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.

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