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Cheap Dam Power Causes Utility Strife by Chris Mulick, Herald staff writer Tri-City Herald, April 5, 2004

SEATTLE -- A renewed effort to divvy out the cheap megawatts generated at Northwest federal dams underscores just how fragmented the public power community has become.

It has by no means become bloody, but as regional stake holders begin the process of outlining the future of the Bonneville Power Administration, previously like-minded utilities are emerging with different interests.

"There's no question," BPA Administrator Steve Wright said in an interview Friday, minutes before his speech to the Seattle CityClub drew questions from across the stakeholder spectrum. "We lack a sense of community."

"We probably have more divisions in the house than we have in the past," said John Saven, executive director of Northwest Requirements Utilities, which represents utilities such as the Benton REA and the city of Richland that rely on the BPA exclusively for all their energy services.

Those divisions are largely because of new wholesale power contract offerings negotiated in 2000 and 2001 that split public utilities into two camps. Most smaller utilities, called full requirements customers, remained with a traditional Bonneville contract that provides them with all the power they need as they need it.

Some utilities not owning their own power plants, including the Benton and Franklin PUDs, also signed up for what are known as "slice" contracts.

Known as the "slicers" in the energy business, those utilities want Bonneville to assign a legally defined piece of its power pie to every one of its dozens of public utility customers. With little surplus left over, utilities would be responsible for acquiring additional supplies as their electricity demand grows. Or they could pay Bonneville to do it for them, just as the giant federal power marketer has done for decades.

The implications for ratepayers depend entirely on how much they trust their utilities to make their own decisions about future power supplies, just as the slicers have been doing for the past 2 1/2 years.

Benton and Franklin PUDs, for example, suspect they may be able to do that better than Bonneville can. That's despite the fact their decisions to build small-scale power plants to meet peak demands and their purchase of output from a Tacoma-area gas-fired generator to meet future needs have so far borne little fruit.

"We're showing we're doing a pretty good job of it," said Jean Ryckman, interim manager at Franklin PUD. "I'm not looking to prove we did the right thing but the numbers indicate we did."

"We want the option of the choice," said Jim Sanders, Benton PUD manager. "If Bonneville is the best game in town, we wouldn't have an aversion to using Bonneville."

Many still cite the Bonneville-backed failed nuclear construction campaign by the Washington Public Power Supply System in the 1970s and 1980s, or, more recently, the abandoned Tenaska power project that cost ratepayers almost $300 million in the 1990s.

"People look back at Tenaska and WPPSS and aren't real anxious for Bonneville to be in the resources business," Saven said.

Power demands have shrunk with the economy
Bonneville has gotten the message, and Wright said Friday the agency also is trying to push the responsibility of adding new power plants back onto the shoulders of utilities. And though it would be extremely complex to slice up its about 8,000 megawatts of power supply more than 100 different ways, it wouldn't be impossible. Power demands have shrunk with the economy, meaning there would be enough juice for everyone to start with.

"You kind of need a little luck to make something like this work," Wright said. "It's possible we may be at that point."

The smaller full requirements utilities likely to continue using Bonneville to schedule deliveries, provide power, sell surplus and buy extra supplies when needed are willing to discuss the idea, Saven said. But there are scads of details to be worked out.

And not everyone is certain it's a good option.

Benton REA Manager Chuck Dawsey, for example, fears having more utilities scheduling their own transactions would only duplicate services and increase overhead costs. He further worries it would only fragment public power even more with potentially dire consequences in Washington, D.C., where the agency occasionally has to fight off power grabs from other regions or new mandates on how it operates its transmission grid.

"Bonneville's strength politically has been out of a unified customer group," Dawsey said. But now, utilities take different messages and priorities to the Northwest congressional delegation.

"In the long run, that's political suicide," Dawsey said.

The current rate period ends Sept. 30, 2006, and while most expect Bonneville's rates to drop sharply, Wright said Friday that's not certain, due in part to expensive contracts with private utilities that aren't due to expire until 2011.

Even so, few believe any plan to divide Bonneville's coveted power could be done by then anyway, if ever. Negotiators are talking about having agreements in time to correspond with new long-term contracts that could take effect closer to 2008.