Dry Winter May Impact Future Power Costs for PUD

March 25, 2010

An unusually dry winter and low snow pack in the Cascades will cause abnormally low river flows in the Columbia Basin this year, according to the Northwest River Forecast Center. Low water levels reduce hydropower generation, and that increases wholesale power costs for the PUD and other public power utilities in the northwest.

Rain, Snow Help Keep Rates Low

The PUD’s wholesale power provider, Bonneville Power Administration (BPA), is the agency that sells the hydropower generated by the dams in the Federal Columbia River Hydropower System. Most of the electricity that BPA sells goes to public utilities in the Pacific Northwest, including the PUD. When colder, wetter winters increase snow pack in the mountains, river levels rise and hydropower generation increases. Extra electricity is then sold on the wholesale market, potentially earning hundreds of millions of dollars for BPA. This increased revenue helps BPA keep wholesale electric rates low for public power utilities by offsetting operating costs.

This year, river levels are projected to be 33 percent below the 30-year average. BPA will have enough generation to meet the needs of its customers, but it won’t have much extra electricity to sell on the wholesale market. As a result, BPA has already reduced its expectations for 2010 hydropower revenues by $200 million.

PUD Rates May be Affected in 2012

What does this all mean for PUD customers? At the moment, not much. PUD rates have remained steady since 2006, when they decreased by an average of 4.65%. (The PUD last raised base rates in 2002.) When the PUD Board adopted the 2010 budget last December, it did not plan any rate increases this year. Holding rates steady this year is still the plan.

"At this point, we’re just praying for a wet spring," said PUD General Manager Kevin Owens. "Our customers probably won’t see rate increases as a result of this year’s poor snow pack until 2012, when the PUD’s next rate period with BPA begins. Between now and then, both BPA and the PUD will be doing everything we can to reduce the impact of the drought on customer rates."