Move should help curb rate hikes in deregulated market
By Kortny Rolston
As power bills rise and power shortages plague many western towns, Idaho Falls officials are working to ensure the same doesn’t happen here.
They’re negotiating a new 10-year, $150 million contract with the Bonneville Power Administration that they say will help keep the city’s power rates low.
The new contract would change the way Idaho Falls buys power from BPA, giving the city the flexibility to shop for cheap power on the open – and volatile – deregulated market while providing a stable and historically cheap regulated power source to meet most of its needs.
We want to be in the position to have a long-term contract in place so we can provide enough power at stable rates,” Mayor Linda Milam said. “We think this will do that…. It will give us enough flexibility so that when rates are good on the spot market we can get in on that.”
Idaho Falls has bought and sold power to the BPA, a federal hydropower system fed by the Columbia and Snake rivers, for several years. BPA, which generates power for the Pacific Northwest mostly through a series of federal dams, provides Idaho Falls with more than half of its power.
The rest comes from the city’s own sources and entities selling off surplus power. Those factors, city officials say, have allowed Idaho Falls to keep its rates among the lowest levels in the state and the country. On average, after all charges are factored, Idaho Falls residents pay 4 cents per kilowatt-hour for power. Utah Power customers pay 8 cents. Idaho Power residential customers pay about 5 cents. The U.S. average in 1998 was 6.75 cents.
Idaho Falls currently buys its power from BPA by the “block” – a set amount of power for a set rate.
Under the new contract it would buy it by the “slice,” a new product the BPA is offering to its 120 “preference customers” – the cooperatives, municipally-owned systems and public utility districts in the Northwest.
With slice, the city would actually own a percentage of the power the BPA produces every hour. The size of “slice,” or the percentage of power the city will get, is still being worked out with BPA.
“It’s like buying a piece of the rock,” said Mark Gendron, manager of Idaho Falls Power, the city’s electric division. “It’s kind of like being part owners with BPA.”
Slice power is a more risky venture than buying by the block.
There is no guarantee how much power the city would get each hour from the BPA, its main energy source. At times, the city will have a surplus of power and other times it won’t have enough and will have to purchase extra from outside sources.
“If the runoff system is good, they’ll be entitled to a lot of power,” said Rod Aho, a BPA account executive based in Idaho Falls. “If we have a blackout or runoff is low, their entitlement will be reduced.”
But city officials don’t anticipate many problems.
They say Idaho Falls’ peak usage times are opposite of many cities in both Idaho and the region. Idaho Falls requires more power during the winter – when people are heating their homes than in the summer.
Several states including Utah use most of their power during the summer when people are powering air conditioners, Gendron said. Farming areas that rely heavily on irrigation usually peak in the summer as well.
Some Idaho electrical cooperatives, such as Lost River Electric in Mackay, also peak in the summer because farmers are irrigating crops.
He said that usually means Idaho Falls has enough power for its citizens. And under the slice contract, it’s an advantage.
With slice, when Idaho Falls ends up with a surplus of power – most likely during the summer – it can sell off the extra to companies or cities that need more. Cendron said it could also store the surplus to cover periods of heavy usage or trade it to a Utah utility in exchange for more power in the winter. Idaho Falls is a member of the Utah Associated Municipal Power Systems. UAMPS members often buy and sell power to one another.
“We don’t think we’ll have many problems with it,” Gendron said.
But before the city can enter into the new contract it must first clear up some legal issues. The BPA is requiring the city to get a legal opinion that buying slice doesn’t violate any laws before the deal is sealed.
There are also questions about whether the Idaho Constitution will allow them to sign the multiyear deal. A section in it prevents cities from committing to spend money beyond the normal budget year unless it’s for an “ordinary and necessary” expense.
The city must get a judge’s approval that this falls under that category before it can enter into the contract.
Dale Storer, the city’s attorney, is optimistic a judge will rule in their favor.
“I think we meet that criteria,” he said.
Idaho Falls, ID
August 2, 2000