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BPA Rates Could Fall 5 percent Next Year

by Associated Press
Statesman Journal, April 11, 2006

Rules covering the power agency's debt have been changed

KALISPELL, Mont. -- The Northwest's wholesale electricity rates could drop by about 5 percent next year because of new rules allowing the Bonneville Power Administration to pay off debt directly.

Some people think the rates should go even lower. They're asking the BPA to find another $50 million that would push prices to $27 per megawatt, which is several dollars less than the current price.

"Pacific Northwest customers are saying it's time that power rates come down," said James Shefler of the Northwest Coalition for Affordable Power, which has been pushing hard for the $27 figure.

The drive for lower prices received a considerable boost last week, when regional utilities, the U.S. Department of Energy and several senators, including Sen. Max Baucus, D-Mont., won changes in the way BPA services its debt.

The BPA is a quasi-governmental agency that markets power generated at the region's federal hydroelectric dams.

The BPA also backs a handful of Energy Northwest bonds, issued in the 1970s and 1980s to fund construction of nuclear power plants. The BPA backed the loans so the region could take advantage of its tax-exempt status, securing lower interest rates.

To retain tax-exempt status on the bonds, the BPA could not pay down the debt directly. Instead, the BPA historically has paid the debt indirectly by discounting power sold to utilities.

That always meant that the agency had to carry bigger cash reserves to cover its other operating expenses. Currently, about $6 billion in bonds remain outstanding and should be paid in full by 2024.

Under the new rules, the BPA can pay down directly on principal and interest from its Energy Northwest bonds while still keeping its tax-exempt status on the bonds.

"The collaborative process between Energy Northwest, BPA and its customers has borne substantial fruit for Northwest ratepayers," BPA chief Steve Wright said. "Such collaboration provides a good model for what we can accomplish when we work together."

Associated Press
BPA Rates Could Fall 5 percent Next Year
Statesman Journal, April 11, 2006

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