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BPA to Switch to 2-Tier Rate System in October by Luke Hegdal Hermiston Herald, September 2, 2011

Starting in October, Bonneville Power Administration customers, including Hermiston Electric Services, will face a two-tier power rate system designed to promote energy conservation.

According to Mike Hansen, BPA spokesman, the two-tier system replaces a complicated one-tier price structure and is designed to help meet demand for power that is outpacing BPA's ability to produce power.

"It does preserve the low-cost power rates for the majority of our customers," Hansen said.

Essentially, Hansen said the BPA looked at power usage for its 130 public utility customers, as well as its handful of private utility customers, and calculated a "high-water mark" for energy consumption based on power usage in the last two years.

"All of that power falls under tier one," Hansen said.

For Hermiston, the high-water mark for power use will give the city some wiggle room, which will keep rates low for a few years, according to Russ Dorran, superintendent of HES.

"We thought we'd be in tier-two rates right off the bat," Dorran said, alluding to Hermiston's rapid growth rate.

The current economic climate has stifled growth somewhat, helping to keep Hermiston inside tier-one rates. Combined with energy-saving strategies and other proactive measures, it could give the city breathing room.

"We feel that will take us into as many as eight years," Dorran said.

When tier-two rates do kick in, the difference could be significant. Tier-two rates are based on the average market value of power for the entire United States, and will be applied to all power above the high-water mark.

According to Nate Rivera, Umatilla Electric Cooperative spokesman, much of the U.S. is powered by coal at or above twice the cost of hydroelectric power.

Hansen said the high cost of tier-two rates are designed to encourage utility customers to implement energy conservation strategies to keep power use within the tier-one range, allowing BPA power generation to keep up with demand.