A recent proposal for Northwesterners to share among themselves the benefits of the region’s relatively cheap hydropower passes the test of a good compromise: no one loves it, most can live with it, and all will benefit from it.
Two weeks ago, cool-headed negotiators from several private and public utilities — including Snohomish County PUD General Manager Steve Klein — agreed on a way to move gracefully toward a future of relative predictability and stability for their ratepayers. The deal comes just as new 20-year electricity contracts between utilities and the federal Bonneville Power Administration are to be negotiated, setting the stage for long-term cooperation that could keep Congress from getting involved.
It follows a rare legal victory for the public utilities against BPA earlier this year — a case that was pushed doggedly by our own PUD under former General Manager Ed Hansen. At issue was how much private utilities, such as Bellevue-based Puget Sound Energy, should get to share in the benefit of power produced at federal dams, for which the public utilities have been first in line since BPA was established in 1937.
The Northwest Power Act of 1980 created a formula for equitably sharing the benefit, which took the form of cash payments from BPA to the private utilities. But the publics claimed that starting in 2002 BPA had illegally decided the amount of those payments, and that at $330 million a year, they were far too large. (The more BPA pays the private utilities, the more public utilities pay to make up the difference.) The court agreed, and when BPA subsequently suspended the payments altogether, private-utility customers immediately saw their rates rise 13 percent.
The new deal calls for capping BPA’s annual payments to the private utilities somewhere between $200 million and $220 million for 20 years. The private utilities will get a third less, but their benefit will remain significant. Capping the payments for two decades has the effect of paying back the public utilities, over time, for some of the overpayments they made for five years.
All utilities should realize some wholesale rate relief. Whether that results in lower residential bills depends on a host of other factors, including the need for new and upgraded infrastructure. At minimum, it should help keep rates stable.
Reaching a compromise within the region is important. Having Congress step in risks losing our rate advantage to other regions that look enviously upon our hydro system. We don’t want to go there.
All utilities, public and private, as well as the BPA should embrace this welcome example of regional cooperation.
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