The Transformer – August 20, 2007

Volume 4, Number 6

Clean energy forces win a lot, lose a little

in BPA’s power allocation scheme


Table of Contents

Background
Double, double, toil and trouble – The basic problem
Renewed interest – Renewables commitment
Tracks of my tiers – Meeting load growth
How high’s the water, momma? – Power allocations
Fish keep the lights on – Resource adequacy and fish
Fourth and goal – Summary up/unfinished business

Background

On July 13, Bonneville Power Administration released the final version – called the Record of Decision or ROD – of its “Regional Dialogue” document. The Regional Dialogue sets the framework for 20-year power sales contracts between BPA and its consumer-owned utility customers, post-2011. Critically, it establishes a formula for allocating the relatively cheap power from the federal Columbia River hydropower system (and the nuclear-powered Columbia Generating Station) among those utilities. They will have to decide for themselves how to meet additional power needs beyond that allocation.

The draft Regional Dialogue came out three years ago, in July 2004, and was a primary focus of the NW Energy Coalition’s Energy Matters campaign. Coalition staff and allies blanketed the Northwest, telling large and small groups about the importance of BPA’s plan regarding regional clean-energy development, consumer protection and fish and wildlife restoration. The Energy Matters campaign drew hundreds of people to two series of public hearings in Washington, Oregon, Idaho and Montana and elicited mountains of letters and e-mails to Bonneville – all demanding that the Regional Dialogue advance rather than retard our movement toward a clean and affordable energy future.

Those efforts were not in vain. The following summary shows that while we certainly didn’t fix everything, clean-energy advocates wrung significant concessions out of the agency that together mitigate many of the worst aspects of BPA’s radical allocation scheme.

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Double, double, toil and trouble


From its onset, the most troubling, and least tractable aspect of the Regional Dialogue plan has been its abrogation of BPA’s legal responsibility to provide for the load growth of its customers – about 110 public utilities and co-ops across the Northwest. As directed by the 1980 Northwest Power and Conservation Act, Bonneville has historically secured additional power as needed and folded any extra costs into the overall wholesale price all of its utilities pay.

The Power Act further stipulates that Bonneville, when seeking resources to cover rising needs, must prioritize, first, energy efficiency (“conservation”) and, second, affordable renewables.

Now, under pressure from its customer utilities that scapegoat BPA for the energy crisis of 2000-01, Bonneville is limiting its future role in power supply to divvying up the power from the existing federal system and setting the individual utilities free to fill any gaps any way they like, from playing the market themselves to purchasing a “Tier 2” product of higher-priced power through BPA.

The plan constitutes a double-whammy on clean energy development. Left to their own devices, utilities can dodge Bonneville’s mandate to meet new needs with efficiency and renewables. Less obvious is the danger of the allocation process itself: If utilities know their shares of the cheapest power will be based on relative use levels in 2011, why would they reduce those levels through aggressive conservation efforts in the interim?

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Renewed interest


To be fair, Bonneville never completely abandoned renewable energy. In both its draft and final versions, the Regional Dialogue commits the agency to promoting the development of about 100 megawatts of new renewables a year, representing public utilities’ share of the regional renewables target set in the Northwest Power and Conservation Council’s 5th Power Plan.

Initially, the Regional Dialogue proposed capping renewables funding at $21 million a year, which would be rolled into the base (Tier 1) costs borne by all customers. NW Energy Coalition, Renewable Northwest Project and their allies argued that $21 million a year should be the floor rather than the ceiling, and at any rate the spending should be sufficient to achieve the target, not set arbitrarily. BPA agreed … sort of. It kept initial funding at $21 million a year, but added a proviso for reevaluating the renewables budget if goals for renewable resource development aren’t being met.

Bonneville originally intended to spend those funds primarily to “facilitate” renewables development – on such things as integration costs, minor transmission enhancements, research and development. While that approach has merit, the Coalition and allies argued that BPA should quickly acquire some new renewables for inclusion in its Tier 2 product, and purchase options on good wind sites while they’re available. The final Regional Dialogue generally accepts those recommendations, but offers no specifics.

