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Northwest Delegation Responds to OMB'S BPA Criticism by CBB Staff Columbia Basin Bulletin - February 28, 2002

Members of Congress from four states served by the Bonneville Power Administration have asked the White House budget office to retract its criticism of the low-cost energy supplier.

In a letter Tuesday to Office of Management and Budget Director Mitch Daniels, 21 House members and senators said OMB's comments "grossly mischaracterize" the public power supplier's role in the Western electricity industry and its U.S. Treasury financial relationship.

The letter responds to an OMB assessment that was contained in President Bush's FY04 budget documents, which were released on Feb. 3. The response was spearheaded by Sen. Maria Cantwell, D-Wash., and Rep. Peter DeFazio, D-Ore., and endorsed by the rest of the Oregon delegation, all but one Washington member, three of Idaho's four members and Rep. Denny Rehberg, R-Mont.

Rep. Doc Hastings, R-Wash., and Sens. Mike Crapo, R-Idaho, Max Baucus, D-Mont., and Conrad Burns, R-Mont., did not sign the letter.

OMB's one-page assessment said "Bonneville competes with the private sector, particularly in its surplus (electricity) sales to California," and suggested that the federal Columbia River power system and BPA's debt amount to taxpayer subsidies that are not being fully recovered by the U.S. Treasury. In addition, the White House agency suggested BPA's functions "could be performed under contract or through non-federal ownership" of the power system and that the power preference clause "restricts market activity."

The attack raised fears among Northwest members and public utilities that purchase BPA power that the Bush administration was laying the groundwork for selling it to private business or requiring it to charge rates equal to those of private utilities. Either change would require congressional approval. But Daniels later told Northwest senators there is "no such interest on our part."

In their letter, members asked Daniels to revise the OMB assessment to reflect decades-old laws mandating cost-based federal power, giving Northwest public power and other customers first rights to purchase it and previous Bush administration statements of support for those policies. Also, they said OMB mischaracterized BPA's debt repayment and refinancing terms as subsidies. They rejected OMB's suggestions for recovering "these phantom subsidies" through market pricing of power or privatization," which would further raise rates for consumers and businesses "already among those hit the hardest by the general downturn in our nation's economy."

The members vowed to protect and preserve the benefits of the Columbia River power system, "including the preference-centered system of reliable, cost-based power that is the bedrock of our regional economy."

"These assertions not only ignore statutes in existence for decades, but they are inconsistent with Energy Secretary Spencer Abraham's own pledge" at his 2001 Senate confirmation hearing to uphold the system of regional preference and cost-based rates, the letter said.

Members rejected OMB's "erroneous suggestion" that subsidies incurred during construction of hydropower facilities have not been recovered and that BPA's 1996 debt restructuring shifted part of the original construction costs on federal taxpayers nationwide. "As you likely know, it is Northwest ratepayers - rather than taxpayers - who continue to repay the U.S. Treasury for the federal government's investment in the (power system)," they wrote. They said all capital investments and borrowing are fully repaid at market-based interest rates.

In 1996, Congress and the Clinton administration agreed to refinance BPA's debt. The restructuring reduced the amount of debt but permanently raised interest rates to market levels and required a one-time $100 million payment from BPA to the Treasury.

Bush's FY04 budget did not propose legislation to change Bonneville's governing statutes. But in previous years, members of Congress from the Northeast and Midwest have introduced bills to privatize the agency, require it to charge market rates and give customers outside the Northwest equal access to the region's federal power.

The 2000-01 Western energy crisis, drought and economic recession have forced BPA to dramatically increase rates to offset high-cost, long-term contract power, reduced surplus power sale revenue and reduced power generation. BPA officials say its rates now equal or exceed those of private utilities.