Plan could fuel rise in NW electricity rates

A federal budget plan to cut the national deficit could raise electricity rates for many Northwest customers by 20 percent in each of the next three years.

The Bush administration believes the plan would result in at least $2.5 billion from the Bonneville Power Administration that would go toward the deficit.

The administration's budget proposal, sent to Congress yesterday, calls for four federal energy providers, including the Bonneville Power Administration, to begin selling electricity at market rates instead of the wholesale rates at which they now sell power.

At today's Northwest prices, that's a difference of $13 a megawatt-hour. (A megawatt-hour serves about 800 homes for one month.)

Bonneville, which provides nearly half of the Northwest's energy, sells electricity for $32 a megawatt-hour now versus the market-based price of $45 that other energy retailers charge.

Under the budget plan, prices would gradually increase during a three-year period. Overall, it would amount to a 20 percent rate increase annually for local utilities, such as Seattle City Light and the Snohomish County Public Utility District, that rely on Bonneville for power. The increases likely would be passed on to residential and business customers, officials said.

Seattle City Light, which buys 35 percent of its power from Bonneville, would pay an additional $100 million annually using today's prices, utility spokesman Jim Harding said.

The PUD, which relies on Bonneville for 80 percent of its energy, said its customers already are staggering under the weight of rates that increased 50 percent during the West Coast energy crisis between 2000 and 2001. The Northwest's congressional delegation offered bipartisan support yesterday to defeat the budget proposal, which administration officials said must be passed to plug holes in a widening deficit.

The extra money that Bonneville would make under the plan would go directly to the U.S. Treasury Department to pay down the deficit, which is expected to be around $400 billion this year.

Bonneville now pays about $1 billion annually to the Treasury Department to cover its debt. The new proposal would put an additional $3.2 billion toward debt during the next five years, said Chad Kolton, a spokesman for the Office of Management and Budget, which oversees the federal budget.

Bonneville officials, still reviewing the proposal, would not comment yesterday, but Kolton said the recovering national economy makes this proposal worth considering.

"Our thought in the proposal is to make sure we're fair to the taxpayer across the country who provided the funds to build [Bonneville's infrastructure]," Kolton said. "They're responsible for paying the market rate for their power, while [Bonneville] charges a rate that's less than consistent with the market value."

The OMB estimates that Northwest consumers' bills would increase about $30 on average next year, with another surge in 2007. Rates would be expected to reach market prices between 2008 and 2010.

Rep. Jay Inslee, D-Bainbridge Island, said Northwest ratepayers can't afford another spike.

"It's an enormous threat to a Washington economy that's already fragile," he said. "This state lost about $1.5 billion during the energy crisis, and now it could lose another $2.5 billion during the next three years, and only if the rates stay the same."

Rep. Doc Hastings, R-Pasco, also decried the proposal.

"I'm incredulous and outraged by the proposal to unfairly increase Northwest power rates," he said in a statement. "Should the administration insist on pursuing this ill-advised proposal, our congressional delegation will be unified and emphatic in opposing it at every turn."

Others, including Washington Democrats Sen. Maria Cantwell, Sen. Patty Murray and Rep. Rick Larsen, of Lake Stevens, also said they'd work to kill the measure.

With such opposition from the start, lobbyists wondered yesterday how far the measure would go in Congress.

"It's a ridiculous proposal," said Jerry Leone, president of the Public Power Council, which lobbies for Northwest public utilities. "Putting Bonneville at a market rate has been a favorite target, but you can't just put that in the budget and get Congress to approve it."

Under federal law, Bonneville must sell power at wholesale rates, Leone said. It's why the federal agency was created in 1937: to provide a cheap source of energy for a growing region.

Without Bonneville's wholesale prices to hold down market rates, it's possible that the market would escalate rampantly, causing even more hardship for the region, Harding said.

"This idea goes back to the Reagan administration," he said. "We've resisted it in the past. I think we'll be able to resist [this proposal again], but we still have a battle ahead of us."

Christopher Schwarzen: 425-783-0577 or cschwarzen@seattletimes.com