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5 Questions: Wind at Back,
BPA Chief Looks Ahead

by Ted Sickinger
The Oregonian, December 7, 2008

Steve Wright, chief executive of the Bonneville Power Administration, has a lot to be thankful for this holiday season, even as he faces a potential crossroads in his career.

The BPA, which doles out cheap hydropower generated by 31 regional dams and one nuclear plant, just signed long-term contracts with all 135 of its customers -- perhaps the first unanimous decision in the public power community in two decades.

Wright Needs people

The contracts are one of the high-water marks in Wright's eight-year tenure running the BPA. They fundamentally change the way the agency does business, divvying up the hydropower system for the next 20 years and leaving customers responsible for acquiring power they need above and beyond what the BPA has agreed to supply. The BPA says the new rules will stabilize its rates and give customers flexibility to build their own plants or buy power in the market, which some think they can do more nimbly and economically than the 800-pound federal gorilla.

But just getting to this point took years of wrangling.

On top of that, the agency was able to resume making payments this year -- albeit reduced payments -- under its residential exchange program, which shares the benefits of the federal hydropower system with residential customers of private utilities that don't buy power directly from the BPA. Those payments were suspended last year due to a court ruling against the BPA.

In addition, the BPA was able to reach a fish accord with Native American tribes, integrate a huge amount of wind energy into its system, and start positioning itself to build new transmission capacity in coming years.

Of course, nothing is set in stone. Seemingly every decision from the region's biggest federal agency is second-guessed by stakeholders and often litigated at length.

But for the moment, Wright is counting his blessings and contemplating what he'll do next -- an important question because a new president and administration could choose to shake up BPA leadership. Wright spent a half hour Wednesday answering questions about the past year and discussing his plans. His answers have been edited for length:

New presidents tend to staff agencies with their own leadership team. Will that include Bonneville, and is it your desire to stay on after eight years?

I haven't really decided what I want to do. For me, one of the most important objectives was getting to these long-term contracts, and I feel good about doing that. But there's also some fascinating work coming up over the next few years as we address new power supply for the region, particularly wind. There are some really fun things left to do.

The question for me is that a new team will come in, a new secretary of energy, a deputy secretary of energy. They'll want to have a conversation about the direction they'd like Bonneville to go in. I expect that conversation will take place in the spring some time. I have to do a gut check myself. This job takes a tremendous amount of emotional energy, and I need to consider if this is something I'm willing to continue putting heart and soul into.

There has already been quite a bit of turnover in the BPA's top management in the past 18 months, and the agency seems to be on a bit of a hiring binge on its transmission side. Why is that, and is it a departure from the efficiency efforts and downsizing of a few years ago?

We've been worried for quite some time about succession planning, and not just in the executive suite. For any young people who read this, there are job opportunities in the utility industry. We've been planning for that and thinking it through, so we have hired people from outside for senior, midlevel and entry-level jobs.

Our head count has ranged from a high of 3,300 to a low of 2,700. We're at the midpoint of our range right now, higher than we were a couple years ago but within the historical range. I would expect we will continue to see turnover based on retirement demographics. The question now becomes whether those demographics change because of what's happening in the economy.

You've had a long to-do list this past year. With the contracts signed, where does that put you in this marathon process?

It's been an ambitious year and a successful year. I'm exhilarated by getting these long-term contracts signed. We've been at this for six years. It's a huge watershed moment that secures the value of the federal hydro systems for Northwest consumers, ensures a cost-based rate and restructures Bonneville's business where we'll be sending a marginal price signal for load growth. We believe that will create more local control for utilities and unleash creativity that will hopefully lead to more generating resource development.

The core of the West Coast energy crisis was a supply and demand problem, so a fundamental goal for us has been structuring our policies to ensure adequate resource development. Under the existing system there was not clear accountability about who has the obligation to serve load growth, whether it's Bonneville or the customers. And any management system that lacks clear accountability is more likely to fail. These new contracts create that accountability by saying our customers have that responsibility.

You've taken a lot of heat for proposing a long-term contract that provides cheap power to at least one, and maybe two, aluminum companies in the region. Opponents are asking why it's fair to provide a $66 million annual subsidy to Alcoa to save only 480 jobs, while other customers are struggling as well?

Bonneville will recover all of its costs, so ultimately there's no subsidy from taxpayers to ratepayers. The question of whether one ratepayer group is "subsidizing" another really gets to the question of who has the rights to the underlying system.

The public utilities argue that Bonneville does not have the legal authority to serve the aluminum companies. The aluminum companies argue that we have a legal obligation to serve them. We've said that we have the discretion. We're not going to serve them at their full historical load. We're proposing to serve them at half that level, and the price we'll charge them is a higher rate than our preference customers get. That's the compromise. They don't get the rate preference customers get, but they don't get nothing.

We haven't decided whether we're going to go ahead with it. We're still in the process. We have the public comments; the next decision is whether to proceed with a final contract. We have to make that decision, then take more comments, then decide whether we're going to actually ink the deal. We're still more than a month away from coming to a conclusion on this.

Do any of the federal stimulus measures being discussed involve or impact Bonneville?

If you look at what we've been proposing in our budgets for the next few years, we've been talking about substantial ramp-up in capital programs. We're authorized to spend money on energy efficiency, on transmission -- primarily what we're building these days is for renewables -- and for fish and wildlife.

Those kinds of investments also seem to be the kinds of infrastructure investments the new administration has been talking about in terms of creating the combination of economic stimulus and a transition to the green economy. So I think that package of things we're talking about investing in is going to make sense in the environment we're going to be in for the next four years.

The limitation on our program is access to capital. We have a limited amount of authority to borrow from the U.S. Treasury. The question that is certainly going to arise is whether there should be an extension of Bonneville's existing authority. Most of our public preference customers have indicated their support for an increase in borrowing authority.

The key thing is the repayment, and we have a sterling repayment record. Even in the midst of the West Coast energy crisis, we made all our scheduled payments on time. So a strong case can be made that this is an investment that gets repaid. The system is growing, and systems that are growing devour a lot of capital.

Ted Sickinger
5 Questions: Wind at Back, BPA Chief Looks Ahead
The Oregonian, December 7, 2008

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