The INDEPENDENT, June 21, 2007
Page 15
Power of the People
By W. Marc Farmer,
General Manager,
West Oregon Electric Cooperative
Residential Exchange
Controversy
A lot is being written in the papers and reported on televi-
sion regarding the rate increases at PGE, Pacific Power and
other investor-owned utilities (IOUs) due the Ninth Circuit
Court of Appeals decision regarding exchange benefits from
BPA. This has obviously raised questions from our members
wondering if the exchange will affect our rates at West Ore-
gon Electric Cooperative, (WOEC). The direct answer is no, the court’s decision on
the residential exchange will not cause a rate increase for WOEC. The whys and
wherefores are a bit more complicated, but I will attempt to communicate the differ-
ent issues involved.
West Oregon is considered a public-owned utility and therefore is also a prefer-
ence customer. We made a choice years ago to buy all of our power from BPA, giv-
ing us first rights to the low-cost hydro power. The IOUs chose not to, then came
back to BPA through their congressional delegations and claimed their customers
were being unfairly treated by having to pay more for their power supply than oth-
ers in the Northwest.
They claimed that customers from the IOUs had the same right to benefit from
low cost power produced from the Federal Columbia River Power System as the
preference customers and wanted to be compensated for the difference in cost. In
other words, they wanted the benefits of a preference customer even though they
made the choice not to participate. The IOUs prevailed and so, 25 years ago, a
Residential Exchange program was created which would allow the residential and
small farm customers to share some of the benefits of the hydro system that the
public utilities received.
The original intent of the program, called the 1980 Northwest Power Act, was to
be a power exchange between BPA and the IOUs. Through negotiations, this pow-
er exchange instead became direct cash payments based on a formula or rate
methodology. Rather than receiving low cost power from the BPA hydro system,
PGE, Pacific Power, Pudget Sound Energy, Avista, and other investor-owned utili-
ties received monthly cash payments from BPA, which are now $28 million per
month.
In 2002, BPA decided to change the methodology and increased the amount
paid to the IOUs. From 2002 through 2006, this change in the residential exchange
calculations resulted in the payment of $1.8 billion to the privately held utilities. Pay-
ments from BPA that were in the $50 to $150 million a year range until 2002, now
were in the $350 to $380 million range. The higher payments to the IOUs came at
the expense of WOEC and the other public utilities through increases to our whole-
sale power rates.
On May 3, the 9th Circuit Court ruled that BPA illegally changed the methodolo-
gy. As you can well imagine, we are in agreement with the ruling. Our members
should not be paying higher power supply costs to give arbitrary benefits above and
beyond the established methodology of the Residential Exchange Program.
BPA, as a result of the ruling, decided on its own to suspend the exchange pay-
ments to the IOUs until the issue is resolved. This suspension is what has triggered
the rate increases at the IOUs.
None of the public power utilities requested this action, but have instead asked
for an opportunity to sit down with BPA and the IOUs to work out a settlement. In
this settlement, we want to make sure the Residential Exchange Program at least
goes back to its original methodology. We are open to working out a reasonable so-
lution that does not punish our members through higher power supply costs.
There are a lot of questions to be answered during these negotiations, including
whether we can expect to receive back the overpayments we were charged, and
what is going to be the exchange rate going forward? We are in the middle of de-
termining what we are going to do for our power supply after our current contract
with BPA expires in September of 2011.
Included in the new contract BPA will offer, will again be a Residential Exchange
Program. We need to work out a fair agreement now on what the new exchange
should be for the next twenty years, and then make sure that BPA honors the con-
tract. If we are not successful in our efforts to find a solution, we run the risk of hav-
ing Congress step in, which puts our hydro system in jeopardy of being controlled
by outside interests intent on using the profits from the dam to balance the Feder-
al Budget. This most assuredly would result in significantly higher rates for all of us
who rely on low cost hydro power to keep our rates down. We will be working with
our state, regional, and national organizations to resolve this very important issue
for our members.
Largest Sitka spruce losing branches
All roads to Lost Lake now open
The nation’s largest Sitka
spruce, located just off U.S. 26
southeast of Seaside, will be al-
lowed to fall naturally to its
death. Officials will keep visi-
tors from getting too close to
the 200-foot tree. “It could last
another 10 or 20 years, or it
could fall over tomorrow,” said
Steve Meshke, Clatsop County
Parks Director, “It is at the end
of its life cycle; that is one thing
we have all agreed upon. There
is not much we can do at this
stage, except keep everyone
away from it and monitor it.”
The tree shares co-champi-
on status with a tree in Olympic
National Park in Washington as
the nation’s largest Sitka
spruce based on height, trunk
circumference and crown
spread. The tree has survived a
lightening-induced scar for four
decades but a recent wind-
storm knocked loose a large
chunk and revealed a rotting in-
terior. An icon in Oregon, the
tree draws about 100,000 visi-
tors each year.
To prevent people from bring
injured or killed by a falling
Good news for visitors to
Lost Lake in southeast Clatsop
County. The Oregon Depart-
ment of Forestry reports that a
surface treatment project has
been completed and roads to
the lake are now open.
limb, barriers will now be in
place in part of the parking lot
and visitors will have to view
the tree from 165 feet away.
“There are two ways this
tree is going to fall: entirely in a
sudden event or it will continue
to shed branches at a greater
rate than it has in the past. The
distance is safe enough if limbs
are falling but may not be if the
entire tree topples,” said Ter-
rence Flanagan, a Lake Os-
wego arborist consulted by
Clatsop County. “Foresters will
be looking at ways to cable the
tree so that when it does tum-
ble, they can direct the fall. Ide-
ally, it will fall away from the
parking lot,” said Paul Ries, Ur-
ban Forester with the Oregon
Department of Forestry.
Adapted from National Wood-
lands, Winter 2007
State Farm ®
Providing Insurance and Financial Services
Home Office, Bloomington, Illinois 61710
Bunny Girt, Agent
1229 N. Adair
PO Box 543
Cornelius, OR 97113-0543
Bus 503-357-3131 Fax 503-357-9667
bunny.girt.b71g@statefarm.com
Access is available either
from Highway 26 at Quartz
Creek Road, or from Henry Ri-
erson Spruce Run Camp-
ground on Lower Nehalem
Road.
VERNONIA INN
Enjoy a quiet weekend with us.
FULL SIZE, IN ROOM
HOT TUBS
Queen Beds • Private Bath • Separate Entrance
Cable TV • Phones • Handicapped Access
• Commercial Rates
FOR RESERVATIONS CALL
1-800-354-9494 / 503-429-4006
Gift Certificates Available
900 MADISON AVE., VERNONIA, OR 97064
Just one block off scenic Nehalem River Hwy. (Oregon 47)