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Doug Bechtel
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One of the things that has been receiving a lot of coverage in the news recently is the proposed sale of some of the nations power marketing administrations (PMAs). I haven't seen anything specific relating to the sale of the Bonneville Power Administration but it is worrisome due to the potential impact to our members.
I am not convinced that the efficiencies of private industry are going to be able to significantly cut costs over a government agency like BPA. The difference in interest rates on the debt that the government pays itself vs. what a private utility would have to pay on the open market is significant. Remember that some of these loans are nearly 50 years old and carry extraordinarily low interest rates by today's standards. Of course, most privately owned utilities expect to make a profit for their stockholders, usually around 15%. The consensus seems to be that rates would go up if the PMAs are sold to private industry, although there is significant disagreement over how much they would go up.
The thing that worries me on behalf of OPALCO is the extraordinary cost that BPA has incurred to provide power to us on Lopez Island; investments that a private utility with a profit incentive might not be willing to make. For example, BPA has spent more money to install the submarine cables between Anacortes and Lopez than all of the investment that OPALCO has made in all of our facilities. BPA will be the first one to tell you that it costs more to deliver power to us from Bellingham to Lopez, across Puget Power's lines and BPA's submarine cables, than they sell it to us for. Essentially we are getting the power for free and what we pay BPA basically covers the cost to get it to us.
Another thing that worries me is that in five to ten years BPA will have to spend an additional $10,000,000 to $15,000,000 for a new submarine cable to serve us. If they are not making money today delivering power to us, what incentive do they have to spend another $10,000,000 to $15,000,000 to provide an acceptable level of liability?
OPALCO has been having discussions with BPA on the number and size of submarine cables to meet our needs for many years. I think we are getting close to a firm agreement with BPA that will provide a contractual obligation for BPA to provide the necessary submarine cables. I am worried that, if BPA is sold, this agreement might get lost in the search for profits by whoever buys BPA.
On the other side of the coin, I think a potential sale of BPA is remote. I don't think anybody would want BPA until financial problems associated with the WPPSS nuclear plants are resolved and the amount of money spent on fish is known.
We continue to follow the discussions relating to the sale of the PMAs and will let you know if anything important comes up.
Doug Bechtel
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