BPA Should Maximize Relief for Ratepayersby Steve Johnson
Guest Opinion, Seattle Times, September 6, 2004
The day each September when the Bonneville Power Administration (BPA) sets its wholesale electricity rates probably isn't circled in red ink on everyone's calendar — but this year it should be.
The federal power marketer has announced it will reduce its fiscal year 2005 rates by between 5 and 7.5 percent. Even a 5-percent decrease would be good news for Washington families and businesses, but we believe BPA should pursue the maximum 7.5-percent decrease. Its customers have waited too long for rate relief.
High electricity rates are helping to stifle our state's still-fragile economic recovery. Washington's 6.1-percent unemployment rate remains higher than the national average of 5.6 percent, and job growth is flat. Our technology sector needs reasonably priced power — and lots of it — to survive and thrive.
BPA is in a position to help. About 45 percent of the Northwest's electricity comes from Bonneville, which has sold wholesale power to Northwest utilities since 1937. The electricity comes from the Columbia River's 31 federally owned dams, one nonfederal nuclear plant and several other small nonfederal power plants.
Washington's public utility districts purchase wholesale power from BPA and collectively are Bonneville's largest electricity customer. In turn, the nonprofit PUDs provide that power to 30 percent of our state's residents at cost. Bonneville and the PUDs depend on each other, so when prices go up at the BPA end, PUD customers feel the pinch.
For decades, our region has been blessed with affordable, available hydropower from BPA — but the Western energy crisis of 2000-01 called that notion into question.
A dry fall and winter meant little rain in the reservoirs and snowpack in the mountains. Demand for electricity outstripped supply, spurred by the rise of electricity-hungry computer "server farms" and general growth of the technology sector. The term has become a cliché, but it was the "perfect storm."
With too many customers and not enough power, Bonneville resorted to purchasing electricity from the volatile open market, where prices are severely inflated. We now know, thanks to evidence uncovered by the Snohomish County PUD, that energy trader Enron worked to inflate those prices even more by manipulating the market to make money.
Faced with a financial emergency, BPA raised its wholesale rates 46 percent. Most PUDs had to pass these increases on to their customers, boosting retail rates to their highest levels. Around this time, the region's red-hot economy of the late 1990s began to cool off.
In 2003, Bonneville activated an emergency clause in its contracts that would trigger a rate increase every time its reserves dipped below a certain level. Even though the crisis of 2001 is over, this temporary "safety net" clause remains in place — and will cost Northwest ratepayers $94 million extra on their energy bills this year alone. BPA should eliminate the safety-net surcharge. Only BPA Administrator Steve Wright has the authority to do this. If he does, it would help achieve the maximum 7.5-percent rate reduction.
Bonneville is in much better financial shape than in 2001. It has stated it has $600 million in cash reserves, and revenue forecasts are largely positive. Selling sought-after Northwest hydropower to California and other areas outside the region will help those forecasts.
It's also saved nearly $350 million with a series of cost-cutting efforts, which we applaud.
Wright will soon have the chance to reduce wholesale power rates for the first time in years. For the sake of our state's families and our economic recovery, we hope he makes the most of the opportunity.
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