Dividing Up the BPA Pie

A series of meetings is underway to decide how the biggest source of low-cost energy in the Pacific Northwest Region will be divided and distributed among consumers. The source of energy is the federal hydropower system, which is administered by the Bonneville Power Administration (BPA), and the ongoing discussion is called the Regional Dialogue. BPA’s energy is produced primarily as hydropower generated by dams on the Columbia River System (including those on the Snake River) and also by one still-operational nuclear plant in Washington State. Since Woody Guthrie sang of the Columbia River, “your power is turning our darkness to dawn, so roll on Columbia, roll on,” many groups have been jockeying to obtain a share of the Columbia’s massive power for themselves.

BPA’s current customers, or constituents, include public utilities of the Northwest, large industrial customers, and residential and small farm customers of investor-owned utilities (IOUs) such as Pacific Power and Portland General Electric. Because the federal hydropower system is limited, it is important that this cheap hydropower be allocated fairly among all these constituents. CUB’s staff attorney, Jason Eisdorfer, sits on the Principals Management Group and is one of the only consumer group representatives advocating for residential customers at the Regional Dialogue table, where everybody wants to maximize their piece of the pie. Other stakeholders include the Northwest’s Indian Tribes, fishermen’s associations, and environmental groups. The Regional Dialogue involves a complex set of issues, but one we thought was worth talking about.

Although customers of IOUs receive a fraction of the value of low-cost power that public power customers receive, they have still tended to be perceived as a cost to the federal system by BPA. This is because IOUs receive low-cost power through a program called the Residential Exchange, which was set up in 1980, and involves a shifting of numbers rather than an actual flow of energy. When BPA sells power through the Exchange, it actually writes the utility a check for the difference between the utility’s cost of power (purchased or generated from elsewhere by the utility) and the cost of BPA’s lower-cost (mostly) hydropower. The amount of this check gets passed through to residential customers as a reduction in rates. The Exchange is important in that it is the mechanism that provides residential customers with their portion of the value of the federal power system.

The public utilities, on the other hand, simply purchase the power they need from BPA, for the inexpensive price of about $.03 per kilowatt hour, a rate called the Priority Firm or PF rate, and very highly valued by those who have it. People in other parts of the country would love to have this rate. And, in fact, CUB and others in the Northwest regularly have to fight back efforts from other parts of the country to try to force BPA into selling its power at market rates, sending the increase in revenue back to Washington, D.C. to pay off the expanding federal deficit. Another concern is the uncertainty in BPA’s revenue stream that is created when some of its customers come and go, following the short-term energy market. This has become an increasingly popular and yet dangerous choice in the last decade, as the market has become more volatile.

The proposed solution to these concerns is locking in long-term, 20-year contracts for BPA power. In this way, BPA is freed from the uncertainty of wavering revenues, and the federal government receives a steady stream of income from the BPA system, while at the same time being prevented from tying its customers to the vast fluctuations of market costs. The downside of 20-year contracts is that you lock in agreements based on a set of conditions that are like a snapshot in time, conditions which are bound to change in unexpected ways over the course of two decades. So, for example, some of the issues of long-term contracts that CUB has emphasized—and stakeholders are discussing—include:

1) What percentage of the system do residential customers get? (This, of course, is a priority issue for CUB.)

2) How much does BPA commit to spending on renewable energy resources and energy efficiency programs?

3) Does BPA invest in more generating facilities or do individual utilities make those investments? And how do we ensure adequate investments are made, not knowing what energy demands will be in future years?

4) What happens if a new public utility is formed during the 20-year contract (for example, what if PGE were to go public)? Is a new public utility shut out of PF rates?

The decisions made in this Dialogue will affect rates for customers in Oregon for years to come. We are working hard to try to ensure that everybody gets a fair slice of this federal power pie, in particular keeping an eye out for residential customers’ access to BPA lower-cost power, since we are one of the only advocates for residential Exchange customers at the table. At the same time we feel it is important to give a fair hearing to other stakeholders who are working to protect our environment, our Native Tribes, or our larger regional economy.

BPA is hoping to bring groups together in consensus and reach a Regional agreement within the next several months.

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