Power bills likely to remain stable in '03
Avista has natural gas-fueled plants ready for low-water times

Bert Caldwell
Staff writer

At a glance Interview with Steve Wright

Inland Northwest utility customers can expect a year of relative calm in 2003.

Electricity rates should remain steady for almost all area residents. Despite low snowpack levels throughout the region, power will be available.

Last month, the Northwest Power Planning Council pegged chances of a shortage this year at only 1 percent. The council had warned odds were much greater -- 25 percent -- three years ago, just before a combination of low river flows and rising demand drove wholesale electricity prices to more than 100 times normal during some periods.

Retail rates for millions of customers in the Northwest jumped as much as 50 percent, and they have stayed high as utilities pay off debt they assumed to buy electricity.

Washington regulators in June 2002 affirmed a 31 percent rate increase for Avista Utilities that took effect on a preliminary basis in October 2001. Idaho in October approved a 19 percent surcharge that will remain in effect for at least a year.

Avista Chairman Gary Ely said the increases are generating the cash flow needed to strengthen the company's finances.

And unlike two years ago, when historically low streamflows robbed Avista of huge chunks of its generating capacity, the company has natural gas-fueled generating units available to offset possibly low streamflows this year.

Most other utilities in the area buy their electricity from the Bonneville Power Administration. And most of them -- Inland Power and Light Co. and Kootenai Electric Cooperative among them -- locked in prices until Sept. 30, 2006.

Vera Water & Power in the Spokane Valley and Northern Lights Inc. in Bonners Ferry are among the exceptions.

Bonneville finances remain under pressure because of the 2000-2001 electricity crisis. The federal power-marketing agency hiked rates 47 percent in June 2001. For the public utilities that buy most of its power, that translated into small but still-significant rate increases.

But Bonneville Administrator Steve Wright says the financial situation has not improved. He is trying to cut agency costs as much as $500 million over the next few years, but still must contend with $5 billion in additional costs, most for power, taken on to serve new customers just as electricity prices peaked in 2001.

Earlier this month, Bonneville announced it may have to seek a rate increase in the neighborhood of 15 percent. A series of public hearings will be held before the potential hike takes effect Oct. 1.

Bonneville will be under a lot of pressure to hold the line.

To illustrate what Bonneville is up against, Wright noted a single acre-foot of flow on the Columbia River at The Dalles, Ore., can mean as much as $10 million in revenue, or costs, to Bonneville.

Average flow from January to June is 106 million acre feet. Early estimates predict flows for the six-month period this year will be only 77 million acre feet.

Wright and other Northwest utility executives face other major questions.

The Federal Energy Regulatory Commission wants the Northwest electricity transmission grid, as well as those in other regions, to be put under the control of a single operator.

FERC is also pushing another proposal -- Standard Market Design -- that would drastically change the way those systems are managed.

Both plans are unpopular in the Northwest, where they could compromise the region's traditional low electricity prices.

Still unresolved, too, are the many lawsuits and legal questions lingering from 2000 and 2001, when companies like Enron Corp. allegedly manipulated electricity markets, reaping hundreds of millions in profits.

FERC investigators last summer raised questions about the roles of Avista and Portland General Electric in some of the schemes, but appeared to clear Avista of any wrongdoing in preliminary findings released in December.

A final report affirming those conclusions is expected any time. A positive outcome would do much to lift the legal clouds that have shadowed Avista for almost three years.

For Avista ratepayers, the major uncertainty may be natural gas prices. The company lowered rates about 17 percent Nov. 1 in response to a slight retreat in gas prices at the wholesale level.

But prices have since rebounded, creating the potential for another upward adjustment in the fall.

Utilities facts