BPA wants more cuts in demand to avoid doubling electric rates

In a effort to avert a 250% electricity rate hike, Bonneville Power Administration and its major electricity wholesale customers have agreed so far to cut 1,200 Mw of demand. BPA set a goal of reducing demand by 2,400 Mw to limit the amount of power it had to buy on the open market.

Jun 6th, 2001


By the OGJ Online Staff

HOUSTON, June 6 -- In a effort to avert a 250% electricity rate hike, Bonneville Power Administration and its major electricity wholesale customers have agreed so far to cut 1,200 Mw of demand.

But more is needed. "If we were to stop getting demand off of our system now, the rate increase for October would be 150%," said Steve Wright, acting administrator of BPA.

BPA set a goal of reducing demand by 2,400 Mw to limit the amount of power it had to buy on the open market. Even with a 2,400 Mw cut, the rate increase would still be 75%, he said.

The federally owned quasi public transmission and generation company is short of generation because of higher demand and a drought in the Northwest which has cut output from its hydroelectric power facilities. If demand doesn't fall, BPA will be forced to buy 3,700 Mw of additional supply in the wholesale market starting in October. The purchases will translate directly into higher rates.

The aluminum industry has contributed the most to the load reduction effort achieving 75% of its share. Investor-owned utilities have reached 25% of their share, and also are negotiating long-term purchase power contracts to reduce their purchases from BPA. Municipal and other publicly owned utilities have done the least to relieve BPA's outside purchases.

"I am discouraged with the publics. They are one of the major beneficiaries of BPA's power," said Wright.

Wright said he is trying to convince the publicly owned utilities that if all share the pain of reducing system demand, the cumulative result will be lower rates and electric bills for all. But if each utility thinks individualistically, he said, the rate increase will be much higher for everyone and actually cost the individual utility more in the end.

"It is the cheaper option to work collectively," said Wright. "I am trying to explain the benefits of doing that." So far the announced reduction in demand has resulted in softer power prices, he said.

"What we are doing is working," he said. "Prices for 5-year products are falling. If we don't continue to make progress, prices may start going back up."

Wright is convinced that wholesale customers can do more to cut demand. He asked customers reduce load by another 1,200 Mw in the next 2 weeks. BPA will schedule its final rate decision June 20 and submit its recommendation to Federal Energy Regulatory Commission for approval.

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