BPA wants to give utilities power over what energy they use
By WILLIAM MCCALL
The Associated Press
Seattle Post-Intelligencer
23 September 2006
PORTLAND -- At the halfway point between the West Coast energy crisis of 2001 and the next major electricity contract renewal year of 2011, a federal power marketing agency is proposing a policy change that could affect rates in the Pacific Northwest for generations and become a national model for energy development.
Northwest hydropower is one of the cheapest energy resources in the nation -- about half the current market rate for electricity. The Bonneville Power Administration -- which sells power in all of Washington, Oregon and Idaho and parts of California, Nevada, Utah, Wyoming and Montana -- announced this summer it wants to change the way it charges utilities for its wholesale power, to keep rates low.
The BPA proposes to make hydropower a separate resource while charging utilities a different rate for any additional power they want from the federal agency. Currently, utilities pay a blended rate that adds in the cost of developing resources or buying additional power to meet load growth.
In exchange for the low hydropower rate, utilities would take full responsibility for building the power plants or generating the extra electricity needed to meet growing demand past 2011 -- instead of the federal government.
Utilities could still rely on the BPA to get them extra power, but they would have to pay higher "tiered" rates, which the BPA hopes will provide utilities with more incentive to either find ways to conserve electricity or generate it themselves.
"The thing I find exciting about this is a chance for the Northwest to control its own destiny," said BPA chief Steve Wright.
But the Citizens' Utility Board of Oregon warns that the proposal could raise rates for many residential customers and farmers, especially in Oregon, a state dominated by large investor-owned utilities that already generate some of their own power -- unlike small public utilities supplied by the BPA.
The BPA is presenting the plan as a rate decrease, but the regional trend is to raise rates among residential customers of investor-owned utilities, said Jason Eisdorfer, a lawyer for the utility board.
Eisdorfer called the proposal a significant departure from the policy laid out by Congress in the Northwest Power Act of 1980. That law calls for the BPA to acquire resources for the public, he said. Under the BPA proposal, finding new power sources will be up to the utilities.
The BPA markets hydroelectricity from a system of 31 federal dams on the Columbia and Snake rivers, and one nuclear plant in Washington state. It amounts to about 40 percent of all the power supplied in the region, along with seasonal exchanges with California.
But that percentage will keep shrinking as demand for power grows, because no one expects any more huge dams will ever be built, forcing the region to explore alternatives such as wind turbines, solar power, coal gasification and geothermal energy, while facing steep price increases for the other main alternative, natural-gas-fired generators.
"Overall, I think the agency is doing the right thing -- both for itself and for its customers -- and for the region as a whole," said Pat Reiten of PNGC Power, a consortium of 15 rural electric cooperatives that serve seven Western states, making it the fourth-largest BPA customer.
What Wright and the BPA want to avoid is the kind of trap that ensnared the power administration during the 2001 crisis. Prices skyrocketed when customers who had pressured the agency to allow them to buy lower-cost electricity on the open market in the late 1990s suddenly returned for cheap power when wholesale prices spiked over 400 percent. It drove up prices for everybody by forcing the BPA to buy extra power on the volatile spot market.
"We don't want another West Coast energy crisis," Wright said.
Posted by Arthur Caldicott on 24 Sep 2006