A concerted push by utilities and industries in the Pacific Northwest to implement load reductions means that the Bonneville Power Administration (BPA) will only have to raise wholesale power rates by 46% starting the first of October, a not insubstantial rate hike, but a far cry from the 250% or more increases being bandied about by the BPA just two months ago (see Daily GPI, April 11; June 8).

“Of our 2,400 average megawatt goal for load reductions, we have commitments for 2,277 average megawatts,” said Steve Wright, BPA’s acting administrator in a conference call with reporters at the end of last week. “This is 95% of our total goal.” He noted that the load reductions came from all of the administration’s customer groups, including public utilities, private utilities and direct service industries. “With this level of load reduction, we are concluding today that we need a 46% rate increase, rather than a 250% rate increase we thought we were going to have to have.” Wright noted that this rate increase is at the wholesale level and that the impact at the retail level will be approximately half or less.

The BPA official detailed the beneficial impacts that are expected to result from the load reductions and the reduced rate increase. “I believe the quality of life in the Northwest will be substantially improved against what could have been,” he said. “For example, the amount of money that BPA will take out of the Northwest economy is reduced approximately $4 billion next year alone.” Wright also said that with the load reductions, the probability of a major power outage in the Northwest next year is reduced from approximately 25% to 12%. “Finally, it’s clear that our actions are having an impact on the wholesale market prices.” Since BPA’s April warning about a possible rate increase, market prices for five-year blocks of power have decreased from over $100/MWh to just over $50/Mwh.

During the question and answer portion of the conference call, Wright was asked to comment on whether he was concerned about the reaction of generators to the load reductions and reduced wholesale market power prices in the region. Wright said he was “first of all concerned about the reaction of the public at large” and that “people not feel like they can let up in their efforts in terms of energy conservation in their homes and otherwise.”

As for generators, Wright said he was “a little less concerned” about that area as it relates to the Northwest. “There are some high-priced generators that are operating in the region; it’s good that they’re here when prices are high, but when prices go low, we don’t need them,” he added. “We want them to be around when they can help to lower prices, and otherwise they’re welcome to move on to other parts of the country where they’re needed.” At the same time, Wright emphasized that although generators will play a “vital role” in the region in terms of trying to keep wholesale prices down, they are not the long-term strategy. “These are resources that cost $100 to $125 a megawatt hour — that’s double what we would have thought is a reasonable price a year ago — we need to get the infrastructure investments in place so that those resources are not operating in this region in the long run.”

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