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BPA Keeps Low Profile Amid High-Profile Issues by Shelly Strom, Business Journal staff writer Portland Business Journal, August 25, 2003

As the supplier of approximately 45 percent of the Pacific Northwest's electricity, Portland-based Bonneville Power Administration is possibly the single-most influential player in the region's power market.

The $3 billion agency, set up by Congress and the Roosevelt administration in 1937, markets and delivers power generated by a federal system of 31 federally owned hydroelectric dams, one nonfederal nuclear plant at Hanford, Wash., as well as several nonfederal power plants.

Working with utilities and a limited number of industrial power users, BPA has a relatively low profile. But the relatively low-cost power provided by Bonneville to the Northwest is considered to be a significant regional economic driver.

The agency, however, is among the parties hardest hit by the Western power crisis of 2000 and 2001. The situation began percolating years earlier. In 1996, with power readily available on open markets at near-historic lows, utilities and other BPA customers decided to purchase less power from BPA and more from the marketplace. As the economy boomed, so did demand for power, ultimately overburdening supplies.

The situation drove utilities back to BPA in 2000, with requests for power to fill the gap between the levels BPA had agreed to provide in 1996 and the level to which their demand had grown during intervening years.

Because Bonneville is mandated to ensure an adequate, efficient, economical and reliable power supply, the agency obliged, even though the requests amounted to a level of power above and beyond what is generated by the federal system. Fulfilling the requests meant BPA would purchase power on the open market, at a time when prices shot to unprecedented highs.

"Bonneville went from being a $2 billion organization to a $3 billion organization in one day," BPA Administrator Steven Wright told The Business Journal. The jump reflects the cost of procuring 3,000 megawatts of electricity above and beyond the 8,000 megawatts supplied by the federal generating system.

Now the agency is digging its way out of the ensuing budget crisis. And at the same time, the power marketer is preparing to sit down with customers to negotiate the way rates are assessed before the expiration in 2006 of existing agreements with many of its customers.

Meantime, a growing din among politicians in regions beyond the West calls for BPA to be dramatically reorganized. In spite of BPA's repayments to the federal government for money invested to build the federal generating system, critics suggest the agency is an example of socialism and is providing an unfair subsidy to Northwest power customers.

Given the muddled and uncertain energy market that has transpired in recent years, BPA and its customers are going forward with more trepidation and caution than ever before.