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Bush Wants Electricity Set at Market Rates

by Matthew Daly
Los Angeles Times, February 7, 2005

WASHINGTON -- The Bush administration called Monday for a major change in the way federal power suppliers charge their customers -- basing rates on market prices at the time rather than the cost of producing the electricity.

Western lawmakers from both parties vowed to block the proposal, which they said could raise electric power rates in the Pacific Northwest by as much as 20 percent.

Besides the Portland, Ore.-based Bonneville Power Administration, which supplies power to four states in the Pacific Northwest, the plan also would affect three other regional agencies that supply power to dozens of states: the Colorado-based Western Area Power Administration; Georgia-based Southeastern Power Administration; and Oklahoma-based Southwestern Power Administration.

Overall, the plan could save up to $12 billion over 10 years by removing subsidies and other federal assistance, officials said.

The proposal immediately faced trouble in Congress. Sen. Pete Domenici, R-N.M., chairman of the Senate Energy and Natural Resources Committee, called it "politically untenable," adding: "Every once in a while, administrations of either party come up with this idea, and I won't support it."

Sen. Gordon Smith, R-Ore., also opposed the plan, which he said could cost Northwest rate payers as much as $2 billion over three years.

"BPA's customers are still recovering from the West Coast energy crisis and a sluggish economy. They've already been hit with rate hikes and can't afford any more. I am going to exhaust every right and privilege I have as a senator to kill this proposal," Smith said.

Bruce Carnes, a top deputy to Bodman, said the plan would merely take away unfair subsidies that have allowed BPA and other federal providers to supply cheap power at artificially low rates.

Carnes cited studies by the Government Accountability Office and the Congressional Budget Office showing that the four federal power agencies continue to be subsidized, mostly in the form of favorable interest rates unavailable to other providers, such as Indian tribes, municipalities and private companies.

"There are plenty of sources of power out there. They can't compete with the BPA because they are charging a discounted price based on cost and subsidy," Carnes said in an interview.

But Northwestern lawmakers called the plan a direct attack on the wallets of their constituents.

"This is the same as a billion-dollar tax hike on Washington state, and as far as I'm concerned, it's dead on arrival," said Sen. Maria Cantwell, D-Wash. "To think we would arbitrarily pay more for power generated right here in the Northwest is ludicrous."

A spokesman for the BPA declined to comment.

Related Sites:
Bonneville Power Administration

Matthew Daly
Bush Wants Electricity Set at Market Rates
Los Angeles Times, February 7, 2005

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