Rates

Update - News On Your Rates

California’s failed experiment with electricity deregulation has received tremendous media coverage throughout the country. Many of our members are concerned about the effects California’s problems will have on Salem Electric’s rates for electricity. Salem Electric’s rates will be increasing, and the increase will probably be substantial. While California’s mistakes will make a healthy contribution to that increase, their problems are not the only ones causing rates in the Northwest to go up.

California’s mistakes, resulting in enormous increases in the market rates, affect the Northwest because we buy from the same market. Although Salem Electric buys all of its power from the Bonneville Power Administration—BPA often has to augment its resources with power from the market. This winter they have been paying prices far above historic market prices upon which they have based their cost projections.

There are other issues causing increases in BPA’s operating costs and therefore, increases in the price they will charge us for power. Electricity deregulation gained momentum in the Northwest during a brief period when market rates were lower than the cost-based rates charged by BPA. During that time some of BPA’s full-requirements customers removed up to 30% of their load from BPA so that they could purchase power from the market. While some savings were achieved early on, the market soon returned to normal with BPA’s cost-based rates again below market rates. All of BPA’s utility contracts expire this fall. Virtually all of those who took part of their load away are opting to put it back on BPA and power must be found to meet those returning loads.

BPA projected, in December, that runoff would be 75 percent of normal this winter. The actual number, through mid January, has been 68 percent. Less water behind the dams means more purchases of power from the market and a substantial increase in BPA’s cost.

What does this mean for Salem Electric’s ratepayers? We don’t know yet. A few months ago BPA projected a minimal increase for this fall. Since that time their estimates have increased dramatically. An increase of 50% or more in BPA’s wholesale rates is not out of the question. That would mean an approximate 25% or greater increase in the rates Salem Electric charges its members. This number is subject to change on an almost minute-by-minute basis. If the remaining winter weather gets and stays wet — it could go down. If it remains dry, it could go up. The same goes for deregulation related issues. Continuing problems in California could further affect our rates.

We will keep you updated as the year progresses. Soon our website will include more current information on this issue. If you have any questions, give us a call.

Robert J. Speckman
General Manager

February 2001

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