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Power Council Recommends Changes to Boost Bonneville Stability by Associated Press Longview, WA, The Daily News, April 9, 2004

PORTLAND -- The Northwest Power and Conservation Council on Thursday recommended the Bonneville Power Administration return to long-term contracts to help stabilize regional energy prices that skyrocketed during the Enron scandal and the California deregulation failure three years ago.

Bonneville has suffered periods of financial instability ever since Congress deregulated the utility industry in the early 1990s, and a move to shorter terms for electricity contracts has made things worse, a council report said.

In a draft proposal released Thursday, the four-state council recommended the BPA return to 20-year contracts with its main customers in order to ensure lower rates. Most of the current contracts are 10-year contracts that expire in 2011 but include some 5-year contracts with aluminum companies, traditionally heavy users of electricity.

The council also recommended different rates for the relatively cheap hydropower produced at the 31 federal dams in the Bonneville system and the higher-cost power from newer generating sources, including natural gas turbines.

"The council acknowledges that both new long-term contracts and a revised pricing structure will be necessary," the proposal said.

Utilities not expecting much growth in their customer base would benefit from the lower rates while utilities expecting growth would have to rely on higher rates to meet the increased demand but still qualify for some of the cheaper federal hydropower.

The proposal is intended to shift the burden of providing extra power away from Bonneville when shortages occur.

During the Western energy crisis in 2001, drought, the failure of California deregulation and the Enron bankruptcy combined with unexpected high demand for electricity and lack of new generating capacity to force Bonneville to buy extra power on the open market during the crisis, sending wholesale energy prices soaring.

The council recommended new federal rules to allow Bonneville to negotiate long-term contracts rather than resorting to changes in the Northwest Power Act enacted by Congress in 1980.

"I think it would be disastrous for us to march off and engage in legislative changes," said Jim Kempton, a council member from Idaho.

The council was created by the 1980s act to help balance regional energy needs with fish and wildlife conservation. It has two members each from Oregon, Idaho, Montana and Washington.

Ed Mosey, a Bonneville spokesman, said the council recommendations are similar to a policy statement the BPA is drafting for public comment this summer.

"What we're trying to do is preserve the value of the Columbia River system," Mosey said.

The power council recommendations are open for public comment until April 24.

Related Pages:
BPA's "Lessons Learned"