« April 2007 | Main | June 2007 »

May 31, 2007

We need a new system for sharing BPA benefits.

Loss of BPA Benefits Means Rate Increase

When we urge our children to share, whether toys, food, or time, we're teaching a lesson against greed, and one that hasn't been learned by some members of the Northwest power community. Not content with merely being 40% of the Pacific Northwest population receiving 85% of the low-cost hydropower benefits of the Bonneville Power Administration (in Oregon this is about 25% of customers), a very few publicly-owned utility leaders and industrial customers sued for more.

At issue was the Residential Exchange settlement, a process which has given residential and small farm customers of investor-owned utilities a share of the federal hydropower system for almost 30 years. The 9th Circuit Court of Appeals ruled on the suit a few weeks ago in such a way that the Exchange settlement was invalidated. In reaction to the ruling, BPA has suspended the Residential Exchange program and, as a result, 75% of Oregonians are no longer receiving any BPA benefits.

If you are a customer of PGE or PacifiCorp, that includes you, and it means that you can expect to see your rates go up 13-15% next month (Idaho Power customers will see an increase of 6%). According to a statement from the Public Utility Commission yesterday, the average household can expect to pay about $10 more per month (Idaho Power customers, look for an increase of about $6.50).

No Added Value
CUB often fights against rate increases (and usually succeeds in trimming them considerably), but our usual rate increases of 2% or 5% can be linked to a higher market price for fuel, or the investment in a new power generation plant, or even rising personnel costs at the utilities that provide us with electricity. The large increase we are facing as a result of BPA's reaction to the court ruling, however, gives nothing in return (no gains in infrastructure or long-term stability), and is due only to the shortsighted unwillingness of certain industrial customers and public utility leaders to share.

Minority of Publics Fighting Against Fair Allocation
Now, we realize that every group of people has its moderates and its radical extremes, and we don't want to tar everyone with the same brush. Only two publicly-owned utilities, along with industrial customers, opposed a settlement signed by more than 100 other public utilities, as well as investor-owned utilities and advocacy groups such as CUB. It is therefore a relatively small bunch of people who have shifted the economic reality for 75% of Oregonians, who will face large electricity increases of 13% (for most residential customers) to 90% (for some farmers).

Some Publics Also Oppose Sharing with New Publics
A similar group fought the Oregon Community Power bill a few years ago in the 2005 Legislature; the bill would have allowed for the purchase of a private utility by a regional public entity using state bonding authority. Nobody fought the bill harder than advocates of existing public power utilities. They did not stop the fight until the bill was amended to guarantee that the new utility could not exercise its right under federal law to access the lowest cost power from BPA. In other words, existing public power did not want any new public power if it meant sharing the finite benefits of the system.

Likewise, in negotiating a long-term policy with BPA, public power representatives have succeeded in excluding newly created publics from receiving BPA benefits when they form. They currently want new contracts from BPA that will lock out any new public power utility from federal hydropower benefits for 20 years. It is also important to note here that Oregon law prohibits new publics from condemning a utility's generation assets, and so without the access to BPA benefits, it becomes impossible to form a new public utility, effectively closing off the ability of any other Oregonians to ever benefit from the financial advantages of a publicly owned utility.

Many of CUB's members are either customers of public power utilities or strong ideological advocates for public power. CUB believes in public power, too, and has fought for it in tangible ways (for example, we helped write the Oregon Community Power bill). What we cannot support is some publics attempting to block other Oregon customers from receiving the federal hydropower benefits that should rightfully be theirs, whether those customers are public or private or residential or agricultural. And that's exactly what some public utilities have been doing for years -- trying to block others from receiving any BPA benefits. Mine, not yours, not ours -- that's the message they're sending. But this time they may have opened a can of worms they cannot control.

