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BPA Practices: Federal Action Enforces Fairness in Electricity System by By R. Patrick Reiten, J. Rachel Shimsack, Don Furman and Jim Piro The Oregonian, January 9, 2012

When you don't have the facts or the law on your side, distract them with fear and emotion. That seems to be the attitude by some toward the Federal Energy Regulatory Commission's order directing the Bonneville Power Administration to halt discriminatory practices on its electric transmission system (Scott Corwin, In My Opinion, Dec. 21). The FERC order said, in essence, that BPA may not unduly discriminate against non-federal electricity generation in order to gain an economic advantage for its own generation.

BPA performs two primary functions for the benefit of Northwest electricity customers. It markets the output from the federal dams on the Columbia River system, and it operates the transmission grid that serves the entire region. These are two very distinct functions, with very different responsibilities.

When marketing the energy produced by the federally owned dams, by law BPA must give preference to publicly owned utilities and cooperatives. Nothing about the FERC decision changes that. Publicly owned utilities will continue to receive their full allotment of energy from Bonneville.

But the rules are different when it comes to the electricity transmission system. From the beginning, the BPA grid was built and operated for the benefit of all customers in the Pacific Northwest. By paying BPA to transmit power around the region, other utilities were able to avoid building duplicate lines, thereby keeping rates low. As the operator of the transmission grid, BPA is a common carrier and has an obligation to offer fair and non-discriminatory service to all, not just those who happen to be served by public power.

This spring, BPA faced some challenges: There was an oversupply of generation due to extremely high water and an unusually late runoff. There was the potential that these conditions could cause problems with reliability or harm to endangered species. These are legitimate issues, and BPA has the ability to order generation operators to back down if required to preserve the safety and reliability of the system.

That's all fine, but BPA still needs to observe common fairness and avoid discrimination.

There was a third, very important concern that Corwin's piece left out: that the oversupply conditions would cause power prices to plummet, reducing the price BPA gets for sales that are surplus to meeting its own preference requirements, and thereby reducing margin for BPA. This concern was openly expressed by BPA in the public process leading to its decision, at the end of which BPA gave to itself the right to interrupt its transmission to customers if prices got too low. It was this provision -- allowing the interruption of transmission service for economic rather than reliability reasons -- that formed the basis of the multiparty complaint to FERC.

FERC's response? BPA's unilateral actions are contrary to federal energy policy and it must get in compliance. Said another way: What BPA did, and how, was wrong.

Fair and nondiscriminatory access to the electricity transmission grid is critical to efficient operations and low customer rates. BPA itself used the transmission system extensively this year to sell power to California when prices were higher, using earnings from those sales to buffer the rates provided to its public utility customers. But when the transmission grid is used to the advantage of one group of customers over another, and the lowest-cost energy isn't allowed to get to all/others' customers fairly, that hurts the overall economy of the Northwest. Customers -- and the region -- deserve better.

That's why FERC was correct in rebuking the agency's actions. And why it tasked the various Northwest parties to work together to resolve issues and establish a better way to handle this in the future, in a way that benefits all customers. We are committed to do just that, building on our longstanding relationship with BPA and our willingness to work with the agency to find solutions.

Related Pages:
Most NW Wind Energy Continues Uninterrupted by Staff, BPA Journal, 7/18/11
Spring Rise Ebbs in NW; Wind Farms at Full Output by Tim Fought, Seattle Times, 7/18/11
BPA Curtails Wind Production by 7 Percent by Iris Dimmic, Daily Record, 7/7/11