02.09.05

Cantwell: Bush Plan to Hike Northwest Power Rates is Illegal

New OMB documents show plans to hike rates by $100 a year for Northwest consumers

WASHINGTON, D.C. – U.S. Senator Maria Cantwell (D-WA) today said the Bush Administration's proposal to develop legislation increasing the rates of the Bonneville Power Administration (BPA) "directly violates existing law." Cantwell, along with Senators Ron Wyden (D-OR) and Patty Murray (D-WA) called on new Secretary of Energy Samuel Bodman to affirm in writing that the Department of Energy will abandon the plan.

In a letter to Secretary Bodman, Cantwell and the other Northwest Senators cited a provision contained in the Fiscal Year 1993 Energy and Water Development Appropriations Act (PL 102-377) that explicitly prohibits DOE and other federal agencies from "conducting any studies relating or leading to the possibility of changing from the currently required ‘at cost' to a ‘market rate'" for BPA power. The Fiscal Year 2006 budget released yesterday said the Administration is drafting legislation to do precisely that. As such, the Senators called on DOE to cease development of this legislation and any sort of analysis that would support it.

"The Bush plan to hike our energy prices is not only unfair, it's illegal," said Cantwell, a member of the Senate's Energy and Natural Resources Committee. "Even the Administration's most conservative estimates suggest this would raise energy rates by $100 a year for Northwest consumers. The fact is, it's illegal for the Administration to spend Northwest taxpayers' money to develop this proposal, so it can turn around and raise their energy rates."

The Administration's Fiscal Year 2006 budget proposal itself is sparse on details, suggesting the Administration will "propose legislation to very gradually bring [power marketing administration] electricity rates closer to average market rates throughout the country." Meanwhile, internal talking points from the Office of Management and Budget (OMB), designed to promote the plan, concede that wholesale electricity rates could double over the next four years. The documents also conservatively estimate that the average impact on Northwest consumers would reach almost $100 per year by 2011. That projection, however, appears to be based on a series of flawed assumptions.

About 70 percent of the electricity consumed in the state of Washington is BPA power, which today is sold at cost—rather than market-based--rates.

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February 9, 2005

The Honorable Samuel Bodman Secretary U.S. Department of Energy 1000 Independence Avenue, S.W. Washington, D.C. 20585

Dear Mr. Secretary:

We write in strenuous opposition to legislation contemplated in the Fiscal Year 2006 budget that could nearly double electric power rates charged by the Bonneville Power Administration (BPA). In our view, this proposal is dead on arrival. In addition, we believe further development of this proposal by the Department of Energy directly violates existing law, and ask that you immediately make known your intention to abandon this effort.

As you know, the budget proposes to fundamentally alter BPA's traditional cost-based rate structure—and increase the Northwest's power rates until they are equivalent with market rates throughout the country. We caution you that attempts to further develop the Administration's legislative proposal appear to directly violate Section 505 of the Fiscal Year 1993 Energy and Water Development Appropriations Act (PL 102-377). This law states:

"Notwithstanding any other provision of this Act, subsequent Energy and Water Development Appropriations Acts or any other provision of law hereafter, none of the funds made available under this Act, subsequent Energy and Water Development Appropriations Acts or any other law hereafter shall be used for the purposes of conducting any studies relating or leading to the possibility of changing from the currently required ‘at cost' to a ‘market rate' or any other noncost-based method for the pricing of hydroelectric power by the six Federal public power authorities, or other agencies or authorities of the Federal Government, except as may be specifically authorized by Act of Congress hereafter enacted."

Given this provision of existing law, we are asking for your written assurance that the Department of Energy will cease development of this legislation and any sort of analysis that would support it.

It has also come to our attention that you have previously suggested that this proposal would result in only a "dollar or two" increase in the rates of Northwest power consumers. First, given the already staggering rate hikes our region has suffered in the past few years, any further rate increases cannot be tolerated. Second, we are aware of internal documents from the Office of Management and Budget (OMB), which concede the point that wholesale electricity rates may very well double over the next four years. While OMB's analysis goes on to state that the impact of a transition to market based rates on "average" Northwest consumer would be approximately $100 per year by 2011, it is also clear that this conservative estimate is based on a series of flawed assumptions.

In any case, we ask you not to minimize this impact, given that, already, more than 77 percent of the families in Washington and Oregon that are eligible for assistance in paying their energy bills through the federal Low Income Home Energy Assistance Program (LIHEAP) program cannot get help due to a lack of funds. There is no telling at this point how much additional pressure a rate increase of this magnitude would place on already over-burdened energy assistance programs in the Northwest. Of those who do receive assistance in Washington state today, 71 percent make less that $12,000 per year, and nearly 20 percent make less than $6,000 per year. In Oregon , more than 63 percent have incomes less than $12,000, and more than 15 percent have income less than $6,000 per year. For these individuals, the rate increase included in the President's budget represents the difference between having heat during the winter, and choosing to purchase other necessities such as food or prescription drugs.

Lastly, it is imperative that in your new role as the Secretary of Energy you understand that Bonneville power is not subsidized. As we have previously discussed, it is Northwest ratepayers—rather than taxpayers—who continue to repay the U.S. Treasury for the federal government's investment in the Federal Columbia River Power System. The principal on all BPA capital-borrowing costs is fully repaid to the U.S. Treasury, with legally-required, market-based interest. In fact, when BPA's debt was last refinanced—as part of the Omnibus Consolidated Recissions and Appropriations Act of 1996—it resulted in a $100 million benefit to Treasury and U.S. taxpayers in general, a fact confirmed by the Congressional Budget Office and scorekeepers at the Office of Management and Budget.

Thank you for your attention to this matter, which is of such extreme importance to our constituents. We look forward to your timely reply.

Sincerely,

Senator Maria Cantwell Senator Ron Wyden Senator Patty Murray