Wednesday, February 14, 2018
POWER PLAY: The Trump administration’s war against renewable power escalated this week with a proposal to sell off the transmission assets of Bonneville Power Administration, the great engine of hydroelectric power to the Pacific Northwest and—notably—Whatcom County heavy industry.
The proposal is part of a promised infrastructure initiative that attempts to goad state and local governments and private industry to spend more on projects without major new federal investments. In doing so, the plan proposes to privatize or otherwise dispose of a broad array of government assets, from airports to highways to power grids.
Without the tinkering of a succession of Republican administrations that have sought to overextend BPA contracts or part out its assets to investor-owned utilities, BPA is self-funding and covers its costs by selling products and services. The bulk of BPA revenues come from the sale of 22 gigawatts of power from 31 federal hydropower plants to 142 electric utilities throughout the Northwest. These utilities include Whatcom County Public Utility District #1 and its customer base.
Altogether, the BPA provides about 28 percent of power used in the Northwest. It also operates and maintains about 75 percent of the high-voltage transmission in its service territory, which includes Idaho, Oregon, Washington, and parts of all the western states.
The Trump proposal to sell these assets was blasted by Northwest senators in the nation’s capital.
“Selling off BPA’s transmission system and abandoning cost-based rates would raise electricity rates and throw sand in the gears of the Northwest economy,” U.S. Senator Maria Cantwell warned. “Northwest consumers already cover the full costs, with interest, of building and operating our region’s hydropower system,” said the ranking member of the Senate Energy and Natural Resources Committee and Washington Democrat.
Cantwell pledged to work with her Northwest congressional colleagues to head off this challenge.
“Our investment shouldn’t be put up for sale to free up money for runaway military spending or tax cuts for billionaires,” Oregon Senator Ron Wyden stormed. “I fought off efforts to privatize Bonneville a decade ago and I’ll do everything in my power to stop this misguided scheme.”
A decade ago the Bush administration sought to require BPA to sell power at market rates, instead of based on the cost to produce the power. That unrealized plan was widely seen by critics as a step toward privatization. But unrealized or not, the administrative changes destablized BPA—and with it, the balance sheets of a score of Northwest industrial employers.
“Our public power customers have made it clear that BPA’s pattern of rate increases since 2008 is unsustainable,” agency officials admitted in a strategic plan for reorganization released earlier this year. “They are also facing competitive pressures and are prepared to look for alternative suppliers when it comes time to renegotiate long-term power contracts in just a few years.”
Powered by the Columbia River network, BPA remains a centerpiece of the Northwest’s energy industry and economy, historically the low-cost provider of electricity. But it has been struggling to maintain competitiveness amid fast-changing markets and technology. Because the BPA’s profile is predominantly hydropower, the agency is also heavily reliant on the amount and timing of precipitation in the Columbia watershed.
The agency was punched hard by the previous Republican administration, which arbitrarily increased BPA’s customer base and destabilized sweetheart power rates to heavy industries like the Alcoa Intalco aluminum smelter at Cherry Point.
In more recent years, lower natural gas prices and a rush of new renewable power coming online— including a growing surplus of solar power in California—have cut the bottom out of BPA sales of surplus hydroelectricity, a source of secondary revenues that help cover administrative costs and keep rates low for public utility customers. The agency faces major capital costs to maintain and modernize aging dams and transmission assets, which BPA needs to operate with more flexibility amid a changing energy market. Bonneville Power administrators outlined these challenges in their strategic plan.
Theirs is a balancing act that attempts to transition the Northwest into a renewable power portfolio with reduced reliance on dammed river systems, but it must be accomplished amid new power capacity additions that are driving down power prices.
The more-with-less balancing act is playing out amid flat demand, increasing costs to meet fish and wildlife obligations, and the need to maintain required payments to investor-owned utilities in the region. The agency is stretched financially. Projections in its most recent rate filing show that its $7 billion borrowing authority with the U.S. Treasury—a transfer from one federal agency to another—could be exhausted by 2023.
By design, BPA’s rates have been increasing faster than those of other utilities or prices in wholesale power markets. The agency raised power rates by 5.4 percent in July and transmission rates by 0.7 percent.
Scott Corwin, executive director of the Public Power Council, which represents BPA customers, said the agency faces a host of issues that it needs to deal with before renegotiating contracts.
“They only have a few years, and there’s a lot of work to do to make sure they’re in the best position,” he said in a statement. “The focus is on responsiveness to customers and the urgent need to make progress toward future competitive products and services,” he summarized.
Trump administration meddling only increases the difficulty in transition; and the recent federal budget rejiggers how BPA sets rates for power it markets from dozens of dams in the Northwest. The meddling exacerbates a narrative that BPA cannot be not competitive and must be sold off.
With it goes the very model of renewable public power in the Northwest.