Similarly, since current federal power generation capacity will likely fall up to 300 megawatts short of demand before 2011, clean energy advocates pushed for renewables-only augmentation as needed. In the ROD, BPA commits to actively seeking cost-effective renewables, but only “as part” of augmentation.

In the final ROD, Bonneville also assents to Coalition and partners’ request that it offer shaping and storage services for its utility customers’ intermittent renewables.

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Tracks of my tiers


As noted, the Regional Dialogue gives utilities the option of meeting demands in excess of their federal allocations themselves, or by purchasing Tier 2 resources from BPA … for whatever it costs the agency to get them.

Given the priorities of the 1980 Power Act, it makes good sense to restrict Tier 2 offerings to renewables and conservation, and certainly to bar fossil-fueled resources and short-term purchases. Given the acutely myopic views of several Bonneville customers, good sense has not yet prevailed.

The Regional Dialogue now offers four Tier 2 products:

• A new renewables package that comes with a 20-year purchase obligation.
• A default product comprised of market purchases – which usually means coal- or natural gas-fueled power – with a relatively short-term (5-year) obligation.
• Utilities, as individuals or as a group, may also ask BPA to purchase and operate a specific resource (which could be a coal, natural gas or renewable plant) on their behalf for at least 20 years. All costs would be borne by the utilities and their consumers. BPA is calling this the “vintage” product.
• A load-growth product in which BPA would take care of a portion or all of a utility’s load growth for 20 years. While similar to the renewables package, this product might include power from existing fossil-fuel resources, but Bonneville has pledged that new power resources will follow the Council’s 5th Plan … which contains mostly renewables.

BPA is proposing to withhold from its customers any green tags – known as Renewable Energy Certificates or “RECs” – that come with the renewable resources in either the Tier 1 or Tier 2 load-growth and default products. RECs represent the environmental value of the clean resource, as distinct from the cost of the electricity itself. Stripped of its RECs, a particular resource would no longer count toward a utility’s renewables target. In some cases, in fact, utilities may meet some of their renewables requirement by purchasing RECs rather than power.

Bonneville wants to separate (“unbundle”) the tags from the power and sell the RECs to partially defray the cost of the resources. BPA customers would be able to purchase RECs from BPA, but might not get the RECs for the renewable resources in the Tier 1 or augmentation power packages. Renewable advocates argue that utilities should get the RECs along with the power; utilities that don’t need the renewables credits to meet their portfolio standards would be allowed to sell the RECs themselves.

Bundling of RECs is especially important in Oregon, because the state’s renewable energy standard limits the amount of unbundled RECs a utility can use to meet its target. BPA’s public utility customers in Washington expected that the qualifying renewables purchased from BPA would include the RECs. Bonneville seems open to the idea of changing its treatment of the RECs, though the issue demands continued scrutiny.

BPA will require its customer utilities to select which Tier 2 products they will want by 2008, even though deliveries won’t begin until late 2011. The early and lengthy commitments are meant to provide Bonneville a relatively clear picture of the resources it will have to acquire for its customers. BPA was surprised and burned badly in 2001 when many utilities changed their minds about resource needs at the last minute.

Requiring utilities to decide so early how much of their load growth they want BPA to cover might nudge some utilities toward gambling on the market rather than signing long-term purchase agreements for BPA’s Tier 2 products. Still, Oregon’s and Washington state’s renewable energy requirements may well drive utilities to BPA’s renewable Tier 2 product, anyway.

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How high’s the water, momma?


The draft Regional Dialogue set 2011 as the high-water-mark year for determining each utility’s 20-year allocation of cheap federal power. The danger of setting the high water mark in a future year is that interim energy efficiency achievements would reduce electricity usage and, thus, a utility’s allocation.

