The Pacific Northwest Electric Power Planning and Conservation Act-solution for a Regional Dilemma

• Publication year: 1980
• Citation: Vol. 4 No. 01

UNIVERSITY OF PUGET SOUND LAW REVIEWVolume 4, No.1FALL 1980

The Pacific Northwest Electric Power Planning And Conservation Act-Solution For A Regional Dilemma

Hon. Henry M. Jackson(fn*)

I. Introduction

For the past four decades, the Bonneville Power Administration (BPA) has played a singular and powerful role in developing the Northwest regional electric power system, and indirectly in the regional economy that system supports. The federal government's decision during the first half of this century to develop multi-purpose water resource projects led to the construction of many dams, most of them in the Western United States, most built since the mid-1930's, and most including hydroelectric generation.(fn1)

Congress has designated BPA (fn2) as the marketing agent for power and energy produced at these federal dams in the Northwest,(fn3) and recently authorized BPA to serve also as marketing agent for certain non-federal power resources, most of which are still under construction.(fn4) As a complement to its marketing role, BPA has constructed and operates a sophisticated and complex regional transmission grid that is one of the world's best.(fn5)

Since the federal government constructed the Bonneville and Grand Coulee dams in the 1930's, energy from the Federal Columbia River Power System has been available at low cost and in ample quantities. Oil, natural gas, and coal indigenous to other regions are almost nonexistent in the Northwest. Consequently, the region is much more dependent on electric energy than the United States as a whole. The average Northwest consumer uses twice as much electric energy as consumers in the nation as a whole; however, Northwesterners use much less of other forms of energy. Indeed, per capita consumption of all forms of energy in the Northwest is slightly less than the national average.

II. The Need for a Regional Planning Mechanism

As we enter the 1980's, fundamental changes have occurred. Historically, BPA has had sufficient resources to sell power to any utility or other customer in the region. Until recently, finding markets for the abundant low-cost federal power was a perennial problem. However, the era of abundance has abruptly ended. The entire region now faces substantial electric energy deficits for the foreseeable future.(fn6)

Since 1973, the Bonneville Power Administration has been unable to sell any firm power to private utilities. Beginning on July 1, 1983, BPA will have insufficient resources to supply all the needs of its present publicly-owned utility customers with "preference" rights under the Bonneville Project Act. It will terminate service to direct-service industrial customers (DSI's) as their present contracts expire and each DSI will have to seek alternate service, probably through a nearby utility.(fn7)

As existing DSI and public agency power sales contracts expire, BPA must "allocate" all of the power from those contracts in accordance with the "preference clause" among public bodies and cooperatives that want a share of it.(fn8) Each preference customer will receive a portion of the federal resources, but not enough to meet all its requirements. Under present law, BPA has no authority to secure sufficient power resources to eliminate the need for allocation. The allocation process, which has already begun, is likely to be lengthy and contentious.

Given the enormous economic value of the federal hydro resource in the Northwest, someone almost certainly will challenge the final allocation policy in the federal courts. Neither this litigation, nor its unknown outcome, will be conducive to the cooperation and certainty essential to planning and operating an interdependent bulk power industry. The formation of additional public agency customers seeking the federal system's economic benefits, service requests to utilities from present DSI's, the growing overall regional shortage of electric power capacity, and the lack of any effective regionally financed and coordinated conservation program will further complicate the allocation process.

The Northwest needs a regional mechanism for planning and developing its electric energy future. It must be a mechanism assuring early public and governmental involvement from throughout the region. The present system simply does not permit such regionally coordinated planning. Too often public involvement begins at after-the-fact licensing and siting hearings that are adversary in nature and, consequently, an inefficient way to reach timely and considered planning decisions. Early public involvement would provide agreement on power needs and the best means of meeting them before specific resource planning begins.

Northwest utilities presently operate as an integrated regional utility system. The entire region will suffer if the integrity and reliability of any major part of that system is threatened. No class of customer or consumer would be immune from the effects of shortages and chaotic utility planning. These general problems have some specific and immediate implications for BPA customer groups.

III. The Implications of Inaction

A. Existing Preference Customers

The vast majority of BPA's 115 existing preference customers now receive 100% of their power supply from BPA. Exactly how these utilities will be able to provide additional resources to meet their responsibility to serve growing loads is unclear. If BPA eventually adopts its proposed allocation policy, public agencies would receive a base allocation, but would not know from year to year how much federal power they might receive. Meanwhile, forty-three preference customer contracts expire between 1984 and 1986, which is much too soon for those utilities to plan and acquire additional resources, even if they were sure what their additional unmet requirements might be.

B. New Preference Customers

Some areas now served by private utilities will almost certainly try to form new public agencies so they can receive the economic benefits of the federal system. If BPA had sufficient power to serve additional preference customers this development would not complicate the planning process, but under present conditions such systems would have no assurance of a power supply. New preference customer formation may or may not be desirable in itself; but without sufficient power to meet all potential demands, such a development would reduce each public agency's relative share of the federal power supply, and increase the complexity and contentiousness of the BPA allocation process. The establishment of new preference customers would not result in the production or conservation of any additional kilowatts, but it would add to the Northwest's difficulties in making rational utility planning decisions.

C. Direct Service Industries

Direct service industries are of regional and national economic significance. Most notable among the DSI customers are aluminum reduction mills producing one-third of the nation's primary aluminum. Aluminum is increasingly important in national efforts to improve automobile fuel efficiency and provide other modes of transportation. It also is significant in national defense programs. DSI's provide thousands of jobs in the Northwest and historically have reduced utility rates in the region by providing operating reserves and a market for surplus power. However, BPA will be unable to continue serving DSI's as their contracts expire over the next decade. Consequently, DSI's will have to apply to utilities for service, or attempt to develop or acquire their own generating resources. The DSI's will argue that they have legal rights to service under state laws, and ultimately they will likely prevail; however, courts may take years to determine which utility will serve which DSI and at what price. The delay while the courts made these decisions would subject thousands of jobs, large amounts of plant and equipment, and nationally important economic productivity to years of uncertainty. Companies would delay decisions about plant modernization, which could produce significant conservation savings in this energy intensive industry, until the courts clearly resolved these questions.

By accident of history and geography, eighty-five per cent of the DSI loads are located in or adjacent to public agency service areas. Many DSI's will apply to preference customers for a power supply when their BPA contracts expire and most of those preference customers will, in turn, seek additional power from BPA to meet their suddenly increased loads. Like the formation of new preference customers, large increases in existing public agencies' loads will not create additional power for BPA to distribute-it will simply increase preference customer demand for the limited existing supply and further complicate the allocation process and utility planning in general.

D. Private Utilities

Investor-owned utilities face the same overall power supply problems confronting the entire region. Forecasters predict that the 1980's will be a decade of shortages and curtailments in any year of poor water conditions in the Northwest.

A more immediate problem for the private utilities, however, is that their rates are becoming significantly higher than public agency rates. In some areas private rates are two or three times higher than public rates. The most important reason for this disparity is that private utilities have lost their ready access to...