The way electricity rates have skyrocketed the past two years, you’d think any opportunity to reduce them, even by a little, would be embraced by the Snohomish County PUD.
So why is PUD General Manager Ed Hansen recommending that the utility’s commissioners reject a chance for a 10 percent cut in the rates it pays its largest power supplier? Because he correctly has his eye on the big picture — working to keep rates as low as possible for PUD customers in the years to come.
In addition to this practical goal, the PUD is at the forefront of a principled challenge to decisions by that supplier — the Bonneville Power Administration — that it believes are unwise, unethical and illegal. Indeed, actions taken by BPA over the past two years don’t inspire confidence that the federal energy wholesaler is acting in the best interest of all Northwest ratepayers.
The issue at hand is the proposed settlement of a legal challenge brought against BPA by public utilities, including the PUD, that claims BPA is giving too great a benefit to the region’s investor-owned utilities — at the expense of public utility customers like you. Residential customers of these private utilities, which include giants Puget Sound Energy and PacifiCorp, have been eligible to share in the benefits of what used to be relatively cheap regional power since Congress adopted the Northwest Power Act in 1980. That act also specifies that public utilities shouldn’t be penalized by the payment of benefits to private utilities.
That, however, appears to be what’s happening. Accepting the terms of the settlement on the table would sanctify it.
After the "perfect storm" of calamities in 2000-2001 (a drought, California’s failed experiment with deregulation and market manipulation by Enron and others) caused power prices to skyrocket, BPA found itself in a desperate situation. Having strayed from its core mission of allocating and marketing the region’s power, it found itself overcommitted — it had agreed to supply about 40 percent more power than the Northwest system could generate, forcing it to look for electricity in the ridiculously expensive open market. BPA’s best option was to get out of its commitments to private utilities, and in October 2001, BPA Administrator Steve Wright agreed to pay private utility customers to not take power BPA had agreed to sell them.
The price was high. Payments from BPA to the private utilities that had averaged $50 million a year from 1999-2001 would rise to some $380 million annually from 2002-06, with the public utilities paying the difference. The public utilities that challenged this deal didn’t argue that their private counterparts should get nothing; they object to the enormity of the reward to walk away, and believe that the deal violated the Northwest Power Act.
On top of that, BPA later had the audacity to create a "litigation contingency" of $200 million, payable to PacifiCorp and Puget Sound Energy if the public utilities didn’t drop or settle their legal claim. That money would come out of the pockets of public utility customers. It would disappear with a settlement, and is why BPA says a settlement would change a 2.2 percent hike in wholesale rates to a 7.5 percent reduction.
The PUD calls it a poison pill. Some see it as blackmail. Whatever you call it, it’s a coercive tactic to stop the public utilities from exercising their right to challenge BPA’s actions. If the public utilities agree to the current settlement, it will have worked. It’s appalling public policy that shouldn’t be allowed to succeed.
All the parties to the proposed settlement, including the private utilities and more than 70 public utilities, must sign on by late January or the deal falls through. The Snohomish County PUD, as BPA’s largest customer, should reject the current terms. Members of the Northwest congressional delegation should then use their influence to help forge a settlement that distributes the benefits of the region’s power fairly and doesn’t force public utilities to waive their legal rights.
They also work to ensure oversight that keeps BPA on a path to provide reliable power at the lowest possible rates to the customers it was created to serve.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
