Avista Corp., of Spokane, is joining with two other Northwest investor-owned utilities to challenge a federal appellate court finding that the Bonneville Power Administration erred in the method it used to make big payments to the utilities.


The utilities, Avista, Seattle-based Puget Sound Energy Inc., and Portland-based Portland General Electric Inc., together filed a petition with the U.S. Supreme Court earlier this month seeking review of a U.S. Ninth Circuit of Appeals decision last May. That decision prompted the BPA to suspend millions of dollars in monthly payments to investor-owned utilities, which in turn has led to substantial increases in electric rates for those utilities residential and small-farm customers throughout the Northwest. The Supreme Court typically rules on such requests for review within about 90 days, a court spokeswoman says.


Although the stakes in the case are high, an Avista executive describes the petition as just a backstop, designed to protect the investor-owned utilities interests in case current efforts to negotiate a rebalancing of the BPA payments fall apart.


A rate case that BPA announced earlier this month for fiscal 2009, and that reflects some of that utility input, essentially calls for the regions investor-owned utilities to receive nearly $80 million less next year, collectively, than they had received previously. That $80 million would be retained by the regions publicly owned utilities, from which it was being collected. That and other changes would equate to an average 4 percent cut in wholesale power rates to the publicly owned utilities, the BPA says.


The exact long-term financial impacts that the agreement would have on Avista and Spokane-based Inland Power & Light Co., Washington states largest electric cooperative, arent clear yet.


The BPA says it expects that the rate case, which was triggered by the Ninth Circuit decision, will take until late summer to complete. Final decisions that change customers bills wont come until this fall or later, it says.


This will be a hotly contested rate case, involving other complex and polarizing issues, says Kris Mikkelsen, CEO of Inland Power. Mikkelsen also is president of Northwest Requirements Utilities, a trade association representing 53 consumer-owned utilities that rely on the BPA for wholesale power supply and transmission services.


Despite the challenges, she says, We need as a region to move forward and be able to sign long-term contracts (with BPA) before the end of this year. Mikkelsen and other utility executives are concerned that a failure by industry decision-makers to reach a long-term consensus could open the door for the matter to be decided in Washington, D.C., particularly with a new administration taking office, to the likely detriment of the entire region.


The decades-old dispute that led to the appellate court ruling revolves around the BPA-managed residential exchange program, under which utilities share access to the cheap Columbia River hydropower that the federal agency sells. The BPA is a federal electric utility that markets more than a third of the electricity consumed in the Northwest. The power is produced at 31 federal dams and one nuclear plant in the region and is sold to more than 140 utilities in the region. The BPA also operates a high-voltage transmission grid comprising more than 15,000 miles of lines and associated substations in Washington, Oregon, Idaho, and Montana.


Federal law requires that the power BPA markets be made available to publicly owned utilities and cooperatives, many of which have little or no generating capacity of their own. However, the regions six investor-owned utilities also benefit from it. The dispute involves how best to divvy up those assets.


For decades, investor-owned utilities have converted the payments theyve received from the BPAmost recently totaling about $327 million annuallyinto credits on their residential and small-farm customers electricity bills.


Based on the Ninth Circuit ruling last spring, though, the BPA decided to suspend those payments. As a result Avista was forced to boost the typical monthly bill for its residential customers in Washington and Idaho by about 8.8 percent and 9.5 percent, respectively.


The ruling stemmed from litigation brought by a host of Northwest publicly owned utilities, five of them in Spokane and Kootenai counties and many of which have seen substantial rate increases from the BPA in recent years. They challenged agreements reached in 2000 between the BPA and the investor-owned utilities that were the basis for a big jump in the amount of money that the investor-owned utilities received. Specifically, the suit contended those agreements violated the Northwest Power Act, which was adopted in 1980 partly so federal hydropower benefits could be shared among all Northwest residents.


The Ninth Circuit agreed with their contentions, finding that the BPA erred in how it reached the agreements, which were intended to settle disputes involving how residential exchange program money would be disbursed from 2001 through 2011, and also in assigning the costs of those settlements to the publicly owned utilities.


The BPA suspended monthly payments of about $28 million to the investor-owned utilities as a result of the decision, out of liability concerns, but was forced to continue collecting that money from the publicly owned utilities because it cant change rates except through a formal process. That has left BPA with far larger financial reserves than it needs.


Two months ago, it proposed making interim payments totaling more than $320 million to Northwest utilities while it works to address the Ninth Circuits concerns. A number of utilities responded negatively to that proposal for various reasons, despite the immediate relief it would bring to thousands of electric customers, illustrating how polarized the utility factions remain.


The BPA still was mulling earlier this weekwhether to proceed with those interim payments. The rate-case proposal it issued this month, however, is intended to provide a longer-term resolution that all of the utilities will find agreeable.


BPA is committed to finding a legally sustainable solution that is best for the Northwest, says Steve Wright, BPA administrator. This proposal is a good starting point, but theres room for more public comment.


To respond to the issues raised by the Ninth Circuit, the BPAs rate case proposal would do the following:


Disburse to Northwest utilities $504 million of the residential exchange benefit money the BPA has amassed. Of that amount, publicly owned utilities would get $315 million, and investor-owned utilities would get $189 million.


Provide $620 million in future rate relief to publicly owned utilities to reimburse them for overpayments they made from 2002 through 2007. That rate relief would be achieved through reduced residential exchange program payments to investor-owned utilities in fiscal year 2009 through 2028.


Reduce wholesale power rates to the publicly owned utilities, by 4 percent on average, to $26.20 per megawatt-hour from $27.30, in fiscal year 2009.


Re-establish the legally prescribed residential exchange program payments for residential and small-farm consumers served by investor-owned utilities at $250 million for fiscal year 2009. In 2009, $40 million of that money would be applied against past overpayments, leaving $210 million available for crediting to electric power consumers.


Of that $210 million, Avista would receive $23 million. It would be responsible for about $62 million of the $620 million in past overpayments that the BPA proposes to recover over the 2009-2028 period.


Contact Kim Crompton at (509) 344-1263 or via e-mail at kimc@spokanejournal.com.