December 19, 2007

Governor Kulongoski Speaks Out Regarding BPA Residential Exchange

Oregon's Governor Ted Kulongoski spoke recently at the December 2007 meeting of the Northwest Power and Conservation Council. His comments were clear, concise, and spoke to a few issues CUB holds to be extremely important.

He reiterated a basic principle under which CUB has long operated: "Oregon agrees that conservation and renewable resources are the foundation of our energy and economic future." He spoke about the Renewable Energy Standard of 2007, which he first proposed last year, and on which CUB took a leading role, in bringing it to fruition as SB 838.

He went on to talk for several minutes about "one of my greatest frustrations: the sharing of the benefits of the Columbia hydroelectric system." He said that the issue is often discussed in terms of "public vs. private power." But as the Governor said, there is another way to look at it: "The reality is that families have little discretion in who they buy their power from. And currently some families are not getting a fair share of the Columbia hydro system benefits and as a result are paying significantly higher electric bills. As you know, I am referring to the BPA residential exchange program..."

Governor Kulongoski spoke of his letter to the Bonneville Power Administration in August and his wish to see any future exchange agreements meet the principles of meeting historical averages of value and including an inflationary adjustment. Unfortunately, he said,"The recently reported utility agreements that I've seen and heard talked about meet neither of my principles. Under the agreement the rate credits drop under the average historical levels to around 10-12% of the system value, and they are flatlined for 20 years. Based on projected future system value, by the end of the contract, these credits will only represent about 2% of BPA value. So as Oregon's governor, I am looking at a proposal where three fourths of the State's families will essentially be getting no benefits from the Columbia hydro system within 20 years. Frankly, and as I said in my letter, I think this is unacceptable, and I believe that this Council should also believe the same. I ask that you join me in calling on BPA and our regional utilities to reconsider their proposal. At a minimum, any proposal should contain a mechanism to maintain the sharing proportions as time moves forward."

CUB supports the Governor in his call to ask the BPA and the region's utilities to create a proposal that is more genuinely fair to all those involved. We appreciate his knowledge and activism on behalf of a truly fair resolution regarding the residential exchange.

Posted by Oregon CUB at 01:44 PM | Comments (0)

November 15, 2007

Proposed BPA Settlement Is Unfair to Oregon

A proposed settlement regarding the BPA Residential Exchange has recently been reported on in the Oregonian. The settlement being discussed leaves a lot to be desired, decreasing Oregon's share of the federal hydropower system significantly.

As we have talked about before, the Residential Exchange is the process by which the Bonneville Power Administration has for almost 30 years passed through some benefits of the federal hydropower system to customers of the Northwest Region's privately owned utilities. The hydro system was set up in 1937 primarily to serve underserved rural areas, many of which had publicly owned utilities. In 1980, the Northwest Power Act mandated that the benefits of the system be shared with small farm customers and customers of privately-owned utilities. The Residential Exchange, the mechanism for distributing these benefits to privately-owned utility customers, was suspended this past May following a court case brought by some of the Region's publics. With the suspension of Residential Exchange benefits, electricity rates for the majority of Oregon customers went up 14%.

The level of benefits being discussed in the current settlement is between $200 and $220 million per year. This initial figure, though low for the historical average of Residential Exchange benefits (it accounts for 8.8% of the system, down from 14.8% this time last year) is downgraded but not absolutely unacceptable. The real problem is that the 20-year agreement offers no escalation of benefits to keep up with market prices, load growth, or even simple inflation.

We know that load is increasing in Oregon, and much of that increase is to be found in the service areas of the privately-owned utilities. We know that inflation seems to be on an upswing. And we have absolutely no doubt that the cost of energy is increasing by leaps and bounds. As global warming is taken more seriously and carbon regulation is instituted, the market value of BPA's carbon-free hydropower will increase quickly. This includes power that is sold directly to the Region's public utilities and also surplus power that is sold on the market outside of the Region, the benefits of which flow back into the system.

The final year of the agreement, therefore, in 2028, would leave residential and small farm customers of privately-owned utilities, including all those served by PGE and Pacific Power, with 2.9% of the system. That's CUB's analysis, using fairly conservative numbers; an analysis by Oregon Public Utility Commission staff concludes the Residential Exchange share would be even smaller, at 1.8%. The settlement would not meet the intent of the Northwest Power Act to equalize rates amongst Northwest utilities and share the benefits of the federal hydro system.

Many people have said, "Alright, then, all we need to do is go form some more public utilities." Well, unfortunately, that option has been taken away as well. In the Record of Decision regarding BPA's plan for the next 20 years of power contracts, the BPA adopted a new long-term policy that severely limits access to BPA's cheap hydropower for newly-formed publics. As we've said before, this means you can't get in through the front door and can't get in through the side door. So far, we can't see any back door.

Approximately 75% of Oregonians are served by privately-owned electric utilities. This means that as the value of the federal hydropower system increases by leaps and bounds, those benefits will flow more to Washington customers while Oregon customers receive fewer benefits. Oregon's Governor Kulongoski wrote to BPA, saying that any agreement that did not include an escalation of Residential Exchange benefits would be unacceptable. We agree whole-heartedly.

