In light of a new report, Ranking Member of the Senate Energy and Natural Resources Committee Maria Cantwell (D-Wash.) on June 13 spoke against the divestiture of the transmission assets of the Bonneville Power Administration (BPA), as proposed in President Donald Trump’s budget for fiscal year 2018.
“This report shows how damaging President Trump’s proposal is to the Northwest,” Cantwell said in a statement, referencing the report by McCullough Research, which, according to its website, is an energy consulting firm. “Any scheme to auction off the transmission assets of federal utilities, such as the Bonneville Power Administration, is a bad deal for consumers and for jobs in the Northwest.”
As noted in an Office of Management and Budget document on “Major savings and reforms,” the budget proposes to divest the transmission assets of the Power Marketing Administrations (PMAs), which include the Southwestern Power Administration (SWPA), Western Area Power Administration (WAPA), and BPA.
“The vast majority of the nation’s electricity infrastructure is owned and operated by for-profit investor owned utilities,” that document said. “Ownership of transmission assets is best carried out by the private sector where there are appropriate market and regulatory incentives. The budget proposal to eliminate or reduce the PMA’s role in electricity transmission and increase the private sector’s role would encourage a more efficient allocation of economic resources and mitigate risk to taxpayers.”
Discussing the proposed sale of the BPA’s transmission assets, the June 13 McCullough Research report claimed that the proposed revenues from the sale are only 80% of the value of the assets being sold.
“This raises the question of why these valuable assets would be sold at a discount – and who would get the benefit of the discounted price,” the report said. “If the sale goes through, this will also raise novel regulatory issues.”
The budget projects $4.9bn in revenue from the sale between 2018 and 2027, with $1.8bn coming in 2019, the report said. BPA’s 2016 Annual Report cites the system’s original cost at roughly $9.1bn, with an accumulated depreciation of nearly $3bn, putting its depreciated value at $6.1bn, the report said.
“It is unclear how this will impact the regulatory value of the transmission assets,” the report said. “FERC may reduce the rate base of the transmission assets from $6.1 billion to the proposed sale price of $4.9 billion. In either case, privatization will increase transmission rates. If the rate base were maintained at $6.1 billion, the sale of BPA would increase transmission rates by 44%, with a FY 2019 rate impact of $475 million. If the rate base were reduced to $4.9 billion, privatization would increase transmission rates by 26%.”
Representatives for the BPA and SWPA did not immediately respond for comment. When reached by TransmissionHub, a WAPA public relations specialist on June 14 directed questions about the budget to the U.S. Department of Energy (DOE) press secretary, who did not immediately respond for comment.
Among other things, the McCullough Research report noted that the White House has proposed selling off PMAs twice, under former Presidents Ronald Reagan and Bill Clinton, and each attempt was unsuccessful. The report noted that the proposed divestiture is being opposed by, among others, the Public Power Council, which, according to its website, represents the Pacific Northwest’s consumer-owned utilities on important issues in the region and in Washington, D.C.
In a June 13 Op-Ed in The Oregonian, Scott Corwin, executive director of the Public Power Council, said, in part: “Privatizing these assets would be a tax on consumers with no increase in efficiency or reliability. It would work against the administration’s objectives by needlessly tying up private capital to send money to the Treasury in the short-term at the expense of the long-term revenue stream already coming from BPA.”
Among other things, the Office of Management and Budget document said that the budget proposes to repeal WAPA’s “authority to borrow up to $3.25 billion in emergency funds authorized by the American Recovery and Reinvestment Act of 2009 (Recovery Act) for the purpose of constructing and/or funding projects within WAPA’s service territory that deliver, or facilitate the delivery of, power generated by renewable energy resources.”
Investments in transmission assets are best carried out by the private sector where there are appropriate market and regulatory incentives, the document claimed.