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BPA Payback Means PUD Rate Cut by Kathy Gray The Dalles Chronicle, December 19, 2007

$1.5 million refund would be stretched over 10 months

Customers of Northern Wasco County PUD can expect a roughly 6 percent decrease in power rates for most of 2008. Details are not official yet, but PUD directors agreed Tuesday evening to pass along an estimated $1.5 million they expect to get as an interim refund of money the PUD paid to the Bonneville Power Administration's residential exchange program.

"I believe if we took a random poll, very few people wouldn't want that money back," said Director Howard Gonser. "And the timing probably couldn't be any better."

At Tuesday's meeting, the board of directors voted unanimously to accept Bonneville's payment agreement, and reached a consensus to return the resulting money to customers as a rate cut.

PUD staff members will bring a plan for a rate reduction back to the board at its January meeting, said PUD Manager Dwight Langer.

The $1.5 million interim payment will pay for rate cuts over a 10-month period, beginning in 2008, Langer said.

It is important for customers to know the planned rate cut is temporary and rates could go back up, directors added.

After that 10 months, rates will be based on whatever long-term compromise is reached between Bonneville and utilities, both public and investor-owned.

The residential exchange program is a system of cash payments to for-profit investor-owned utilities that allow their residential and small-farm customers a share of the benefits of cheap power from the federal hydropower system. Money for the program comes from higher rates to BPA's primary customers, PUDs, municipalities and power cooperatives.

A group of those nonprofit public utilities successfully sued Bonneville over a residential exchange agreement reached between BPA and the private investor-owned utilities earlier in the decade, saying the agreement violated law established in the 1980 Northwest Power Act.

Since that May 3 U.S. Ninth Circuit Court decision, Bonneville has halted payments to the private utilities, causing their rates to increase, but has continued to collect $28 million a month from the public utilities, causing their rates to remain inflated.

"Providing interim payments is the right thing to do for the region," says Steve Wright, BPA's administrator. "It's better to get some cash flowing into the hands of BPA customers immediately on an interim basis rather than withholding the money until next fall."

Fall is when a new long-term residential exchange plan is scheduled to be complete.

The total interim payout to public and private utilities in four Northwest states is $322 million, according to a BPA news release. About $131 million will be allocated to private utilities and $191 million to public utilities.

The interim payments to participating utilities would be subject to a "true-up" period once long-term residential exchange plans are finalized. That's a period where differences are adjusted between the estimated interim payments and amounts in the final agreement.

Risks include the potential that a future true-up may require some of these funds to be repaid to BPA, Wright said.

But the PUD's attorney, Jim Foster, suggested Bonneville was conservative in what it plans to pay out and any adjustments would likely be paid to utilities, rather than the reverse.

"Bonneville has $1.4 billion in reserves," Director Bill Ward noted. Not all PUDs were universally in favor of BPA's interim payment plan, which is in a comment period until Jan. 7.

Gray's Harbor PUD commission, a vocal and strident opponent of the process taken since the circuit court decision, remained consistent with that stance, calling the proposal "absurd."

"Why should public utilities agree to restart illegal subsidies to investor-owned utilities when we already are owed $1.66 billion in overpayments?" a commission statement said. "We have been asking for BPA to follow the law ever since the federal court last spring sided with 44 consumer-owned utilities and ruled that BPA illegally enacted highly lucrative contracts with investor-owned utilities at the expense of public utilities."

One positive outcome of conceptual agreements reached earlier this fall on residential exchange is that it helped remove a logjam in discussions on Bonneville's entire rate case, Langer noted.

The rate case is a much more critical long-term issue for Northern Wasco and many other utilities, because it will determine just how much cheap federal hydropower utilities will be able to purchase and at what price over the course of 20 years.