If the Bonneville Power Administration carries out the Trump administration's budget proposal to charge electric rates like for-profit utilities, prices will jump 20% to 40% in 2019, a regional power planning council warned.
President Donald Trump's fiscal year 2019 budget proposal calls for authorizing federal power marketing authorities, including BPA, to charge electric rates comparable to those that investor-owned utilities charge instead of rates that only cover the cost of providing power. Such a move would impact 142 public utilities and districts serving several million customers in the Pacific Northwest and would disproportionately hurt low-income, rural residential customers, according to the Northwest Power and Conservation Council.
"Selling Bonneville power at market rates could trigger a recession in the Northwest by forcing Bonneville customers to pay much higher prices for power and imposing higher costs on businesses and consumers," the council said. "It also could drive new and existing businesses out of the region, such as data centers that have located here because of the low-cost, clean electricity."
The council said the impact would be comparable to the western U.S. energy crisis of 2000 and 2001, in which 77,000 jobs were lost and the regional economy lost about $10 billion largely due to cutbacks at energy-intensive industries.
In the long run, the council sees the administration's proposal as a losing proposition for BPA. If large businesses are discouraged from moving to or staying in the region, the reduced loads and price volatility will weaken BPA's financial strength, hindering its ability to cover its costs.
The Trump administration is also is proposing to divest transmission assets of BPA and other federal power marketing administrations, but Sen. Maria Cantwell, D-Wash., said selling BPA's transmission system and abandoning cost-based rates would "throw sand in the gears of the Northwest economy." She and other members of Congress from the Northwest have vowed to thwart the ideas.
Even without such disruptions, Public Utility District No. 1 of Cowlitz County, Wash., General Manager Steve Kern warned of a dire financial situation for BPA by 2028 because the agency's rates are significantly higher than spot market prices. Addressing the planning council to discuss BPA's position in the power market, Kern said a "financial cliff is coming" because BPA's power prices are forecast to be 55% above spot market rates by 2028. "Who's going to sign up for BPA power at those prices?" he asked. The Cowlitz PUD buys wholesale power from BPA for its customers.
The agency's position will stay weak because low natural gas prices continue to fuel cheap gas-fired generation and the market is being flooded with solar and wind generation, Kern said. BPA is hobbled by increasing fish and wildlife costs, including requirements that it continue to spill water rather than run it through its generators in order meet court-ordered fish-saving measures.
BPA itself warned that "shifting industry dynamics and other risks, such as low wholesale energy prices and changing customer needs, are working against BPA's cost competitiveness and commercial performance."
The agency in late January released a five-year plan aiming to boost its financial health and provide competitive products.