Published March 2003

Businesses: We can’t afford another PUD rate hike

By Lukas Velush
Herald Writer

If Kimberly-Clark Corp.’s electricity rates go up again, the longtime company will scale back operations and possibly start discussions that could lead to shutting down its 900-employee pulp and tissue mills in Everett.

Kimberly-Clark and several other large power users in Snohomish County say they can’t afford another PUD rate increase. All said recent spikes in power bills tied to the 2000-01 energy crisis are unacceptable.

If the PUD passes on a Bonneville Power Administration rate increase to its customers, Kimberly-Clark will look at building its own power plant.

“If that’s not cost-effective, we’ll have to take a look at whether it makes sense to continue to do business in this county,” said Dave Faddis, general manager of Kimberly-Clark’s Everett operations. “We cannot tolerate these kinds of price swings.”

The PUD has not announced that it will raise rates, but BPA — the federal energy wholesaler that provides 80 percent of the PUD’s power — in February proposed a 15 percent rate increase to cover a massive budget shortfall. If adopted, it would go into effect Oct. 1.

The PUD, which charges residential customers the highest electricity rates in the state, also has some of the highest rates for industrial customers. A 2002 survey of major U.S. public utilities by Weyerhaeuser Co. shows that Snohomish County PUD rates for large industrial customers rank 29th out of 32 surveyed.

Kimberly-Clark’s rates are up 85 percent since late 2001, when the PUD raised costs because of a 46 percent Bonneville increase and a similar spike in rates linked to high-priced power contracts signed by the PUD.

For residential customers, the two rate increases and one small reduction translated to bills that are 50 percent more than they were two years ago.

The Boeing Co. and the Everett School District are among the county’s big power users that have complained to Bonneville and the PUD.

But Kimberly-Clark’s worries are urgent. The company has cut its local work force by 10 percent over the last two years and projects that the trend will continue if electricity rates go up.

The Everett paper mill is one of Kimberly-Clark’s most expensive plants in the country, where two years ago its was in the “middle of the pack.” The rising cost of power and the higher cost of fiber, the wood material the company uses to make its paper products, are listed as reasons.

Kimberly-Clark uses about 300 million kilowatt-hours of power a year. To compare, the average home uses only about 13,000 kilowatt-hours.

The company has been in Everett since 1927. The Dallas-based corporation is known for making Scott paper towels, Huggies diapers and Kleenex tissues, most of which are made here.

Meanwhile, Boeing’s Everett assembly plant, which employs about 20,000 people, uses about 360 million kilowatt-hours a year, spokesman Dean Tougas said.

Alan Mulally, president and CEO of Boeing’s Commercial Airplanes division, asked Bonneville to avoid another rate hike in a letter sent in October.

“Boeing urges BPA to forgo these rate increases and explore alternative strategies for addressing its potential budget shortfalls that do not impose greater financial burdens on its customers,” Mulally said.

“As you are aware, the Pacific Northwest is suffering from a significant recession with some of the highest unemployment rates in the nation. Boeing simply cannot absorb more rate increases.”

Bonneville has started a rate-case proposal to make up for a budget shortfall of about $500 million. It will take about six months for an increase to be approved.

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