Spokane Journal of Business

Inland Power to delay rate increase until next spring

Spokane-based co-op's wholesale power cost to rise about 7.5 percent

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Inland Power & Light Co., the Spokane-based electric cooperative, will be hit with a roughly 7.5 percent increase in its wholesale power costs on Oct. 1, but has decided not to boost its members' rates until next spring, says CEO Kris Mikkelsen.

"We just don't like raising the rates going into the winter heating season. We think it's just real difficult for our members," particularly this year given the deep economic recession that so far has shown few signs of easing, Mikkelsen says.

"We're hoping to keep the increase under 8 percent," and expect to implement it in April 2010, though the co-op hasn't firmed up those details formally yet, she says.

Inland Power has about 38,000 members, located mostly in rural areas across 13 Inland Northwest counties. It's a "full requirements" customer of the Bonneville Power Administration, meaning that BPA, which markets more than a third of the electricity consumed in the Pacific Northwest, provides all of the co-op's power requirements at cost-based rates.

The power is produced at 31 federal dams owned and operated by the U.S. Corps of Engineers and the U.S. Bureau of Reclamation and one nuclear plant, and BPA sells it to more than 140 Northwest utilities.

BPA also buys power from seven wind projects that are connected to its high-voltage transmission grid.

BPA announced last week that rates for customers that buy power and transmission will rise on Oct. 1 by an average 6 percent. Transmission rates will remain unchanged, but power rates will increase by an average of 7 percent, it said.

Mikkelsen says a BPA account executive informed Inland Power that its rates probably would be going up 7.5 percent or 7.6 percent. "We pay for transmission and for power," but power accounts for about 85 percent of what the co-op pays BPA, she says.

The BPA rate increase will be its first since 2002, and the agency says the increase is being driven both by rising costs and decreasing surplus revenues. Initially, it had projected a rate hike of 9.4 percent, and later suggested that rates potentially could rise 15 percent to 20 percent, so the lower increase that the agency eventually settled on was somewhat of a relief, Mikkelsen says. Also, she says, "We've been trying to position ourselves to absorb the increase."

All things considered, looking at the costs that Inland Power will need to pass on to its members, she adds, "We feel pretty good that we're looking at something under 8 percent and that we're able to defer it through the winter heating season."

BPA says in its news release announcing the rate hike that once the threat of a higher rate increase became clear, it identified more than $100 million in cost reductions through a public cost-review process.

Those cost reductions, combined with an innovative agreement with the U.S. Treasury Department to provide an expanded line of credit, allowed the power rate increase to be brought back down to 7 percent, it says. The new rates will remain in place until October 2011.

Inland Power plans to move its administrative offices within the next few weeks into a new headquarters building it's been constructing on the West Plains. Its administrative offices currently are located in a 20,000-square-foot building at 320 E. Second that it has occupied since 1951. As the Journal reported earlier this month, the Arc of Spokane, a nonprofit that serves people with developmental disabilities and their families, has agreed to buy that building and underlying land and plans to consolidate its services there from two North Side buildings.

Inland Power's total assets at the end of last year were $129.3 million, up 12 percent from $115.1 million at the end of 2007.

Kim Crompton
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