the highest in the state since they went up by about 50 percent in 2001, an increase linked to the record electricity price run-up that occurred during the 2000-2001 West Coast energy crisis.

If the utility wins any of a number of energy crisis-era legal fights in the coming year, including a high-profile fight with Enron Corp., chances are good rates will fall in 2006, Hansen said.

“We’re looking at the day when there will be a rate reduction,” he said.

The PUD releases its first look at the next year’s budget every August. The proposed 2005 budget is $586 million, $13 million more than the PUD’s $573 million in forecast revenues.

The budget is likely to go through several revisions before it is adopted by the end of the year.

Wright said BPA was able to lower its cost despite a fifth consecutive year of drought by cutting costs within the organization and because projections show it will get a good price for the excess electricity it sells on the open market in the coming months.

BPA sells electricity to much of the Pacific Northwest. It gets the power from federally owned dams on the Columbia River and from a nuclear power plant.

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

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