Rates

BPA Wholesale Rate Increase

The Bonneville Power Administration (BPA) recently announced another large increase in power costs to take effect this fall. We realize it is difficult for our members and other Northwest utility customers to cover these additional costs imposed by BPA. We believe another large BPA price increase is unnecessary.
     BPA says it needs to fund a $900 million deficit between its forecasted revenues and costs by increasing wholesale power rates to Northwest utilities by as much as 25%. This rate increase is called the Safety Net Cost Recovery Adjustment Clause (SN CRAC). According to BPA, this action is necessary because it has a 50% risk of missing its payment to the U.S. Treasury.
     The SN CRAC is one of three such surcharges that are a part of most utilities’ power sales contracts with BPA. There are actually four layers in BPA power rates to utilities like ours:

1. A base price for wholesale electricity of 2.2 cents per kilowatt-hour (kWh)
   
2. The Load Based CRAC (LB CRAC) covers BPA’s market purchases for power to serve its utility customers. The LB CRAC triggered at 46% in 2001, and has been adjusted every six months since then.
   
3. The Financial Based CRAC (FB CRAC) triggers if BPA’s average accumulated net revenues fall below a certain level. The FB CRAC triggered at 11% in 2002, the maximum assessable under our contract, and is expected to run through the remaining
   rate period, which is September 30, 2006.
   
4. The issue we’re fighting now is the Safety Net CRAC, which could increase the base price for power by another 25%.

The actual amount of the increase is not known at this time.
     One thing we do know is that BPA should cut costs and change its strategies to deal with declining revenues instead of raising rates again for consumers. The answer to these high electricity costs is in BPA’s control. BPA must consider all options including the following:

• BPA needs to address financial problems on a year-by-year basis. BPA could save $400 million by not building up excessive financial reserves.
  
• BPA offered some for-profit utilities in the Northwest “goodwill” money to discourage them from pursuing a lawsuit. We urge BPA to take all actions necessary to reduce payments to third parties, including this $200 million bonus to some of the region’s for-profit utilities.
  
• BPA could cut non-purchased power costs and payments to related agencies back to 2001 levels in order to save $100 million.
  
• BPA should treat a portion of its upcoming bond refinancing as a reserve to deal with financial problems.

Electric co-ops, like Salem Electric, and other public power utilities are working hard to cut costs and reduce the burden on our members. It’s only fair that BPA do the same. We will keep you informed as these events unfold.

—Information provided by “Power of Community”

June 2003

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