September 29, 2008

Idaho Regulators Oppose Power Credit Reduction

By Anonymous

Idaho utility regulators oppose a Bonneville Power Administration decision to eliminate or radically reduce electric rate credits to 85 percent of residential and small-farm electric customers in the state.

The Idaho Public Utilities Commission said in a release Sept. 25 that it will pursue all available legal remedies to address "this punitive and egregious error."

BPA this week established new power rates and Residential Exchange Program credits that essentially eliminated the credit for Idaho Power and Rocky Mountain Power customers and greatly reduced it for Idaho customers of Avista Utilities. The credit for Avista customers was reduced from $3.5 million to $1 million. The credit was reduced to zero for customers of Idaho Power (from $15 million) and to zero for customers of Rocky Mountain Power (from $10.7 million).

Idaho utility commissioners said the biggest factor in the almost total elimination of the credit is BPA's decision to require future customers in the region to repay $767 million in benefits already credited to customers in the past. BPA opted to shorten the pay- back period to seven years from a previously stated 20 years.

"The Northwest Power Act envisioned Residential Exchange Program benefits for all four states - Idaho, Montana, Washington, and Oregon. For the BPA administrator to issue a decision that all but eliminates these benefits for Idaho customers is inconsistent with the Act." the commission statement said. "The act does not say that the benefits are available in the other three states, but not in Idaho.

"Based on the BPA Administrator's Record of Decision, which wipes out all but minimal benefits to Idaho customers, the Idaho PUC will pursue all available legal remedies to address this punitive and egregious error," the commission said. "We are extremely disappointed that the administrator did not use his discretion to address this imbalance of benefits in the four-state region."

The amount of the credit is determined by formulas using various factors, including a utility's average system cost for producing power. In essence, if an investor-owned utility's average system cost to produce electricity results in rates higher than those offered to public utility customers served by BPA, a financial credit can be obtained through BPA that lowers investor-owned utility rates.

However, in an action that the Idaho commission says has "no bearing in the plain language of the Northwest Power Act," BPA is claiming that Idaho Power and Avista owe it money because their average system costs for many years allowed lower rates for their customers than BPA's rate to customers of publicly owned utilities. BPA calculated that Idaho Power owes more than $250 million and Avista owes more than $100 million. BPA decided these amounts must be repaid before either company receives REP credits. It will take Idaho Power more than 20 years to repay BPA, thereby denying credits to Idaho Power's residential and small-farm customers for at least a generation.

The Northwest Power Act, enacted in 1980, allows residential and small-farm electric customers in the Northwest to share in the benefits of the region's federal hydroelectric projects through one of two ways. Customers of publicly owned utilities, such as rural electric co-ops and municipalities, benefit with preferential access to low-cost federal power available from BPA. Customers of the region's investor-owned utilities - which represent about 85 percent of Idaho customers - receive their share of the benefit through a financial credit on the bills of residential and small-farm customers through the Residential Exchange Program (REP). Residential and small-farm customers of Rocky Mountain Power in eastern Idaho, of Avista Utilities in northern Idaho and of Idaho Power across southern Idaho have received REP credits since 2001.

In May 2007, the Ninth U.S. Circuit Court of Appeals declared that BPA, the region's federal wholesale power marketer, did not act in accordance with the Northwest Power Act when it approved a settlement in 2000 regarding wholesale power rates and REP credits to customers of public and private utilities in the Northwest. The court said customers of the region's investor-owned (private) utilities received too much in credits while customers of public co- ops and municipalities were overcharged.

Shortly after that decision, BPA suspended the credit for all of Idaho's three major investor-owned utilities until BPA could re- calculate the rates and credits to comply with the court's directive. The temporary suspension of the credit resulted in an almost immediate 9.5 percent increase in June of 2007 for Idaho Power and Avista residential and small-farm customers. The impact was even more severe for Rocky Mountain Power in eastern Idaho, where the loss of the credit meant a 28 percent increase for residential customers and a 51 percent increase for irrigation customers.

Credit: IBR Staff Report

(Copyright 2008 Dolan Media Newswires)

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