The future role of Bonneville Power Administration in power supply

The issue

Over the past several years, Bonneville has periodically faced significant financial and political difficulties as a result of the risks it faces in carrying out its traditional role in power supply in the region. In the mid-1990s, Bonneville found its rates above prices in the power market and was pressured to allow customers to take load off. In 2000-2001, Bonneville was faced with the need to augment its system to accommodate new and returning loads and do so during a period of extreme high power prices. The region is still feeling the economic effects.

Potential solutions

Many believe these problems are likely to continue unless Bonneville's role in regional power supply changes. Potential solutions have been developed through several public processes carried out over the last decade, including:

One common element of these processes was the recommendation that Bonneville sell the federal power through long-term contracts (20 years) to reduce uncertainty and help protect the region from external efforts to appropriate the benefits of the FCRPS. Another common recommendation was to limit Bonneville's and the region's exposure to risks of the wholesale power market by limiting Bonneville's role in serving loads beyond the capability of the FCRPS. This could be accomplished through bilateral contracts, in which customers bear the cost and risk of resources Bonneville has to acquire in order to augment the federal system and serve load. For various reasons, efforts to implement these and other recommendations developed in the public processes have stalled.

Council role

The Council believes the region should address the question of Bonneville's future role in the regional power supply now, before another crisis develops. The Governors of the four Northwest states have recognized that perpetuating uncertainty regarding Bonneville's role risks the adequacy and economy of the region's power supply. The Governors asked the Council and Bonneville to reinitiate the Regional Dialogue, which was suspended in 2002 while Bonneville addressed its most recent financial crisis. As a result, a number of discussions with representatives of customers, regulators, industry, and environmental interests were held in the early fall of 2003. The major conclusion drawn from these discussions is that while some things may have changed and need to be reexamined, many of the basic elements of the 2002 Joint Customer Proposal still have regional support and could form the foundation for moving forward.

Next steps

Because of issues surrounding the proposed settlement of the benefits for residential and small farm customers of the region's investor-owned utilities, a formal effort to address the future role of Bonneville in power supply was not initiated until February 2004.

That process has now begun with the initial intent of informing the policy process that Bonneville intends to initiate in June 2004.