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Higher costs

| February 14, 2006 11:00 PM

It's interesting to find out that while information is unraveling and becoming public about a proposed electrical wholesale boost by the Bonneville Power Administration, the Bush administration is also looking at giving oil companies $7 billion worth of royalty free oil from public lands.

Both proposals are unlikely to happen given the unpopularity of each with congressional members from both parties.

The administration is looking at giving up royalties paid by the companies for drilling oil on public land. The incentive was originally created to help oil companies during times when the price per barrel was about $10. The net worth of the oil to be pumped off public lands is about $65 billion.

Meanwhile, the price per barrel is more than 5 times the $10 trigger of the past. And consumers are paying an average $2.26 per gallon at the pumps nationwide.

Kerr McGee is about to challenge a Department of Interior decision that dozens of companies received too much royalty relief in 2004. If it is successful, that challenge could cost the federal government another $28 billion in royalties over the next five years.

The New York Times is reporting that the sum total of these royalty giveaways is equal to proposed spending cuts in Medicaid, Medicare and child support enforcement programs.

Meanwhile the administration is giving the BPA the go-ahead to raise wholesale rates for 2008-2009 by 10 percent. Flathead Electric has estimated that to be a 6 percent increase for its electrical consumers. One electrical retailer in the northwest estimates the cost of the next 10 years to be $1 billion for consumers.

Normally, if the BPA has revenue excesses beyond what they need to pay off their Treasury debt, those excess monies have been used to offset consumer costs for power. The administration wants the BPA to accelerate it's debt reduction efforts.

What's interesting about all this is the administration is looking for ways to cut spending and reduce the rapidly growing federal debt. Giving away royalties to corporations making record profits while American consumers are financially wincing from pump prices doesn't seem to be a good budget strategy, just a giveaway. And asking the BPA to raise rates at the expense of the ratepayers and the Pacific Northwest economy doesn't seem like good public policy either.

What they do appear to be is bad politics during a mid-term election year. That's maybe why the administration has little support for either proposal among Republic or Democratic congressmen.

Whatever it is, things could get quite expense of us consumers. — Roger Morris