The Bush Administration has some good advice for itself. Unfortunately, the recipient is the Bonneville Power Administration.
The two-fold message boils down to this: Bonneville, raise your revenues and borrow less money.
Part One has received the most comment because the effect on Northwest consumers would be immediate. The administration wants the agency to sell power from 31 federal dams in the region at market rates. For the last 70 years, buyers have paid only the cost of generating and transmitting that power. The difference between market- and cost-based rates could translate into a rate hike of as much as 40 percent. This while Northwest ratepayers continue to cope with an increase of about that size imposed in 2001 to cover an episode of market-based pricing that wiped out thousands of jobs in 2000 and 2001. Remember Enron?
Action in the U.S. Senate may have stymied implementation of Part One. But Part Two remains in play. A newly released study from the Northwest Power and Conservation Council says it could play heck with Bonneville’s conservation and fish and wildlife programs.
Bonneville borrows money to make improvements and additions to its dams and power lines. In recent years, extensive investments have also been made in programs that help consumers save energy — remember the free light bulbs? — and subsidize development of new technologies such as wind generation. Total debt as of Sept. 30, 2004 was $13.1 billion. Half that money was either appropriated by Congress during the early years of the federal system’s development, or borrowed from the U.S. Treasury. The other half, mostly associated with the disastrous nuclear power plant construction program of the 1970s, was obtained from private lenders.
Current law caps Bonneville’s Treasury borrowings at $4.45 billion. Although debt owed the Treasury today is only $2.9 billion, seemingly leaving a substantial cushion, Bonneville expects to spend $517 million a year over the next five years to expand and maintain the transmission grid. Even though Bonneville continues to pay down its Treasury debt, the power-marketing agency will reach the cap in 2010.
To give itself some breathing room, Bonneville added to the grid last year by contracting with a private investment group that sold $119.6 million in bonds to finance a new line between Ellensburg and Hanford. A 30-year Bonneville lease backs the bonds. Similar arrangements have assisted the conservation programs of several utilities in the region. If the administration has its way, there will be no more such deals.
Bonneville has few other options.
The agency has retired $1.1 billion in Treasury debt early by refinancing the nuclear plant bonds. Another $461 million could be retired by 2012. That creates only so much additional headroom.
Also, maintenance and new construction could be delayed, jeopardizing the reliability of a grid that carries more than three-quarters of all electricity consumed in the Northwest. The word could be financed out of annual operating revenues, but that would mean heaping on more rate increases. Or funds could be redirected from conservation and fish programs, actions that would be both counterproductive and controversial.
Northwest senators and representatives could also ask their congressional brethren to increase Bonneville’s borrowing limit — the agency has never missed a payment — but the administration would likely frown on that idea.
Bonneville is not a wanton debtor. Its focus on maintaining reserves to cover annual Treasury payments has sometimes driven customers crazy, especially if the result might be higher rates. Those customers, mostly public utilities directly responsible to their ratepayers, are a better check against irresponsible Bonneville borrowing than anyone in Washington, D.C., where there seems to be no check on spending whatsoever.
Meanwhile, low stream flows are raising the potential for more conflict over the limited water that will be available unless it rains like the dickens soon. Extremely poor returns so far of spring Chinook could increase demands that more water bypass generators in order to help the fish. Not to mention the sea lions who have found the fish ladders, and do not think in terms of catch and release.
If the administration has a problem with federal borrowing, the solution is somewhere on Capitol Hill. Where, specifically, nobody seems to know.