No Buyers Likely in
by Christine Pratt
By The WENATCHEE -- The Trump Administration’s budget proposal to privatize the Bonneville Power Administration would meet fierce opposition in Congress, wouldn’t save the billions of dollars claimed, and likely would never attract any sound-minded, profit-seeking buyer.
So say the general managers of North Central Washington’s PUDs.
“It’s very unlikely this would pass Congress,” said Steve Wright, general manager of the Chelan County PUD and longtime former chief of the Portland-based Bonneville, which operates and maintains about three-quarters of the high-voltage transmission lines that power much of the western U.S.
The Trump budget proposes massive cuts to federal spending to pay for an increase in defense spending, a down payment on a wall at the border with Mexico and school voucher programs, The Washington Post has reported. Congress usually changes the president’s proposed budget.
The Bonneville privatization is part of a larger privatization proposal that includes the country’s other three federal power agencies that serve the country’s west, southwest and southeast regions.
Bonneville values its capital assets at $17.2 billion. Its transmission system is the super highway that Chelan, Douglas and Grant PUDs depend on to get their surplus electricity -- a key source of revenue -- to market.
Bonneville receives no taxpayer support. The costs and expenses to maintain its transmission system, fund environmental improvements for fish and debt obligations are all funded by the its customers.
The federal Office of Management and Budget estimates that a divestiture of Bonneville’s transmission assets would save the government $5 billion through 2027.
Wright doubts it.
“We don’t believe the administration’s proposal is financially viable and will not produce the revenues to the federal government assumed in the budget,” he said Friday. “The things a purchaser would have to address would decrease that value.”
Wright said he’s counted at least eight reasons why the complexity of Bonneville’s debt and collateral obligations would overstate the Administration’s savings estimates.
The entire Bonneville system is the collateral for the bonds that funded Energy Northwest’s nuclear plant in the Tri-Cities, Wright says.
In 1996, a legislative act that defines the terms of a debt-refinancing plan for Bonneville required the agency’s power and transmission customers to pay an extra $100 million in return for legal limits on the rate Bonneville can charge them for repayment, he said.
Wright said he helped craft some of this legislation when he worked for Bonneville in Washington, D.C., in the 1990s.
Any potential private purchaser of the system “can’t charge more and would have no reason to pay a premium price” for Bonneville’s assets, he said.
Privatization of the Pacific Northwest’s federally operated transmission system and federal dams has been tried before in the administrations of both Ronald Reagan and Bill Clinton. Both failed in the face of wide regional opposition, including the region’s elected officials in Washington, D.C.
Bill Dobbins, general manager of the Douglas County PUD, said he expects the region will again be well represented in opposition to any new privatization effort.
“We’ve got people with some seniority in our Northwest delegation,” he said of Peter DeFazio (R-Oregon), Cathy McMorris Rodgers (R-Spokane), Washington senators Patty Murray and Maria Cantwell, both democrats, and others. “The Northwest delegation is probably pretty well-positioned to protect Northwest customers.”
If private investors found a way to untangle Bonneville from its complex legislative commitments, circumvent the rule that limits rate increases and decide they could make money off the system, the impact to Northwest ratepayers could be neutral to negative, the managers say, but there would be virtually no impact to NCW’s PUDs.
It could be neutral, because Bonneville already operates under a policy of open access to its transmission system to both private and public utilities, Wright said.
It could also be negative, Dobbins said, because a private utility would seek to raise rates, be subject to regulation and a different taxing structure.
PUDs are created under state law, not federal law, they say. Impact to PUDs would come only if they failed to meet their federal dam-license obligations, and a private licensee made a successful pitch to the feds to do better.
“Based on the information we have access to at this time, we see no signs that the privatization of BPA would lead us to believe that the privatization of Grant PUD is also on the horizon,” Grant PUD spokesman Tom Stredwick said in an email. The Ephrata-based utility continues to analyze the Trump Administration’s proposal, he said.
“The incumbent licensee will always have an advantage, unless they’re a bad player,” Dobbins said. “If they’re neglectful or not living up to their license, they’ll be at risk.”
That hasn’t been a problem in North Central Washington, with all PUDs now on their second long-term federal licenses at most PUD dams.
“It would be a long, long, long --I’m not sure how many ‘longs’ I can put in front of this -- stretch before there’d be some impact to the PUDs,” Wright said. “If we are good stewards, the license holder is not likely to change. And we fully intend to be good stewards.”
Okanogan County PUD General Manager John Grubich didn’t immediately respond to a request for comment.
BPA Grid Sale Tied to Fantasy Budget by Editorial Board, Spokesman-Review, 6/7/17
21 U.S. Senators Blast Trump Proposal to Sell BPA Power Grid by Staff, Seattle Times, 6/8/17
Northwest Lawmakers Oppose Selling BPA Transmission Lines by Dameon Pesanti, The Columbian, 6/6/17
Politicians Oppose Privatization of Bonneville Power Administration by News Sources, KOBI 5, 6/5/17
NW Lawmakers Urge President Trump: Don't Sell Off BPA Assets by News Sources, KTVZ, 6/5/17
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