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Energy Bill Deals with Hydro Reforms,
BPA Transmission

by CBB Staff
Columbia Basin Bulletin - May 2, 2003

The U.S. Senate is expected to begin debate next week on a comprehensive energy bill that would enact controversial hydroelectric relicensing reforms and expand federal rate-setting authority over the Bonneville Power Administration's transmission system.

After several weeks of work, the Senate Energy and Natural Resources Committee approved its package of energy production and conservation measures on Wednesday, 13-10, with most Democrats voting no. The four Northwest senators on the panel split evenly along party lines.

The Senate is expected to take up the bill on Monday and Tuesday, but debate could extend as long as three weeks, aides said.

In comparison to the House-passed energy bill, the Senate committee's version would halt a Bush administration effort to deregulate the electric utility industry through nationwide rules set by the Federal Energy Regulatory Commission.

In concessions to Northwest senators, Chairman Pete Domenici, R-N.M., included a provision that blocks the FERC for two years from imposing nationwide competitive electric market standards, which public power utilities oppose. Domenici also agreed to another change in the bill and make Bonneville Power's membership in a regional transmission organization voluntary instead of mandatory. Language specifically states that FERC does not have authority to force federal power marketing agencies, such as BPA, to join RTOs.

But Democrats, including Maria Cantwell of Washington and Ron Wyden of Oregon, said the bill did not go far enough in protecting consumers from price gouging by energy trading companies. "In the name of dealing with concerns over the Standard Market Design proposal, the bill cripples the FERC's ability to respond to electricity crises that may arise over the next two years," former chairman Jeff Bingaman, D-N.M., said.

In addition, Cantwell said FERC's expanded review authority over BPA transmission rates could allow FERC to increase Northwest electricity costs.

That section would enhance FERC's limited authority over transmission rates set by Bonneville Power for the Northwest's federally built high voltage transmission system. It would hold unregulated transmission utilities to a "comparability" standard, giving FERC authority to ensure BPA's transmission rates and conditions for themselves and publicly owned utilities are comparable to those it sets for privately owned companies and are not unduly discriminatory and preferential, according to Cantwell.

Cantwell said the provision conflicted with the 1980 Northwest Power Act and the BPA Act by potentially allowing FERC to require BPA to charge market rates instead of cost-based transmission rates for public power transmission. But her amendment to strike the section was defeated a party-line vote of 11-12, with Smith and Craig opposed.

"The Northwest economy is based on some very energy intensive industries," such as airplane and high-tech manufacturing, and residential rates have skyrocketed because of the 2000-01 Western energy crisis, Cantwell spokeswoman Jennifer Crider said. "This puts us at risk of having our cost-base rates increased. FERC wants to use market based rates for transmission."

An aide to Craig said that while the section is not perfect, Republican senators won other major concessions from Domenici and that Bonneville was sufficiently protected. Committee report language is being written to clarify the provision to address Cantwell's concerns, said the aide, who asked not to be identified.

"We certainly sympathize with Senator Cantwell's concern," he said. "Sen. Craig made that clear during the meeting and to her personally. But we felt had gotten enough concessions from Chairman Domenici to put BPA in a position of comfort and that we didn't need to do more."

The concessions came on Tuesday during a meeting of committee Republicans. Craig, Smith and Sen. Conrad Burns, R-Mont., demanded tougher language in the bill to stop a FERC takeover of traditional state utility regulation.

They "fought fiercely for concessions" from Domenici and other Republicans and threatened to force the electricity title to be dropped in committee and instead debated on the Senate floor, Craig's staffer said. The committee previously deferred global warming and auto fuel efficiency issues to be decided by the full Senate.

FERC's proposed SMD rule would have imposed "a one-size-fits-all national market design for the sale of electricity" on the Pacific Northwest, Craig said. The committee approved language that remands the SMD proposal back to FERC and prohibits any further action on the rule until July 1, 2005. "This gives both the agency and Congress an opportunity to thoroughly examine the flaws contained in the proposed rule and to more thoroughly evaluate the usefulness of such an approach in the hydropower-dependent Pacific Northwest electrical system," Craig said.

The bill also includes reform of the relicensing process for hydroelectric dams that was sought by the hydropower industry and supported by Craig and Smith. Under current law and court cases, federal fish and wildlife and resource agencies can require dam owners to make fish-passage improvements, increase streamflows and set other conditions for relicensing by the Federal Energy Regulatory Commission. "Yet the resource agencies do not balance all of the interests associated with hydropower projects when they submit terms and conditions for a FERC license," Craig said.

The committee bill requires federal resource agencies to document they give "equal consideration" to the economic, environmental and other public impacts of their mandatory conditions before imposing them on licensees, Craig said. It also allows the license applicant to obtain "trial type" administrative review of the conditions proposed by the federal resource agency.

Democrats and environmental and sports fishing groups said the changes bend the process in favor of industry and undermine fish mitigation measures. "The bill creates a new special interest provisions for one group of parties in hydroelectric relicensing proceedings," Bingaman said.

CBB Staff
Energy Bill Deals with Hydro Reforms, BPA Transmission
Columbia Basin Bulletin, May 2, 2003

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