Proposed BPA Settlement Is Unfair to Oregon
Posted on November 15, 2007 by oregoncub
Tags, Consumers and Utility Customers
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.
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03/10/17 | 0 Comments | Proposed BPA Settlement Is Unfair to Oregon