PUD considers rate increases

The Bonneville Power Administration (BPA) announced September 7 it would raise the average cost of power to its more than 140 wholesalers by 7 percent.

The rate hikes take effect October 1, and Wahkiakum PUD residential customers will see their bills go up by about 5 percent.

The question: Why is Bonneville raising its rates in a recession? “That is the question everyone is asking,” said Wahkiakum PUD Commissioner Bob Jungers.

The BPA said the rate increase is to help pay its share of cost to the Columbia Nuclear Generating Station in Richland. The plant has tripled its safety procedures and security staff, as well as implementing new reliability measures. The additions have added about $20 million a day to its operating costs.

Energy Northwest owns the Columbia Nuclear Generating Station. “Next to hydro power that generating facility is BPA’s only other real source of electric power,” said Jungers.

The BPA also sells the power generated by 31 dams owned and operated by the Corps of Engineers and the Bureau of Reclamation. And it resells the power generated by the Columbia Nuclear Station.

The BPA also has had to cover the cost of integrating wind power into its power grid; and cover all fish mitigation costs.

Included in the BPA rate-hike is the added expense of BPA’s court-ordered salmon recovery programs.

“I think about 40 percent of the BPA’s actual power costs go to fish mitigation,” said Jungers, “and the way their doing it may not be the best way.”

“Bonneville spends hundreds of millions of dollars a year on fish mitigation issues,” said Wahkiakum PUD General Manager David Tramblie.

The rate increase also goes to paying back $183 million to residential and small farm customers, and investor-owned utilities that feed power into BPA’s electrical grid.

The controversial residential exchange payment program evoked an expensive fight between the BPA and the small private generation facilities, and private utilities. The 9th Circuit Court of Appeals has ordered the BPA to pay back the millions starting in 2010 - 2011.

For Wahkiakum the 5 percent increase will be felt county wide.

For Puget Island and Western Wahkiakum the 5 percent increase is the first of a two-phase rate increase that also includes a 3 percent hike in water rates. Tramblie said both areas are below their 10-year average in maintenance and infrastructure schedules and he is not (from a reliability standpoint) comfortable with that average.

Wahkiakum’s annual cost for power to the entire county is just under 50 percent of the PUD’s total budget.

“To that the PUD must add increased fuel and labor costs,” said Tramblie.

The PUD also has to factor in the ever-increasing cost of materials, “One example is the cost of copper, it has skyrocketed,” said Tramblie, “and if you toss in the rise of aluminum and steel, everything purchased has gone way up.”

So what makes BPA’s electricity still a good deal? Tramblie said that the agency not only sells power but it also folds into its cost it auxiliary issues.

One of the most expensive aspects of generating and selling electricity is transmission. Known in the industry as “wheeling,” it is getting the power from the generator to the user; in this case the Wahkiakum PUD.

“The BPA absorbs a lot of the infrastructure costs for its power distribution,” said Tramblie.

The PUD’s goal is to achieve maximum reliability and that means finding and securing a reliable source of power for its customers, then making sure to get the best bargain for the dollar.

Jungers said the PUD takes seriously its mandate to provide reliable services to its customers. “For this reason we build into our rates what we call ‘cash capitol retention reserves’ which means we build a certain amount of what could be erroneously perceived as profit,” said Jungers.

The capitol reserves are placed into a fund the PUD draws from to maintain the county’s electric infrastructure. The fund also creates a cushion for the future.

"Right now our reserves are healthy,” said Jungers, “and to the customer the rate increase we’re proposing may seem “piggish,” but over the last year our reserves have been declining because our rates haven’t been keeping up with our costs.”

The PUD has several projects in the works that it considers important. The first is retrofitting a new substation in western Wahkiakum.

“The transformer operating at that substation was installed in 1947 and they don’t last forever,” Jungers said.

The PUD has also hired an electrical engineering firm to evaluate its overall needs. The firm’s report said that the PUD could expect to lay out about $5 million in capitol and infrastructure cost over the next five years.

Jungers said that the PUD’s commissioners and management agreed they would rather be able to pay for the repairs and improvements up front, and not incur any public debt.

Tramblie said the PUD also has to build into its budget room for inflation.

“The BPA rate increase is still a bargain,” he said. “Wahkiakum can’t afford to compete on the open market for its power.”