[BETA] Fortnightly

Bonneville Power "Subscriptions" Seen Among Sticky Issues

A panel of governors in the Pacific Northwest expects to issue a plan this month that proposes a restructured Bonneville Power Administration, primed for the regional free-market electric economy.

The panel would act on a steering committee report that resolved pressing energy matters in the Northwest. But the committee report left open other issues that some say could leave the BPA's future in doubt.

The 20-member Steering Committee of the Comprehensive Review of the Northwest Energy System issued its report December 12. Picking it up from there was the Northwest Energy Review Transition Board, which includes governors' reps from Idaho, Montana, Oregon and Washington.

The plan recommends that state regulators offer open access to electric customers no later than July 1999. It also suggests that BPA transmission facilities should be operated independently of generation plants, and that an independent grid operator should oversee Bonneville and other major transmission owners. Any changes in the agency would require federal approval.

What could prove more important, however, are three key issues the Review left unresolved.

• BPA Debt. The steering committee made clear that the BPA could provide an economic edge in attracting and keeping business. However, it left open certain points crucial to BPA's survival (em and its bottom line. The BPA, after all, remains $14 billion in debt, with about half representing construction debt from failed nuclear plants taken on via the Northwest Power Planning Act of 1980.

• Fish and Wildlife. The report also includes a single paragraph on stranded costs. If a stranded charge is needed, it should be considered later, the report says. The Review doesn't resolve fish and wildlife restoration issues, although some say that was never within its scope. Yet "fish costs" will run to more than $425 million annually until 2001.

Fish costs will be reflected in power costs and will push users into taking short-term contracts, says William Drummond, who sat on the steering

committee. And it wouldn't take even half that much to push the system to bankruptcy, adds Drummond, also manager of Western Montana Electric Generating and Transmission Co-op, Inc.

• Capacity Subscriptions. The largest gamble the report makes on BPA's future, at the expense of fiscal salvation, could be its proposed subscription process, where users buy the output of BPA's 8000-megawatt hydropower system. BPA customers include 16 direct service industries (primarily aluminum, pulp, and paper companies), 41 municipal utilities, 29 public utilities, 56 co-operatives, seven federal agencies and seven investor-owned utilities.

Subscriptions would be sold at cost-based rates in five to 20-year increments. Shorter-term contracts would include fees to make up any risk to the Treasury. The process would begin in 2001, when BPA's current contracts expire.

Essentially, the process requires subscribers to buy in at higher rates in promise of lower rates over time.

Dulcy Mahar, BPA spokeswoman, says agency figures show that cost-based rates should drop below market around 2001. Up through 2017, most of the agency's largest debt would be retired. Over the next five years, the BPA would trim $600 million annually from its budget.