CUB will urge the PUC to reject the deal, when Oregon's private utilities bring it to the PUC for approval. We hope that the Commissioners will find it was not a "prudent" agreement, did not meet the needs of its customers, and that therefore shareholders should be held accountable for some of the loss of benefits.

Oregon's Senators Wyden and Smith should hear from you on this issue. Call and let them know that they should tell BPA that, as the value of the federal hydro system increases, the benefit to Oregon customers should as well. Not doing so increases the disparity in rates between the average Oregon customer and the average Washington customer. We can and should do better.

Posted by Oregon CUB at 04:07 PM | Comments (0)

August 02, 2007

CUB Speaks Publicly About Sharing of Federal Hydro System

Yesterday evening, Bonneville Power Administration held its first (and hopefully not last) public meeting to discuss the Residential Exchange, since the suspension of Residential Exchange benefits to customers of privately owned utilities, such as PGE and PacifiCorp, two months ago. Those private utility customers have seen increases of 13-14%, or an average of $10 per month, as those utilities pass along the costs to customers that once were covered by BPA as those Northwest residents' share of the federal hydropower system. The meeting room was packed, with public utility representatives (who had just finished a meeting in the building) and also with low income customer advocates, privately-owned utility staff representing their customers, and, of course, CUB was there too. As one of four invited speakers, CUB Executive Director Bob Jenks laid out his understanding of the situation as it now sits and where we need to go from here.

About a week ago, BPA Administrator Steve Wright signed the Record of Decision (ROD), a document laying out the 20-year policy for division of BPA power benefits, an agreement that resulted from many months of discussion. CUB was very disappointed that the ROD was signed without a clear message that a major factor in the implementation of benefits, the Residential Exchange, must be settled before the policy can be in any way made whole. There are, in fact, millions of residential customers, 60% of Northwest residents, who have not yet been made whole in this process.

Those customers have lost their access to financial benefits from the federal hydropower system because the Residential Exchange, which delivered those benefits, has been suspended. They have lost their ability to form a new public and receive the priority benefits from BPA that would have been their right as a public entity up to this time, because new BPA policy severely limits benefits to any newly-formed, publicly-owned utilities. And they have lost their seat at the table, since customer advocates such as CUB have not been invited into the process of reworking the Exchange policy in the months since the Exchange was suspended and rates have soared. The importance of the matter has prompted statements from state and national leaders, such as the op-ed in today's Oregonian by Senator Wyden and Representative Blumenauer.

Because the issue is so complex, Bob gave attendees a broader historical context. He spoke of his grandfather, who traveled the length of the Columbia River many years ago. As a region, we have all given up the freedom of a wild river and the ability to travel it as in years past. We all, and particularly the native peoples of the Northwest, have lost the former abundance of the salmon runs. The trade-off for what we have lost as a region has been inexpensive electrical power shared amongst all residents, to a greater or lesser extent. Now the majority of Oregon utility customers are receiving no benefits to offset the losses we all share.

The increase residential customers of privately-owned utilities have seen on recent utility bills comes on top of other recent rate hikes, and low-income advocates testified to the fact that this is a heavy burden for many families to bear. One public power representative answered this issue yesterday by saying basically that this issue is not about poor people, it's about the law. CUB does not dispute that federal law gives priority rights to customers of the publicly-owned utilities of the Northwest; however, we are certain that the law can also support a robust benefit for the millions of other households who do not happen to live in public power districts. A reasonable, equitable sharing of the federal hydro benefits with all the neighbors in the Northwest is a practical way to manage the system for the good of the region. We also think it's the right way to enact the law of the land.

CUB realizes our tone may get a bit frosty at times discussing the Exchange, as when we say: "The policy embedded in this ROD simply cannot go forward without a fair resolution to the Residential Exchange, period. Our frustration level is running high and our patience is running out." You see, we've been shut out in the cold on this issue and we're not ones to sit outside waiting forever. We've been shut out of the power benefits in the form of the Exchange that should rightly belong to all Northwest residents, shut out of the possibility of becoming public power customers and accessing benefits in that way, and shut out of the process at which these weighty matters are discussed and decided. We're going to go bundle up, grab a hot drink, and continue to examine our options for moving forward.

Posted by Oregon CUB at 03:14 PM | Comments (4)

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)

September 12, 2006

BPA Proposal Would Raise Rates for Most Oregon Electricity Customers

In 1980, smallpox was pronounced eradicated, Reaganomics was born, Caddyshack and The Shining were in theaters, and the Northwest Power Act was passed by Congress. This Act provided some important, and indeed, historic, decisions about power in our Northwest Region, aiming "to assist the electrical consumers of the Pacific Northwest [Idaho, Montana, Oregon and Washington] through use of the Federal Columbia River Power System to achieve cost-effective energy conservation, to encourage the development of renewable energy resources, to establish a representative regional power planning process, to assure the region of an efficient and adequate power supply, and for other purposes [such as protecting fish and wildlife affected by the Columbia and Snake River dams]." (FocusWest Price of Power Glossary.)

