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Economic and dam related articles

Power Council Urges BPA
to Alter Ways it Sells Electricity

by CBB Staff
Columbia Basin Bulletin - May 14, 2004

To improve the long-term economic stability of the Bonneville Power Administration and its customers, Northwest Power and Conservation Council recommends that the federal power-marketing agency fundamentally alter the way it sells electricity.

Bonneville sells the output of the Federal Columbia River Power System, which includes 31 federal dams and one non-federal nuclear power plant. Bonneville is required by law to sell power first to publicly owned utilities and to meet all of the demand placed on it by those customers. Because the existing federal power system cannot meet all of the demand of Bonneville’s customers, the agency buys power for its customers from other sources including the competitive wholesale market, where prices can be volatile. Bonneville’s customers currently pay an average rate that reflects the cost of the purchased power and the cost of power from the existing federal system.

The Council’s recommendations would have Bonneville market the output of the existing federal Columbia River Power System to eligible customers at rates reflecting the embedded costs of the system. Service beyond the capability of the existing federal system would be provided in such a way that customers requesting that additional service would pay for it, and the cost would not be melded into the rates paid by other customers.

The Council believes these changes should be implemented through long-term (20-year) contracts guided by a clear and durable statement of energy policy. Meanwhile, Bonneville should continue to pursue cost-effective energy conservation and renewable resources.

The Council believes these policy changes would not affect Bonneville’s fish and wildlife mitigation obligations. Costs of that mitigation should be allocated to the existing power system, the Council recommends.

The Council also recommends that Bonneville provide a limited amount of power for a limited period for its direct-service customers, primarily Northwest aluminum smelters. This could involve Bonneville purchases of market power. To minimize the cost to other customers, Bonneville should sell power to the industries through contracts that allow the power to be interrupted in emergencies, the Council recommends.

The recommendations approved today are similar to those the Council made in 2002, the last time Bonneville took up the issue of its future role in power supply. That process slowed, however, as the agency dealt with a financial crisis. The financial crisis resulted, coincidentally, from Bonneville’s extraordinary power-purchase costs during the energy crisis the previous year.

The Council will forward its recommendations to Bonneville, which plans its own public process this summer to assess its future role in regional power supply.

The Council is an agency of the states of Idaho, Montana, Oregon and Washington and is directed by the Northwest Power Act of 1980 to prepare a program to protect, mitigate and enhance fish and wildlife of the Columbia River Basin affected by hydropower dams while also assuring the region an adequate, efficient, economical and reliable power supply.

CBB Staff
Power Council Urges BPA to Alter Ways it Sells Electricity
Columbia Basin Bulletin, May 14, 2004

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