BPA says deficit might grow to $1 billion by 2006


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 Northwest.

But this year, energy prices have declined sharply, reducing Bonneville's revenue.

"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 production.

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 system."

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 rate increases.

"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.

In accordance with Title 17 U.S.C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment for non-profit research and educational purposes only. [Ref. http://www.law.cornell.edu/uscode/17/107.shtml]


Back to Current Edition Citizen Review Archive LINKS Search This Site