Spokane Journal of Business

Inland Power to ponder rate increase for spring

Spokane-based co-op's wholesale power cost to rise about 9 percent

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Inland Power & Light Co., the Spokane-based electric cooperative, will absorb a 9 percent average wholesale power rate increase this fall, and any hike to its members' rates likely won't happen until spring, says CEO Chad Jensen.

"We don't anticipate raising that until next April, maybe a 3 to 5 percent retail rate increase, but we want to complete a study before we make that decision," Jensen says. "We plan to present to the board in September or October to get approval."

Jensen says the utility is doing a cost study to determine the impact from the Bonneville Power Administration's July announcement that it will adopt a 9 percent average wholesale power rate increase, as well as an 11 percent hike to transmission rates. The new rates take effect Oct. 1.

The latest BPA wholesale rate increase, when factoring the power and transmission line rate hikes together, amounts to about a 12 percent average increase for the utility, Jensen says.

Inland Power has about 38,500 members, located mostly in rural areas across 13 Inland Northwest counties.

The co-op is what's called a "full requirements" customer of the BPA, meaning that the BPA, which markets the electricity generated by the Northwest's federal dams, provides all of the co-op's power requirements at cost-based rates.

However, Jensen says Inland Power expects to gain a cost-savings benefit from a 2012 prepayment arrangement with BPA. He says the co-op borrowed $173 million at an interest rate of just under 3 percent and prepaid a portion of its future "power bill" to BPA, resulting in an effective discount of roughly 4.2 percent.

"The difference in interest rates will save our members over $21.3 million over the next 15 years," Jensen says.

He adds, "It was a bidding process, for a portion of our power bill for the next 15 years, because BPA needs money to update the dams. We were one of only four utilities that did that."

In its news release announcing the rate increases, BPA said the additional revenue from the hikes will help pay for needed improvements to federal hydropower and transmission systems to deliver power to Northwest homes and businesses.

BPA also said the power rate increase stems from higher costs to operate and maintain the federal hydroelectric system, and to fund existing long-term agreements for its fish and wildlife mitigation program. The agency also had reduced revenues from surplus power sales due to low market prices.

Inland Power last implemented a 6 percent retail rate increase in April 2012 to cover the cost of a wholesale power rate increase that BPA enacted in October 2011. The co-op didn't schedule any rate increase for 2013.

Inland Power is one of 11 nonprofit electric cooperatives in the state of Washington that have boards of directors who are also members of the cooperatives. The cooperatives aren't state regulated, but rather are governed by the board members who have the authority to set cost-based rates, an action that state regulatory approval as investor-owned utilities, Jensen says.

Treva Lind
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