Newspaper article The Christian Science Monitor

Washington Hydropower Pinched by Cheaper Rivals Fish-Protection Costs Eat Up 15 Percent of Federal Agency's Budget

Newspaper article The Christian Science Monitor

Washington Hydropower Pinched by Cheaper Rivals Fish-Protection Costs Eat Up 15 Percent of Federal Agency's Budget

Article excerpt

FOR decades, customers have taken for granted the cheap hydropower from 30 federally owned dams on the Columbia River and its tributaries. The federal agency that sells the power also has taken for granted its central role in the region.

Today, these certainties are giving way, though power still costs less here than elsewhere in America. The Bonneville Power Administration (BPA) is having to reinvent itself.

"We are trying to get ourselves more competitive," says Randall Hardy, administrator of the BPA. Bonneville is caught between its own rising costs for protecting endangered salmon and private-sector competition, bolstered by low natural-gas prices and a more open market created by the 1992 Energy Act.

The danger is that power from the BPA may gradually lose its cost advantage over utilities and other suppliers.

"We still have an advantage, but our margin has shrunk significantly," Mr. Hardy says. Fish-protection costs have risen from $150 million in 1991 to $350 million this year, or 15 percent of the agency's budget.

Already, Clark County Public Utility District in Washington State is building a gas-fired turbine that will displace about half the power it now buys from Bonneville. If more of the agency's customers (mainly utilities) follow suit, Bonneville may have to raise prices. The BPA now provides more than 40 percent of the power used in Washington, Oregon, Idaho, and Montana.

To deal with the competition, Hardy is negotiating with customers for a new two-tiered rate structure, which is intended to keep the bulk of power from Bonneville's existing plants inexpensive and customers buying. This "tier 1" power, priced around 2.77 cents per kilowatt hour, could meet about 90 percent of customers' current demand from the BPA. "Tier 2" would represent the cost to BPA of building new plants or buying from new or outside sources, and might cost 3.5 cents per kilowatt hour. Tier 2 would compete directly with private-sector sources.

"The negotiations are going very, very slowly," says Lon Peters, an economist for the Public Power Council, which represents 115 utilities in the talks with Bonneville. …

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