Utilities Vow to Seek Restoration of Customers' Federal Power Benefits

Business Wire, May 21, 2007

Court's Rulings Cause Suspension of Bill Credits for Majority of Northwest Consumers

PORTLAND, Ore. -- The Pacific Northwest's seven shareholder-owned electric utilities, together serving 60 percent of the region's population, said they will fight to restore their customers' federal power benefits after being notified earlier today by the Bonneville Power Administration (BPA) that a recent federal court ruling is forcing suspension of those benefits.

BPA told the utilities this morning it is immediately suspending monthly payments to them of approximately $25 million, or about $300 million annually. The utilities - Portland General Electric, Pacific Power, Rocky Mountain Power, Avista, Puget Sound Energy, Idaho Power, and NorthWestern Energy - have for nearly 30 years directly passed through BPA's federal power benefits as credits on the electricity bills of their residential and small-farm customers. The payments, made under agreements between BPA and the seven utilities, represent the 3.35 million utility customers' share of power-cost benefits from the Northwest's federal hydropower system.

"We very much regret that it is necessary for us to suspend payments at this time, since we understand that this will rapidly result in large and, for some, severe rate consequences for your residential and small farm customers," said Mark O. Gendron, BPA vice president of Requirements Marketing, in a letter to the utilities.

"We believe the Court's decisions on the settlements are in error," Gendron said, "and we are exploring all potential viable avenues for rehearing, including by the full Court if possible."

A three-judge panel of the 9th U.S. Circuit Court of Appeals on May 3 ruled that certain actions BPA took in entering into settlement agreements with the affected utilities are inconsistent with the Northwest Power Act. That law requires BPA to give household and small-farm customers served by private utilities an equitable share of the Northwest's federal power benefits.

None of the BPA's credit payments goes to the utilities' shareholders; 100 percent of the benefits, under the law, are passed through to the utilities' customers.

The affected utilities today defended their agreements with BPA, saying the court's rulings are flawed. Even under the settlement agreements now in question, customers of the affected utilities, who make up 60 percent of the Northwest's population, receive less than 15 percent of the regionwide consumer savings provided by the Northwest's low-cost federal hydropower.

The 9th Circuit Court's decision and the BPA's subsequent suspension of its credit payments mean a majority of the Northwest's population, for the time being at least, will receive none of the power-cost benefits the region derives from its low-cost federal hydropower system. Those benefits currently are estimated at more than $2 billion annually.

Because the payments that fund the BPA credit are no longer being made, the seven utilities each will soon file with state utility commissions requesting that the BPA credit be suspended on their customers' bills. [The effect of the credit's suspension on each utility's customers is listed below.]

The utilities said they will pursue all available options necessary - judicial, administrative, or legislative - to restore their customers' federal power benefits. Their initial move, they said, will be to seek a 9th Circuit Court of Appeals rehearing of the May 3 decisions. Discussions also are under way with members of the Northwest's congressional delegation to inform them of the credit suspension's impacts on customers and to begin exploring potential legislative action to address the sudden change.

Effect of the credit's suspension on the typical residential customer's monthly bill (based on average residential electricity usage, in parentheses):

* Avista Utilities (Idaho) ............. 9.5 % / $6.03 (@ 1,000 kwh / mo.)

* Avista Utilities (Washington) ...... 11.3 % / $6.69 (@ 1,000 kwh / mo.)

* Idaho Power (Idaho).................. 9.3 % / $5.35 (@ 1,050 kwh / mo.)

* Idaho Power (Oregon)................ 6.2 % / $6.54 (@ 1,230 kwh / mo.)

* NorthWestern Energy ................ 1.5 % / $1.13 (@ 750 kwh / mo.)

* Pacific Power (Oregon) .............. 13.1 % / $9.62 (@ 1,000 kwh / mo.)

* Pacific Power (Washington)......... 16.8 % / $11.49 (@ 1,300 kwh / mo.)

* Portland General Electric ........... 13.9 % / $10.66 (@ 900 kwh / mo.)

* Puget Sound Energy.................. 13.2 % / $10.28 (@ 1,000 kwh / mo.)

* Rocky Mountain Power (Idaho) .... 25.3 % / $16.76 (@ 1,000 kwh / mo.)

Utility leaders' quotes on suspension of the settlement payments:

* "Our customers have a right to a fair share of the benefits of the Northwest hydro system. The court's action has taken that away. We all need to come to the table immediately to preserve the value of the system for all Northwest residents." - Peggy Fowler, CEO and president, Portland General Electric Company

* "It's a simple question of equity for all Northwest electric consumers. Until this can be resolved, we are in the obviously flawed situation in Oregon, for example, of having benefits from the federal power system flowing entirely to just the 25 percent of electric consumers who happen to be served by municipal and consumer-owned entities in the state." - Pat Reiten, president, Pacific Power