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Northwesterners View Bush's Move on BPA
Debt Payments as a Dangerous Precedent

by Matt Cooper
The Register-Guard, February 26, 2006

Lawmakers and utility interests across the Northwest say a push by President Bush to speed up debt payment by the Bonneville Power Administration will raise electric rates and shock the regional economy, and they're fighting the White House plan.

The effect Bush's proposal might have on the region's well-being is, in fact, a point of debate. But BPA supporters fear more than a rate increase. They say Bush is trying to set a dangerous precedent that might lead to retooling this longtime regional asset to serve the federal deficit.

"Even if (the Bush administration) comes up with something that might be good, you always wonder about their motives," said Steve Weiss, of the Northwest Energy Coalition, which represents utilities and other groups. "Is this just the camel's nose under the tent? Is this just the beginning of a whole bunch of other interference?"

Using 31 federal dams and other projects, the Portland-based Bonneville Power Administration produces and sells 44 percent of the electricity used in the Northwest, including much of the power in Lane County. The BPA's low-cost electricity has long been an economic boon for the region.

Starting next fiscal year, Bush wants BPA earnings above $500 million annually sent to the federal government to repay the BPA's federal debt, rather than letting BPA use the money to subsidize electricity rates in the region. The faster BPA shrinks its $7 billion debt to the U.S. Treasury, the quicker the power agency can invest in projects to keep rates down, argues the U.S. Department of Energy.

But the bipartisan Northwest energy caucus - which includes Oregon Congressmen Peter DeFazio, D-Springfield, and Greg Walden, R-Hood River, and more than a dozen other federal legislators - has urged Bush to strike the proposal. The plan would raise rates by nearly $1 billion over the coming years and cost the region 1,120 jobs, they said in a joint letter.

The caucus isn't currently challenging the president's authority to make the change, said Penny Dodge, a spokesperson for DeFazio. Congress will decide whether to include his proposal in the budget for the fiscal year starting Oct. 1, she added.

To account for the lost revenue, BPA might be forced to raise rates by 10 percent or more, experts say. In turn, utilities that buy from BPA would raise rates to customers 3 percent to 6 percent.

That's not an extreme increase. But local utility officials say it's an unwarranted byproduct of a Bush proposal they call illogical and dangerous.

The Eugene Water & Electric Board is "adamantly opposed" to the Bush plan, said Dick Helgeson, director of power resources.

"It sets a very dangerous precedent that would allow (the Bush administration) to essentially dictate to Bonneville what its rates are going to be," he said.

Traditionally, BPA rate-setting is done through a public process guided by Northwest lawmakers, Helgeson said. For EWEB customers, if the Bush plan is approved, the electricity rate increase it might prompt for customers could cap two other recent rate increases.

In May, EWEB plans to raise electricity rates 5.8 percent to cover debt payments and other costs. The utility also plans to bump electricity rates another 5 percent to 6 percent in October due to higher BPA prices unrelated to the Bush plan, Helgeson said.

The Bush proposal could force the utility to add another increase of 3 percent to 6 percent. For that increase alone, an EWEB residential customer who uses 1,050 kilowatt-hours of electricity a month would pay $2.70 to $5.40 more a month.

Likewise, the Springfield Utility Board said electricity rates to customers could jump 5 percent if Bush is successful. The average residential monthly bill in Springfield would rise to $63.09, from $60.08.

Forest products giant Weyerhaeuser Co., EWEB's biggest customer and one of Lane County's top employers with 1,800 workers here, said it can't speculate whether jobs would be cut if rates go up.

But company spokesman Mike Moskovitz said power rates affect the company's ability to compete globally. "We are concerned about the effect this proposal will have on all manufacturing in the Northwest," he said.

How might the Bush plan affect the state economy?

It wouldn't wreck Oregon, but it wouldn't help, said Randall Pozdena, managing director of ECONorthwest, a Eugene-based consulting firm for economics and finance.

Pozdena said the Bush plan and subsequent rate increases wouldn't plunge Oregon into recession - that is, a reduction in total jobs statewide. But it would slow the economic recovery of a state that is only now returning to employment levels that were in place prior to the recession of 2001, he said.

Pozdena noted that one's opinions about the Bush plan may vary depending on one's address.

Americans paying high power rates in other regions may object to federally owned dams keeping power prices down in the Pacific Northwest. On the other hand, Northwest ratepayers have to live with the environmental effects of BPA's dams - low salmon runs, for example - and can make a case that they deserve the benefits.

"There's no right or wrong to these kinds of issues," Pozdena said.

But BPA supporters also fear Bush would set a precedent for the White House's right to set rates in the Northwest.

The Bush plan "is a fairly direct reach into the Bonneville till, as opposed to something that would be normally implemented through the rate process ... that includes congressional oversight," EWEB's Helgeson said.

Presidents have tried to change how the BPA works or siphon its revenues since Ronald Reagan, said John Harrison of the Northwest Power and Conservation Council, which resolves energy and environmental planning issues.

But Congress and its Northwest representatives have always prevailed, he added.

Bush, however, would be the first to propose a major change to Bonneville without going through Congress, Harrison said, "and that's worrisome." Why?

If Bush can change the BPA without congressional approval, nothing would guarantee that future BPA revenues would go solely to its debt and its services to ratepayers in the Northwest, said John Saven, chief executive officer of the Northwest Requirements Utilities, which represents SUB and other utilities across seven states.

"You could end up with somebody saying, 'We're not going to use this to buy down the Bonneville debt,' " Saven said. "It could go into the general coffers of the U.S. Treasury, for any purpose. ... Given all the other problems that the country may be facing with regard to deficits expanding and other things, I'm really concerned about where this could be headed."

Under this scenario, Pozdena said, Oregonians would be the losers. Oregonians account for a little more than 1 percent of the U.S. population. So, if any BPA money dedicated to Oregon to keep electric rates low is instead rerouted to shrink the federal deficit, the nation as a whole would benefit, but Oregonians would reap only a tiny portion of that overall benefit.

"You're essentially collecting the revenue from firms and households and industry in the region and ... rather than spending them again in the region, you're diverting them outside the region," Pozdena said. "There's really no way it can be a positive for our region."

Matt Cooper, Associated Press
Northwesterners View Bush's Move on BPA Debt Payments as a Dangerous Precedent
The Register-Guard, February 26, 2006

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