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A Look Ahead Mark Ohrenschall Con.Web, July 29, 2004

BPA Proposes Continuing, But Potentially Different,
Post-2006 Role in Conservation, Renewables

Bonneville Power Administration proposes a continuing--but potentially different and in some ways diminished--role for itself in regional energy conservation and renewable energy development after fiscal year 2006.

The federal power marketing agency plans to pursue its relative share of Northwest energy conservation potential, while emphasizing low-cost conservation to minimize wholesale rate impacts. Most regional energy savings would be gained through local endeavors, in BPA's view, although some regionwide approaches would be suitable.

Meanwhile, Bonneville envisions it would facilitate renewables development, through such means as integration services and transmission improvements, but it would avoid buying large amounts of renewably generated power.

These broad concepts are contained in BPA's "Policy Proposal for Power Supply Role for Fiscal Years 2007-2011," released July 7 as part of the agency's Regional Dialogue process on its post-2006 future.

Many details on specific approaches remain to be determined, including the fate of BPA's current primary energy-saving initiatives, Conservation Augmentation and the Conservation and Renewables Discount Program.

The BPA document offers a long-term notion to limit BPA firm power sales, at the lowest cost-based rate, to the existing capacity of the Northwest federal hydropower-based system. Additional loads would be charged a higher, tiered rate, which could influence regional utility conservation and renewables development.

"This draft decision is built around creating an environment in the region that encourages investment in generation, transmission and energy efficiency," said BPA administrator Steve Wright in a news release. "Developing needed infrastructure is the key to a successful, stable energy future for the region."

BPA is seeking public comment on its proposal through Sept. 22; six public meetings also are scheduled around the region. Wright plans to sign a final record of decision on these policies by December.

Regional Dialogue

The Regional Dialogue is an attempt by BPA to "provide clarity around key issues the agency and region will face when the current rate period ends with FY 2006," according to the July 7 proposal. "BPA's immediate goal is to decide issues for the FY 2007-2011 period that prepare the way for setting rates for the next rate period while assuring that the agency's long-term strategic goals and its long-term responsibilities to the region are aligned."

This process began in spring 2002 with a joint proposal from a group of Northwest utilities, centered on resolving litigation over BPA's residential exchange program for investor-owned utilities as well as the longer-range marketing and distribution of energy from the federal system.

BPA slowed the Regional Dialogue in early 2003 to address its financial woes, but Northwest governors in June 2003 urged a resumption. The Northwest Power and Conservation Council weighed in with its recommendations in May, followed by BPA's proposal.

Bonneville first wants to "resolve policy issues that likely will influence the next rate case and which must otherwise be made before 2007." Accordingly, Bonneville's document outlines its thinking on tiered wholesale rates (not recommended as a 2007 proposal, but possibly as a long-range way to limit cost-based firm sales); the duration of the next rate period (likely less than five years, to reduce risks); service to different types of customers; power products; conservation and renewables; and cost-control mechanisms.

Looking further ahead, BPA also proposes to eventually "limit its sales of firm power to its Pacific Northwest customers' firm requirmeents loads at its embedded cost rates to approximately the firm capability of the existing Federal system. BPA is further proposing a policy that firm power service beyond what the existing system can supply would be provided at a higher tiered rate that would reflect the incremental cost of purchasing power to meet those additional loads."

BPA advanced several rationales for this notion, including lower wholesale rates, assurances on load responsibilities and electric infrastructure development, and the sending of market price signals to help utilities render decisions on conservation and other resources.

Conservation Concepts

BPA's proposal expressed general support for continued energy-saving activities, pledging that "conservation will remain a major portion of the agency's resource portfolio in the future." This jibes with the Pacific Northwest Electric Power Planning and Conservation Act, the document noted, while also benefiting the region's energy efficiency infrastructure.

The July proposal spells out five principles for conservation development, but is intentionally unclear on the details. "BPA envisions some form of collaborative planning process in which experienced individuals can develop a fully defined proposal for conservation that can then be brought to the entire region for consideration," it said.

ConAug, C&RD and the Northwest Energy Efficiency Alliance "may provide a solid foundation for establishing viable program elements," the proposal continued. It also said conservation and demand-side management "will be carefully considered" as an alternative to transmission line construction.

"We've got some fairly high-level principles that are critical going forward," BPA energy efficiency vice president Mike Weedall told Con.WEB in June.

First, BPA wants to use the Council's upcoming regional plan to set energy-saving goals. BPA will "continue to be responsible for our share of the region's conservation, and we want to work with others to make sure their shares of conservation also get acquired," said Weedall.

The second principle is localism. Although some regionwide strategies are viable--such as market transformation via the Alliance--"The bulk of the conservation to be achieved is best pursued and achieved at the local level," the proposal said.

Third, cost considerations are key: "BPA will seek to meet is conservation goals at the lowest possible cost and lowest possible rate impacts." The proposal notes C&RD savings cost about $2.2 million per average megawatt, while ConAug comes in about $1.3 million and Alliance savings are around $1 million. "The wide variance in cost per aMW offers a significant opportunity for the region to pursue an important cost-saving option," it said.

BPA also plans to financially support local utility planning and implementation of conservation programs, "with the appropriate level of funding open for discussion."

Finally, Bonneville wants to keep funding education, outreach and low-income weatherization programs, which the proposal describes as successful complements to the conservation portfolio.

Renewables

BPA proposes a fundamental shift in its approach to renewables, calling for "an active and creative facilitation role ... This signals a move away from large-scale renewables acquisition toward a greater focus on finding ways to reduce the barriers and costs interested customers face in developing and acquiring renewables."

Bonneville now buys the output from 198 MW of renewable resource capacity, almost entirely wind power.

For renewables facilitation, BPA lists several options.

One is integrating renewables into the grid, as with its recent introduction of wind integration services (see Con.WEB, Jan. 30, 2004). "These services, and other intelligent and prudent uses of the flexibility of the Federal hydro system, will serve as the centerpiece of a renewable resources facilitation effort," the proposal said.

Transmission upgrades are another avenue, potentially including new lines "to foster the development of the region's excellent wind resources," as well as more effective use of existing wires.

Continuing the renewables piece of the C&RD is a third possibility.

BPA also floats the prospect of a "limited" role in buying renewable power, as an "anchor tenant" for projects, but cautions that "direct acquisition places the greatest financial demands on BPA and would be subject to rigorous financial and risk tests before approval."

Bonneville proposes to continue its net annual spending on renewables of up to $15 million, plus $6 million yearly through C&RD, though the agency hasn't decided whether the discount program is the right vehicle.--Mark Ohrenschall

Related Pages:
Bonneville Power Administration's Policy Proposal for Power Supply Role for Fiscal Years 2007-2011
NPCC Analyses Look at NW Power Supply Columbia Basin Bulletin,3/5/4
Bullish on Conservation by Mark Ohrenschall , Con.Web 5/28/4