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Bush Pressures BPA for Extra Cash

by Jeff Kosseff
The Oregonian, February 5, 2006

Energy - The president wants excess revenue
normally used to cut rates to go for paying down debt

WASHINGTON -- President Bush's new budget will again propose that the Bonneville Power Administration use some revenue from surplus power sales to pay down its debt.

BPA, a Portland-based federal agency that sells about half of the Northwest's electricity, currently uses that money to reduce wholesale power rates. But under Bush's plan, revenues from surplus power sales over $500 million in a year would be used for early payments on the agency's roughly $6 billion in debt to the U.S. Treasury.

The administration says its plan, to be released Monday as part of Bush's 2008 budget proposal, will enable BPA to expand its infrastructure, but critics in Congress say it will lead to higher rates in the Northwest.

Bush put a similar proposal in his budget last year, and Democrats and Republicans in the Northwest's congressional delegation killed the plan. This year's proposal was immediately greeted by similar opposition from Congress, even though BPA says this year's plan accounts for the regional concerns raised last year.

"Once again the administration is looking at Bonneville as a piggy bank to pay for its own priorities at the expense of consumers in the Northwest," said Sen. Ron Wyden, D-Ore.

Sen. Gordon Smith, R-Ore., questioned whether the administration has the authority to make those changes.

"We've rejected these proposals before and we will again," Smith said. "Any threat to Northwest electricity rates is a nonstarter." Both Smith and Wyden sit on the Senate Energy Committee, and they both have fought previous proposals.

Protecting the BPA is a nonpartisan matter for the Oregon delegation. In the House, both Rep. Peter DeFazio, a Democrat, and Rep. Greg Walden, a Republican, criticized the Bush plan while also calling it an improvement over previous BPA budget proposals from the administration.

BPA says this year's proposal allows stakeholders in the Northwest to discuss how to minimize the impact on rates before the policy goes into effect.

"This proposal is basically about developing business practices to store acorns away when times are good," BPA Administrator Steve Wright said in a written statement. "We want to actively engage with BPA customers to ensure this works for the benefit of Northwest ratepayers."

Sen. Maria Cantwell, D-Wash., said Bush was "calling for a conversation in the region on how to implement the decision he's already made."

But BPA said the discussions could include ways to protect the Northwest from large rate increases in the future.

"If BPA does make these prepayments on its debt from surplus power sales, there probably will be some discussion of getting some of this money back when the agency experiences tougher years," said Scott Simms, a BPA spokesman.

Surplus power is the power that BPA sells both inside and outside the Northwest that is not part of its long-term Northwest contracts. Its volume varies annually based on the market.

The provision would not necessarily be triggered. Last year, was the first time that the surplus revenues exceeded $500 million. This year, they are estimated to be right around $500 million, Simms said.

If BPA repays the debt early, he said, customers might benefit.

"Customers would be getting a long-term benefit from lowering the agency's overall debt load," Simms said. "It's akin to paying your mortgage down early, realizing ultimately a lower interest expense."

Also unlike last year's proposal, Bush's budget this year does not count BPA's third-party financing toward the statutory cap on its borrowing from the U.S. Treasury. This will allow BPA to borrow money to improve its system.

"The electricity industry is a giant devourer of capital," Simms said. "We have an infrastructure need that's pretty significant."

Jeff Kosseff
Bush Pressures BPA for Extra Cash
The Oregonian, February 5, 2006

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