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BPA Offers Interim Fixes to Utilities

by Ted Sickinger
The Oregonian, December 18, 2007

Electricity - The agency would pay $131 million to private companies, resulting in rate relief for some customers

The Bonneville Power Administration is proposing to resume making payments to private utilities early next year that could temporarily trim electricity bills for their residential and small-farm customers by about 6 percent.

At the same time, the federal power-marketing agency is proposing to refund $191 million to publicly owned utilities, which claim they have been paying inflated rates to subsidize overly generous payments to private utilities.

The something-for-everyone offer from BPA is an interim measure, good only until next fall, if utilities agree to the provisions. The offer would give the BPA some breathing room to figure out a long-term settlement to its ever-controversial and legally challenged residential exchange program.

The exchange is a system of monthly cash payments that provides a share of the cheap power generated by the federal hydropower system in the region to customers of private utilities, which don't buy power directly from the BPA.

Last June, the BPA suspended the payments because a federal court ruled it had overstepped its authority in a series of cash settlements of the exchange, ignored formulas for determining the benefits laid out in the Northwest Power Act, and overpaid private utilities.

The BPA is starting a formal rate case next month to determine exchange benefits long term. It has offered the interim payments until the end of September 2008, by which time it hopes to have long-term contracts in place.

Representatives from PacifiCorp, Portland General Electric and the Public Power Council said they supported the interim move, which would provide a $131 million payment to private utilities for BPA's 2008 fiscal year. That, in turn, would allow the utilities to provide some rate relief during the winter months, when electricity demand peaks in the region. Public utilities, too, would be able to pass BPA payments back to customers.

"It's a helpful step," said Scott Corwin, executive director of the Public Power Council, which represents a broad coalition of publicly owned utilities. "We've been in this lose-lose situation. . . . It helps straighten this out for the next year at least."

After months of on-again-off-again negotiations, an uneasy coalition of public and private utilities recently forwarded the BPA a set of recommendations that laid out how they would structure the residential exchange long term. It called for an annual payment to private utilities of $210 million, with no escalation of benefits over the long term -- as the value of the BPA system grows -- and no refund of past overpayments to private utilities.

According to ratepayer advocates and Gov. Ted Kulongoski, those recommendations are unacceptable. And since the Oregon Public Utility Commission ultimately would need to sign the contracts that private utilities reach with the BPA, the advocates and governor may have the leverage to kill the deal if the BPA comes up with similar numbers in its rate case, as expected.

A number of public utilities also object to the long-term recommendations, intimating that it would leave them little choice but to challenge the BPA in court again.

It's not clear how they will respond to the interim offer. The BPA will take comments on its proposal until Jan. 7 (go to

Ted Sickinger
BPA Offers Interim Fixes to Utilities
The Oregonian, December 18, 2007

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