the film forum library tutorial contact

BPA Asks Public to Help Solve Financial Woes by Cookson Beecher Capital Press - July 12, 2002

PORTLAND, Ore. -- Bonneville Power Administration is asking for help in getting its financial house back into order.

In a July 2 letter sent to BPA customers, tribes, constituents and interested parties, BPA Administrator Stephen Wright warned that BPA is expecting to lose "a substantial amount of money" for the second year in a row.

In analyzing its expected revenues and expenses for the 2003-2006 period, BPA has discovered that it will most likely experience substantial losses through the remaining four years of the rate period unless some changes are made.

"We have been concerned for awhile that this problem may be coming our way," Wright said in his letter.

But BPA has no intention of setting a course without input from its customers and other interested parties.

"We invite you to work with us to meet this challenge," said Paul Norman, senior vice president of Power Business Line, in a detailed companion letter sent out with Wright's letter. "Tough financial and program decisions must be made with active regional involvement if we are to achieve sustainable solutions."

Possible changes that could help solve this bleak financial picture include increasing rates, cutting costs, increasing efficiencies, pushing costs into the future and taking greater risks to making the annual payment to the U.S. Treasury.

As part of its cost-cutting measures, BPA has terminated two of its contracts with Enron and has asked the Federal Energy regulatory Commission to take actions that could allow it to further reduce payments to Enron.

But while these are good steps, they won't cure all of BPAs financial woes.

Norman warned that if BPA relies solely on letting the established rate mechanisms work, without implementing other options, BPA's wholesale power rates probably will increase over the remainder of the rate period.

Norman's letter also explained some of the circumstances that led to this situation. Most recently, unexpected low market prices have reduced the revenue BPA expected to earn from surplus sales. As a result, BPA is estimating a decrease of $710 million in revenues from surplus sales over the rate period that ends in FY 2006.

Earlier, because of last year's drought and higher market prices, BPA lost $260 million 2001 and ended the year with low reservoirs.

And since Sept. 11, it has had to increase security measures, thus adding to expenses.

With tough choices ahead, BPA has come up with five approaches that include various ways BPA could overcome its financial problems. It wants customers and other interested parties to look them over, choose one or a combination of several, or offer up other ideas.

Get involved.

Jim Davis, a Douglas county wheat farmer and a PUD commissioner, said it's important for farmers to stay on top of this issue.

Emphasizing that a stable BPA is critical for the economic health of the entire Pacific Northwest, Davis said that ag figures into this picture in a significant way.

"Agriculture is still the state's largest employer," he said. "When you mess with something that's this critical, it has cascading impacts throughout the state. And BPA is right in the center of that."

Darryll Olsen, who represents the Columbia-Snake River Irrigators Association board of directors, agrees that farmers need to be involved.

"BPA is the heart of business for irrigated agriculture," he said. "It's impossible not to pay attention to this and survive."

When the association's board members began getting nervous about the situation in April, they sent a blunt message to BPA: "Don't even think about raising rates."

On June 14, officials from the association and from the Eastern Oregon Irrigators Association met with Wright in Hermiston, Ore., and outlined their concerns.

They explained that growers have installed the latest irrigation efficiency measures; that many are growing less irrigation-intensive crops with lower value; that this switch is hurting other businesses reliant on higher-value crops; that growers are not able to pass on rate increase to wholesale customers and processors; and that despite stringent efforts to control costs, some growers are at risk of losing their operations.

Tom Casey, cattlemen, hayrasier and PUD official in Grays Harbor County for the past 20 years, said that in Western Washington, farmers are no different from anyone else operating a small business or owning a home.

"People don't like paying higher power bills, and we're hearing about it," he said.

Copies of Wright's and Norman's letters are available at www.bpa.gov/power/PSP.rates/announcements.shtml.

Pressure
Tom Casey, a PUD official in Grays Harbor County for the past 20 years, believes BPA would have no money problems now -- even figuring in last year's drought and California's fiasco with deregulation -- had it now bowed to political pressures exerted by players in Washington, D.C.

He said those pressures pushed BPA into serving corporate interests such as aluminum companies and large private regional utilities at the expense of public interest.

That left BPA in a situation of having to provide 10,000 megawatts of power when it had only 7,000 megawatts of its own to offer. As a result, it had to go out onto the open market last year and get zapped by high power prices. Later, it go hit hard when market prices dropped dramatically, thus lowering the revenue it expected to make from selling surplus power.

"We need to fight pressure with pressure," Casey said. "Farmers, businesses and residents need to let their Congress members know that they shouldn't use BPA to serve corporate interests."

Timeline
BPA will welcome public comments from July through Sept. 30, 2002. People can submit recommendations in several ways:

• They can sent written comments to David Basaraba, Communications and Liaison -- PL-6, Bonneville Power Administration, P.O. Box 3621, Portland, OR 97208-3621.
• They can send comments electronically vie e-mail to financial-choices@bpa.gov.,
• or send a fax to 503-230-3613.

Conclusions resulting from this public-comment process will be made later this year. BPA Administrator Stephen Wright plans to announce the direction the agency will take in a letter that will be sent out in December.