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Advisory Panel Warns Against Utility Dependence on BPA by Brent Hunsberger The Oregonian, April 9, 2004

The Northwest Power and Conservation Council suggests
longer-term contracts and fixed allocations of low-cost energy

Northwest power companies need to plan for their own growing energy demands rather than relying so heavily on the Bonneville Power Administration's network of hydroelectric dams and a nuclear plant.

That's what the Northwest Power and Conservation Council, a federal advisory board with representatives from Oregon, Washington, Idaho and Montana, said Thursday about the role the BPA should play as an energy provider of last resort.

The council's recommendations are designed to help stabilize the region's energy prices, which skyrocketed during the West Coast power crisis of 2000 and 2001 and which, in the process, increased the BPA's costs by $1 billion a year.

The Northwest council also recommended that the BPA enter 20-year contracts with utility and industrial customers in order to give itself more protection from future market fluctuations. Currently, most contracts last 10 years, and some -- with aluminum smelters -- last five years.

The council's recommendations align closely with the BPA's own proposed long-term plan as it gets ready to renegotiate some contracts scheduled to expire in 2006. The recommendations also mirror the suggestions of many utilities, which are clamoring for rate relief from the agency's power prices that have increased 45 percent, on average, since 2001.

The BPA consolidates and sells the power generated by a network of 29 federal dams in the Columbia River Basin, along with a nuclear plant in Eastern Washington. Utilities, such as Portland General Electric and PacifiCorp, buy the power, as do some industrial customers.

Under the draft plan released Thursday, each of Bonneville's customers would be allocated a set portion of the system's low-cost, 8,000 megawatt production based on past use, council director Dick Watson said. When an individual customer needs more than its allotted share of power, he said, the customer will have to purchase power on the open market or implement conservation measures.

Customers can still ask the BPA to acquire the extra power on their behalf, but the agency would charge a separate rate reflecting the price available on the open market.

Previously, Bonneville went outside the system to buy the extra power itself, and then sold it to Northwest customers at the contractually agreed-upon prices, which tended to be significantly lower.

But in 2000, the BPA agreed to contracts providing customers with 3,300 average annual megawatts more power than it could produce. It was then forced to purchase that extra power on the open market at what were then skyrocketing prices, ultimately leading to an average 45 percent rate increase for all its customers.

The council's recommendation are designed to encourage power users to realize the cost of rising energy demand themselves and to take steps toward conservation, Watson said.

The council also recommended that the BPA limit the amount of power it supplies directly to aluminum smelters, with the right to interrupt service during a power crunch.

Related Pages:
BPA's "Lessons Learned"