BPA initially offered to count back in all the interim conservation done on a utility’s own dime, but only half the conservation funded by the federal agency. Technically, this results in a 50-percent “decrement” in power allocation for savings achieved with BPA help. With friends like these …

Public-interest forces couldn’t get BPA to backdate the high water mark, but did succeed in lowering the decrement on Bonneville-funded efficiency to 25 percent.

That decision takes on increased significance with another, somewhat startling improvement in the final document. From the inception of the Energy Matters campaign, the Coalition argued that “Bonneville’s share” of the Power Council’s conservation target should be based on the total load-growth potential of the agency’s utility customers – not just the percentage of that load currently served by BPA.

For example, Seattle City Light sells its consumers about 1,100 average megawatts of electricity each year, but because it owns other resources, only about a third of that power comes from BPA. So by its initial reasoning, Bonneville would be responsible for ensuring acquisition of only a third of City Light’s cost-effective conservation.

But the Coalition argued that under the Regional Power Act Bonneville is legally responsible for covering ALL the load growth of its customers, not just the load served with BPA power. And the difference is hardly trivial. Regionwide, BPA’s initial position commits it to achieving 52 megawatts of energy efficiency a year. Counting its utilities’ total loads boosts that target to about 75 megawatts per year.

The Regional Dialogue’s ROD shows Bonneville has seen the light. It agrees to base its conservation target on its customers’ total loads. (That the total annual savings come to 65 rather than 75 megawatts is a function of the recent kerfuffle over the residential exchange benefits to customers of investor-owned utilities – an issue too large to be addressed here.)

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Fish keep the lights on


A big problem with BPA’s allocation scheme is that Bonneville’s 100-odd utility customers must now acquire enough generation and efficiency to keep the lights on, when they run out of BPA-supplied power. The 2000-01 energy crisis, while greatly exacerbated by drought and market manipulation, was made possible only because utilities failed to keep up with load growth. Bonneville, in fact, resorted to fish-killing “emergencies” to generate extra power rather than spill water to help salmon pass over Snake River dams.

This issue — known as “resource adequacy” — was not even on BPA’s radar until the Coalition made some noise. But to its credit, the agency’s final ROD requires its customers to file resource plans every two years showing how they intend to supply their needs. The icing on the cake is that these plans must mirror the Power Act’s priorities: efficiency and renewables first. Bonneville should be applauded for including these provisions, which will help advocates keep the utilities’ feet to the fire on clean energy issues without sacrificing salmon.

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Clarification:

Bonneville will not require utilities’ resource plans to mirror Power Act priorities. However, the biennial plans must explain why the utility has taken a different, fossil-fueled path, if it has. Bonneville still should be applauded for including these reporting provisions, even if it’s not requiring utilities to do the right thing.

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Fourth and goal


BPA’s 60-page policy document addresses several other issues of interest to clean-energy and consumer advocates.

However, the preceding discussion shows that the Coalition and its allies’ intervention in the Regional Dialogue process led to substantial improvements in the areas of renewable energy and energy efficiency. These victories – large and small – should hearten those working to overcome remaining barriers to a clean and affordable energy future and remind us all of the vital importance of open and transparent public processes.

The ROD’s release begins the game’s fourth quarter, in which the Regional Dialogue policies express themselves as contract language. This process resembles the rulemaking that normally follows passage of a particular piece of legislation. The Coalition and allies are now participating in a series of intensive meetings called by BPA to draw detailed implementation guidance from the policy document.

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Additional resources

BPA’s Regional Dialogue Record of Decision (326-page downloadable.pdf)

BPA’s Regional Dialogue policy statement (60-page downloadable .pdf)

BPA Regional Dialogue fact sheet

Sept. 7, 2006, Transformer on draft Regional Dialogue

Download a PDF version of this edition

NW Energy Coalition Web site

Previous editions of The Transformer

What do you think?

We are interested in your reactions to these articles. We will print as many responses as possible in future editions of The Transformer. Please email comments to ma**@nw******.org.