Jan. 31, 2001The federally owned Bonneville Power Administration (BPA) is warning industry and utility customers in the Northwest that electric rates may increase as much as 60% over 5 years.
BPA, the supplier of almost half of all the power consumed in the Northwest, is facing escalating demand, higher wholesale power prices, drought conditions, and pressure to send power to California. BPA operates a series of hydroelectric plants capable of generating about 11,000 MW. The federal agency has had to buy power in the market to meet customer contracts.
“The problem is unprecedented high market prices. Unless the region finds ways to bring costs down, steep rate increases are unavoidable,” said Steve Wright, BPA acting administrator in a statement.
BPA is in the midst of establishing new rates for customers in pending rate cases. The impact on BPA customers will vary according to how much of their total electricity needs come from BPA.
The energy market on the West Coast is so volatile, that setting rates adequate to recover rising purchased power costs is difficult, BPA officials said. Revenue must be adequate for the agency to meet its federal U.S. Treasury payment, while funding fish programs and meeting other obligations. If BPA were to collect more revenue than needed, the agency would return it to ratepayers.
BPA said regional utilities have asked for more power from BPA than in the past. By law BPA must accommodate the demands of municipal owned utilities, said Mike Hansen, spokesman.
This year utilities have asked for 3,000 MW more than the federal Columbia River system can produce. Worse, BPA is facing extremely low water conditions which means the agency will have to buy more power on the open market.
Wright said despite the anticipated huge rate hike, BPA’s rates remain among the lowest in the U.S.. Retail rate increases that result from BPA’s action will still be less than increases in the wholesale power market.