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BPA Rate Hike Looms for OTEC by Scotta Callister Blue Mountain Eagle, March 2, 2011

New meters, line extension costs alarm some members

JOHN DAY - With a Bonneville Power Administration rate increase looming, Oregon Trail Electric Cooperative is making some changes in the way it operates - and warning members that higher rates are coming.

Werner Buehler, OTEC general manager, said BPA is raising its rates to power purchasers including OTEC by 8.5 percent on average, effective next October.

Some BPA customers may see rate hikes as high as 15 percent.

Such increases are hard for operations like OTEC, he said.

"The cost of power is 50 percent of our total cost of doing business," he said.

Buehler and Angela Perez, communications specialist for OTEC, were in John Day last week to talk about the next steps for the cooperative, which operates in Grant, Baker, Harney and Union counties.

OTEC members can expect a rate hike, but how much is not known. BPA's final figures aren't in yet, but OTEC estimates it will see an 11 percent boost in its cost for wholesale power - an amount that could translate to a 5.5 percent increase on members' bills.

"As soon as OTEC knows exactly how much the BPA is going to charge us, we will let our members know," said Perez.

Buehler said that in anticipation of higher costs, OTEC has been cutting its overall day-to-day operation costs and investing in new technology to save money over the long haul. The cooperative also is leaving some jobs vacant as employees retire. There are six vacancies now, reducing the total Scotta Callister to 91.

He said OTEC is implementing infrastructure and technology upgrades in a quest for greater efficiency. One step in that direction is the changeover to so-called "smart meters."

The new meters will be able to feed information digitally to OTEC, rather than by meter readers - and that has stirred concerns about those jobs. However, Perez said the meter readers - eight jobs now - are being encouraged to apply for other OTEC jobs as they become available.

OTEC's technology upgrades are funded by a $6 million loan to be amortized over the life of the assets. Perez estimated the payback on the meters at less than eight years.

The meters will be installed throughout the territory over three years; Grant County isn't scheduled for the change until 2013.

Once the installation is complete, OTEC will be able to phase in new programs that make use of the digital technology.

In other parts of the country, utilities even offer voluntary "demand-side management" programs. The utility can even turn off a water heater, change a thermostat or take other steps remotely when the system is in a peak-load situation.

However, Perez said OTEC doesn't plan to offer demand-side options anytime soon. If it did, they would be voluntary, not mandatory.

Perez also said that OTEC doesn't offer "time of use" rates now, although it would be possible with the digital meter system. If that is offered in the future, it also would be voluntary - for members who sign up to have that program, she said.

Smart meters have sparked concerns in other areas. Critics have complained about higher bills for some consumers, and the specter of a "Big Brother" effect.

Buehler said new programs made possible by the meters are intended to enable members to better control their own costs and help the cooperative conserve energy and more effectively gauge power needs for the future.

As for the information generated by the meters, OTEC plans to keep it confidential.

Some critics aren't convinced.

"This is going to allow them to have a tiered rate," said Steve Parsons, whose family runs an electrical contracting firm in Grant County. Of more concern to Parsons, however, is revised line extension policy, which went into effect Jan. 1.

Under the new policy, a landowner planning a line extension - with a cost of more than $5,000, and where the cost of the extension is three times the forecasted revenue from it - pays the cost of materials and work upfront, plus a monthly surcharge - 1 percent of the estimated cost of the line construction and installation, for five years. As an alternative to the monthly charge, the owner could pay an additional 50 percent of the line cost up front.

The policy also says the contract will be recorded as a lien against the property benefiting from the new line.

Parsons said the new surcharge and other policy changes could have chilling effect for both developers and individual landowners seeking to build on unserved lots.

"This is going to just kill any development that could happen in the rural areas," he said.

The cost of extending power to a property is one of the first considerations when prospective residents look at land in the region, he said.

He said this will encourage people to look at solar and other options for providing power - options that would take them off the grid.

John Day resident Shaun Robertson also protested the change in an e-mail, calling it a significant departure from past practice and incongruous with keeping members' costs down.

"I also find it surprising that OTEC would so readily implement these new charges in this economic climate and in light of the millions of dollars they have recently spent constructing new office facilities for themselves in John Day, Baker and La Grande," Robertson said.

OTEC is planning to hold a meeting in mid-March in John Day to talk with contractors about the change.

Meantime, Buehler said customers with line extension projects already in progress are "grandfathered in" and can still qualify for the old rate structure.

Buehler said the changes are intended to protect OTEC and its members from the rising cost of new service and particularly in cases where a developer extends lines, but doesn't proceed with the project. In those cases, he said, the cooperative is left with the responsibility for maintenance and repairs, but no revenue from the new line.

With rates rising and the cost of doing business going up, OTEC is trying to keep from shifting upfront costs onto the general membership, the officials. said.

Buehler said all the change facing OTEC comes amid to a "paradigm shift" in the electric power industry. Part of that shift is due to end of the era of cheap hydro power, which enabled providers to get all the low-cost power they needed to serve a growing customer base.

Where providers once spread their costs by adding customers, the new business model favors conservation over consumption. Buehler said the new BPA contract will put a cap on that cheaper power, and the next tier of power will cost two to three times more. That means new customers and added service come at a higher cost - one that is borne by the overall membership, Buehler said.

BAKER CITY - Steven Wright, the BPA chief administrator, will come to Baker City March 29 to discuss the agency's rate hike. He is expected to take questions and to explain the challenges leading up to the rate change, including the cost of bringing wind power on line, fish mitigation issues and aging infrastructure.

The meeting will be at 11 a.m. the Oregon Trail Electric Cooperative headquarters, 4005 23rd St. Members who would like to attend should contact Joan Macy, 541-524-2831 or e-mail to jmacy@otecc.com no later than March 18.