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BPA Should Spare Salmon, Clean Energy as Agency Searches for Budget Solutions
The Bonneville Power Administration (BPA )'s projected budget shortfall has grown to over $1 billion since the agency first announced its financial woes on July 2nd (see the July Report ). BPA Administrator Steve Wright delivered the news to regional energy stakeholders in a series of meetings last month. Wright also outlined the implications of five options for how the agency proposes to deal with its deepening financial crisis. They range from raising rates by about 7 percent for four years, to cutting costs, including the agency's vital investments in clean energy and salmon restoration, to pushing agency costs into the future.
Wright has stated strong reluctance to defer the agency's annual payments to the U.S. Treasury or otherwise shifting costs into the latter years of the current five-year rate period, which began in October 2001. But the NW Energy Coalition (NWEC ) is recommending a combination of strategies which includes having the agency essentially borrow $60 to $90 million now to help ease the agency's immediate cash crunch. NWEC is also proposing BPA go ahead with proposed administrative cost cuts and raise rates by 3 to 4 percent to avoid cuts to conservation, renewable energy and salmon restoration.
Steve Weiss , senior policy associate for NWEC, acknowledges BPA's billion dollar shortfall is daunting, but points out that it is spread over four years, and that BPA's annual budget is in the $3 billion year range. Weiss notes the Coalition's wait-and-see approach is based on two main principles:
1) BPA must avoid doing irreparable harm to region-wide investments in energy efficiency, renewables and salmon restoration Ñ they are the solution, not the problem to maintaining BPA's long-term financial health.
2) Bonneville shouldn't make long-range decisions based on what could be a short-term problem.
The Coalition argues cutting clean energy and salmon restoration in order to avoid a small, short-term rate increase would be counterproductive. The impact of a 3 to 4 percent rate increase on the monthly power bills of Northwest ratepayers would add about $1.50 for customers of utilities that get all of their power from BPA. The increase would be closer to $.50 or less for customers of utilities like Seattle City Light , Snohomish PUD , Tacoma Power and other public utilities which receive only a portion of their power from BPA. Customers of investor-owned utilities like Puget Sound Energy , Portland General Electric and Avista would see even smaller increases.
A wait-and-see strategy takes into account that BPA's deficit is a forecast and that the agency's financial fortunes could change quickly. BPA's budget from year to year depends heavily on power prices and mountain snowpack Ñ both of which are highly variable and have worked against BPA in recent years. The agency's revenues could recover dramatically in the next year due to higher electricity prices and/or a rise in energy demand tied to economic recovery.
BPA's strong credit rating should allow the agency to borrow necessary funds without incurring a heavy interest penalty. But scuttling valuable investments in energy efficiency and renewables would only perpetuate the destructive rollercoaster funding cycle BPA officials and energy planners agree must be avoided for the Northwest to reap the environmental and economic rewards of sustained, orderly development of cost-effective clean energy resources.
And BPA's proposed cuts in salmon restoration come as the agency should be stepping up recovery efforts. BPA's investments in restoring habitat and making dam operations less deadly for migrating juvenile salmon are critical elements of the federal government's promised effort to restore salmon without dam removal.
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Mark Glyde and Steven Weiss