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BPA Policies Getting Scrutiny from California, Others by Staff Columbia Basin Bulletin - October 27, 2000

In an attempt to reduce high electricity prices in California, members of Congress from the state are attacking federal laws and policies that provide the Northwest with exclusive rights to low-cost power generated at Columbia and Snake river dams.

California and Northeast-Midwest Coalition leaders -- who have long claimed the Bonneville Power Administration is subsidized by federal taxpayers -- have launched legislative and administrative initiatives that would affect public and regional power preferences.

In recent weeks, the following have occurred:

-- Four California House members introduced a bill to let private utilities buy federal power on the same terms as municipal and other publicly owned utilities;

-- Two Eastern congressmen asked the General Accounting Office to investigate BPA for alleged "profiteering" on sales of its power to California this year;

-- A group of California members asked Secretary of Energy Bill Richardson to stop Bonneville from signing long-term contracts with Northwest utilities and industries pending a review of its policies.

In response, the congressional delegations from Oregon, Washington, Idaho and Montana have united to oppose these efforts and defend Bonneville's actions.

California's problems began this summer when a heat wave boosted demand, and a 1997 state law deregulating the utility industry effectively removed limits on the cost suppliers could charge. Shortages and price increases also spread to the Northwest and diverted surplus emergency power from Bonneville.

Northwest members say the Golden State's attacks on BPA are unjustified and are an attempt to shift the blame and cost for its problem onto others. "We are not responsible for the failure of California's electricity restructuring plan," Sen. Patty Murray, D-Wash., and senators from Oregon, Idaho and Montana said Oct. 12 in a letter to Richardson. "Instead of attacking BPA, Californians should thank the agency for providing emergency power last summer that helped California avoid rolling blackouts."

California's problems already have spilled over and are "pushing prices up in the Northwest and hurting Northwest businesses and consumers," the senators said. "Rather than seeking scapegoats beyond the borders of their state, Californians would do well to at least attempt to fix their failed electricity restructuring plan."

"Efforts to interfere with BPA and regional preference will not go unanswered. I will exert every power available to a U.S. senator to block such efforts," Murray vowed in a separate statement.

Rep. Peter DeFazio, D-Ore., who organized a similar letter by Northwest House members, said he fears "a whole new level of threat against our regional system" of federal dams and transmission lines, which were built to electrify rural areas, serve publicly owned utilities and promote certain industries.

Also, DeFazio predicted electricity supply and cost problems in the Northwest this winter, when electricity usage in the region usually peaks. Bonneville and regional utilities often buy surplus power from California suppliers at such times.

The latest battle over Bonneville began in early September when Rep. Brian Bilbray, R-Calif., and three other House members from the state introduced a bill to allow private and investor-owned utility companies to buy from "taxpayer subsidized federal power generator facilities at the same cheaper rates as public power agencies" and pass the savings along to their customers. Bilbray represents the San Diego area, where electric rates have doubled or tripled.

His measure would repeal the public power preference in federal law that favors city utilities, cooperatives and other non-profit public utilities. But it would apparently not change Bonneville's other legal requirements, including charging cost-based power rates. The main result of the bill would be to spread more low-cost power to investor-owned utilities and force public utilities to buy more high-cost power on the open market.

Subsequently, on Oct. 5, Reps. Bob Franks, R-N.J., and Marty Meehan, D Mass., asked the General Accounting Office to investigate whether BPA gouged Californians on the price of surplus power. The two members, who co-chair the Northeast-Midwest Coalition, charged Bonneville sold electricity that cost 2 cents per kilowatt for 20 cents in California.

Previously, they have introduced legislation to require BPA and other federal power marketing agencies to sell electricity at market rates. That could boost Northwest rates by an estimated $2 billion per year.

"Lawmakers from across the country must recognize that electricity markets - and the Northwest economy - have changed dramatically over the past 60 years. BPA must change too," Franks said in a letter to fellow House members on Monday, Oct. 16.

In their letter to Richardson, Northwest House members said that historically, BPA sold surplus power to California for relatively low prices. But under the state's industry restructuring law, all suppliers must be paid the "market-clearing price" for sales into the California Power Exchange -- even though Bonneville consistently bids its surplus power at prices below the market-clearing prices.

"Thus, it is California state law, as opposed to BPA pricing policies, that is responsible for BPA's price differentials," the House members said in their Oct. 17 letter.

By law, BPA can only sell power to California that is surplus to Northwest needs.

BPA has sold about 6,000 megawatts of surplus electricity -- about a fifth of its load -- to Southern California Edison, Bay Area Rapid Transit and several California cities under long-term contracts. But the agency recently notified them that it is unlikely to renew their contracts next year because the Northwest needs the energy. The Northwest Power Planning Council has projected that the region faces an increasing risk of winter peak power shortages.

On Oct. 6, three California Democrats -- Sens. Barbara Boxer and Dianne Feinstein and Rep. George Miller -- asked Richardson to intervene and stop BPA from signing new long-term contracts with Northwest entities "until Congress has had an opportunity to review" the situation and its impacts. "My constituents paid for those dams, too," Miller said.

In their separate letters to Richardson, Northwest senators and House members strongly opposed any delay in the contracting process and said it could pose financial, economic and environmental problems for the Northwest. "Bonneville's cost-based power sales have been a bedrock of the Pacific Northwest economy for over 60 years, and their continuation is essential to avert economic disruption in the region," the House letter said.

Current contracts will expire Sept. 30, 2001.

Delay of the subscription process and consequently of the agency's 2002-2006 rate proposal "would throw the agency into financial chaos and pose a serious threat to BPA's ability to meet its financial obligations to the U.S. Treasury and its responsibility to help fund the recovery of endangered fish and wildlife in the Columbia River basin," House members wrote.

They also said BPA has conducted an intensive four-year public process to allocate power and meet its legal requirements, and that at least one congressional hearing has been held. "Members of Congress and their constituents have had ample opportunity to express their concerns with the subscription process to Bonneville and the Department of Energy," they said.

Northwest members deny Bonneville receives federal subsidies and is repaying the federal government with interest for the cost of constructing hydropower facilities.