Regulators in Washington State Approve
Accord to Trim Companies' Power Costs
By ROBERT GAVIN
Staff Reporter of THE WALL STREET JOURNAL


OLYMPIA, Wash. -- Washington state regulators Thursday approved a settlement
between the state's biggest utility and some of the largest industrial users
that aims to lower the companies' soaring electricity costs.

The settlement brings to an end a bitter dispute between some large
industrial concerns, including Seattle-based Boeing Co. and Puget Sound
Energy of Bellevue over a pricing structure that tied electricity sales to
volatile spot markets, where prices have soared to levels 10 or more times
as high as year-ago prices. Recent spot-market prices have ranged between
$200 and $350 a megawatt hour.

The settlement, in effect, introduces retail electricity competition in a
state that has yet to deregulate its power markets.

The Washington Utilities and Transportation Commission, which announced the
settlement, had ordered hearings in January to develop price controls after
a dozen companies filed complaints alleging they were being overcharged by
Puget Sound Energy. The hearings were delayed while the parties negotiated
the settlement.

Under the settlement, the six biggest customers will be able to buy power
from any source, including other utilities, power marketers and even each
other. Puget Sound Energy will provide the transmission at regulated rates,
which include the cost of transmission and a profit. This arrangement will
allow the customers to lower costs because they will be able to enter
longer-term contracts, typically 60 to 90 days, at prices that are lower
than those of the spot market, which reflects the most expensive prices.

In addition to Boeing, those customers include Georgia-Pacific Corp. of
Atlanta, which operates a plant in Bellingham, and Equilon Enterprises LLC
of Houston, which operates refineries near Anacortes.

"This gives us the flexibility to structure our own transactions and
purchase power at prices [at which] they can afford to stay in business,"
says Melinda Davison, a lawyer who represented most of the companies in the
case.

Puget Sound Energy officials weren't available for comment.

Part of the settlement is similar to Oregon's electricity-deregulation plan
for big commercial customers, scheduled to take effect in the fall. Cass
Bielski, a regulatory analyst at Edison Electric Institute, a Washington,
D.C., industry group, called the settlement "cutting-edge news in the
industry" and "unusual in a state that has not adopted electric retail
choice" as a policy.

Under the settlement, four smaller users -- including Intel Corp. of Santa
Clara, Calif., which operates a plant near Tacoma -- were given the option
of seeking alternative electricity providers or buying power from Puget
Sound Energy at rates capped at either $225 per megawatt hour or $100 less
than the spot price on a major Northwestern U.S. spot-price market. Two even
smaller users will simply buy their power at regulated rates.

Puget Sound Energy also agreed not to recover any revenue lost because of
the settlement from other residential and commercial ratepayers.

Write to Robert Gavin at robert.gavin@wsj.com