By the OGJ Online Staff
HOUSTON, Apr. 10--After months of warnings drastic wholesale price increases were inevitable, Bonneville Power Administration said wholesale customers could expect hikes of 250% by October, if demand is not reduced.
This could double retail rates for some Northwest consumers. BPA administers hydroelectric power facilities and transmission system in the Northwest that service the area's utilities and large industrial customers.
"Recent developments in the market now require a first-year increase of 250% or more, absent vigorous efforts to reduce demand," acting BPA administrator Steve Wright said in a release.
He asked for commitments to cut demand within 60 days to reduce the size of the rate increase.
If demand is not reduced, BPA will have to buy power to cover its expected shortfall. It specifically asked regional aluminum smelters to stay off line for 2 years, a move that could free up about 1,500 Mw of electricity.
The Northwest is experiencing what could be its driest year on record. Water shortages are threatening electricity generation. Wright said BPA is 2,500 Mw short of meeting demand in October when new wholesale contracts take effect.
BPA is facing a market with skyrocketing wholesale power costs. Prices are expected to be $300/ Mw-hr compared to $25-$30/Mw-hr just 1 year ago.
In January, BPA projected rates were going to be at least 60% higher. At that time there was still hope precipitation would be sufficient to refill water reservoirs for power generation this summer.
"The drought is leaving the region short of electricity for this summer and the winter," BPA said.
Wright said the BPA would ask for the following actions from each customer group:
� Request publicly-owned utilities to cut purchases from BPA by 5-10% through retail rate incentives and load buy back programs.
� Request investor-owned utilities to give up some of the savings obtained from buying cheaper BPA power and share the savings with their customers.
� Request that aluminum companies stay off line for up to 2 years. The plants could resume operations when the power situation stabilizes. During the downtime, BPA would provide funding for employee compensation to minimize the impact of reduced economic activity on communities.
Wright said BPA must raise rates enough to pay its obligations to the US Treasury on money borrowed to build the federal power system.