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Altered Utility Agreements Provide Big Savings to BPA by Jeff Manning The Oregonian, April 17, 2004

PacifiCorp and Puget Sound Energy forgive
a $100 million obligation to reduce energy costs

Two large investor owned-utilities have agreed to forego $100 million they were due from the Bonneville Power Administration in a deal that would decrease the federal energy marketing agency's costs and possibly lead to lower electricity costs.

PacifiCorp, the Portland-based unit of Scottish Power, and Puget Sound Energy in Bellevue, Wash., have agreed on terms to modify their existing power contracts with BPA that call for them to give up the $100 million and defer payment of another $100 million until 2006-2011.

The utilities were owed the $200 million under complex and controversial agreements Bonneville forged with the companies during the Western energy crisis of 2000-2001 to reduce the quantity the two utilities received from BPA.

Bonneville officials said the agreement, which must be approved by the Oregon Public Utility Commission, would significantly reduce the agency's costs, allowing the agency to keep wholesale rates 6 percent less than they otherwise would be.

"We continue to strive to find responsible ways to keep our rates as low as possible," said Steven Wright, BPA administrator.

The deal doesn't necessarily mean the agency will reduce its wholesale rates by 6 percent. It remains unclear what direction BPA rates will go, in large part because of this spring's dry weather, said Dulcy Mahar, a BPA spokeswoman.

Bonneville sells the power generated by the Columbia River dams and the region's one nuclear plant.

A PacifiCorp spokesman, Dave Kvamme, said the agreement "is a good thing for our customers and for the region. What we're doing is providing some long-term assurance that our customers will continue to receive the benefits of the federal hydroelectric system."

The Northwest Power Act of 1980 requires Bonneville to pass on the benefits of its historically cheap power to residential and small-farm customers of the region's privately owned utilities. Historically, PacifiCorp, Portland General Electric, Puget Sound Energy and Avista have received those benefits.

How BPA figured those benefits to the investor-owned utilities has been a constant source of friction between the agency and its primary customers -- the Northwest's publicly owned utilities. The bickering intensified during and after the power crisis, when power costs soared to unprecedented levels and the sums due from BPA to the privately owned utilities grew to enormous levels.

Bonneville managed to renegotiate its deals with the private utilities. In exchange for giving up some of the benefits, the investor-owned utilities got the $200 million "reduction of risk discount."

The deal with PacifiCorp and Puget is part of a longer-term agreement Bonneville is attempting to reach with the region's other private utilities. Under that deal, the investor-owned utilities would receive a total of $100 million to $300 million a year from BPA.