Washington, DC – U.S. Senator Ron Wyden today urged the Bonneville Power Administration (BPA) to settle ongoing litigation brought by public utilities, saying that the savings of contract costs and legal costs to BPA could ward off a projected rate increase for the utility’s Northwest customers and even provide a short-term reduction in rates.

In December 2000, a number of Northwest public power agencies sued BPA over the agreements BPA had struck with investor-owned utilities as part of a program called the “Residential Exchange.” That program is designed to allow customers of private, investor-owned utilities to enjoy the lower power costs provided by Federally-affiliated BPA. It allows BPA to provide either cash payments or additional power resources to the investor-owned utilities to keep costs down for those utilities’ customers. In their lawsuits, the public power agencies alleged that BPA’s Residential Exchange agreements provided more benefits to the investor-owned utilities than the Northwest Power Act allows. These cases are still active today, and BPA is incurring enormous legal costs as they continue.

During the energy crisis of 2001, BPA found that it could not produce enough power to meet its commitments to all its customers. In attempting to reduce the demand for its power during the crisis, BPA agreed to pay investor-owned utilities and others to cut back on their power use. In some of those agreements, BPA also promised to provide litigation protection for the investor-owned utilities – in the form of higher payments per megawatt-hour – as long as the public power lawsuits remained in litigation.

Wyden first broached the idea of settling the public utility lawsuits in a phone call with BPA Administrator Steven Wright last week. In a letter to Wright today, Wyden reiterated that “a settlement between [the investor-owned utilities] and public utilities would clearly be a win-win proposition for the region. It could save at least $400 million in the current rate period. That savings would allow Bonneville to reduce current rates by as much as five to six percent this year, and it would give regional utilities and consumers greater certainty about Bonneville power for the future.”

This week, the public utilities involved in the lawsuits presented a proposal for settlement, agreeing to drop their lawsuits if BPA can find a way to avoid this year’s projected rate increase; a rate increase would adversely affect those public utilities because they buy much or all of their power from BPA. A settlement of the public utilities’ lawsuits, however, could provide BPA with more than enough savings to avoid the rate increase.

“The public utilities’ willingness to settle can provide BPA with the cost savings it needs to avoid a rate increase – and with the cooperation of the investor-owned utilities, BPA can meet the public utilities’ condition of avoiding a rate increase simply by working out that settlement,” said Wyden. “It’s a bit of a circular solution, but in the end it’s Northwest ratepayers who win.”

If a settlement can be struck, BPA could save an estimated $200 million or more in projected legal costs for the existing lawsuits; in addition, a settlement will release BPA from its commitment to pay additional fees to investor-owned utilities as long as the lawsuits remained active. That restructuring of BPA’s financial obligations will save an additional $200 million, and help to allow the utility to avoid costs in the next few years that would otherwise require a rate increase.

Wyden’s letter urges Administrator Wright to “do everything [he] possibly can to bring the parties together and achieve a settlement.” It also encourages BPA to look for other cost savings opportunities to further reduce rates for Northwest consumers.

###