Power administration suspends residential exchange payments

Mitch Lies
Capital Press Staff Writer

May 23, 2007

SALEM - Many Oregon farmers face another cost-of-production increase: A 13 percent jump in their electricity rates starting in June.

The Bonneville Power Administration announced May 21 that it would suspend its residential exchange payments to investor-owned utilities in reaction to a recent ruling by the 9th Circuit Court of Appeals.

The utilities, including Portland General Electric, PacificCorp and Idaho Power, use the payments to reduce rates for residential and small farm customers.

The suspension is expected to drive up energy rates about 13 percent.

Oregon Public Utility Commission Chairman Lee Beyer immediately blasted the decision and said the commission would do everything in its power to stop the rate increase.

"This will include fighting it in the courts, seeking congressional intervention and working with BPA, utilities and customer groups to craft a solution," he said in a press release.

The 9th Circuit Court of Appeals earlier this month ruled BPA violated the 1980 Northwest Power Act in 2000 when it reached a settlement with investor-owned utilities to provide them more than $1.5 billion in benefits between 2002 and 2006.

Customer-owned utilities, also known as public utilities, challenged the amount of the settlement and the agreement on the grounds they weren't consulted in the negotiation process.

"(BPA) ended up making the decision in a way that we thought was too generous for the investor-owned utilities, and we suspected that it was in violation of the law," said Scott Corwin, executive director of the Public Power Council, one of the groups that challenged the settlement.

Because the settlement affected their rates, Corwin said the public utilities should have been part of the settlement negotiations.

Investor-owned utilities serve about 75 percent of Oregonians, including many small farms. Idaho also is served primarily by investor-owned utilities, while Washington has mostly public power.

Corwin said May 22 that he hoped the suspension of the residential exchange payments would prompt BPA to lower rates for customers of publicly owned utilities, including many Oregon farmers served by electrical cooperatives in Eastern Oregon .

"What we are looking for is a redo of the residential exchange amounts in accordance with the law and a correction to the overpayments to the investor-owned utilities that caused our rates to go up," Corwin said.

Rates for public utilities went up 46 percent at the wholesale level in 2002 after the settlement took effect, he said - a direct consequence of the settlement.

The debate over how to distribute BPA's benefits equitably has waged since the late 1930s when a federal program gave publicly owned utilities preferential access to BPA's hydropower. The program was designed to help get power to rural areas.

The residential exchange payments originated in the 1980 Northwest Power Act.

The Public Power Council never advocated that BPA completely suspend the payments, Corwin said. But BPA officials said it was necessary, in part because they are personally liable if payments are inconsistent with the law. The payments average about $28 million a month.

"We very much regret that it is necessary for us to suspend payments at this time since we understand this may rapidly result in large and, for some, severe rate consequences," Steve Wright, BPA administrator and CEO, said in a press release.

Wright said BPA was planning to initiate discussions immediately with key stakeholders.

"Working together, I believe we can ensure a fair distribution of the value of federal power throughout the Northwest," he said.

Corwin also said he wanted to work with stakeholders.

"We're ready to figure out what makes sense, but it's got to be something that all parties can agree to," Corwin said.

"All we're looking for is fair treatment for all entities," said John Prescott, CEO of Pacific Northwest Generating Co-op in Portland .

BPA is a not-for-profit federal agency that markets power from 31 federal hydroelectric dams and a nuclear plant.

In addition to PGE, PacificCorp and Idaho Power, utilities affected by the payment suspensions include Avista, Puget Sound Energy and NorthWestern Energy.

For farmers served by the utilities, the electricity rate increase comes on top of increases in the cost of diesel, fertilizer and other crop inputs.

Mitch Lies is based in Salem . His e-mail address is mlies@capitalpress.com

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