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BPA Must Bridge Billion Dollar Deficit by Jeff Brady Oregon Considered, Oregon Public Broadcasting, August 16, 2002 (Listen with RealPlayer)

PORTLAND (Oregon Considered) - The Bonneville Power Administration is facing a billion-dollar deficit over the next four years. The agency is blaming the unpredictable energy market in the West for its financial problems. The BPA is looking for ways to make up that money and is asking for help in deciding how to do it. Last year Bonneville warned it might have to more than double its rates because of the West Coast Energy Crisis. In the end rates went up about 50% because the agency assumed it would be able to sell electricity on the open market for a profit and offset some of the rate hikes. But as the BPA's Kim Leathley says, things didn't work out as planned. Leathley: No one expected energy prices to go through the floor like this--I mean, it really wasn't on anyone's screen; it certainly wasn't on our screen. Leathley says the agency ran through its numbers in early Spring and found that a deficit was building which could reach $860 million by 2006. Leathley: Now, since the time we did the analysis, the markets have further eroded further exacerbated this picture. We're probably more in the range of minus a billion now over the course of the rate period. The BPA's Paul Norman says the agency is trying to save money internally by making itself more efficient, but that won't be enough to make up a billion dollars. He says the agency has identified several options. Norman: One is raise rates, two is cut costs, three is we could borrow and push this problem out in the future, and four is we could take more risk in making our payment to the U.S. Treasury for the cost of the federal system. Bonneville's customers--primarily residential customers don't want rates to go up even further given the poor economy. Norman says cutting costs means cutting programs the BPA funds such as conservation projects and fish and wildlife restoration. Fish programs are a big budget item and Norman thinks there might be some savings there. Norman: Is there some way of accomplishing that goal at lower cost. Take fish. Is there a way of meeting the biological goals of fish but doing it in a more cost-effective way? Norman says borrowing money and paying it back in the future is an option but he says skipping the federal treasury payment shouldn't be. Norman: You have lots of people in the rest of the nation whose attitude is, "Well, the federal government paid for those dams. Why doesn't the federal government take that value back in some way, shape, or form and spread it out to everyone in the nation?" And not making our treasury payment would provide the perfect excuse for those folks to come in and say, "Look, let's take that value back from the people of the Northwest." And that's something we don't want to have happen. Norman says in the end, the BPA likely will make up the billion dollar deficit through a mix of all these options. He says the purpose of public meetings throughout the region is to help the agency develop the right mix of options. Steve Eldridge with the Umatilla Electric Cooperative attended one of the public hearings in Portland. He says Bonneville should focus on cutting programs and avoid raising rates. Eldridge: I have a concern that they'll do what's comfortable for the agency--that they'll basically look at all the stakeholders and add em up and shake em out and decide politically what can they sustain. I think the people that pay the bills ought to have a higher level of say in how Bonneville spends the money. Jeff Brady: That's you. Eldridge: That's me and the people I represent. But the BPA has requirements to improve fish habitat and make it easier for endangered species to get around dams. Nicole Kordan with the Save Our Wild Salmon Coalition says she's frustrated that the BPA didn't anticipate its financial problems. She says during hard financial times, conservation and fish programs are the first to suffer. Right now, Kordan is even more frustrated than usual because, she says, the agency is talking about its problems in broad generalities rather than specific numbers and programs. Kordan: There's a lot of information that's not out there yet. So it's hard for us, I think at this stage in the game, to really adequately comment to them and to give some feedback and to sit down at a table and try to craft a solution that makes sense to everybody. The BPA has wrapped up its public hearings in Portland but in coming days it will also host sessions in Seattle, Spokane and Burley, Idaho. A final decision on how the agency will bridge its billion-dollar budget gap is expected by the end of the year.