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BPA Looks to Change Allocation Rules

by Jeff Brady
Oregon Public Broadcasting, April 11, 2002
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PORTLAND, OR (Oregon Considered) -- Northwest electric utilities are working on an agreement that would put an end to legal battles over who gets access to cheap electricity from the Bonneville Power Administration.

The proposal has cleared its first hurdle but it may face serious opposition from Portland. That's because the agreement could derail plans to form a public utility in the city.

Federal law says publicly-owned utilities are first in line for electricity produced by dams on the Columbia River. Investor-owned utilities and aluminum companies are next.

Fifty years ago that was just fine because there was more than enough power to go around. But today the region has grown and electricity consumption is up.

Paul Norman with the BPA says allocating the agency's precious resource has become contentious.

Paul Norman: "The history over decades has been that the various Bonneville customer groups do, sort of, duke it out over who gets how much of the federal power at what price. And the problem with that is it really puts the whole system in jeopardy."

Norman says that's because other parts of the country have their eye on Bonneville and some would like to get their hands on it too.

Paul Norman: "There are plenty of folks outside the Pacific Northwest who think that the people of the Northwest are getting' too good a deal with this federal power. And they're quite willing to step in or attempt to step in and take it away. And if the Northwest is squabbling over this then that door is open to the outside folks."

When last year's drought hit, the B.P.A. found it had committed to supply more power than the federal system could generate. To avoid buying electricity on the volatile spot market, it paid many customers millions of dollars to give up their rights to Bonneville's electricity. The cost of those deals was passed onto the B.P.A.'s remaining customers.

Last fall Bonneville encouraged its three customer groups aluminum companies, public utilities and private utilities to work out their differences so everyone could focus on fighting outside threats.

Jerry Leone with the Public Power Council a trade group for public utilities was game.

Jerry Leone: "We're hoping that this will rid the region of some of the price volatility that we have experienced."

So far, discussions have taken place behind closed doors between Leone and investor-owned utilities like Portland General Electric and Pacific Power. Leone says the result of these discussions will have an impact on everyone in the Northwest.

Jerry Leone: "This is really technical, background stuff that's hard to make sexy for the general public until they see a bill that comes in that's two or three times what it used to be."

Now details of the proposal are being made public.

Steve Weiss is a policy analyst with the Northwest Energy Coalition. He says that instead of promising a certain amount of power, Bonneville's customers would get a percentage of the electricity produced by the federal hydro-system and the region's lone nuclear plant.

Steve Weiss: "You'd slice up the system so each utility would get a percentage of Bonneville's electricity output. But they also would pay a percentage of Bonneville's costs."

Electricity prices would still be based on the production cost but Bonneville wouldn't get over-extended. Weiss likes the proposal.

Steve Weiss: "I think if folks out here in the Northwest want the benefits of low-cost power they should be willing to take the risks of weather conditions. Of the nuclear plant and so on. It's not really fair for us to expect the federal government to take those risks when we get the benefits."

And that could mute the arguments of some outside the region who say the Northwest is getting too good a deal from Bonneville.

Weiss says instead of allocating power in five-year increments as Bonneville has done in the past the agency would sign 20-year contracts with its customers. That would mean 20 years of political peace and no fighting over allocations.

Mark Fryburg with Portland General Electric says it's a wining proposition for everyone.

Mark Fryburg: "And now with an agreement like this if everyone signs off on it, we'll all be on the same page and if someone comes in and says, 'We want BPA power or we want the money from the B.P.A. system,' we can get together and resist that."

There are some downsides Paul Norman with the B.P.A. says it can be risky to sign such a long-term contract.

Paul Norman: "Any 20 year contract can get stale. What happens is people sign 20 year contracts and then the world changes and one side or the other is wishing they hadn't done it."

And Norman says at first glance, it appears the proposal would make it difficult for large public utilities to form. That's because they'd have to wait for the 20 year contract to expire before getting a share of Bonneville's cheap power.

Paul Norman: "This proposal would say that after the year 2006, at least, new public utilities couldn't They could still buy power from Bonneville but they wouldn't be able to get the advantage of the low cost-based rates coming out of the federal power system."

Without Bonneville's cheap electricity there's little benefit in forming a public utility. Several groups in Portland are exploring the possibility of bringing Portland General Electric under public control.

City Commissioner Erik Sten says Portland would have to act quickly to get in under the 2006 deadline.

Erik Sten: "You know, I think we'll know by fall if there's any life to the idea of a publicly-owned utility. So, we're not out of the running but there's a door in front of us that you can see closing and your electricity prices staying high."

Sten says he'll likely ask his colleagues on the city council whether they want to weigh in on the B.P.A. proposal, which also could face opposition from environmental groups. They likely wouldn't support the extended contracts without adequate protections for endangered species.

There's also a wildcard in this proposal the aluminum companies. Historically the industry has gotten about a third of the B.P.A.'s electricity. It has lots of lobbyists in Washington D.C. But so far, the aluminum companies have been left out of negotiations.

Officials with the industry did not respond to OPB's requests for interviews.

B.P.A. officials have now asked the public and private utilities to begin talks with Northwest aluminum companies.

Jeff Brady
BPA Looks to Change Allocation Rules
Oregon Public Broadcasting, April 11, 2002

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