The potential increase is up drastically from January, when the BPA said wholesale rates could rise 60% on average for the next five years, with a first year increase of 95% a possibility. "Recent developments in the market now require a first-year increase of 250 percent or more, absent vigorous efforts to reduce demand," says Steve Wright, acting BPA administrator. "This could double the retail rates of many Northwest consumers."

Such increase will have major economic consequences, says Wright. "Already some businesses have closed and people are out of work due to high energy costs," he says. "Such an increase portends vast economic troubles--more businesses closing their doors and more lost jobs. Those with lower incomes would suffer disproportionately."

The situation is being exacerbated by the drought that will leave the region short of electricity this summer and winter. Coupled with the underlying energy shortage, the BPA says there will be problems meeting demand for several years until new power plants, power lines and conservation can be brought on line.

BPA is a not-for-profit Federal agency required by law to pass through all its power costs to its electric utility and direct service industrial customers. Wright says the BPA is about 2,500 megawatts short of meeting all the demand of its customers on Oct. 1, when new power sales contracts take effect. If that remains the case, BPA must purchase power on the market, where prices have exploded from $25 per megawatt-hour to $300 in just over one year.

If the BPA can achieve the load reductions it's hoping for--a shutdown of the aluminum plant, a 5% to 10% reduction in power purchases by publicly owned utilities and investor-owned utilities like Portland General Electric and PacifiCorp--the Federal agency would have to buy less power at higher prices and therefore need less of a rate increase to meet demand.

The shutdown of aluminum smelters is likely, as their operators will likely find it uneconomical to pay substantially higher prices for the electricity they would need to operate. During the downtime, although no deals have been cut, the BPA says it would provide funding for employee compensation to minimize the impact because it would still be cheaper than the alternative.

"We can learn from California's problems and seek to avoid them," says Wright. "We need to do everything we can to avoid power purchases in this incredibly expensive market, and we also need to make sure we set our rates high enough so we can cover our costs to assure generators get paid when they deliver power so that we don't put our credit at risk."

If the conservation isn't enough, the BPA must raise rates enough to pay its obligations to the US Treasury on money borrowed to build the Federal power system. "There are those in Congress who see our current weakness as an opportunity to deprive the region of the future benefits of Columbia River hydropower," says Wright. "Failure to pay our debts would only further their cause, with potentially disastrous future consequences to the region."

Commitments to take action to reduce the size of the rate increase are needed within the next 60 days, says Wright. This will allow time for BPA to submit its new rates to the Federal Energy Regulatory Commission for approval and to purchase power necessary to meet its commitments beginning Oct. 1.