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Clark Public Utilities Supports Settling a Lawsuit Against BPA by Erik Robinson, Staff Writer The Columbian, December 24, 2003

Clark Public Utilities on Tuesday agreed to settle a lawsuit challenging the Bonneville Power Administration's right to cut deals with privately owned electricity providers, but there's a catch.

Seventy-one other public utilities throughout the Northwest have to follow Clark's lead for the agreement to matter and two have said they will reject it.

Either way, Clark customers are unlikely to see a decrease in electrical rates. What the settlement would do, however, is reduce the chance that rates will go up through September 2011. Clark Public Utilities has raised rates by 45 percent over the past three years.

The exact financial impact of a potential settlement on ratepayers is clouded by three factors: the lawsuit deals with the wholesale rate that Clark Public Utilities pays, the benefits of the terms of the settlement vary depending on the level of demand for electricity in the future and the potential savings are split between 72 public utilities.

At the heart of the suit is whether the BPA has the right to set aside supplies of electricity at contracted rates in deals it cuts with investor-owned utilities. By doing that, the suit argues, the BPA could inadvertently force public utilities to subsidize their investor-owned counterparts. That situation is far from theoretical. It happened in 2001 when the market rate for electricity exceeded the contract rate investor-owned utilities agreed to pay. Because the BPA can't operate at a loss, it was the public utilities that were charged higher rates to make up the difference.

The proposed settlement would result in an immediate reduction of BPA's wholesale electricity rates by about 10 percent. In return, Clark and other public utilities would drop their lawsuit challenging Bonneville's ability to strike deals with privately owned energy companies.

Representatives of Bonneville and Washington Gov. Gary Locke welcomed the unanimous action by Clark commissioners on Tuesday. All four governors in the Northwest, as well as most of the region's congressional delegation, have endorsed the settlement. They argue the settlement guarantees a cost savings because of a provision that absolves the BPA of a contractual obligation to pay $200 million to PacifiCorp and Puget Sound Energy, money that's currently built into Bonneville's wholesale rates.

'Big shot in the arm'

"It's a big shot in the arm for the economy at a time when we're coming out of a recession," said Dave Danner, Locke's energy policy adviser.

Public utility districts in Clallam and Snohomish counties have rejected the proposal, but Bonneville spokesman Ed Mosey said the agency is hopeful they will reconsider in light of Clark's action on Tuesday.

"Clark is one of our largest customers, and their vote is very significant," he said. "A lot of utilities throughout the region are in a wait-and-see mode. When you have a major, sophisticated player with a lot of resources that sees fit to make the settlement, that makes a big difference."

The lawsuit challenges contracts the BPA reached with private utilities during the energy crisis of 2001.

Central to the suit is a 1980 law that intended to spread the benefits of cheap federal hydropower to Northwest residents who happen to be served by privately owned utilities such as Portland General Electric. Congress required Bonneville to give customers a billing credit to share in the lower cost of federal power. Public utilities, previously the sole recipients of low-cost federal hydropower, claim that Bonneville violated the Northwest Power Act of 1980 by agreeing to provide investor-owned utilities with energy rather than cash generated at 29 federal dams and one government-backed nuclear power plant.

Offer expires on Jan. 21

Snohomish PUD commissioners have agreed to meet with Locke to explain their position, Danner said, but the governor will be hard-pressed to change their minds by the time the proposal expires on Jan. 21.

Snohomish president Kathleen Vaughn sent a letter to Bonneville Administrator Steve Wright on Dec. 9 stating that the utility's board of directors "irrevocably rejects" the proposed settlement.

Clark General Manager Wayne Nelson said rates are likely to go up within the next two years, if the settlement falters.

He also sees little to gain by continuing the legal fight.

Strip away the lawsuit's philosophical merits, Nelson said, and commissioners are left with two essential questions: "Can we win the litigation? Can we get a better settlement?" The answer to both of those questions, he said, is probably "No."

Bonneville supplies about half the county's electrical load, with Clark's natural gas-fired turbine near Vancouver Lake providing the rest.