The new money will speed up building lines to the new green energy economy. Or will it just touch off more power struggles? The Northwest has a rich history of these epic battles over public power. Part 1
Conservatives who fear for our future (not to say our souls) if government winds up owning banks or auto companies should get a clue: Government has owned crucial parts of our economy for generations, and no place more than in the Pacific Northwest. (They should also brace themselves: New York Times columnist Paul Krugman wrote recently that it has been "interesting to watch the idea of temporary bank nationalization move from the fringe to mainstream acceptance.")
Here in the Northwest, of course, creeping socialism has crept further into energy than into banking. Ever since the Great Depression — it's still a bit early to say the First Great Depression — the feds have built, owned, and operated the Columbia River Dam system that has generated much of the region's electric power.
They're still at it. The stimulus legislation just passed in Congress will enable the Bonneville Power Administration (BPA), which transmits and markets electricity from the dams, to borrow another $3.25 billion from the federal treasury for capital construction. Three-quarters of the projects on BPA's to-do list involve building or expanding transmission lines. The BPA will probably use some of the extra borrowing capacity to build new lines to wind farms near Goldendale and The Dalles. Most of the people who use electricity live far from the places in which most of the wind blows, so getting one to the other is a key development of wind power.
The BPA, which was created by the Bonneville Power Act of 1937, may well become a federally financed midwife of the 21st-century green energy economy. Whether or not it does, the agency has long played a crucial role in regional energy rates and policy. People still argue over who should benefit. and how much. No matter which side you are on, someone else is getting more than a fair share.
Last fall, the BPA "promised to cut wholesale power rates for public utilities by 1 percent...and send them an additional $240 million in refunds of past overages," Ted Sickinger wrote in the Oregonian. "Meanwhile, residential and small farm customers of investor-owned utilities (IOUs) were promised a resumption of payments from BPA that lower their monthly bills. The payments, however, will be much lower than those customers received between 2002 AND 2007.”
Predictably, no one is happy with BPA's promises. Public utilities want more; so do the IOUs. The least-happy campers have already gone back to federal court. At stake are millions of dollars that either will or won't show up on people's electric bills. At stake also may be the principles on which the BPA was established nearly 70 years ago.
It may now seem as remote as the battles over prohibition, but for much of the 20th century, government involvement in electric-power production was a hot issue at both national and state levels. Battles between allies of and lobbyists for public and private utilities consumed Washington state politics into the 1960s. During the New Deal, the feds jumped into the electric-power industry with both feet, creating the BPA and the Tennessee Valley Authority, and launching the construction of dam systems on the Columbia and Tennessee rivers.
The 1937 legislation that established the BPA to market and transmit power from federal Columbia River system dams gave a clear preference to public utilities and cooperatives. They got first crack at that cheap, plentiful hydropower. Everyone else had to get in line.
Lots of people, including a large share of the nation's aluminum smelters, did line up — so many that as the 1960s ended, it became clear that when you added up all their demands on the system, even the Columbia River couldn't produce enough power to go around. In the energy-conscious 1970s, everybody had a Christmas list: The aluminum industry, which was taking some 40 percent of the power marketed by BPA, wanted new, long-term contracts. The IOUs wanted access to some of the cheap hydropower that public utility customers enjoyed. The publics naturally wanted to make sure their good thing lasted.
The Northwest's Congressional delegation wanted to prevent an unseemly scramble for kilowatts that would leave the aluminum industry and perhaps some utilities out in the cold. Senator Henry M. Jackson and regional utility and aluminum executives began developing legislation that would allocate the region's cheap hydropower in a time of scarcity. Their vehicle was the 1980 Pacific Northwest Electric Power Planning and Conservation Act, which set up a Northwest Power and Conservation Council to create power plans for the entire region.
The act created a program called "residential exchange," which made cheap power available to residential and agricultural customers of IOUs at the kind of low rates enjoyed by customers of Public Utility Districts (PUDs). The legislation referred back to language in the original Bonneville Power Act that granted preference to public utilities and cooperatives. It specified that nothing in the residential exchange should raise the preference-customers' rates. It said that an IOU could calculate its average system cost, and the BPA would basically pay it the difference between that cost and the cost of supplying the same number of residential customers from the Columbia River dams. The payment couldn't come from the rates of preference customers. The BPA would have to get the money someplace else.
In 2001, the BPA "settled" the rights of big investor-owned utilities to payments under the residential exchange program, paying them sums not based on a current calculation of system costs, and with money that came in part from public utility customers' rates.
Inevitably, public utilities sued. Actually, before the case was settled, lots of people sued. The BPA suspended payments until the suits were settled. Last year, the 9th Circuit ruled against the BPA. The fact that the agency termed the deal a "settlement" didn't give it a free pass to avoid the legislative requirements of either 1980 or 1937. Lapsing into rare judicial sarcasm, the court said:
We think it obvious that the contracts into which BPA may enter must be grounded in the authority ... that Congress has granted BPA. Congress may have authorized BPA to enter into contracts, but BPA cannot acquire an NBA franchise just because it can be accomplished by contract; BPA has broad authority to settle claims, but it cannot buy timeshares in the Bahamas by calling them a "settlement." ... A settlement agreement cannot be a means of bypassing congressionally mandated requirements.
Next: The BPA devises a new settlement formula.