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BPA Review says Agency Lacks Vision by Chris Mulick, Herald Olympia Bureau Tri-City Herald, July 3, 2003

A candid internal report has concluded the Bonneville Power Administration lacks long-term vision, a proper understanding of risk management and business concepts, and shirks accountability to Northwest ratepayers.

The report was requested in January by BPA Administrator Steve Wright to determine why the agency's 3-year-old financial forecasts used to set rates through 2006 were so far off.

The agency, which supplies almost half the power consumed in the Northwest, has fallen under a financial crisis that has it planning for another rate increase in the fall, two years after it raised rates by an average of 46 percent.

The utility rate increases that followed helped close factories, further burdened the poor and strained family budgets.

An internal review team concluded in its May 6 analysis that the agency is prone to using optimistic revenue projections and it is too easily swayed by political winds that produce inconsistent directives. Also reported in the jolting litany of alleged shortcomings was an inability to articulate objectives that can be used to measure success or failure.

"We often avoid accountability, self-criticism and acknowledgment of mistakes," the report reads.

Further, "executives tend to have a high tolerance for ambiguity" that "creates confusion and organizational dysfunction."

Its existence was largely unknown until a reporter for the industry publication Clearing Up found it posted on the agency's expansive Web site and reported its contents this week.

"The people inside Bonneville are saying the same things that we on the outside have been saying for years," said Steve Weiss, a senior policy associate for the Northwest Energy Coalition, an organization of governments and environmental groups. "It doesn't have a long-term vision."

The report is the first effort from within Bonneville to accept at least partial blame for the agency's financial woes. The review team points to a series of faulty decisions -- some made before Wright took over as the BPA chief -- made during negotiations for power sales contracts that took effect in October 2001.

• The agency offered customer utilities complicated new contracts that carved up power from the Northwest's system of federal dams and lone nuclear plant while instituting a series of complex rate surcharges. Both have "sometimes overwhelmed the capabilities of BPA's systems and staff."

• Bonneville offered rates capped at 2000 levels to consumer-owned utilities that signed contracts first and approved a plan that ultimately boosted benefits to investor-owned utilities by 600 percent. Ratepayers for the agency's remaining utility customers, including all in the Tri-Cities, have had to pay for those benefits.

• The BPA based its projected profits from surplus power sales on expectations for dramatically higher wholesale market prices that were commonplace at the height of the energy crisis but haven't materialized since.

It also concluded the culture inside the agency discourages "information, insights, and perspectives that challenge conventional wisdom." That culture may have prevented analysts from speaking out against financial forecasts they viewed as too optimistic, the report says.

"Many interviewees state that there is an unwillingness to stand up and be the only champion for an idea, possibly because 'rocking the boat' is perceived as career limiting," the review team wrote.

Despite the unusually striking critique, stakeholders say nothing has changed since it was issued. The final rate structure issued this week for the next three years is almost identical to the draft the agency floated earlier, despite heavy criticism in formal responses.

So far, the agency is expecting a 5 percent rate increase effective Oct. 1.

"They didn't hardly make any changes at all," said Benton REA Manager Chuck Dawsey. "They pretty much rejected anything anybody had to say."

"Customers are losing confidence in them more and more," said Franklin PUD Manager Ken Sugden. "They are just going down the same road."

That's not what the internal report called for. It recommended Wright name a senior project manager reporting directly to him who would begin work implementing the team's various recommendations to change the culture within the agency.

"The interviewees expect significant change," the report reads. "The team believes that, if the executives don't lead this effort, it won't happen.

"We can stay our course and further jeopardize the benefits that we provide to the region. Or we can make fundamental changes in the way we do business to avoid outcomes like those that helped fuel the financial crisis."

Related Sites:
The report is available at www.bpa.gov/corporate/kc/home/docs/2003/Report_to_administrator.pdf