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BPA Looks To Create Two-Tiered Rate System For Power by Ley Garnett OPB News, August 23, 2006

PORTLAND, OR -- The Bonneville Power Administration is wrapping up the last public meeting on its new power plan Wednesday in Idaho Falls.

The federal wholesale power marketer wants to change the way it sells electricity to dozens of utilities in the Northwest. The changes would come when long-term power contracts expire in 2011.

SOURCE OF CHEAP POWER

Bonneville Dam has provided cheap electricity to the Northwest for nearly 70 years. It was the first of several federal dams to dot the Columbia and Snake Rivers.

It's those dams and a nuclear plant in Hanford that provide most of the electricity that the Bonneville Power Administration distributes.

The fast growing population of the Northwest has sucked up all the energy from these cheap sources and the region demands more today.

DESIRE TO AVOID ENERGY CRISIS

The BPA's Scott Sims says his agency wants to prevent what happened 5 years ago.

"It's really a process so we can avoid the most damaging impacts of the 2000-2001 West Coast energy crisis," Sims says, "No one wants to revisit that period again."

Earlier this month in Portland at BPA headquarters several dozen people turned out to comment on the plan.

Among them were aluminum workers like Pat Flairety, who believes his fellow workers lost their jobs because of that energy crisis. Flairety wore a t-shirt with a message: "Alcoa can provide 5,630 jobs in the Northwest."

He said he was among 1200 workers enjoying a nice paycheck from an Alcoa plant in Ferndale, Washington.

"And then in the year 2000 a company called Enron reared its head," Flairety says, "And our lives changed and have never been the same since."

Flairety's plant laid off two-thirds of its workforce after power prices jumped by 50 percent. The aluminum industry that had provided good paying blue-collar jobs since World War II virtually collapsed.

POWER NEEDS GROW ALONG WITH INDUSTRY

But Alcoa Northwest Vice President Jack Speer says the international aluminum market has rebounded.

"Because of growth in China and India all commodities are in demand. So there is a demand for our product around the world," Speer says, "And we would love to produce that here in the Northwest if only we had cost effective power rates to do that with."

To run at full capacity, he said, Alcoa needs more cheap power. The BPA recently offered special discounted rates to aluminum companies, the same prices the plants enjoyed before the energy crisis.

SOME CHANGES CONTROVERSIAL

But the amount of power would be capped at less than a fifth of the amount sold before 2000. So Alcoa wants more power. But other big industries are not happy about the aluminum discount.

"While it may be tempting to offer enhanced benefits to some, please remember that the cost of those benefits is coming from the pockets of others," says Alan Meyer, energy director for Weyerhaeuser.

"One of the advantages we had in the Northwest in the past was low power rates that offset some of the other higher costs here," Meyer says, "We've lost that advantage even with the lower rates that BPA just announced."

"BPA's wholesale rates are below wholesale rates in the West but the retail rates that we pay our public utilities are no longer lower than those we pay in other parts of the country."

The deal BPA is offering aluminum companies isn't the only sticking point. Bonneville also wants to create a two-tiered rate system in its new plan for most utilities.

Tier 1 would be cheap power from the dams. Tier 2 would be more expensive because the BPA would have to buy the electricity from other utilities.

POSSIBLE ENVIRONMENTAL CONSEQUENCES

Conservation and public interest groups say under that system utilities would likely try to build their own power plants as cheaply as possible and that could be bad for the environment.

"The proposal may encourage movement away from conservation and renewables, and toward other resources including coal-fired generation," says Jeff Bissonette with the Citizen's Utility Board, "Conservation and renewables, which are the priority resources in the 1980 Power Act, get platitudes and promises in this proposal."

The BPA's Scott Sims says everyone in the Northwest wants cheap power, and that's why it's holding these meetings.

"And so we want to make sure that we have that discussion now, that we talk openly about what the future might look like, so we can find some collaboration," Sims says.

Regardless of whether the interest groups can come to an agreement on sharing power, the BPA will send a new marketing plan to the U.S. Energy Department in January.