The head of Bonneville Power Administration told local utilities Tuesday that the agency proposes keeping rate increases lower than projected for the next two years, but ratepayers will get less certainty in return.
Earlier this year, BPA was telling utilities that rates could jump up to 20 percent for the two-year agreements with PUDs and power companies that take effect in October 2011.
Tuesday, BPA head Steve Wright said the agency will propose in November a way to keep rate increases at 6 percent to 10 percent.
To do that, the agency will use a line of credit from the U.S. Treasury and borrow from the healthy reserves built up from charging for the use of its transmission lines, which is a separate program.
But because both of the sources it will rely on are short-term lenders, BPA also will use "cost recovery adjustment" clauses to allow the agency to raise rates during the term of the contract if necessary.
For example, factors that could trigger increases during that two-year period could be a poor water year, the court challenge to the salmon plan or the economy.
"There's a 40 percent chance that we will have to increase rates above the rate proposal," Wright told about the audience of about 40 people.
Jim Sanders, Benton PUD's general manager, said he worried when he heard Wright say the clause could kick in on the day the contract takes effect.
"It could kick in on day one," Sanders said. "Oct. 1, 2011."
The Benton PUD is basing its budget on the expectation that BPA will raise rates just 10 percent for the two-year contract.
At this point, the PUD is looking at a rate increase of 8 percent in January and is forecasting another increase of 10.5 percent in 2012. The utility is predicting it will need a 32 percent increase in its rates in the next four years.
Franklin PUD and other smaller utilities in the region said their increases will not be as large because they don't have the same renewable energy requirements as bigger utilities.
Cries from power companies and public utilities pushed the federal power agency to propose using the credit line from the Treasury and borrowing from extra money made from its transmission service.
Wright answered some questions from the Franklin and Benton PUD boards and audience members after his presentation.
Tom Mackie, of AgriNorthwest, an area farming corporation, told Wright that power price stability is important because the company had to make cuts in other areas to make up for higher power costs.
Food production relies on low-cost power because goods must be shipped to where most of the county's population lives, while keeping consumer prices low.
"We live in a country with a low food cost," Mackie said. "Costs are going up faster than prices."