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Refusals to Sign BPA Agreement Halts Rate Decrease Plan by CBB Staff Columbia Basin Bulletin - January 23, 2004

Five Northwest public utility districts refused to sign a settlement agreement with other Northwest public utilities, the Bonneville Power Administration and investor owned utilities (IOU) that was strongly supported by the Northwest congressional delegation.

The settlement would immediately have lowered BPA wholesale rates by pushing off payments to IOU residential and farm customers until fiscal year 2007 and after.

The agreement would also have required public utilities to drop their challenges to contracts BPA had signed with the IOUs after the energy crisis in 2000-01. The contracts promised to deliver a portion of the benefits from the federal power system to IOU residential and farm customers in an exchange program required by the Northwest Conservation and Power Act of 1980. The agreement would have eliminated about $200 million of those payments and deferred to the 2007-11 rate period about $269 million in payments.

The settlement agreement was supported by as many as 86 public utilities, according to BPA, but it had to be signed by all 72 public utility litigants and three IOUs by Jan. 21, 2004 for the settlement to succeed. Its approval would have paved the way for BPA to lower rates for public utilities by 7.4 percent or about $190 million retroactive to Oct. 1, 2003 and through the current rate period, which ends Sept. 30, 2006. And, it would have softened the impact of the federal power marketing agency's 46 percent increase of two years ago. BPA said rates have dropped in fiscal year 2004 by about 3 percent due to rate adjustments, but it will make no more adjustments this year.

"I am disappointed that the settlement proposal was not adopted," said BPA Administrator Steve Wright. "We believe the proposal offered the best opportunity for near-term rate relief for the region's public power customers. Still, I want to thank those who took the time to negotiate the settlement and those who carefully considered it."

"It's really unfortunate that a handful of misdirected utilities in Washington state could have hurt the whole region," Rep. Peter DeFazio, D-Ore., told The Oregonian.

Leading the pack of five utilities (four Washington utilities and one Oregon public utility) that opposed the plan was Snohomish County Public Utility District, Washington's largest public utility. Snohomish called it a "one-year deal" and refused to sign the agreement because, among other reasons, BPA couldn't promise the rate decrease would stick beyond the current rate period.

"BPA promises a temporary 7.4 percent rate cut to utilities, but ignores long term rate stability. BPA needs to address the real issue - rolling back the 46 percent rate increase it imposed over the past two years," Snohomish wrote on its web site (www.snopud.com). In addition, it said that pushing off payments to IOUs is like "paying this week's groceries with a credit card you'll pay off later with interest.

"Regional utilities and BPA need to focus on solutions that preserve the value of the federal power system in the Northwest - not just next year but over the coming decades," the PUD concluded.

If new rate proposals were to arise, they would have to meet several tests, said Wright. Those include providing near-term rate relief and not relying on abrogating existing contracts, ignoring environmental commitments, jeopardizing reliability or increasing the risk of BPA failing to pay the U.S. Treasury on time and in full, BPA said.

"Our attention to the future needs to increase," Wright said. "There are major issues on the horizon, including power rates after 2006, post-2005 transmission rates, implementation of a cost-effective fish and wildlife program that meets performance objectives and assurance that cost-effective electricity infrastructure investments are implemented.

"While we will not close the door on discussion of any reasonable proposal, it will no longer be our primary focus," said Wright. "We must now increase our focus on 2006 and beyond because there are many issues that significantly affect the region.

"We made a commitment to stringently manage our costs, and that commitment does not depend on the success or failure of the proposed settlement," Wright concluded.

Related Sites:
Bonneville Power Administration: www.bpa.gov
Snohomish PUD: www.snopud.com