Treasury Payment Reflects Stability
BPA Journal, November 2008
BPA made its annual payment to the U.S. Treasury - a total of %963 million for fiscl year 2008, which ended Sept. 30. The payment underscores BPA's financial stability and its return in value to U.S. taxpayers, who originally invested in the region's federal dams and transmission infrastructure.
BPA is a self-financed agency that covers its costs with revenues from Northwest ratepayers and others who purchase its wholesale power and transmission products and services. BPA receives no annual appropriations from the U.S. Congress and repays borrowing from taxpayers with interest.
"BPA's record of on-time and in-full payments reflects our conservative approach to fiscal management," said Steve Wright, BPA administrator. "This is a clear indicator that taxpayers are getting a solid return on their investment and that BPA has proven to be financially stable in the long term despite turbulence over the years in economic and power markets, including the West Coast energy crisis of 2000-2001."
BPA has focused on maintaining appropriate reserves to ensure its ability to make its Treasury payments even during economic downturns and low water conditions. Wright explained that BPA's financial stability, including healthy reserves, is particularly important now. "During this period of global financial stress, BPA's financial reserves provide a cushion against unexpected events, which will benefit both ratepayers and taxpayers."
A Look Back: Why the 2008 Treasury payment marks a milestone
This year's Treasury payment marked a milestone. BPA has paid its bill withoug fail for a quarter of a century. But what happened just over 25 years ago that led BPA to miss payments?
The region had seen decades of burgeoning growth, and energy demand forecasts all pointed up. Utilities unveiled resource projects, the largest of which was construction of five nuclear plants by the Washington Public Power Supply System - now known as energy Northwest. The plan called for BPA to market power from three of the plants.
But plant construction costs soared due to cost overruns and double digit interest rates on construction bond. Then a deep recession hit in the early 1980s, curtailing demand for power.
To help recove costs, BPA doubled its power rate in 1979 but couldn't increase rates in 1980 as costs continued to rise because, prior to the Northwest Power Act, BPA could adjust rates only once every five years.
Only plant 2, now called the Columbia Generating Station, was completed. BPA was not associated with plants 4 and 5, which led to the largest default in U.S. history at the time. Halting constructin of plants 1 and 3 and a series of rate increases allowed BPA to catch up on its Treasury payments and pay off deferred interest.
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