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National Perspective | ENERGY

California's Electricity Woes Power Up Northwest

Bonneville agency's sales to Golden State keep rates low for customers up north. But doubts remain on how long the region can benefit from its federal dams.

April 05, 2001|KIM MURPHY | TIMES STAFF WRITER

PORTLAND, Ore. — As California searched last summer for surplus electricity to keep its air conditioners humming, the Bonneville Power Administration stepped forward to help.

How much did the marketing agency charge for each of the 489,000 megawatt-hours it shipped south, power generated by the massive federal hydropower dams in the Northwest?

If you guessed $22.39, the amount BPA charges public utilities in Seattle, think again. The average price was three times that. And at the height of the power-marketing frenzy, Bonneville got $750 a megawatt-hour, 33 times what public utilities and private firms in the Pacific Northwest were paying.

As power generators throughout the West profited from California's energy appetite last year, so too did Northwest customers: BPA netted $400 million from sales to the Golden State, which helped hold down rates for private electricity users here who already pay the lowest rates in the nation--half of what Californians pay.

And major aluminum, steel and chemical companies across the region--which not only pay lower rates but also have the right to purchase certain allotments of energy produced by the federal dams--stand to pocket $1.8 billion in the next few months by reselling or exchanging their shares so Bonneville can help California out of its crisis.

How long, Northwestern politicians wonder, can the region hold onto the exclusive benefits of a multibillion-dollar network of 29 federal dams on the Columbia and Snake rivers--legendary edifices such as Bonneville and Grand Coulee?

How long, others ask, should it be able to?

California's two Democratic senators--Dianne Feinstein and Barbara Boxer--have questioned the fairness of locking in low power rates "for a select group of consumers, to the detriment of tens of millions of others whose taxes also paid for the facilities that generate and manage that power source."

Said David Luken of the Edison Electrical Institute, a coalition of investor-owned utilities: "It would be as if California took all the revenues from offshore oil and used it to hold down gasoline prices in Los Angeles."

Critics estimate that BPA routinely sells its power to customers in the Northwest for about $1 billion a year less than it could earn at market rates. Last year, the gap spread to about $3 billion. The BPA is the major reason homeowners in Seattle are paying 5.4 cents a kilowatt-hour for electricity; Southern California Edison customers pay 10.2 cents.

After suspending sales to California late last year because the power the BPA was able to generate in the face of an extreme drought was needed in the Northwest, the agency briefly resumed sending electricity south last month--dispatching between 600 to 1,000 megawatts an hour for about eight days between March 7 and March 21.

Although officials would not disclose the negotiated price, the market rate for power then ranged from $210 to $350 a megawatt-hour.

Despite the windfall sales to California, however, the BPA has its problems. With contracts to deliver much more power than it can generate, BPA has said it would have to institute rate increases totaling $3 billion a year or more unless it can wean substantial blocs of customers off of federal power.

The belt-tightening threatens the region's aluminum industry and ratepayers in Washington state, Oregon, Montana and Idaho--some of whom already have seen their electric bills rise 50% or more over the last few months.

The looming fiscal emergency is so severe that Oregon Gov. John Kitzhaber recently proposed seeking a temporary reprieve from most of BPA's annual $732-million debt repayment. That is money to reimburse federal taxpayers, who funded the region's massive system of concrete and generators.

Most Northwestern political leaders are loath to miss a Treasury payment--as many believe that would leave the agency ripe for plunder.

That is the region's greatest fear: that California's hefty congressional delegation will make a grab for the agency's power.

The debate over who controls BPA--and who benefits from it--promises to emerge as a key question before Congress as the West's energy woes continue.

Several Northwestern legislators have proposed buying BPA back from the federal government in an attempt to lock in benefits for regional ratepayers. Congressional lawmakers last year countered with a proposal to force Bonneville to sell low-cost power to private utilities in California. Some also proposed auctioning BPA power at market rates--ending the cost-based, regional-preference formula.

BPA contracts with about a dozen users--companies such as Alcoa, Kaiser and Reynolds--that have guaranteed the energy-intensive aluminum industry access to a fifth of Bonneville's power at rates lower than those paid by other customers have come under particular scrutiny.

The contracts are so lucrative that Kaiser is expected to earn up to $500 million this year by shutting down its factories and remarketing its BPA power allocation.

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