One of the central tenets of the Act is the assumption that the federal hydropower system (and this now includes one nuclear plant), managed by the Bonneville Power Administration (BPA), should benefit all "electrical consumers" of the Pacific Northwest. BPA recently produced a Regional Dialogue Policy Proposal addressing its resource management for 20 years beginning in 2012 (we've written about the Regional Dialogue process before), and this Proposal does not honor this supposition of equality among consumers.

CUB takes issue with several of the Proposal's terms, first and foremost being that this Proposal would penalize customers of investor-owned utilities (IOUs), giving an unfair majority of the financial benefits of the system to customers of our region's public power utilities. While 60% of the Pacific Northwest is served by an IOU, such as Pacific Power or PGE, currently only about 18% of the benefits of the federal system accrues to those citizens.

This Proposal would slash that meager level of benefits even further. This means that BPA's Proposal would raise the rates of most Oregon residential customers, and this rate hike would be used to support the reduction of the rates of other customers in the Northwest. This does not make sense and it is not fair.

We are not alone in this critique. Comments issued by the combined Public Utility Commissions of the four Northwest states affected said this: "BPA's proposed annual benefit of $250 million (2012 dollars) represents a significant, unjustified and unfair reduction in the benefits received by IOU-served residential and small-farm customers." (Comments of the Pacific Northwest State Utility Commissioners, August 25, 2006.)

Now, $250 million is a great deal of money, but everything is relative. One report calculated "that a properly determined REP [the value for the Residential Exchange, an amount which goes to the IOU residential and small farm customers to give them their share of the value of the federal system] would produce benefits of $610 million (2011 dollars) at the end of the current contract period." The historical average of the value of federal hydropower benefits has been computed to be $375 million. Depending on the parameters the BPA Administrator chooses to use in determining the value of the system for IOU customers (a process which is very flexible), the number could go as high as $778 million. Any of those numbers is well above the amount offered to residential and small farm customers, and using even the most conservative number, we figure the $250 million offer amounts to a reduction by about one third of federal system benefits for IOU customers.

Currently, electricity prices on the general market are hovering around 4.5 cents per kilowatt hour (kWh) and have gone as high in recent years as 7 cents. Electricity customers buying their power at cost from BPA are paying only about 2.7 cents per kWh. That's a great discount, almost half off what others are paying. This translates to a savings of billions of dollars for the customers of our region's 130 or so public power utilities. The amount of value these customers are receiving will only increase, as the fundamentals (gas costs, plant manufacture costs, environmental regulation costs) of the energy market rise. The amount of value of the system allotted to the Northwest Region's IOU customers, who should have a fair share in the system, are being offered instead a relatively small amount of the system value, one that will decrease as years go by and other energy expenses rise.

This is a concern for all IOU customers in the Pacific Northwest, but particularly so for Oregon residential customers, 75% of whom receive electricity from an IOU. This figure is the opposite for our neighbor, Washington State, 75% of whose citizens receive electricity from a public power utility. Benefiting public power customers at the expense of IOU customers therefore also means benefiting the majority of Washington electricity customers at the expense of the majority of Oregon customers.

We want to state clearly that we are not anti-public power here at CUB. We love public power, and have worked to expand public power in recent years. In fact, some of our best members are served by public power utilities. However, we feel it is important to defend the terms of the 1980 Power Act that seek to ensure fair access to the federal system for all residents of the Pacific Northwest. This Proposal falls woefully short of that primary goal.

CUB finds BPA's Proposal wanting on other fronts as well. Regional planning is endangered, due to a big shift that would freeze BPA resource acquisition and instead substitute the expectation that individual public power utilities will now manage their own resource acquisition. For the same reason, resource adequacy, or maintaining enough power generation to serve everyone's needs, may well suffer, if no one is planning for the system overall. Also, according to CUB's Regional Dialogue Comments on August 9, 2006, "Conservation and renewables, the priority resources in the 1980 Power Act, get platitudes and promises in this proposal." A more detailed plan for implementing these important tools, including energy efficiency, is in order. And finally, "fish and wildlife cannot do worse," CUB believes, "than they are faring now ... We can view the Columbia River system as providing benefits in the form of low rates, flood control, navigation, irrigation, and recreation, but we must remember that the Columbia River also happens to be home for an abundance of fish and wildlife." Regional planning, system stability, conservation, renewables, fish, and most Oregon customers all suffer under this plan; we can do better.

To our knowledge, none of the Oregon Congressional Delegation has yet submitted Comments to BPA regarding this flawed Proposal. Time is running out; the Comments period closes Sept. 29th. We urge CUB members and anyone reading this article to contact your Senators and Representative today and tell them that BPA's current Proposal falls short because: 1) it will raise the rates of most Oregon customers; and 2) it should devote more resources to implementing energy efficiency and renewables.

This is our opportunity to plan for a stable, fair and clean energy future in the Pacific Northwest. The current Proposal does not achieve that. Let's make some noise, and get BPA to take our concerns seriously. We want to see a BPA proposal that is fair to all Northwest electricity consumers, and offers a better plan for clean and stable energy.

Posted by Oregon CUB at 11:33 AM | Comments (0)