Finding a Regional Solution

From Kevin P. Owens, P.E.
General Manager

On the front page of the May 31st edition of the Oregonian was a story titled “Oregon electricity bills just got bigger.” This is not the case for consumer-owned utilities like Columbia River PUD.

In what is good news for PUD customers but bad news for investor-owned utility residential and small farm customers, the US Ninth Circuit Court ruled against the Bonneville Power Administration (BPA) on May 3rd in a complex case regarding calculation of BPA’s Residential Exchange payments between 2002 and 2006. The Court said the payments of $1.8 billion made by BPA to investor-owned utilities between 2002 and 2006 were too excessive, and we agree.

The intent of the Residential Exchange Program implemented by BPA twenty five years ago as part of the 1980 Northwest Power Act was to set aside some benefits of the federal Columbia River hydroelectric power system for residential customers and small farm customers served by qualifying utilities. While the Act originally anticipated the benefit would be a power exchange between BPA and qualifying utilities, it quickly turned into a direct cash payment based on an agreed to methodology. The methodology was not used in 2002.

As a result of the Court ruling, BPA suspended Residential Exchange payments to Northwest investor-owned utilities of $28 million per month on May 21st. In return, Pacific Northwest investor-owned utilities immediately passed along a rate increases of 6% to 13% to residential and small farm customers to make up for the suspended payment.

While you will not experience a rate increase as a result of this Court decision, this decision by the Court is important to you as a PUD customer. Consumer-owned utilities like the PUD have paid for these excessive payments through higher wholesale power costs. As a result, since 2002 you have paid rates that were 3.5% higher. That equates to $1 to $1.5 million a year that has been taken from our local economy.

This also has implications for the future. BPA has built these excessive payments into the 2007-2011 rates you are paying today and into the rates planned for post 2011 contracts. It is a complex issue and we will participate in the discussion to ensure that the rates you pay today and in the future are fair.

Many questions need to be answered before this issue can be resolved. How will consumer-owned customers be reimbursed for past overpayments of residential exchange benefits to investor-owned utility customers? What are fair and equitable exchange benefits in the future?

We agree that all residential customers in the region should share in the benefits of the federal Columbia River based hydro system. However, it is time to return to the intent of the 1980 Northwest Power Act and apply a methodology that is fair and sustainable. It is also imperative that consumer-owned utilities preserve their preference rights provided in the Act to the output of the hydropower system as preference customers of BPA.

Investor-owned utilities and state PUCs are putting considerable pressure on BPA and the Northwest Congressional delegation to reinstate payments at the levels set in 2002. Consumer-owned utilities agree with the court’s finding that the amount of benefits was excessive.

The battle over these payments puts all Northwest ratepayers at risk. Our region relies on the hydro power system to provide clean, reliable and affordable electricity. It is the backbone of our economy in Columbia County. If the regional stakeholders can’t resolve this issue and Congress gets involved, we may very well lose the benefits of the hydro system to outside interests beyond the Pacific Northwest or BPA may be forced to succumb to Congressional pressure to increase rates to reflect current market conditions for our cost-based hydroelectric power with the profits being used to balance the Federal Budget.

Over the coming months we will work with our Congressional delegation, state governments, BPA, regional utilities and other stakeholders to develop a solution that works for the Northwest and our customers. Rewriting the Northwest Power Act as suggested by many investor-owned utilities is irresponsible and a prescription for disaster for our customers and the economy of the Pacific Northwest.

As a region, we must find a better solution.