PORTLAND, OREGON -
8/19/02 -- The Bonneville Power
Administration says the unpredictable
Western energy market could boost the
agency's deficit to $1 billion over the
next four years.
Last year, the BPA warned it might
have to more than double its rates when
electricity prices skyrocketed across
the West, partly due to deregulation
problems in California and drought that
reduced hydroelectric capacity in the
But this year, energy prices have
declined sharply, reducing Bonneville's
"No one expected energy prices
to go through the floor like this -- I
mean, it really wasn't on anyone's
screen; it certainly wasn't on our
screen," said Kim Leathley,
Bonneville's manager of business
strategy and finance for power
Last spring, the agency projected an
$860 million deficit by 2006, she said.
But declining electricity prices have
pushed that estimate closer to $1
billion, Leathley said.
Paul Norman, a Bonneville senior vice
president, said the agency is trying to
save money by making itself more
efficient, but that won't be enough to
make up the deficit.
Norman said the agency has four main
options: "One is raise rates, two
is cut costs, three is we could borrow
and push this problem out in the future,
and four is we could take more risk in
making our payment to the U.S. Treasury
for the cost of the federal
The third option -- borrowing money
and paying it back in the future -- is
risky, especially if Bonneville is
unable to repay it, Norman said.
"That's something we don't want
to have happen," he said, because
"you have lots of people in the
rest of the nation whose attitude is,
'Well, the federal government paid for
those dams. Why doesn't the federal
government take that value back in some
way, shape, or form and spread it out to
everyone in the nation?' "
Other options, such as cutting costs,
offer less risk but pose different
problems, such as cutting back
conservation projects and fish and
wildlife restoration programs.
Norman says the BPA likely will make
up the deficit through a mix of all the
options, including rate hikes.
But some of the agency's customers
already are asking for cuts rather than
"I have a concern that they'll
do what's comfortable for the agency --
that they'll basically look at all the
stakeholders and add them up and shake
them out and decide politically what can
they sustain," said Steve Eldridge
of the Umatilla Electric Cooperative,
who recently attended a Bonneville
public hearing on the deficit.
Nicole Kordan with the Save Our Wild
Salmon Coalition said conservation
programs, including salmon restoration,
are usually the first to suffer when the
BPA runs into financial problems.
"It's hard for us, I think at
this stage in the game, to really
adequately comment to them and to give
some feedback and to sit down at a table
and try to craft a solution that makes
sense to everybody," Kordan said
Bonneville has scheduled additional
public hearings on its rates in Seattle,
Spokane and Heyburn, Idaho.