It's Electrifying! - November 9, 2004

IT'S ELECTRIFYING!

This article about OPALCO’s retail rates was written by General Manager Randy J. Cornelius.

Many of you probably know by now that OPALCO is facing cost increases from Bonneville Power Administration (BPA) for both transmission and wholesale power (transmission is the system by which our power is delivered, and wholesale power is the power we buy from BPA); the best projections at this point are increases of 10-14% for transmission costs beginning in 2005 and 30% for the purchase of wholesale power in 2006. To meet these increases in power and transmission costs – which represent about 40% of our total operating budget – OPALCO needs to increase our retail electric rates.

In addition to the projected increase in our wholesale power and transmission, we also need to address the uncertainty associated with cost recovery clauses, which Bonneville Power Administration (BPA) says it will be adding to all of its wholesale power sales agreements beginning in 2006. Cost recovery clauses are adjustments to BPA’s base rate to recover the cost of high-priced market power purchased by BPA to meet load demands, to help BPA improve its financial condition, and to assure that BPA can meet its obligation to repay its treasury debt. OPALCO has been able so far to avoid the increases from cost recovery clauses due to our full service power agreement with BPA which the board of directors signed in September 2001 – many of our neighbors have not been so lucky and have been paying as much as 44% more for their wholesale power than OPALCO because of these cost recovery clauses.

We also need to address important objectives set by staff and the board of directors, including building up our reserve accounts to stabilize our financial position and help with risk management; implementing (at a cost of $8.8 million over a six-year period) the construction work plan, which was approved by the board and Rural Utilities Service to address system reliability and sectionalization of our system; improving our meter reading and distribution system to reduce future operating and meter reading expenses; and getting OPALCO back on a "pay as we go" basis.

Two work sessions were held recently so that the board of directors could extensively review revenue requirements and revenue projection models designed to address the increase in wholesale power and transmission costs plus the objectives listed above. At our December 16, 2004 board meeting (to be held at our Eastsound office at 183 Mt. Baker Road at 10:00 a.m.), the directors will vote on an increase of 8% for retail electric rates and an increase of $1 a month for the basic charge for both residential and commercial accounts, with an effective date of March 1, 2005. (An 8% residential electric rate increase would move our energy rates from 6.02 cents to 6.50 cents per kWh, and our commercial members’ energy rates would move from 5.42 cents to 5.86 cents per kWh.)

Everyone at OPALCO is working very hard to keep operating expenses down, and we are trying to limit any increases in our operating budget. With the rising prices of materials and transportation and the overall cost of doing business, this is no easy task.

OPALCO
Member Owned & Operated