August 14, 2003

The Council and the Bonneville Power Administration plan to restart a "regional dialogue" to gather public comments on the future role of the federal power marketing agency.

The public dialogue got under way in 2002 but lost momentum as Bonneville's customer utilities turned their attention to Bonneville's proposal to raise its rates this fall. Although discussions that can affect Bonneville's rates are continuing, Bonneville and the Council intend to return to an issue that is critical to the Northwest: How Bonneville should supply power in the future. The Council expressed its intention this week in a letter to Bonneville Administrator Steve Wright.

Bonneville sells the output of the Federal Columbia River Power System, which includes the output of 31 federal dams and one non-federal nuclear power plant. Bonneville is required to supply electricity to any public utility in the Northwest that requests it. Contracts signed in 2001 resulted in demand for federal power that exceeded the output of the federal system, and Bonneville faced purchases of up to 3,000 megawatts of additional power to meet that demand.

A key question for the future, then, is whether Bonneville should continue to augment the output of the federal system by purchasing wholesale power from other suppliers, or limit the amount of augmentation and encourage its customers to buy additional power on their own, if needed. Bonneville's wholesale power purchases on behalf of is customers during the energy shortage of 2000 and 2001, when prices jumped up to 10 times normal and higher, were a major factor in the agency's recent financial crisis.

In June, the Governors of the four Northwest states issued a set of recommendations for restoring fish and wildlife populations in the Columbia River Basin and preserving the benefits of the federal power supply for Northwest ratepayers. The Governors asked the Council and Bonneville to reinitiate the "regional dialogue" with the intent of "achieving a role for Bonneville that is sustainable for the long term."

This week the Council proposed to reinitiate the regional dialogue with a series of meetings this fall among Bonneville, public and investor-owned utilities, state utility regulators and other interested parties. As a starting point, the Governors pointed to the Council's December 2002 recommendations on Bonneville's future, which called for long-term contracts, a limited role for Bonneville in supplying power beyond the capability of the federal system, fulfilling existing obligations for fish and wildlife restoration and pursuing regional conservation and renewable energy opportunities.

Last fall, a coalition of Bonneville's customers issued a proposal that expressed consensus on a number of key issues, including:

1. Bonneville would sell power through long-term (20-year) contracts, as opposed to 10 years or shorter, as it does now;
2. Bonneville would have a limited role in developing new sources of power to augment the federal system; and
3. agreement on a formula for determining the financial benefits provided by Bonneville for the residential and small-farm customers of investor-owned utilities.

With the Council's recommendations and the customers' proposal as starting points, key issues for the regional dialogue this fall are likely to be:

1. the length of future contracts;
2. how to allocate the existing federal system among public utilities;
3. how power to meet growing demand will be developed in the future;
4. whether and under what circumstances to provide federal power to Bonneville's direct-service industries such as Northwest aluminum smelters; and
5. how to ensure continued investments in energy conservation and renewable resources like solar, wind and geothermal power.