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BPA Rate Hikes Can Help PNW Customers in the Long Run by Larry Swisher Guest Comment, Capital Press - July 25, 2003

Even in a recession, people who are out of work or earning less know they still have to keep up the mortgage payments or else risk losing their homes.

But some Northwest utility leaders, ratepayers and politicians who have been complaining loudly about Bonneville Power's recent rate hikes don't seem to get it.

To cope with the aftermath of Western drought and energy shortages, BPA rates shot up 46 percent in October 2001 and will rise another 5 percent this fall. The federal low-cost electricity provider curtailed spending on salmon recovery and conservation and cut other costs. As a result, Northwest ratepayers via Bonneville will make their annual $700 million repayment to the U.S. Treasury for the original cost of building dams and other facilities this year for the 20th year in a row.

All this has, of course, generated a cacophony of screaming and moaning and cries of financial mismanagement.

The problem is that this noise quickly reached the ears of Bonneville's critics who lie in the weeds in far-off Washington, D.C., never missing an opportunity to attack. They and others have set in motion new congressional and Bush administrations scrutiny of the agency's "fiscal challenges."

If Northwesterners want to inflict another deep economic blow on themselves, throwing BPA to the dogs is just the ticket. Pitted against the rest of the country, our region's small congressional delegation -- even if members stand united -- will fall.

Last Friday, the House passed a spending bill for the Department of Energy, which includes the Portland-headquartered BPA. There in the fine print of its lengthy explanation of the bill, the House Appropriations Committee demanded that the department conduct "an independent review" of BPA's "mission, management and financial condition."

The reasons cited were contained in preliminary findings of a General Accounting Office study that was ordered this spring by the chairman of energy and water appropriations subcommittee -- David Hobson, R-Ohio -- who happens to be a member of that constant thorn in Bonneville's side" The Northeast-Midwest Coalition.

These members from Rust Belt and Eastern states that are bleeding population to the West and South claim modern-day Pacific Northwest electric customers are unfairly still receiving federal subsidies long after the massive dams were built on the Columbia and Snake rivers. They have pushed legislation to privatize BPA or to require it to charge market rates and make a profit for the federal government.

In the bill's explanatory language, Hobson and the subcommittee -- which includes outnumbered Rep. Mike Simpson, R-Idaho -- also directed the secretary of energy to respond with specific recommendations to Congress for reshaping Bonneville to "reduce the risk to the ratepayers in the region and to the federal Treasury."

"There are folks who believe that despite the evidence, that our rates are subsidized and would like to change the way we do business," Jeff Stier, BPA federal liaison and former Oregon congressional staffer, said. "That's why it's important to continue to make those Treasury payments and satisfy our obligations to the Treasury and the taxpayer."

The latest attack seizes on BPA's financial troubles to suggest it is in danger of defaulting on its debt repayment. "Bonneville continues to operate at significant financial risk," the subcommittee said.

Its evidence is flimsy, however.

The present rate structure "insulates customers from natural fluctuations in hydropower availability, thus eliminating any price signal when electricity is scarce." The recent rate hikes alone disprove this statement, but also there are now mechanisms in place to enable quicker price responses to future energy shortages and costs spikes.

Furthermore, BPA's increase investments in the transmission system are said to do nothing to "resolve its current financial difficulties on the power generation side." This is irrelevant since the improvements are paid for separately by transmission fees.

The one true charge the subcommittee leveled is that "BPA is currently overextended as a result of committing to provide more power than it can generate from the federal hydropower system." In hindsight, Bonneville officials gave away the store in the late 1990s, but they did so only after coming under heavy political pressure from aluminum companies and union workers and investor-owned utilities -- neither of which has legal rights to federal power.

The over-generous contracts spawned a major lawsuit by publicly owned utilities. The case could cost Bonneville $200 million to defend, and its contracts with two private utilities -- PacifiCorp and Puget Sound Energy -- another $200 million, Sen. Ron Wyden, D-Ore., said.

Urging Bonneville and the parties to settle out of court, Wyden said last week that rather than a rate increase this fall, the savings would enable a small rate cut. "A settlement between (private) and public utilities would clearly be a win-win proposition for the region," he said.

Such a fiscal shot in the arm and less in-fighting over BPA's spoils would also help thwart the Northwest's enemies in Washington, D.C.