Council analysis suggests Bush proposal would force BPA to raise electricity rates in 2008

February 9, 2006

The Bonneville Power Administration could absorb the additional cost of diverting a portion of its annual revenue to the federal Treasury in 2007, but President Bush’s proposal would force Bonneville to raise its electricity rates about 7 percent in 2008. The increase for customers of utilities that buy electricity from Bonneville would be about half that amount, and the result would be a decrease of $109 million in personal income and 1,120 jobs in the region, according to an analysis (80k PDF) by the staff of the Northwest Power and Conservation Council.

The Council staff performed the analysis at the request of U.S. Sen. Gordon Smith, R-Oregon.

“Not only are we concerned about the potential impacts on Northwest ratepayers and the economy, but this proposal would set an alarming administrative precedent by targeting Northwest ratepayers to reduce the federal deficit without the consent of Congress,” Council Chair Tom Karier of Spokane said.

President Bush’s budget for Fiscal Year 2007, released this week, would require Bonneville to give the federal Treasury all net revenues in excess of $500 million annually from the sale of surplus electricity. The Treasury would use the cash to reduce Bonneville’s federal debt, thus increasing the amount of money Bonneville could borrow in the future for construction projects such as transmission improvements. At the same time, the cash would benefit the Treasury by being available for national deficit reduction.

“Basically, it’s a windfall for the Treasury,” Karier said. “It would reduce Bonneville’s bank account, increase Bonneville’s costs, and force a future rate increase.”

Bonneville, a division of the federal Department of Energy, sells the electrical output of 31 federal dams, one non-federal nuclear plant and several non-federal wind power plants in the Columbia River Basin to 149 customers in the Northwest. Most of the customers are publicly owned utilities. Bonneville has surplus electricity to sell during certain times of the year. Most of the surplus power is sold out of the Northwest, primarily to utilities in the Southwest.

Currently Bonneville predicts average net revenue from surplus power sales of $645 million per year in the 2007-2009 period, meaning that an average of $145 million would be paid each year to the Treasury if the President’s proposal becomes law. In essence, that would be the same as removing $145 million annually from the Northwest economy, according to the Council’s analysis.

Bonneville’s cash reserves likely would cover the payment in 2007, but not in 2008. Based on Bonneville’s estimates of its future power sales and revenues, the Council estimates that Bonneville would have to raise its retail rates about 7 percent beginning in 2008 in order to meet its obligations, such as its annual debt payment to the Treasury. Typically, Bonneville’s customer utilities pass through about half of a Bonneville rate increase to their own ratepayers. This could increase the monthly bill of public utility customers by $2.18, reduce personal income in the Northwest by $109 million and result in the loss of 1,120 jobs, according to the analysis.

See the analysis (80k PDF), which includes an appendix explaining the Council’s methodology.

Contact:  John Harrison, Information Officer, 503-222-5161,

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