PR 51 08
BONNEVILLE POWER ADMINISTRATION
FOR IMMEDIATE RELEASE
TUESDAY, SEPT. 23, 2008
CONTACT: Scott Simms, BPA (503) 230-3520
BPA restarts Residential Exchange Program
PORTLAND, Ore. - The Bonneville Power Administration this week responded to three 2007 Ninth Circuit court rulings with a decision that will lower its wholesale power rates by 1 percent for fiscal year 2009, return an additional quarter of a billion dollars in past overcharges to the region's consumer-owned utilities in 2009, return additional overpayments in future years, and re-establish Residential Exchange Program benefits to most of the region's investor-owned utilities.
BPA Administrator Steve Wright said this has been a very difficult undertaking that is fraught with complexity and has large financial stakes.
"We appreciate that many of the parties to this case worked collaboratively to reach conceptual recommendations last November. Unfortunately, the customers' recommendations could not be translated into agreement on rates in the rate case context within the short time available and that resulted in many difficult and arcane issues being fully contested," Wright said. "Under these circumstances, I believe we have done our best to find a legally sustainable and politically equitable solution - in that order - to the challenge provided by the Ninth Circuit Court."
"Despite this rate case coming to a close, there still remains considerable uncertainty for the parties as to how the Residential Exchange Program issues may evolve in the future," Wright added. "I continue to urge the parties to work toward a lawful settlement that will provide greater long-term certainty and, because it will be defined by the parties based on the law, greater political equity than that which any single administrator, acting within the confines of the law, can provide. BPA will work with any parties that want to pursue this path."
The agency's Residential Exchange Program was established by the 1980 Northwest Power Act as a mechanism to distribute financial benefits of the Federal Columbia River Power System to residential and small-farm customers of the region's investor-owned utilities. In 2000, BPA reached settlement agreements with investor-owned utilities over exchange benefits. But on May 3, 2007, the U.S. Ninth Circuit Court of Appeals ruled that BPA's settlement agreements with investor-owned utilities and its allocation of exchange settlement costs to publicly owned utilities were not in accordance with the Northwest Power Act.
In the months following the Ninth Circuit's decisions in May 2007, BPA and regional representatives participated in numerous formal and informal discussions regarding how to properly respond to those decisions.
"Throughout these discussions, I and other BPA representatives have stated that the agency's decisions must be based on law. At the same time, I have stated that whenever the law offers me choices, my choices will be strongly influenced by the will of the region because the Residential Exchange Program, at its core, is about equitably allocating the value of the Columbia River federal hydro system among regional consumers. The conceptual recommendations have helped provide a rudimentary compass to use where there were issues left to the discretion of the agency."
Wright also urged consumer owned utilities to consider that there is a substantial potential for a BPA rate increase next year as they consider how to allocate the returned funds and the modest rate decrease.
BPA's rates will be forwarded to the Federal Energy Regulatory Commission for review. The new rates are expected to go into effect Oct. 1.
Wright added his personal thanks to BPA staff for their dedicated public service during the past year.
"Many BPA staff members have put in extremely long hours to work through these complex issues, and I know that's taken a toll on peoples' personal lives," he said. "But their work has made a difference. During the process, many parties went out of their way to acknowledge the extraordinary dedication of BPA staff as displayed by their responsiveness to questions and willingness to ensure everyone had the information necessary to make well-informed decisions."
Key results of BPA's decisions
o Reduces BPA's fiscal year 2009 power rates by 1 percent and sets power rates for FY 2009 in accordance with Ninth Circuit rulings (which required BPA to run rate tests that ensure consumer-owned utilities do not have to pay more than is mandated by the Northwest Power Act).
o Resolves a number of legal issues to establish exchange benefits after 2008.
o Returns overpayments to consumer-owned utilities. BPA calculates that investor-owned utilities were overpaid $767 million dollars from the beginning of the exchange settlement agreements in October 2002 until payments were suspended in May 2007. Therefore, BPA will return $240 million to the consumer-owned utilities in FY 2009. Of that total, $154 million will be used to begin the repayment of the $767 million in past overpayments to the investor-owned utilities ─ returning these funds to the consumer-owned utilities that originally paid them. The balance of $86 million goes to the consumer-owned utilities to complete the repayment for overcharges in FY 2007-2008 that was begun earlier this year with the Interim Agreements. (For details on these interim payment agreements, please see BPA's Feb. 22, 2008, news release at the link given below).
The remainder of the $767 million ─ about $600 million ─ is to be returned to consumer-owned utilities in 2010 and beyond through reductions in future Residential Exchange Program payments to the investor-owned utilities.
o Re-establishes Residential Exchange Program. Total exchange program benefits due to investor-owned utilities in FY 2009 are about $250 million. Of this, $178 million will be provided to those utilities for their residential and small-farm consumers, with the remaining $71 million going to consumer-owned utilities as part of the $240 million payment.
o Establishes that Residential Exchange Program benefits to investor-owned utility ratepayers and returns of overcharges to consumer-owned utilities for 2010 and beyond will be determined in BPA's rate proceedings.
Background and helpful links
For a full list of Northwest utilities included in this decision, as well as details of the financial benefits resulting from BPA's decision, please visit: https://secure.bpa.gov/ratecase/openfile.aspx?fileName=WP-07-FS-BPA-08.pdf&contentType=application/pdf. Refer to table 15.4 (page 270 of the printed document) for an overview of the investor-owned utility amounts and table 15.9 (pages 282-284 of the printed document) for additional details on the investor-owned utility amounts. For consumer-owned utilities, please see table 15.10 (pages 285-288 of the printed document) for amounts during the 2002-2006 period and table 15.11 (pages 289-292 of the printed document) for 2007 and 2008 amounts.
To review BPA's record of decision on this matter, please follow this link: www.bpa.gov/corporate/ratecase/2008/2008_WP-07S/proposal.cfm
For a historical primmer on the Residential Exchange Program, please refer to this link: www.bpa.gov/corporate/pubs/fact_sheets/07fs/fs061507.pdf
To access BPA's news release about interim agreement payments that was issued Feb. 22, 2008, please see this link: www.piersystem.com/go/doc/1582/192893/
BPA is a not-for-profit federal electric utility that markets more than a third of the electricity consumed in the Pacific Northwest. The power is produced at 31 federal dams and one nuclear plant in the Northwest and is sold to more than 140 Northwest utilities. BPA operates a high-voltage transmission grid comprising more than 15,000 miles of lines and associated substations in Washington, Oregon, Idaho and Montana.
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