02.08.06

Cantwell Leads Northwest Senators in Opposition to Backdoor Rate Hike on Families, Businesses

Bush plan would raise Northwest electricity rates by almost $1 billion

WASHINGTON, D.C. – Thursday, U.S. Senator Maria Cantwell (D-WA) led a bipartisan coalition of Pacific Northwest senators in opposition to a Bush Administration plan to increase the region’s electricity rates by as much as 10 percent. The plan would reverse a decades-old Bonneville Power Administration (BPA) policy of using revenue from surplus power sales to lower electricity rates for consumers in the Pacific Northwest. In a letter to the president’s Office of Management and Budget (OMB)—the agency in charge of the president’s budget proposal—the senators called for the immediate cessation of efforts to circumvent Congress and implement the ill-advised plan.

“This backdoor rate hike would cost jobs, weigh our economy down, and hurt working families throughout the Northwest,” said Cantwell, a member of the Senate Energy Committee. “Just a week after the president said lower energy prices are the key to moving our economy forward, he’s proposing a nearly $1 billion rate hike that our economy simply cannot afford.”

In their letter to OMB, Senators Maria Cantwell, Larry Craig (R-ID), Patty Murray (D-WA), Conrad Burns (R-MT), Ron Wyden (D-OR), and Gordon Smith (R-OR) called on the president to abandon the plan, which they said would undermine decades of regionally-based decision-making on issues critical to the Northwest economy.

“We ask that you immediately cease efforts to administratively implement this plan,” the senators wrote. “Northwest ratepayers continue to recover from high power costs resulting from the Western energy crisis, which increased regional wholesale electricity rates by 46 percent. …The latest OMB proposal [sets] a dangerous precedent of unwarranted, administrative micromanagement when it comes to decisions that must be based on Northwest consensus.”

Currently, BPA has the authority to sell surplus power to customers both inside and outside the Northwest. BPA then uses the revenue from these surplus power sales to lower electricity rates throughout the region. About 70 percent of the electricity consumed in the State of Washington is BPA power. The proposal included in the administration’s Fiscal Year 2007 budget would prevent certain surplus sale revenues from being used to lower power prices for BPA customers, and could raise Northwest power rates by an estimated $924 million over the next 10 years—depending on the amount of surplus power BPA sells and the market price of power.

Cantwell, along with other members of the Pacific Northwest delegation, successfully defeated a similar proposal in last year’s budget that would have directed BPA to abandon its historic system of cost-based rates—costing the Northwest more than 13,000 jobs. Energy Secretary Samuel Bodman later promised not to carry out similar proposals without the approval of Congress. This week’s rate-hike plan abandons that promise.

[The text of the Senators’ letter follows below]

February 8, 2006

Joshua B. Bolten
Director
Office of Management and Budget (OMB)
725 17th Street NW
Washington, DC 20503


Dear Director Bolten,

We are writing to voice our unified opposition to the proposal included in the Office of Management and Budget’s (OMB’s) Fiscal Year 2007 budget request, which would raise Bonneville Power Administration (BPA) electricity rates and undermine decades of regionally-based decision-making on issues critical to the Northwest economy. As such, we ask that you immediately cease efforts to administratively implement this plan.

The latest proposal by OMB would redirect almost a billion dollars of projected BPA revenues over the next decade to accelerate payments to the U.S. Treasury. This ill-advised plan is but the latest in a long line of proposals—offered by both Democratic and Republican Administrations—that would erode the value of the Northwest’s cost-based hydropower system. In addition to the immediate rate impacts to Northwest consumers and businesses, we are concerned that this proposal would short-circuit the regional consensus necessary to balance the complimentary goals of meeting our fiscal responsibilities, providing affordable electricity vital to the Northwest’s economic growth, and investing in our energy future.

It is disturbing that the OMB has included a proposal that would raise rates while circumventing the proper congressional process to evaluate such proposals. As in the past, Congress disapproves this plan and is disappointed that OMB did not work with Congress to find a solution. As you know, Northwest ratepayers continue to recover from high power costs resulting from the Western energy crisis, which increased regional wholesale electricity rates by 46 percent. Five years after that crisis, our region has been working to ensure that the next BPA rate period would bring a measure of relief from these high energy costs and some predictability to volatile power rates. Under the pending BPA rate case, Bonneville and its customers would share the risks and benefits of fluctuating water conditions and off-system sales. The latest OMB proposal changes this dynamic, by making the region bear the risk of sudden rate increases to address revenue shortfalls--without receiving the compensating benefit of rate reductions when revenues are better than expected. It would instead increase regional electricity rates by an estimated $924 million over the next 10 years, and set a dangerous precedent of unwarranted, administrative micromanagement when it comes to decisions that must be based on Northwest consensus.

It bears mentioning that BPA and regional stakeholders are currently in the process of making important decisions about the long-term future of the agency, and how best to maximize the value of this important asset and its limited resources. Once again, these decisions will depend on compromise forged within the Northwest, by stakeholders who grasp the importance of fiscal responsibility, powering the regional economy forward and managing the system to meet a complex array of public purposes. OMB’s continued advocacy of its rate increase plan undermines the careful process of collaboration that the Northwest has been developing.

Lastly, it is also important to note that Northwest ratepayers have long been responsible stewards of BPA. For more than two decades, Bonneville has successfully made its payments to the Treasury. In fact, absent a mandate from the federal government such as OMB’s latest proposal, Bonneville and its customers have voluntarily made more than $1.46 billion in early payments to the Treasury over the past five years—even as our region has grappled with the economic aftershocks of the Western energy crisis. Bonneville’s stakeholders place a high priority on prompt payment of financial obligations to the federal government and have worked to implement appropriate measures to ensure these obligations are met. Moreover, if the Administration is truly interested in facilitating additional infrastructure investment, it will rescind its proposed legislation to restrict the use of creative public-private partnerships to finance Northwest transmission facilities.

Thank you for your attention to this issue, which is of great concern to our constituents.

Sincerely,

Senator Maria Cantwell
Senator Larry Craig
Senator Patty Murray
Senator Conrad Burns
Senator Ron Wyden
Senator Gordon Smith

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