Direct-service industries

The Bonneville Power Administration sells the electricity output of the Federal Columbia River Power System — 31 dams and one non-federal nuclear power plant — to public utilities around the Pacific Northwest. This electricity is called firm power — it is delivered 24 hours a day without interruption. Bonneville is required by law to supply firm power to any public utility that requests the service. Historically, Bonneville also sold firm power to a small number of industries in the Northwest, even though it had no legal obligation to do so. These are called the direct-service industrial customers, as they purchase power directly from Bonneville as opposed to buying from a utility customer of Bonneville.

Primarily, the direct-service industries are aluminum plants although the customers also included, over time, some paper and pulp mills and chemical manufacturers (at their peak number, there were 15 direct-service customers, and 11 of these were aluminum plants). Aluminum plants are power guzzlers. A single smelter or rolling mill can consume as much power as a city of 100,000 people, and more. After BONNEVILLE DAM was completed in 1938, and as more dams were added to the Columbia River power system over time, aluminum smelters were built in the Northwest to take advantage of the large supply of inexpensive electricity.

Until about 2001, the direct-service industries took steady amounts of power and provided a substantial and steady stream of revenue for Bonneville. Bonneville and the aluminum companies agreed that one quarter of their electricity supply could be curtailed in an emergency, and the companies also agreed to increase their power usage when Bonneville’s other demand was low, and decrease it when demand was high. This allowed the federal system to operate more or less constantly at the same level of output, thus improving the efficiency of system operations and reducing the stress on the system during periods of high demand. The plants provided family-wage jobs and were important in the communities where they were located.

Over time, however, the aluminum plants reduced operations as the cost of electricity rose, the worldwide prices of aluminum and bauxite fluctuated, and newer, more energy-efficient plants were built elsewhere in the world. From a high of about 3,000 average megawatts in 1995, Bonneville’s direct-service industry load fell to about 300 average megawatts in 2006. Over time, pressure also increased on Bonneville’s power supply. Requirements to spill water over dams to aid fish passage reduced the amount of power the system could generate by about 1,000 average megawatts. As the Northwest grew, so did demand for power. Bonneville no longer could meet the demand of its public utility customers and still have firm power left over to sell to the industries. In 2000 and 2001, during an energy crisis when wholesale power prices jumped up to more than 10 times average and stayed there for about seven months, some of the aluminum companies angered Northwest citizens and lawmakers by closing their plants and selling their low-cost power from Bonneville for huge profits.

Following the energy crisis, in response to a recommendation by the four Northwest governors, the Power Council and Bonneville began studying how Bonneville might change its future role in power supply so as to reduce its exposure to the volatile wholesale power market. This public process led to a number of policy proposals that were vetted publicly by Bonneville in 2005 and 2006. Among these is a proposal for supplying power to direct-service industries in the future. Recognizing the decline of the aluminum industry in the Northwest, but also recognizing that some of the aluminum plants could remain economically viable, Bonneville proposed to earmark a total of 577 average megawatts of federal power for the industries. This would be sold by Bonneville to local utilities in the areas where the plants are located, for resale to the companies. Thus, Bonneville no longer would serve the industries directly.

Bonneville planned to make a final decision on this and other policies regarding its future role in power supply in 2007 and implement the changes in its next round of power-sales contracts, which will take effect in 2011.

comments powered by Disqus