The Bonneville Power Administration is proposing interim payments totaling $322 million to Northwest public and investor-owned utilities while the agency continues to work with the region to establish a long-term Residential Exchange Program.
“Providing interim payments is the right thing to do for the region,” Steve Wright, BPA administrator said.
“It's better to get some cash flowing into the hands of BPA customers immediately on an interim basis rather than withholding the money until next fall.”
The REP is used to distribute financial benefits of the Federal Columbia River Power System to the region's investor-owned utilities.
On May 3, 2007, the U.S. Ninth Circuit Court of Appeals ruled that BPA exceeded its settlement authority in 2000 when it executed the REP settlements with six IOUs, holding that BPA's decision to allocate the costs of the settlements to publicly owned utilities was not in accordance with the law.
The court remanded the issue back to BPA.
As a result of the court's decisions, BPA suspended approximately $28 million a month in program benefits to the IOUs.
Because BPA cannot change rates outside a formal rate process, BPA is continuing to collect that $28 million a month from its publicly owned utility customers.
This has left BPA with larger financial reserves than it needs to manage its business.
BPA has begun to address the court rulings, but the formal processes will not conclude until early fall 2008. Because BPA's formal processes will not allow determination of final REP benefits or other adjustments until Oct. 1, 2008, BPA believes the region should consider interim payments to both sets of parties.
The $322 million is based on the funds BPA has collected and will continue to collect in power rates during FY 2008 for the purpose of paying REP benefits.
The IOU interim payment reflects an amount of benefits based on a non-prejudicial, 50/50 weighting of a critical rate issue that will be resolved in the coming formal rate process and limited to not more than what the utilities would have received under the REP settlement.
This amount totals approximately $131 million for the IOUs. The remainder, or approximately $191 million, will be allocated to publicly owned utilities based on each utility's contribution toward REP costs in BPA's power rates.
Interim payments to participating utilities would be subject to true-up once the formal processes are concluded. The allocation approach is only an interim measure and does not establish a precedent for what will be concluded in the formal process.
BPA is taking public comments on the proposed interim agreements through Jan. 7. If finalized, the agreements could be sent to the utilities for signature in January.
Utilities could receive their interim payments as soon as five to 10 working days after signing agreements. The proposed interim agreements for the utilities are posted at
HYPERLINK: “http://www.bpa.gov/power/pl/regionaldialogue/implementation/Correspondence/”
BPA also has a variety of background materials available at
HYPERLINK:
“http://www.bpa.gov/corporate/BPANews/Perspective/2007/ResExchRuling/”
While these funds will be paid to individual utilities, each utility has a different financial position and faces different financial risks, Wright explained. Those risks include the potential that a future true-up may require some of these funds to be repaid to BPA. Each utility will need to determine how to use these funds based on its individual circumstances and the terms of its respective interim agreement.
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.
Reader Comments(0)