Economic Effects
This issue is not, unfortunately, a small economic matter. The value of BPA power, as measured against market-priced energy, is between $2 and $2.5 billion dollars every year (that figure could rise). So while residential customers of private utilities get $300 million per year in benefits, customers of public utilities are getting 6 times that amount every year. Two facts about BPA power to put the benefits into perspective: BPA's hydropower is currently selling for less than half of the market price of power, so that public power customers can pay $27 a megawatt hour for power that everyone else must pay $60 to buy. These benefits ought, under the law, to be accruing to all residents of the Pacific Northwest; publicly-owned utility customers receive their benefit in the form of cheap power and privately-owned utility customers (at least until recently) in the form of a check figured through the Residential Exchange that reduced their own utility bills.

On top of that, public power customers have had the option to leave BPA and buy power on the market, if the market should ever dip below BPA prices. This unusual situation did occur in the late 1990s, and the desire of industrial customers and some publics to leave was a problem for BPA, who tried to solve it by shifting benefits from IOU customers to industrial customers, in order to induce those businesses to stay. The option to leave your contracted power producer's system would be an expensive option on the market and only adds to the value of what public power customers are already receiving. These are tremendous benefits, and yet these publics and industrial customers are saying it isn't enough.

Oregon Hit Hard
Moreover, private utilities serve about 75% of Oregonians. The suspension of the Exchange translates into a transfer of wealth in the amount of over $100 million per year from residents of Oregon to residents, businesses and industry in Washington State.

This situation has caught the attention of six Northwest Senators, representing Oregon, Washington, and Idaho, who sent a joint letter to BPA Administrator Steve Wright. In it, the Senators said: "Everyone in the region has an interest in reaching a legally sustainable compromise that fulfills the public policy goals of the NWPA and allows BPA to enter into new power supply contracts with public agencies before the current contracts expire. This requires that all stakeholders -- public and private utilities, BPA and consumers, states and public utility commissions -- join together in good faith in an effort to negotiate a mutually agreeable and legally sustainable compromise." CUB welcomes a genuine compromise from all parties which results in a fair allocation of benefits; however, we are committed to going beyond the negotiation table, where we already have spent years, should that become necessary.

Northwest Power Act Demands Sharing
So, despite serious trepidation from politicians and utility leaders alike, it may be time to go back to the source. The source of authority for allocation of BPA Benefits is the Northwest Power Act, which requires that the cheap hydropower sold through BPA be shared with customers throughout the region, public and private. If the Residential Exchange no longer works to effect that sharing, then we may have to ask Congress to look again at the Power Act and devise a way to fairly allocate the benefits of the system. The trepidation is due to a very real risk that other regions will now fight for a piece of the pie. CUB says it may be time to take that risk. After all, the way it stands now, most Oregonians don't have any pie on the table to risk. Somebody else has it all on their plate and is refusing to share. We wouldn't allow that in our families and shouldn't accept it in the debate over the BPA system benefits.

CUB Executive Director Bob Jenks spoke at a PUC hearing and a meeting with the Governor yesterday, saying, "The Federal Power Act requires a sharing of federal hydro resources between publicly-owned utilities and investor-owned. This makes sense, since both groups of customers spent decades helping to support the hydro projects, both by buying output and by protecting this resource for the benefit of Northwestern customers. But as of today, there is no longer any sharing of the federal hydro system." Publicly-owned utilities and industrial customers have become accustomed to thinking of the federal hydropower system managed by BPA as belonging to them alone, and not to the region as a whole. CUB believes this is a flawed perspective, and will no doubt be speaking regularly about a fair allocation of BPA benefits for all Oregon customers, well into the foreseeable future.

What You Can Do
Call your members of Congress. Tell them that the implementation of the Northwest Power Act, which requires a sharing of benefits, is not working. As our federal elected representatives, they need to be working to ensure that the federal hydropower system is fairly allocated and no one left out.

Posted by Oregon CUB at 04:04 PM | Comments (6)

May 24, 2007

Clean Energy Bill Going to Become a Law!

There has been dancing in the streets, or at least around our desks, after the passage of SB 838, the Renewable Energy Standard, by the Oregon House yesterday, with a final vote of 41-18. The passage of this bill means that by 2025, 25% of Oregon's electrical power needs will be met by new renewable energy sources. This is the most significant move Oregon has yet made to reduce greenhouse gas emissions and address global warming.

