BPA: Real rates for NW power users

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The Bonneville Power Administration gave its Northwest customers a realistic, grownup choice: Use less electricity or pay more. A lot more.

BPA acting administrator Steve Wright is doing exactly what should have happened in California last summer: making rates reflect the actual cost of power.

That will happen here with a vengeance. Wright said Monday that rates for his clients - big industrial customers, public utilities and investor-owned utilities - could jump 300 percent if demand for electricity is not reduced.

Those increases, of course, would be passed on to residential, commercial and industrial ratepayers.

BPA is working its way through the region's second-worst drought in 72 years. That means less water for power and fish, and each suffers the consequences.

For BPA's energy customers, the volatile wholesale energy market is the greatest threat. Hydroelectricity is still cheap and plentiful in the Northwest, but BPA customers use 25 percent more power than the agency's 29 dams produce.

For years, finding the extra power on the wholesale market was relatively easy and inexpensive. With California in an energy meltdown and wildly bidding up the price, the wholesale cost of the needed 3,000 megawatts is profoundly expensive.

Keeping rates down means increasing supply of available low-cost power and buying less in the wholesale market.

Balancing the Northwest's energy budget requires new sources of generation. More regional power supply is coming online in the next 18 months, but nothing looms ahead for the coming summer and winter seasons.

To temporarily increase supply, BPA is asking the aluminum industry to shut down for at least two years. This is startling but not as outlandish as it reads in headlines. Part of the industry is already closed, taking advantage of lucrative contracts that allow it to resell electricity at inflated market rates. California's debacle made electrons more valuable than ingots.

Many Northwest plants will not be able to operate profitably with higher rates after Oct. 1. The market is extinguishing those aluminum pot lines, not BPA.

BPA is offering to pay the plants to stay down or close. Providing financial incentives to companies and their workers and buffering the impacts is cheaper than buying power on the open market.

With the aluminum industry's power share back on the grid, with pledges from the utilities to cut back their power demands, and conservation on the home front, BPA thinks it can keep rate increases under - drum roll - triple digits.

This is brutal, but longer term, the picture is not so gloomy. BPA still produces low-cost power that is the envy of the nation. Keeping BPA solvent and paying its Treasury debt is good for ratepayers and fish.

A combination of conservation and more generating capacity is the key to regional energy stability. More power plants have received permits and are under construction, and venture capitalists are attracted to this lucrative new business. Regulatory functions must be keenly balanced between environmental protection and the demonstrable need for more power.