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Northwest Passage: BPA's Changing Role

The treacherous journey toward a more efficient and transparent Northwest power market may be nearing its conclusion.
Fortnightly Magazine - July 2004

has reason to hope that finally the region's fortunes might be turning around.

First, the BPA managed to squeeze an additional $700 million of borrowing capacity out of the U.S. Congress for fiscal year 2003, allowing it to build badly needed transmission capacity, including the region's first new 500 kV-line in decades. "Infrastructure is destiny," Wright says. "The way you avoid price volatility and reliability problems is by building adequate infrastructure."

Second, more than 2,000 MW of new generating capacity has entered service in the Northwest since 2001, taking some of the pressure off BPA's resources.

Finally, in the past year the region's major stakeholders have taken important strides toward a functioning regional transmission organization (RTO). At the same time, consensus is building to create a new role for the BPA that would facilitate private investment in wholesale power supplies, while ensuring that BPA's customers continue to benefit from federal hydro assets. Such efforts are laying the foundation for a more stable and efficient Northwest power market-or at least one hopes they are. The current process-the third wave in an ongoing series dating from 1996-does show signs of greater promise.

"I'm reasonably optimistic that solutions will be found for an effective Grid West [the new name for RTO West], and for BPA to participate in it," says Harvard Spigal, a partner with Preston Gates & Ellis, and previously BPA's senior vice president and general counsel. "In time, the problems that people have had in the past will be worked through."

But, having seen it all before, Spigal adds, "How you get there, and the degree of consensus necessary, is less clear."

Troubled Waters

Depending on whom you ask, the source of the Northwest region's recent power-system problems can be traced back to 1999, 1980, 1937, or even earlier.

In the late 1880s, commercial salmon fishers depleted many fish populations in the region's rivers. Those ecosystems had not recovered by the time dam-building began in the Columbia River system. 2

In the 1930s, Congress created the Bonneville Dam Project to boost the Northwest economy and harness water resources for agriculture and power generation. In 1937, the first BPA administrator was endowed with broad powers to manage hydro-dam operations. On this foundation, the agency would become a dominating force in the Northwest region. BPA now owns 75 percent of the transmission lines and generates more than 40 percent of the power in its jurisdiction.

Fast-forward to 1980. Congress passed the Northwest Power Act to allocate the finite power resources of the Columbia River system among the many groups of customers clamoring for its output. The act prioritized the loads of public utilities (primarily cooperatives) and residential and small-farm customers of investor-owned utilities (IOUs). It also mandated that BPA pursue conservation, renewable energy, and fish and wildlife habitat mitigation.

In 1992, the Energy Policy Act began the process of restructuring the U.S. power grid, and in 1996 FERC Order No. 888 opened the door further to wholesale power wheeling. This set the stage for the departure of Bonneville's prodigal sons-certain load-serving utilities and large industrial