Utilities propose new sharing of hydropower.

Byline: SCOTT MABEN The Register-Guard

The Eugene Water & Electric Board and other utilities are promoting a new plan to divvy up federal hydropower in the region that would ensure stable supplies and shield the Bonneville Power Administration from the uncertainty of the open market.

The proposal, backed by nearly every Northwest utility, would guarantee each utility a fixed share or "slice" of the BPA's annual power production under 20-year contracts starting in 2006.

In exchange, a utility would pay a percentage of the cost to operate the federal system, which relies primarily on hydroelectric dams. If a utility uses 5 percent of Bonneville's power, it would pay 5 percent of the agency's costs.

The advantage for wholesale consumers such as EWEB would be protection from sharp increases in BPA power when the federal agency runs short and has to buy electricity on the market.

That was the case last year as a drought slowed power production at dams across the region. The BPA spent hundreds of millions of dollars on expensive market power to make up the energy shortage and raised wholesale rates 46 percent last fall to pay for it.

In response, EWEB raised retail rates 36 percent in October, and many other utilities passed along similarly large increases to customers.

But the BPA also shops for extra power to meet the needs of growing communities, and it spreads those costs among all of its wholesale consumers - a practice many utilities see as unfair.

Under the proposal, a utility that enters into a "slice contract" with the BPA would be responsible for finding any additional electricity it needs to serve its customers. A fast-growing utility might choose to build a power plant or enter into long-term power contracts with other generators. A slow-growing utility, on the other hand, might step up its conservation program to free up more electricity.

The important thing, said Jim Wiley, director of EWEB's electric division, is "we won't be cross-subsidizing anyone's load growth."

Plus, when the BPA maneuvers in the market, it behaves like a 500-pound gorilla, Wiley said. The agency, which supplies 40 percent of all power consumed in the Northwest, is such a large player that its purchases and sales cause market prices to rise and fall sharply.

In meeting its own load growth, a utility still may be exposed to some market risks but would have much more control over those risks, Wiley told EWEB commissioners in a Monday night briefing.

Public utilities would be given first choice for the federal power. Privately owned utilities would qualify for a share only if the public utilities do not take their allocated amount.

Regardless, private utilities would continue to benefit indirectly from the region's cheap hydropower by dividing up $370 million in annual payments from Bonneville intended to mimic the benefits of a BPA slice contract. These payments are credited to residential, small business and small farm customers of investor-owned utilities such as PacifiCorp and Portland General Electric.

Utility executives have presented the plan to the BPA, the U.S. Department of Energy and members of Congress from Oregon, Washington, Idaho and Montana.

The BPA is taking several weeks to review the proposal before commenting on it.

"We just needed to take time before we gave any sort of response," spokesman Mike Hansen said. "Just because we're not on board doesn't mean we don't like it. We haven't had a chance to review it thoroughly."

The proposal will be considered as part of a larger public process to decide how the BPA should allocate power after five-year contracts expire in 2006, Hansen said.

Utilities expect opposition from aluminum plants and other "direct-service industries" that long have fought for a share of BPA power.