[BETA] Fortnightly

But who gets a slice of the pie?

In August the Bonneville Power Administration released its proposed wholesale electric rates for the five-year period from 2002 to 2006. The controversial proposal is subject to five months of scrutiny, including eight public hearings from Sept. 30 through Oct. 14, with adoption of final rates expected early in 2000.

In this era of emerging competitive markets, relatively low-priced federal power is prized by wholesale customers in the BPA's Northwestern U.S. service territory. Eleven large industrial companies - known as direct service industrials, or DSIs - had been haggling with BPA since the start of 1999 over how much electricity they will receive under the new rate plan. The dispute arose because BPA-produced power is predicted to be cheaper than the market rate for electricity. So the industrials are clamoring for as much BPA power as possible - available from about 2.3 cents per kilowatt-hour to 2.45 cents per kilowatt-hour. It is estimated that overall, BPA has about 6,400 megawatts of firm power to sell, but to meet demand would require more than that. So BPA must mete out its power selectively.

Besides having insufficient electricity, another problem for BPA arises because it wants to reward its "loyal" customers with the cheap federal power. In 1995, the last time that BPA had to renegotiate its five-year contracts with large industrial users, lower electric prices in the Northwestern U.S. power markets brought about by increased competition had caused some companies to purchase power elsewhere. The U.S. Department of Energy at that time had required that industrial customers commit at least 80 percent of their load demand to BPA in order to receive the new contract rates.

The customers that left BPA and bought power on the market no longer are eligible to purchase those same large amounts of BPA power. But now, some of those industrial customers are demanding that BPA sign them up again for the same amounts of power they had bought under previous contracts.

Vanalco, a Vancouver, Wash.-based aluminum producer, wants BPA power. But at the last contract renewal, Vanalco chose to buy most of its power from other suppliers. That sin may cost Vanalco dearly. Now that BPA power is once again cheaper, BPA claims that it only wants to serve "loyal" customers and that it is not obligated to provide Vanalco with power. Vanalco disagrees and argues that it deserves more power.

"They kind of shot themselves in the foot back then," argued BPA spokesman Perry Gruber.

In January, Vanalco and seven other companies filed placeholder lawsuits in the Ninth District Court against BPA in case no agreement could be reached. BPA since has negotiated deals with most of parties, who then agreed not to continue with the lawsuits. But Vanalco may press forward.

"We're meeting with lawyers basically every day and trying to decide what to do," said Vanalco spokesman Chuck Reali. He added that "there is a lot of posturing going on." Reali noted that even if Vanalco presses forward with a lawsuit, it likely would not come to