CUB feels like we have a won an Academy Award and so, before the music swells, we'd like to thank Governor Ted Kulongoski for his leadership on this bill, ably assisted by Staffer Peter Cogswell, Jeremiah Baumann of OSPIRG for tenacity and temerity in the face of huge opposition, Senator Brad Avakian, without whom the bill would not have begun its journey in the Oregon Senate, Representative Jackie Dingfelder, who made a fantastic showing in the Oregon House, and Portland General Electric and PacifiCorp, who helped organize support for the RES. CUB received some criticism for working with the utilities on this bill, but we say the end result speaks for itself: together we passed a strong bill that is going to keep Oregon clean and prosperous for the long haul. A large coalition of environmental groups and other stakeholders also played a large role and those groups deserve our thanks (some standouts include OLCV, the Oregon Conservation Network, the Oregon Business Alliance, EWEB, Oregon AFL-CIO, Renewable Northwest Project, Oregon Municipal Electric Utilities, Portland Jobs with Justice, and Ecumenical Ministries of Oregon).

CUB thanks all of our members who made phone calls and emails and trips to Salem in support of SB 838. And most of all, CUB staff and board members wish to thank our own Jeff Bissonnette, CUB Organizing Director and Man In Salem, who worked strategically and unceasingly to bring about this victory. And we thank our families, especially our mothers...

We tracked down Jeff, who had this to say about the passage of the RES: "Customers can rest a little easier knowing that, not only does this bill take us a big step forward in protecting our children's future, but also protects all of us against steep carbon-related rate hikes in coming years." When asked if he could relax a little now, he raised his eyebrows (through the phone line) and responded, "We still have quite an agenda going on."

The bill goes back to the Senate for a concurrence vote and then on to the Governor's desk. Passing the RES makes Oregon one of 22 states who have passed some sort of renewable energy legislation, and Oregon being Oregon, our bill is one of the very strongest in the nation. It's a wonderful success, and it WILL make a difference.

By the way, this is our 100th blog entry. We began this series of CUB Online newsletters with the news of our victory in the PUC decision to not approve the Texas Pacific purchase of PGE. We love having good news to share with you today, 99 emails later, as well.

Posted by Oregon CUB at 02:48 PM | Comments (0)

May 16, 2007

PGE tries to neutralize tax law, CUB holds the line.

Oregon utilities were about fit to be tied when the Oregon Legislature passed SB 408 in 2005, prohibiting them from using unregulated or affiliate losses to justify retaining tax payments made by customers. The Legislature said tax payments go to the government or should be refunded to customers. There went millions of dollars of windfall shareholder profits (Enron kept close to $100 million of customer tax payments PER YEAR during its ownership of PGE).

The law is written but the fight for those dollars is far from over, though on a smaller scale. Now the fight is over single-digit millions: $4.8 million to be exact. In UM 1271, PGE has filed an application asking the Public Utility Commission for permission to open a deferred account, offsetting the amount of money they owe customers (again, $4.8 million) on an unregulated business venture gone bad. PGE purchased a gas turbine in 2001, hoping to sell the power it generated on the open market (not to its regulated utility customers), but the plan didn't work out and they sold the turbine in 2006 at a $12 million loss. Now the company wants customers to pay for some of that speculative business loss by allowing the company to retain the tax dollars paid by customers. The case itself may only be worth a few million dollars, but if PGE wins, it would overturn the core purpose of SB 408, putting many more millions of dollars of customers' money at risk.

CUB's Opening Brief in the case had this to say in response to the request: "What PGE is asking for here is extraordinary. While admitting that, under the law, customers are entitled to a refund of the amount of taxes that they overpaid, PGE argues that this refund is unfair and the Commission should violate the law and authorize the Company to establish a deferred account of $4.8 million in order to 'neutralize the tax effect of the loss associated with the sale of the turbine.'"

