BPA's Risk of Default Grows, GAO saysby Les Blumenthal, Herald Washington, D.C., Bureau
Tri-City Herald, July 18, 2003
WASHINGTON -- Congressional investigators say the risk of the Bonneville Power Administration defaulting on its debt to the U.S. Treasury has increased over the past several years as the federal power marketing agency's financial situation has deteriorated.
The General Accounting Office said Bonneville has paid too much for the outside electricity it needed to cover all its customer demands. Its report also says BPA's operational costs have mounted -- especially for protecting endangered salmon runs -- and the utilities it serves are starting to look elsewhere for power.
"The likelihood of greater risk to the Treasury seems to be coming to pass," GAO said.
The GAO report could provide the impetus for Congress to order a study of Bonneville's future even as the Bush administration raised the possibility the agency, which supplies 45 percent of the electricity in the Northwest, should be sold or privatized.
The House today is expected to approve an energy and water spending bill that directs the Department of Energy to conduct an independent review of Bonneville's "mission, management and financial condition."
Bonneville, which markets the low-cost electricity generated at federal dams on the Columbia and Snake rivers, is part of the Energy Department.
Taking note of the GAO report, the bill says "the net result is that Bonneville continues to operate at significant financial risk, which impacts both ratepayers in the region and taxpayers in the rest of the country."
If the Senate agrees, the Energy Department would be required to submit its report on Bonneville to Congress by the end of 2004, after the election.
Ed Mosey, a spokesman for Portland-based BPA, said every time the federal deficit grows there is talk of selling off the agency.
"The evidence will show it would be a mistake," Mosey said. "The federal system (BPA) is the driving engine of the Northwest's economy and privatization would add costs and increase rates."
Mosey said the GAO, which has long been critical of Bonneville, made some mistakes in its analysis and misinterpreted other factors that have created financial problems for Bonneville.
"It sounds like they waded into water over their heads," Mosey said.
While the GAO report notes Bonneville warned earlier this year there was a 74 percent chance it could miss a Treasury payment, Mosey said that was based on concerns the region was headed for a drought that could affect power production at the federal dams.
The fear of low-water conditions has eased and there is now 100 percent certainty Bonneville will make its Treasury payment this fall, Mosey said. The payments usually are between $700 million and $800 million.
Bonneville owes the Treasury $7.4 billion, money that was used to finance construction of the hydroelectric dams and the region's extensive electricity transmission grid. The agency has not missed a Treasury payment in more than 20 years.
Even so, the GAO said Bonneville's long-term risk of default is greater than it was five years ago because of its "higher costs and because of uncertainty surrounding both its role as electricity provider and its obligations to protect fish and wildlife."
"While BPA has taken steps to improve its financial condition and deal with its long-term challenges, the past such efforts have not entirely succeeded," the report says.
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