Friday, March 3, 2006
By RAELYNN RICARTE
News staff writer
February 15, 2006
Three Northwest Congressmen are calling for withdrawal of a provision in President George W. Bush’s 2007 budget that could bring double digit power rate increases.
U.S. Reps. Greg Walden, R-Ore., Peter DeFazio, D-Ore., and Doc Hastings, R-Wash., co-chairs of the Northwest Energy Caucus, are “disappointed” not to have been consulted about the issue. They believe that Bush’s move to accelerate Bonneville Power Administration’s debt repayment is untimely.
The elected officials contend that Bush’s intent to reduce the federal deficit and provide BPA with more financial flexibility could result in rate hikes of 10 percent or more.
“Our region’s ratepayers are still recovering from the dramatic electric rate increases that followed in the wake of the 2001 California electricity crisis and associated market manipulation,” wrote the legislators in a Feb. 6 letter to the Office of Management and Budget (OMB).
“Successive years of drought and increasing fish costs have also reduced hydro generation and increased power rates. The families, farms and job-creating businesses of the Pacific Northwest can ill-afford another rate increase at this time,” they continued.
Bush wants BPA to use all secondary market revenue above its highest earnings of $500 million to make early payments on its federal debt. At the end of fiscal year 2005, BPA had $2.8 billion in U.S. Treasury bonded debt out of $4.45 billion available from its “line of credit.”
BPA, a self-funded agency, has borrowed federal funds for the construction of major hydroelectric dams, energy conservation projects, and wildlife habitat enhancements. In addition, BPA has installed 15,000 circuit miles of high-voltage lines and maintained 284 substations to provide 40 percent of the region’s electrical energy.
“It is the Administration’s position that it is sound business practice to use these higher-than-historical revenues to invest back into energy infrastructure and pay down debt. Infrastructure investments are needed now and will continue to be needed in the future,” stated a BPA press release after Bush’s budget plan was unveiled.
Traditionally, BPA has sold extra energy on the open market at much higher prices. That money was then used to keep operational costs down so that Northwest rates stayed among the lowest in the nation.
Ed Mosey, BPA spokesperson, said, because of the high profit margin, electricity rates actually decreased by 1.5 percent in 2005 and 7.5 percent in 2004.
Since BPA has made routine payments to the U.S. Treasury for more than 20 years — including $1.46 billion of early payments — Walden, DeFazio and Hastings argue that the repayment schedule should be left alone.
“We ask that you suspend the pursuit of this ill-conceived plan, which will negatively impact the Northwest economy,” stated their letter to Joshua Bolten, OMB director.
“We believe this proposal to use a portion of BPA’s secondary sales revenue for accelerated debt repayment is a disguised rate increase. By capturing secondary revenues in this manner, electric rates throughout the Northwest will increase,” they wrote.
“This runs counter to the President’s interest in reducing energy costs for Americans and will negatively impact electricity-intensive industries. Under this direction, millions of dollars will be pulled out of our region’s economy today to pay a federal debt obligation that is already ahead of schedule for repayment.”
Both the Hood River Electric Cooperative, which serves 3,500 accounts, and the City of Cascade Locks, which provides power to 750 meters, purchase power at cost from BPA.
The rural utility companies have planned small rate hikes for later this year — regardless of whether the president prevails with his new budget plan. The provision regarding BPA is not subject to the approval of Congress since the agency’s budget is not reliant upon tax funding streams.
Therefore, many Gorge customers could be hit with a local increase, and, in the near future, even more money to cover BPA’s operating costs.
“This is not a good thing when we’re already looking at our first increase in five years,” said Tracy Hupp, Cascade Locks operations superintendent.
“We’ll be working very closely with our Northwest Congressional delegation to see what can be done,” said John Gerstenberger, general manager of the Hood River co-op.
Mosey said the Administration factored a “red hot” electricity market into the budget plan. Absent the deficit-reducing proposal, he said BPA could have run out of borrowing authority from the Treasury as early as 2011.
He said this year BPA expects to exceed the $500 million that has been earned only three times before. Mosey said the high cost of natural gas is driving the market so the profit margin this year could be “sky high.”
If BPA’s actual surplus sales meet projections, the agency figures the new repayment plan could prevent rates from being about five percent lower for retail customers than they otherwise might have been in 2008 and 2009. However, BPA believes that ratepayers could reap benefits in future years by having the debt service reduced.
“This initiative takes advantage of a potential unique opportunity to make a long-term investment in the Northwest’s electricity future,” said BPA Administrator Steve Wright.