The city of Ashland will receive a payment of $160,045 plus reimbursement of $652,870 in the wake of a court case that alleged the Bonneville Power Administration overcharged publicly owned utilities like the Ashland Electric Department.

The city of Ashland will receive a payment of $160,045 plus reimbursement of $652,870 in the wake of a court case that alleged the Bonneville Power Administration overcharged publicly owned utilities such as the Ashland Electric Department.

The city already received a payment of $636,275 in April from BPA. The Ashland City Council decided in March to use that money to help make Ashland Fiber Network debt payments.

Launched in the late 1990s, the city's Internet and cable television system sank $15.5 million in debt as construction costs exceeded estimates and the city and Charter Communications offered cut-rate prices on cable television.

The city privatized the television service while keeping its Internet service in 2006. Since then, AFN has stopped falling further into debt and has been able to pay part of its debt payments. However, other departments — including Ashland Fire & Rescue — have endured cuts to help pay the debt.

Electric Department Director Dick Wanderscheid said no decisions have been made yet about how to use the new payments from BPA.

BPA has also agreed to lower wholesale power rates by 1 percent for the 2009 fiscal year.

But BPA Administrator Steve Wright urged publicly owned utilities to be aware that there is a "substantial potential" for a future BPA rate increase. He urged utilities to keep that potential rate increase in mind as they budget how to use the BPA payments and handle the year-long 1 percent wholesale rate reduction.

The Ashland Electric Department buys wholesale power from BPA and then sells it to customers here.

Wanderscheid said wholesale electric rates could go up significantly in 2010 and 2011. Using the payments to blunt a rate increase might be the best option, he said.

"If that's the case, it may make sense to mitigate the rate increase," he said.

The electric department is also facing rising costs for labor, employee health care, materials that contain metal and transportation, he said.

Wandersheid said he will recommend to the Ashland Citizens' Budget Committee whether to lower, raise or keep electric rates the same. The budget committee will begin meeting again in early 2009 to begin the annual city budget process.

The $160,045 will come to the city as a payment, but the $652,870 reimbursement will come in the form of credits of $54,406 each month for a year, Wanderscheid said.

BPA's most recent decision to give payments, reimbursements and a one year wholesale electric rate reduction to publicly owned utilities came last week as it continues to work out the consequences of three 2007 Ninth U.S. Circuit Court of Appeals rulings.

BPA will return a quarter billion dollars in past overcharges to publicly owned utilities, return additional overpayments in future years and lower its wholesale power rates for a year, agency officials said.

Investor-owned utilities had sued BPA for a greater share of financial benefits from the federal Columbia River Power System. BPA settled with the investor-owned utilities in 2000. But that prompted publicly owned utilities to launch their own court fight, leading to the 2007 court decisions that BPA's settlement with the investor-owned utilities put costs on publicly owned utilities that violated the Northwest Power Act.

Wright said BPA is trying to fairly allocate the value of the federal hydroelectric system on the Columbia River among BPA's different customers in the region.

Staff writer Vickie Aldous can be reached at 479-8199 or vlaldous@yahoo.com.

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