The Legislature clearly intended that customers no longer subsidize unregulated portions of corporate utility business. The Legislature clearly intended that the law go into effect January 1, 2006, which makes the sale of the turbine fall within the effective time frame of the new law. The Legislature spelled out that utilities could not collect more for taxes than "The utility pays to units of government and that is properly attributed to the regulated operations of the utility." We assume the Legislature would prefer the laws they pass not be "neutralized" out of existence. End of story.

Except that it's not. PGE's most recent argument is that SB 408, at its core, is unconstitutional. We don't think that argument is going to fly either. CUB will submit a Reply Brief tomorrow, responding to issues of constitutionality, etc. We don't mind defending this law -- it's a good law (if we do say so ourselves). We hope the issue will be "neutralized" by the Summer of 2007, when the Commission will decide on the case.

Posted by Oregon CUB at 03:30 PM | Comments (0)

May 10, 2007

Q: Where's the real threat of higher rates coming from? A: Not clean energy.

The Industrial Customers of Northwest Utilities, better known as ICNU, has been opposing SB 838, the Renewable Energy Standard (or RES), Oregon's chance to build an electricity system composed of 25% renewable resources by 2025, on the grounds that rates might go up. One of the leaders of its coalition in opposition has been local corporate heavy Weyerhauser. Despite the 4% cost cap IN THE BILL, they have continued to beat the drum with legislators that rates would rise if we protect the stability of our electrical supply and our environment through investments in renewables. In fact, investment in renewable energy now will prevent higher costs later by avoiding fossil fuel volatility and carbon regulation. The bill also contains other consumer protections.

The truth is that the threat of higher rates isn't from the RES. As a matter of fact, PacifiCorp, in their latest resource plan, is expanding by over 40% -- from 1400 to 2000 Mw -- their amount of cost-effective renewable resources, and plans to integrate these resources by 2014. They are finding that renewables are cost-effective even today. (It's still important to pass the RES to ensure that all utilities make these kinds of investments.) And as carbon regulation hits and gas and coal prices go up, they will be even more affordable.

The real threat of higher rates is actually from Weyerhauser and ICNU themselves.

While the industrial customers were bemoaning higher rates at the Capitol, they were also actively trying to raise most residential customers' rates, by suing Bonneville Power Administration over the Residential Exchange. Their argument was that the Exchange, a provision of federal law that allocates a share of the benefits of the federal hydropower system to residential and small farm customers of investor-owned utilities (IOUs) such as PGE and PacifiCorp, was unfairly "subsidizing" these residential customers of IOUs on the backs of public power and industrial customers. The amount of benefits under the current Exchange settlement is worth $300 million/year or about 13% of these residential customers' rates. The court decided last week that the way BPA settled the Residential Exchange in their last rate case was not consistent with federal law; the court did not decide against the Exchange itself, but the amount to be allocated now hangs in some uncertainty. "'We're pleased that the 9th Circuit recognized the BPA was overstepping its authority,' said Melinda Davison, an attorney who represents industrial customers such as Weyerhauser and Georgia Pacific. 'We don't think public power customers should be subsidizing residential ratepayers.'" ("Ruling could raise power rates," Oregonian, 05-04-07.)

Where to begin? First off, there's the matter of complaining about a potential (but unlikely) 4% rate increase while actively working to raise other customers' rates a good deal more than that. Nice one. Then there's the matter of calling the Exchange a subsidy, when it's actually a fair allocation of shared federal resources, granted to all the region's residents in the 1980 Northwest Power Act. The Exchange is no more of a subsidy than the benefits that public power and industrial customers get. We actually don't believe it would even be legal for BPA to eliminate the Exchange benefits, but that's a battle for another day. Finally, what are industrial customers thinking? They insist that investment in new resources is unnecessary, be they renewable resources, conservation and energy efficiency programs, or even traditional fossil fuel generation (the one place we tend to agree with them). What, then, do they think we're going to do for increased energy as our region absorbs the expected growth in population over coming decades? We don't follow their reasoning, but we're certainly not following their lead on a path sure to lead to higher costs and bigger problems down the road.

