Boise Inc. balks at Pacific Power's rate hike request

Operators at Boise Inc.'s manufacturing plant in Wallula say the increase would amount to $4.5 million more for its annual electric costs.

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WALLA WALLA - Business and economic development officials are reeling from sticker shock after Pacific Power's latest proposal to increase electricity rates.

The Portland-based energy provider wants to raise its residential and commercial rates next year by nearly 21 percent, according to a filing with the state Utilities and Transportation Commission.

The hike is expected to offset rising costs of power, a company spokesperson said. But employers and critics say the proposed amount is so large its impacts would stretch beyond individual households to businesses and possibly the Valley's ability to recruit new ones.

If approved, the increase would take effect in April 2011, generating an additional $57 million in revenue for Pacific Power. The monthly bill for the average residential customer using about 1,300 kilowatt hours per month would increase $19.75 to $112.86. The request to recover increased electricity costs also includes a 50 percent increase in the basic customer service charge from $6 to $9 a month.

Operators at Boise Inc.'s manufacturing plant in Wallula say the increase would amount to $4.5 million more for its annual electric costs. The kraft pulp and paper mill relies on hundreds of motors that drive pumps, conveyors and all kinds of other equipment around the clock. At the new electricity rate its annual bill would climb over $25 million, said Destry Henderson, communications manager at the Wallula mill.

"This affects our ability to remain competitive," said mill Manager Nick Nachbar.

Henderson and Nachbar have been reaching out to other area businesses, hoping to raise awareness and opposition to the proposal.

They have high hopes the utility company won't get near the proposed 21 percent from the state Utilities and Transportation Commission, the regulatory body that approves or denies such requests. The agency will give the public a chance to voice opinions at a public hearing, which has not yet been scheduled.

Over the past several years the UTC has approved increases from Pacific Power at significantly lower rates than originally proposed.

The 5.3 percent increase that took effect last January, for instance, was about two-thirds less than the utility company originally requested. An 8.5 percent increase that took effect in 2009 was a little more than half the original proposal of 15 percent. A 6.5 percent increase took place the year before that.

Though the adjustments have provided some relief, the cycle feeds a suspicion that the utility intentionally asks for more money than Pacific Power knows it will receive. That's a suspicion the utility says is untrue.

"We don't file these cases lightly," said Pacific Power spokeswoman Jan Mitchell. "We look at our numbers very carefully and come in with what we need to be able to serve our customers," she said.

Mitchell said some rate increases in the past have been tied in to the company's capital improvements. This one, however, is directly related to the cost of power.

She said a number of the utility's long-term contracts for power - including agreements with Bonneville Power Administration and a natural-gas-fired plant in Hermiston, among others - have either expired or are expected to. The agreements, which locked in rates at a lesser price than the market today, must be replaced at the now higher costs.

"Our customers have benefitted for many, many, many years with some very long-term contracts," Mitchell explained.

"We've mitigated where we can. We generate a lot of the power our customers need, and we recently purchased a natural-gas-fired plant in Chehalis, Wash. But even with that we still need to replace some expiring contracts."

Mitchell acknowledged the increase is high and comes during a time of economic strain for many customers. Ultimately, the expiration of contracts was unavoidable, she said.

A division of Pacificorp, Pacific Power is owned by MidAmerican Energy Holdings Co. The utility has about 130,000 customers in Yakima and Walla Walla counties.

Its latest request for higher rates punctuates the need for a better long-term strategy for power production and for budgetary planning, said Port of Walla Walla Commission President Mike Fredrickson.

Fluctuations in the rates have an impact on the Port's business recruitment, he said.

With very little in the way of tax incentives to offer new businesses, the Port relies on access to viable transportation options and competitively priced utilities as two major enticements to its Burbank and Wallula-area properties in landing new industry.

The importance was affirmed to Fredrickson in 2007, when Procter & Gamble was considering building a $300 million paper products manufacturing plant on Port-owned land in Wallula. During the company's due diligence process Pacific Power made a rate request to the UTC.

Immediately Procter & Gamble wanted to know how any plans they might have would be tied to the rate structure and its operating costs. The company ultimately chose to build in Utah, which offered the company a number of sales tax incentives.

Fredrickson said one upside to energy services in the community is that there's competition. In addition to Pacific Power, Columbia Rural Electric Association can serve a number of new businesses that come to the area. The competition can help stabilize prices to a degree.

For the residents and businesses already served by respective providers, he said a better structure for long-term planning could help reduce some of the financial struggle.

"Not only for big companies, but for families," he said.

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