Avista Corp., the big investor-owned utility here, and Inland Power & Light Co., the Spokane-based electric cooperative, say they're enthused about a potential settlement of a decades-old regional dispute over how to divvy up benefits from the cheap Columbia River system hydropower that the Bonneville Power Administration manages and markets.

Representatives for a host of Northwest utilities that have been embroiled in the dispute announced in a news release two weeks ago that they've reached an agreement in principle regarding how the BPA should administer what's called the residential exchange program, through which utilities share access to that hydropower. The release says three state utility commissions also joined in the tentative pact.

The agreement calls for investor-owned utilities to receive benefits, or payments, totaling $2.05 billion for the 2007 through 2028 fiscal years. Other details of the agreement still are being worked out, with a deadline for reaching a final settlement set for Nov. 1, so it's unclear what effect the pact would have on electric rates here. Industry representatives say they're excited, though, about the potential for it to end years of distracting litigation and to bring added certainty to costs that affect rates.

"We're certainly happy that this thing is moving forward. It's for the benefit of our customers," says Avista spokesman Hugh Imhof. "It's good, and it's progress."

Kris Mikkelsen, Inland Power's CEO, says, "I'm really pleased with the progress being made. It's been a contentious issue in the region for many, many years, and it's time to bring that contentiousness to an end and create some certainty" about how the hydropower benefits are distributed.

"An inordinate amount of time is spent haggling over this" by power providers, diverting time and resources away from larger, shared concerns, Mikkelsen contends. "The fact is, we have so much in common and so many big issues we should be working together to try to solve. I think it would be a great thing to get behind us," she says.

The BPA, caught between sparring factions in the dispute, is a federal electric utility that markets more than a third of the electricity consumed in the Northwest. The power is produced at 31 federal dams and one nuclear plant and is sold to more than 140 utilities in the region. The BPA also operates a high-voltage transmission grid comprising more than 15,000 miles of power lines and associated substations in Washington, Oregon, Idaho, and Montana.

Federal law requires that the power BPA markets be made available at preferential rates to publicly owned utilities and cooperatives, many of which have little or no generating capacity of their own, but the region's investor-owned utilities also benefit from it.

The dispute over how to divvy up those benefits came to a head in May 2007, when a U.S. Ninth Circuit Court of Appeals ruling raised questions about the legality of payments the BPA was making to Avista and the other investor-owned utilities. For decades, the utilities had converted those payments—totaling about $300 million annually at the time of the ruling—into credits on their more than 1 million residential and small-farm customers' electricity bills.

Based on the ruling, BPA suspended those payments.

As a result Avista was forced to boost the typical monthly bill for its residential customers in Washington and Idaho by about 8.8 percent and 9.5 percent, respectively. BPA later resumed making interim payments while the parties sought to negotiate a compromise that addressed the federal court's concerns.

The Ninth Circuit ruling stemmed from litigation brought by a number of Northwest public utilities, many of which had seen substantial rate increases from the BPA in recent years. They challenged agreements reached in 2000 between the BPA and the investor-owned utilities that were the basis for a big jump in the amount of money that those utilities received. The suits contended that those agreements violated the Northwest Power Act, which Congress adopted in 1980 as a method for sharing federal hydropower benefits among all Northwest residents.

In conjunction with a regulatory filing for a natural-gas purchase cost adjustment, Avista announced last week that it was seeking to increase electric prices slightly for residential and small-farm customers in Washington and Idaho due to a reduction in the benefits it receives from BPA under that residential exchange program. An Avista spokesman said, though, that the filing was unrelated to the larger regional dispute that was the subject of the recently announced agreement.