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Changing Currents: Picturing a Northwest
Without Cheap, Public Hydropower

by Felicity Barringer
What If! & The West, January 29, 2018

The power gained by harnessing the Columbia River paved the way for industrial development and widespread
farmland irrigation. But what if, instead of public utilities, that power had been sold by private firms seeking profits?

Bonneville dam is the most downstream dam on the Columbia River After the creation of states of the Pacific Northwest following a series of treaties with Native tribes in the mid-19th century, the area's most dramatic transformation came with the arrival, in the late 1930's, of large-scale, low-cost hydropower developed by the government from the muscular Columbia River system.

The power gained by harnessing the Columbia River paved the way for industrial development and widespread farmland irrigation. But what if private firms seeking profits had developed the power? This blog again looks at how the West might be different if a major event had -- or had not -- occurred.

'Electricity and Power Made So Cheap That They Will Become A Standard Article Of Use'

By the time of the Great Depression, "There had been a debate going on for decades between public and private power," said John Findlay, an historian at the University of Washington. In the early 20th century, success in the turbulent power markets had brought enormous wealth to men like Chicago's Samuel Insull, whose face inspired the cartoon plutocrat of the Monopoly board game.

The collapse of Insull's empire of electric holding companies "contributed a great deal to the fall of the stock market" in 1929, said Libby Burke, an historian at the Bonneville Power Administration. Other scholars disagree about the utility bubble's role, but public dislike of private electric companies was pervasive as the Great Depression took hold. In 1934, Franklin Roosevelt, speaking at the site of the Grand Coulee dam on the upper Columbia River, said, "We are going to see electricity and power made so cheap that they will become a standard article of use. . ."

Roosevelt's Bonneville Project Act of 1937 called for a federally-constructed hydropower grid and federally-controlled distribution of the power. In the decade thereafter, the populations of Washington and Oregon grew by more than 37 percent, almost double the rate of the U.S. population. The hydropower and World War II sparked an economic revolution.

What if a call for private power had prevailed? Counterfactual arguments are endlessly debatable. This one explores a question that keeps coming back. In 1984, the Grace Commission, appointed by President Reagan, recommended privatizing all federal systems for generating and transmitting power. Last spring, President Trump's first budget proposed privatizing Bonneville's transmission assets.

In the 1930s, Roosevelt's policy of cheap power was sold with the strumming guitar of Woody Guthrie, the federal pitchman, who lionized dams "for the farmer and the factory and all of you and me." "Once Franklin Roosevelt comes to power," said Professor Findlay "they want to introduce the idea of a planned economy, a coordinated economy. Public power got a huge boost from that." Carol Opatrny, a longtime consultant to lawyers and companies dealing with the Bonneville Power Administration, said simply, "Higher prices would have slowed things down."

The biggest evidence for their argument: the arrival of the power-hungry aluminum industry in the late 1930s. Production of aluminum ingots requires large, steady and continuous amounts of electricity. It requires roughly 10 times the power needed to make steel, glass, or paper.

In the East, the first big company, Alcoa, usually located factories near hydropower sites, sometimes generating its own hydropower. It didn't come to the Northwest by accident. The Bonneville Power Administration was charged with managing and marketing the hydropower from the Bonneville and Grand Coulee dams. With local towns, businesses and politicians, BPA aggressively courted the industry. Their big draw: cheap power. In 1940, private companies serving towns with aluminum smelters, like New Kensington, Pa., charged industries up at least double the Bonneville rates per kilowatt-hour, based on the Federal Power Commission's archival data.

BPA's additional mandate, to electrify rural areas, set it apart from private companies, whose profit motive discouraged the practice. As Ms. Burke said, they "weren't going to spend the money to send electricity to those places" in areas with few customers.

Aside from price, the attraction for industry was "an abundance of power was available 24/7," said Ms. Burke. Ms. Opatrny noted that other power-hungry industries, like primary metals, pulp and paper, steel, and chemicals, also arrived. "They came as the [power] load enabled further development. It was the availability and relatively low cost that brought them in droves," she said.

The arrival of aluminum production came as World War II broke out. The strong, lightweight metal was crucial to building America's arsenal. Boeing built bombers with it; Kaiser shipyards along the Pacific coast used it for warships. BPA devoted large electrical resources to the "mystery load," -- power from two of the eight generators at Grand Coulee was set aside to create the plutonium for the atomic bomb dropped on Nagasaki.

Now 31 dams provide hydropower for the Federal Columbia River Power System. The BPA sells it to 142 of the region's consumer-owned electrical utilities -- public power districts -- and six of the area's eight investor-owned utilities. In 2018, the BPA is the source of about one-third of the region's electricity, and BPA power reaches California and the Southwest.

