Washington state regulators have approved a settlement between Puget Sound Energy and some of its largest industrial users to lower the companies’ escalating electricity costs, which, in effect, will bring retail electricity competition to the state for some users. The state has yet to deregulate.

The Washington Utilities and Transportation Commission had ordered hearings in January to develop price controls after 12 companies, including Seattle-based Boeing Co., Atlanta, GA-based Georgia-Pacific Corp. and Equilon Enterprises LLC of Houston, filed complaints that alleged they were being overcharged by Puget Sound Energy. Georgia-Pacific operates a plant in Bellingham, and Equilon operates refineries near Anacortes. The commission delayed hearings while utility officials and the customers worked out a settlement.

Under terms of the agreement, the six largest customers will be able to buy power from any source, including each other. Puget Sound Energy, headquartered in Bellevue, WA, will provide transmission at regulated rates, including the cost of transmission and profit. Customers will have lower costs because they now may enter longer-term contracts at prices lower than those on the spot market. The contracts typically will last 60-to-90 days.

Also under terms of the agreement, four smaller users, including Intel Corp., which operates a Tacoma plant, were given options. The settlement gives the four companies the option of seeking alternative electricity providers or buying power from Puget Sound Energy at rates capped at either $225/MWh or $100 less than the spot price on a major Northwestern U.S. spot price market.

Melinda Davison, who represented the plaintiffs, said the settlement gives the companies “the flexibility to structure our own transactions” and the ability to purchase power at prices that will allow them to stay in business. Puget Sound Energy agreed not to recover any of its lost revenue from the settlement from other residential or commercial ratepayers.

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