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.

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