Aluminum has long ceased to be the industrial king of the Columbia River. Six decades after 10 aluminum smelters were built, the power-hungry offshoots of a very different industry have followed their footsteps. Almost all of the smelters around the river have been shuttered. About 3 gigawatts of electricity could have remained idle.

Graphic: Bonnevlle Power Administration pricing displayed with and without inflation (1940-1987). After Aluminum's Decline, A Search for New Customers

Then, in the first decade of the 21st century, technology firms, which need copious and reliable power to run and cool huge data centers, moved in. Would they have come without cheap public power? Unclear.

There were at least two other lures. First, tax breaks. Just as locals did in the 1930s, the towns and counties around the Columbia River competed to attract firms, offering huge tax breaks. Second, the region's technologically savvy workforce. And some technology executives have expressed a preference for "green" power.

Data centers -- the muscles and memory of the Internet -- are essential to the reach and profitability of companies like Amazon and Microsoft.They are now in Washington towns like Wenatchee -- a former smelter town -- and Quincy and Oregon towns like Boardman and Prineville.

Aluminum and the internet. "Both industries are power-electricity intensive," said Massoud Jourabchi, manager of economic analysis at the Northwest Power and Conservation Council. "The main difference. . . is that power was a much larger cost of the aluminum industry than of the data centers. Profit margins weren't that high for aluminum.

". . .Both needed cheap, reliable power, but the revenue picture was not the same. You're dealing with selling aluminum versus selling advertising. . . . The margins and the industries are quite different -- and they're at different stages of their life cycle," Mr. Jourabchi said.

How Would Salmon Fare Under a Privatized BPA?

The notion that Columbia River hydropower is environmentally sound gets strong pushback from Native Americans and environmentalists, who point to the decimation of salmon species. Their age-old journeys downriver to the ocean as juveniles and upriver to spawn as adults are impeded by dams. Manipulations of the river system have added further insults.

The U.S. Fish & Wildlife Service lists 13 Columbia or Snake River stocks of salmonids as threatened or endangered. The BPA spends $250 million to $300 million a year on recovery methods like habitat restoration, fish hatcheries, and fish ladders. The total exceeds $621 million annually when one includes things like debt service and loss of revenue when river water is deployed to help salmon, not to generate electricity.

Since managing the dams and selling cheap hydropower is a federal job, does that mean salmon recovery efforts have more funding with federal control of power than if private firms were in charge? Northwestern tribal leaders think so. Fishing experts working with Native American groups say that private utilities are responsible to a tough boss that BPA doesn't have: shareholders. And private firms have no legal responsibility to honor the 19th century treaties guaranteeing fishing rights. Tribes have opposed privatization of the BPA.

Lowering the Cost of Agriculture... and Enabling Irrigation

Agriculture is another industry whose needs Bonneville has served over the decades. As David Freyberg, an associate professor of civil engineering at Stanford University, explained, "The cost of delivering irrigation water is partially subsidized by the sale of electricity. So even though the power [from Bonneville] is cheap, some of that goes to subsidize the delivery of irrigation water. If the power were private, that would not have happened at all."

And, he said, "farming uses a good bit of energy. There are a lot of groundwater wells, for example. The lower price of electricity does facilitate agriculture." He added, "If power were private, the lack of irrigation would have precluded agriculture."

From 'Economic Backwater' to Vital and Balanced Economy

Reviewing the full regional picture, Mr. Jourabchi said, "The whole economy of the Northwest is resource based. Having access to reliable electricity at below-national-average prices has helped bring that kind of industry into the region. If we didn't have cheap power what would industries have done? It's the cart and the horse. . . . You might have had more efficient kind of productivity if you had a more expensive cost."

But cheap public power, he said, "has certainly made a contribution to the development of the Northwest." Not a small one. No cheap power, less aluminum. No cheap power, probably less of a war industry. No cheap power, a slower migration of electricity into farmland, so a slower rise of the region's orchards and wine industry. No cheap power, less to attract data centers.

"The Pacific Northwest began as an economic backwater, more like a colony that would send raw materials to the nation's industrialized centers and purchase . . . finished products," explained Jeff Hammarlund, a recently retired professor at Portland State University, specializing in Northwest energy policy. "As a result of our low-cost, reliable, and virtually carbon-free power system, our region has blossomed into a more vital and balanced economy based largely on energy-intensive industries. We've become an important center for innovation that contributes benefits extending far beyond the Columbia River basin."

Felicity Barringer
Changing Currents: Picturing a Northwest Without Cheap, Public Hydropower
What If! & The West, January 29, 2018

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