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Utilities Group Sues BPA by Pat McCoy Capital Press, October 2, 2008

The Idaho Public Utilities Commission will take legal action to halt a Bonneville Power Administration decision to eliminate or radically reduce electric rate credits to 85 percent of residential and small-farm customers in the state.

The action is unacceptable, state regulators say.

The Northwest Power Act of 1980 allows Northwest residential and small-farm electric customers to share in the benefits of the region's federal hydroelectric projects in one of two ways, PUC spokesmen said.

Customers of publicly owned utilities, such as rural electric co-ops and municipalities, receive preferential access to low-cost BPA power, the spokesmen said. Customers of the region's investor-owned utilities, about 85 percent of all Idaho customers, receive a financial credit on the bills of residential and small-farm customers through the Residential Exchange Program.

A 9th Circuit Court of Appeals ruling issued in May 2007 said BPA did not act in accordance with the Northwest Power Act when it approved a settlement in 2000 regarding wholesale power rates and Residential Exchange Program credits. The court ruling said customers of the region's investor-owned utilities received too much in credits, while customers of public co-ops and municipalities were overcharged.

Shortly after that decision, BPA suspended the credit for all of Idaho's three major investor-owned utilities until rates and credits could be recalculated to comply with the court's directive.

The temporary suspension of the credit caused an almost immediate 9.5 percent increase in rates for Idaho Power Co. and Avista residential and small-farm customers. The impact was even more severe for Rocky Mountain Power customers in Eastern Idaho, who saw a 28 percent increase for residential customers and a 51 percent increase for irrigation customers.

BPA established new power rates and credits during the week of Sept. 25, which essentially eliminate the credit for Idaho Power and Rocky Mountain customers and greatly reduce it for Idaho customers of Avista Utilities, predominantly in northern Idaho.

In addition, BPA will require future customers in the region to repay $767 million in benefits already credited to customers in the past and set the pay-back period at seven years, rather than a previously stated 20-year time frame.

"The Northwest Power Act envisioned Residential Exchange Program benefits for Idaho, Montana, Washington and Oregon," an Idaho PUC statement said. "For the BPA administrator to issue a decision that all but eliminates these benefits for Idaho customers is inconsistent with the act. The act does not say that benefits are available in the other three states, but not in Idaho.

"Based on the BPA administrator's Record of Decision, the Idaho PUC will pursue all available legal remedies to address this punitive and egregious error," the commission said. "We are extremely disappointed the administrator did not use his discretion to address this imbalance of benefits in the four-state region."

The amount of the credit is determined by formulas using various factors such as a utility's average system cost for producing power.

BPA claims Idaho Power and Avista owe it money because their average system costs for many years allowed lower rates for their customers than BPA's rate to customers of publicly owned utilities. BPA calculated that Idaho Power owes over $250 million, and Avista over $100 million, amounts it says must be repaid before either company receives any more Residential Exchange Program credits.