Senate defeats rate hike for BPA

Lukas Velush
The Herald - Everett, Wash
March 3, 2005

"Common sense is prevailing," an Idaho senator says, but a proposal is still alive in the House.

A plan by President Bush that could raise Snohomish County PUD rates by as much as 30 percent died in the U.S. Senate on Wednesday, officials said.

Bush proposed collecting billions of dollars to help pay down the national debt by requiring the Bonneville Power Administration to charge market rates for the electricity it sells to the PUD and other Northwest utilities.

Sen. Judd Gregg, R-N.H., chairman of the Senate Budget Committee, told his colleagues Wednesday that the market-rate plan would not be included in a budget resolution to be approved this year, Sens. Larry Craig and Mike Crapo, both R-Idaho, said in a statement late Wednesday.

Craig said that with Gregg's decision, "common sense is prevailing," while Crapo called the administration proposal "an ill-advised, unworkable concept based on misinformation about BPA."

"We're obviously very appreciative of the support from the senators, including our delegation from the Northwest," said Neil Neroutsos, a PUD spokesman. "They know how severe of an impact it would have on rate payers here in the Northwest."

BPA currently charges only what it costs to generate electricity at a series of dams on the Columbia River and at a nuclear power plant. Estimates are that forcing it to sell electricity at market rates would force the energy wholesaler to raise its rates by 66 percent.

That would be particularly tough on Snohomish County PUD, which buys 80 percent of its electricity from BPA and is its largest customer. Using a formula developed by the Northwest Power and Conservation Council, a 66 percent BPA rate hike would translate into a 30 percent PUD rate hike.

The PUD has had some of the state's highest power rates since 2001, when it raised rates more than 50 percent because of the 2000-01 West Coast energy crisis. The PUD has had record numbers of disconnections since the rates went up, and companies that use large amounts of electricity have struggled to keep their doors open.

Sen. Maria Cantwell, D-Wash., a member of the Senate Energy Committee, hailed Gregg's announcement, which followed weeks of intense lobbying by Western lawmakers from both parties.

"The Bush rate hike would have a devastating impact on our economy and jobs," Cantwell said. "I will not rest until the administration's plan is dead and gone."

Rep. Rick Larsen, D-Wash., said that he'd now like to kill the BPA measure in the House of Representatives.

"This fight is not over," Larsen said. "On the House side, I will join with my colleagues to fight this destructive proposal. We won't rest until this proposal is resting squarely in the graveyard of bad ideas."

A Portland-based economist estimates that bringing BPA power to market rates would cost Washington and Oregon up to 60,000 jobs.

Job losses would rival the 70,000 jobs lost in the two states during the record electricity price run-ups during the energy crisis, said Robert McCullough, managing partner of Portland-based McCullough Research.

McCullough estimates that Washington state would lose 21,000 to 32,000 jobs. It's unknown how many jobs would be lost in Snohomish County, he said. He used federal data on electricity rates, economic activity and jobs to estimate the region' s potential job losses.

The PUD and other utilities would like to keep future administrations from making runs at BPA by locking in 20- or 30-year contracts with the energy wholesaler.

"By securing long-term contracts, we have some assurances that we can do better planning in terms of our overall power supply," Neroutsos said. "Our main interest is stabilizing Bonneville and, potentially over time, lowering its rates. If that were to happen, we would hope that, over time, we would be able to find some rate relief for our customers."

In its Feb. 7 budget proposal, the Bush administration called for a major change in the way the BPA and other federal power suppliers charge their customers, to rates based on market prices at the time rather than the cost of producing the electricity.

The Bush proposal estimates that the government could collect $12 billion by forcing BPA to raise its rates. Based on today's market rates, the $2.4 billion that BPA now takes in each year could increase to nearly $5 billion in five years.

Bush's plan calls for gradually raising power prices to market rates, which now are 4 cents to 6 cents per kilowatt-hour. Currently, BPA sells its electricity for 3.1 cents per kilowatt-hour.

But Northwest lawmakers said the plan could cripple a region still recovering from the West Coast energy crisis and a sluggish economy.

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See also BPA plan called a job-killer