This obstinate refusal to acknowledge the new ecological and economic reality is not really a necessary part of corporate business practice. The Oregonian announced May 9th that REI, Yakima, and Nike are all working on achieving carbon neutrality by offsetting the greenhouse gases they emit as a part of doing business. The day before that, Environmental Defense sent out a News Release saying that 12 more multinational corporations, including General Motors and Shell, were signing on to the U.S. Climate Action Partnership (USCAP), bringing the total number to 22. "As part of this announcement, these companies pledge to support national legislation to reduce America's global warming pollution by 60-80% by 2050." These organizations, not known for their radical rabble-rousing, are simply seeing the writing on the wall. In fact, according to one local expert, quoted in the Oregonian, "'It's not entirely commercial self-promotion, and it's not entirely intrinsic corporate virtue,' said Angus Duncan, president of the nonprofit Bonneville Environmental Foundation, which promotes clean energy development. 'It's a mix of two.'" These businesses know it's in their best interests to change course. Apparently Weyerhauser, which had earnings of $755 million in the first quarter of this year, isn't seeing the pattern or what is at stake.

If we let Weyerhauser dictate energy policy for the region, the end result will be both higher rates and hotter, dirtier air. What a deal. The RES still has a chance and is the best deal for Oregon's environment, community and economy. Oregon Legislators have the opportunity to do a good thing if they will only pass a Renewable Energy Standard for Oregon. Call your House Representative now at 800-332-2313 or email through the web. Tell him/her to vote yes on SB 838 for clean energy.

Finding a way to balance affordable rates and stable energy sources that don't cause irreparable harm to our environment is not radical politics -- it's just good energy policy.

Posted by Oregon CUB at 03:22 PM | Comments (0)

May 03, 2007

Only One Hurdle Remains for Renewable Energy Standard Bill -- Let's Clear It!

The Renewable Energy Standard Bill, SB 838, has passed out of committee in the Oregon House and will be headed for the floor soon. If passed, Oregon will produce 25% of its electricity from renewable sources by the year 2025, and will benefit from a wealth of new clean energy resources and a revitalization of rural economies.

If you've been reading CUB Online for long, you may have followed the entire course of this legislation, from "pie-in-the-sky" idea back in 2006, through strategic planning and drafting, on through its trajectory in the Oregon Senate, and here we are ready to take it home. Along with everyone from the environmental community to rural county commissioners, the Governor loves this bill; we have no doubt he'll sign it if passed. This is the final hurdle, folks.

The opposition hasn't given up, but has switched tactics. Knowing that they will have a hard time convincing anyone to vote "no" outright on such a great bill with such widespread support, they've decided to try to kill it by getting members to vote to send it back to committee. Don't let them do it.

CUB is going to be phone banking next week to awaken the considerable amount of grassroots support that we know exists out there. Dozens of people on this list, perhaps hundreds, have already taken action to support SB 838. There are hundreds more we can move to action with your help.

If you haven't already contacted your own House of Representatives member, do so now. This is a crucial time and the stakes are high. We could be developing a cleaner, more prosperous Oregon to leave to our children and grandchildren, or we could lose this opportunity. Call the Oregon Capitol now at (800)332-2313 or send an email through this link. Tell your rep to vote "yes" on SB 838 and to not let anyone send this bill back to committee.

If you've already contacted your legislator in the House, and you are assured of his/her support for the RES bill, consider coming down to the CUB offices in beautiful downtown Portland one evening next week to spend a few hours calling other CUB members to urge them to call their own representative. If you can phone bank for this Renewable Energy Standard, contact CUB Organizing Director Jeff Bissonnette at 503-516-1636 or at jeff@oregoncub.org. Also, send this message on to everyone you know who cares about clean energy.

We are so very close to victory. We can do great things for Oregon by passing this bill. We'll reduce greenhouse gases, we'll build businesses and create jobs statewide in rural economies, and we'll keep our own utility costs down (since this will protect all customers from the volatility of fossil fuel markets and the future costs of carbon regulation). Let's take it on home.

Posted by Oregon CUB at 12:39 PM | Comments (0)