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BPA/Utilities Settlement Terms Final and Awaiting Signings by CBB Staff Columbia Basin Bulletin - October 24, 2003

The Bonneville Power Administration and members of the two major utility groups in the region have signed a proposed litigation settlement that would roll back the Bonneville Power Administration's wholesale rates 7.4 percent if ratified by all remaining public utility litigants, BPA officials said this week.

BPA signed the agreement and sent it to more than 50 litigant utilities to do likewise within 90 days. Avista Corp. of Spokane, Wash., Puget Sound Energy Inc. of Bellevue, Wash., and Vera Water and Power, located near Spokane, were the first to ink the documents.

Steve Wright, BPA administrator, said all parties involved must sign the agreements within 90 days and give final approval within 120 days.

"Negotiations have produced a solid agreement and now negotiations are complete. It's time for an up or down vote by all the utilities involved," Wright said. "The settlement reduces BPA rates now and creates greater certainty about BPA benefits and costs in the future."

In a joint letter to Wright, the entire Northwest congressional delegation BPA_Settlement_Letter voiced strong support for the settlement. The four Northwest governors 4GovsSNRACLetter also sent a letter endorsing the settlement and urging the parties to conclude the agreement. "We support the settlement framework and we urge all parties to work toward the settlement," the governors asserted.

Kyle McSlarrow, deputy secretary of energy, said the settlement is an important step in the region's effort to stabilize rates and promote economic recovery.

"The terms now on the table strike a balance of interests of all parties. I urge the utilities to sign the agreement," he said. "DOE is committed to helping BPA achieve an additional $100 million in cost reductions or revenue enhancements cumulatively for fiscal years 2004 and 2005, consistent with the agreement and at the urging of the Northwest congressional delegation."

Steve Loveland, general manager of Springfield Utility Board in Oregon, said his utility "is a strong supporter of the agreement and is encouraging all its counterparts involved in the lawsuit to sign the agreement. It not only provides needed rate relief for Northwest ratepayers, it allows us to move on to other pressing issues facing the region."

The lawsuits, filed earlier by various utilities, challenge the nature and level of investor-owned utility benefits and other contractual arrangements entered by BPA in 2001. If the settlement succeeds, BPA would eliminate a 2.2 percent rate increase that took effect Oct. 1 and reduce rates 7.4 percent below 2003 average rates. The net effect, compared to current rates, would be a nearly 10 percent reduction in wholesale power rates for fiscal year 2004.

A refund beginning March 2004 would give the utilities the full benefit of the rate decrease.

If executed by the parties, the settlement would eliminate $200 million in costs and defer an additional $269 million into the 2007-2011 period. The impact of the wholesale reduction on retail rates of public agency customers would vary by utility.

The settlement also clarifies and stabilizes benefits for small farm and residential customers of investor-owned utilities between now and 2011. Members of utility groups in the region advocated settlement as the best outcome for all parties.

Kimberly Harris, vice president for regulatory and government affairs of Puget Sound Energy, said the settlement is a first step toward resolving contentious issues. "Hopefully the region will now be able to move forward to address other important energy concerns," she said.

John Saven, executive director of Northwest Requirements Utilities, represents over 40 public agency utilities in the Northwest. He said, "The settlement provides BPA customers needed rate relief in the short term, and greater certainty about the agency's costs in the years ahead."

Steve Klein, Tacoma Power superintendent, said the agreement opens the door for future progress. "All parties had to compromise to reach this settlement, but it will return immediate benefits to the Northwest economy and its citizens," he said. "We must now take this positive momentum and focus our collective efforts toward agreement on the optimum framework for a reliable, cost-effective power supply for the longer term."

In a letter to Wright, the entire Northwest congressional delegation asserted: "We commend both BPA and regional utilities for working diligently to reduce rates for the benefit of the region, and we urge all parties to quickly complete the work necessary to conclude the settlement."

The four Northwest governors commended the region's utilities for their work on the settlement and urged them to reach a final agreement. "We are writing today to voice support for your efforts to achieve a settlement that we believe goes far to minimize or avoid further BPA rate increases in the near future," the governors asserted.