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Challenges Facing Bonneville Power Administration by Missoula Electric Cooperative Seely Swan Pathfinder, June 21, 2018

With falling energy prices, particularly for natural gas generation, excess hydropower generation
has become less valuable and harder to sell on the open market.

At Missoula Electric Cooperative (MEC), we often tout the many benefits of purchasing all of our power from Bonneville Power Administration (BPA). However, it is the members of MEC who truly benefit from this relationship and its access to what is arguably the greatest collection of energy generating resources in the world -- the Federal Columbia River Hydropower system.

The Federal Columbia River Hydropower system is a collection of dams controlling and harnessing the power of the Columbia River Basin which begins at its headwaters in British Columbia, Canada and terminates at the Pacific Ocean. The dams on this side of the border are owned by the U.S. Government and operated by the Bureau of Reclamation and the Army Corps of Engineers. Bonneville Power is a Power Marketing Administration (PMA) which is responsible for selling the output of the system, primarily to public power entities through preference power agreements, with excess generation sold on the open market.

This network of hydropower dams constitutes upwards of 85 percent of BPA's total power generation portfolio. BPA also markets additional output, about 10 percent of the total power portfolio from the Columbia Generating Station, a commercial nuclear facility located about 10 miles north of Richland, Wash. When you add in the wind and solar output from around the region you find that year in and year out, the energy our members purchase to power the homes, ranches and businesses in our service territory is more that 95 percent carbon free.

It is worth noting that in a country where states struggle to achieve carbon reduction goals on one hand, while still keeping electricity affordable on the other, our members have the best of both worlds. Our region maintains some of the lowest energy rates in the nation while at the same time delivering an energy portfolio that is nearly carbon-free. Only when we stop to consider the tremendous value of this resource, can we begin to understand why we must work diligently to protect the preference power rights of our member owners and maintain BPA's competitive position in the years ahead.

Unfortunately, BPA faces more than its share of challenges while trying to keep their wholesale energy rates competitive. With falling energy prices, particularly for natural gas generation, excess hydropower generation has become less valuable and harder to sell on the open market. Couple this with rising expenses related to wildlife mitigation efforts and you can see the uphill battle ahead for BPA. In fact, BPA spent more than $621 million on wildlife mitigation programs in fiscal year 2016, accounting for about a third of the agency's annual operating costs. While it would be one thing if these costs leveled off or even decreased over time, in actuality BPA has seen new requirements come into effect, which have yet unknown costs.

One such cost recently imposed on BPA comes from an order requiring dam operators to spill water over the dam thus decreasing the amount of energy generated and available for sale to the region. The move is believed to reduce impact on young salmon making the trip to the Pacific. In response to this lost revenue, BPA announced in May, the need to pass these costs along in the form of a "Spill Surcharge". Unfortunately, the impact of spilling water on young salmon is only theoretical and data on its success or lack thereof will not be available until after the fact. The cost, however, is all too real as BPA estimates a loss of revenue totaling $10.2 million associated with the experimental practice of spilling. In fact, concerns have been raised that an increase in dissolved gasses in the water resulting from the turbulence created by spilling water over the dams could harm fish rather than help.

In addition to marketing the output from 31 hydroelectric dams on the Columbia and Snake Rivers, BPA owns and maintains more than 15,000 miles of high voltage transmission lines and 300 substations to distribute generation throughout the Northwest. Like so much of the nation's infrastructure, BPA's transmission network is showing its age and requires maintenance and modernization. BPA employs a small army of highly trained linemen and technicians to accomplish this task with little to no noticeable impact to public power entities or their end consumers.

Given the size and complexity of BPA's operation and maintenance efforts as well as the skill with which they execute this work, one finds it hard to imagine why they would become a target for privatization. However, the 2019 Federal Budget proposal drafted by the current administration contemplated the sale of BPA's electric transmission assets and the reforming of cost-based rates of BPA and other PMAs in the U.S. Selling off these assets would have driven up our rates and shifted economic value from families and businesses in Montana to for-profit entities, whose investors expect a positive rate of return. While this may be a new development, it is certainly not a new concept. Prior proposals to sell off PMAs have been made and defeated in the past for harmful impacts such sales would cause.

Unfortunately, there is a misinformed belief by some lawmakers in Washington, D.C. that BPA and other PMAs are just another piece of the federal bureaucracy supported by the taxpayers. In point of fact, BPA not only fully pays its way, it also provides benefits to the federal government by fully recovering -- with interest -- the initial federal investments in hydroelectric dams and transmission facilities.

These challenges represent just a few of the obstacles facing BPA in the coming months and years. Through continued efforts to educate and inform our elected officials on the critical role of BPA in our region, we will do our part to ensure BPA can remain competitive through the end of our 2028 power contract and beyond.