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BPA Legal Shift Unfair to Oregon, Critics Say by Ted Sickinger The Oregonian, May 22, 2007

Power - A move to freeze benefit payments would raise bills for most, except in next-door Washington

Ratepayer advocates, industry regulators and electric utilities in Oregon rose in collective outrage Monday over a decision by the Bonneville Power Administration that would increase monthly bills for most residents by 13 percent beginning next month.

The increase applies only to investor-owned utilities such as Portland General Electric and PacifiCorp, which supply power to about 75 percent of Oregonians. It won't hurt customers of public utilities, which supply most of the power in Washington.

"This has a huge impact on the region," said Jason Eisdorfer, a lawyer for the Citizens' Utility Board of Oregon, a ratepayer advocacy group. "It's a significant redistribution of wealth from Oregon to Washington state."

The issue being debated is as old as Bonneville itself: who is entitled to the benefits of a regional hydropower system that sells power to its customers at cost, which is currently about half the market rate.

When Franklin Roosevelt in 1937 established the agency that evolved into the BPA, his intent was to bring electricity to rural areas being ignored by the large electric monopolies of the day. Part of his solution was to encourage rural municipalities to form publicly owned utilities, which were given preferential access to BPA power.

Today, few rural areas lack electricity, and some of the biggest beneficiaries of the low-cost power generated by the BPA's 31 hydroelectric dams are large, publicly owned utilities that serve customers in Seattle, Tacoma and Eugene. The BPA's decision Monday was a victory for them.

The federal power marketing agency, prompted by a ruling earlier this month from the 9th U.S. Circuit Court of Appeals, told six investor-owned utilities that it was immediately suspending benefits for their residential and small-farm customers under the controversial "residential exchange" program.

Established by the Northwest Power Act of 1980, the exchange allocates a share of BPA benefits to residential and small-farm customers of investor-owned utilities.

Unlike public utilities, investor-owned outfits such as PGE don't buy their power directly from the BPA. Instead, they get monthly cash payments from the federal agency based on the difference between their own cost of providing power and the BPA's. The utilities then pass the money directly to ratepayers, who see it as a credit on their monthly bills.

Investor-owned utilities have long argued that their customers' benefits were too low. And in 2000, under threat of a lawsuit, the BPA reached a settlement with the companies to provide benefits of about $1.5 billion between 2002 and 2005. Under a subsequent deal, it is now paying about $28 million a month that is passed through to customers of PGE, PacifiCorp, Avista, Puget Sound Energy, Idaho Power and NorthWestern Energy.

Public utilities challenged the 2000 settlement, and the appeals court ruled May 3 in their favor, saying the BPA had overstepped its authority.

"We very much regret that it is necessary for us to suspend payments at this time, since we understand this may rapidly result in large and, for some, severe, rate consequences," said Steve Wright, the BPA's chief executive.

Wright said the suspension was necessary because BPA officials potentially would be personally liable if payments are inconsistent with the law.

While an $11 increase in the average residential electricity bill won't break the bank for most Oregon households, the increase brings no value to ratepayers and is independent of other increases in fuel costs or equipment that utilities typically seek to pass on to their customers. It also comes at a time when most consumers are seeing eye-popping increases in their other big energy cost -- at the gas pump.

Most observers agree the BPA has wide discretion in determining the level of residential exchange payments because it controls the calculation outlined in the 1980 act. Depending on how that is applied, advocates say, the residential exchange can be worth anything between zero and $600 million a year.

The BPA said Monday that the court erred in its ruling, and the agency is considering an appeal to a larger panel of 9th Circuit judges.

Meanwhile, ratepayer groups and utilities are calling on Oregon's congressional delegation and the governor to pressure the BPA to take quick administrative action to resolve the dispute.

"The real danger for all of us is that it takes forever and a day for BPA to run a rate case," said Patrick Reiten, president of Pacific Power. "If there isn't some haste to solve this, we have no choice but to escalate."

Escalating, the utilities say, would mean asking Congress to resolve the dispute, either by legislative fiat or by reopening the Northwest Power Act for wholesale revisions.

The latter is a risky course. The benefits the BPA provides to the Northwest are the envy of other regions and are under regular threat by the Bush administration, which would like to sell all federal hydropower at market rates.

U.S. Rep. Peter DeFazio, a Democrat who represents southwest Oregon, said Monday that the BPA's move sounded fairly draconian, but that it was premature to consider reopening the act.

"We need to calm down and work our way through this as a region," he said, "I wouldn't want to expose us to a nearly evenly divided Congress or subject ourselves to intervention by the Bush administration."

Ratepayer advocates, however, said the BPA's decision left them with little to lose.

"We just lost," said Eisdorfer of the Citizens' Utility Board. "In Portland, for all the benefits we get right now, they may as well breach the dams and give us better fish passage."

Related Pages:
Casey Wants Payments to Have a Purpose, by Jordan Kline, The Daily World, February 27, 2007