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Bonneville Power Administration Raising Rates by Associated Press Forbes, July 22, 2009

PORTLAND, Ore. -- The Bonneville Power Administration is increasing its wholesale electricity rates for the first time since 2002.

Under the BPA's new rates, the average wholesale buyer will pay $28.77 per megawatt-hour of electricity compared with the previous rate of $26.90 per megawatt-hour - an increase of 7 percent.

The BPA, which markets the energy produced at 31 hydroelectric dams and a nuclear plant in the Columbia River Basin, said the increase was needed because of rising costs and falling revenues from surplus power sales.

The power rate increase is down from the initial proposal in February of 9.4 percent. In early April, the BPA talked about a potential 15 to 20 percent increase because of the severe recession and below average water.

"Nobody wants a rate increase, and we have worked very hard to keep the increase as low as possible," BPA Administrator Steve Wright said Tuesday. "We tightened our belt and worked with stakeholders to keep the increase to a minimum, while honoring our commitments to fish, wildlife and maintaining system reliability."

The new rates take effect Oct. 1 and will remain in place until October 2011. How they affect retail rates will vary depending on what portion of a utility's power or transmission is purchased from BPA.

Clark Public Utilities, across the Columbia River in Vancouver, Wash., will see an annual $5 million to $7 million increase in its power supply costs because of the BPA action, said Mick Shutt, a spokesman.

The utility, however, won't know until its board votes on a new budget whether to boost rates to its residential, commercial and industrial customers. Natural gas prices have fallen and the utility may be able to offset the BPA rate hike, Shutt said. The utility also gets power from its own natural gas-fired generating plant.

"It's just way too early to know at this point," Shutt told The Columbian newspaper. "We're doing everything we can to avoid an increase, but until we see these numbers and look at them in context with our budget, we won't know."

The hydropower BPA sells makes up 40 percent of the energy consumed in the Northwest, and it owns three-quarters of the transmission wires that send electricity from power plants to customers as far away as California.

Its 541-page order for setting future rates to public and private utilities also brought new attention to the challenge it faces in absorbing new wind power. At issue was a controversial decision dealing with how much to charge wind producers to absorb and smooth out the intermittent stream of power they send to the grid.

The rate increase imposed on wind producers came in at about 90 percent. While that's hefty, it is far less than the 300 percent increase that the agency proposed earlier this year. The BPA says the lower rate increase resulted from efforts by the wind power industry to improve its forecasting and operational practices, allowing the federal hydro system to operate with lower emergency reserves.

"Wind was the hardest issue in this rate case because it was completely new," Wright told The Oregonian newspaper. "There was more thought on that issue than anything else."