comp_review.html
Comprehensive Review
of the Northwest Energy System
Final Report
Toward a Competitive Electric Power
Industry for the 21st Century
December 12, 1996
Preamble
Introduction
Summary of Recommendations
Federal Power Marketing
Columbia River System Governance
Conservation, Renewable Resources and Low-Income Energy Services
Consumer Access to the Competitive Market
Transmission
Future Power System Role for a Four-State Regional Body
The 20 members of the Steering Committee of the Comprehensive Review of the Northwest Energy System have worked for 11 months to develop the recommendations contained in this final report. These recommendations represent a consensus of 13 of the 14 voting members of the Steering Committee, a consensus that has been achieved only by compromise and sacrifice on the part of each of the members on the Committee. The 14th voting member acknowledges the significant progress made in many areas but does not believe that sufficient progress was made on issues related to fish and wildlife to constitute a real consensus. His views are presented in Appendix A.
We, the members who voted with the majority, support the report and will work to educate and persuade others, but our support here does not commit all of the groups we represent. These compromises, as difficult as some may find them, are worth making for a simple reason: we have more to lose as a region than we have to gain as disparate interests.
There is still much work to be done. This final report is specific in some areas and general in others. More detail and further refinement will be required to convert these recommendations into the contracts, legislative bills, rules and policies that will implement them.
As regional interests work further on these restructuring initiatives, there are bound to be disagreements and new issues to be resolved within the outlines of these recommendations. However, we believe that the principles outlined here must remain if any regional consensus is to be hoped for. With a consensus position, the Pacific Northwest has the best hope of retaining the benefits of the federal hydropower system and transitioning to a competitive electricity system that will maximize benefits for all consumers in the region. The work embodied in this report will not easily be replicated if the regional consensus is destroyed by unilateral actions of any party.
Finally, the Committee recognizes that electric utility restructuring is evolving rapidly and that efforts in Congress and the states almost certainly will change some of the assumptions underlying this report. Although our recommendations may not reflect the ultimate end-state of this restructuring, we nevertheless believe that it does reflect a workable outcome in itself and a very positive step in this process.
Why Are We Doing This?
The electricity industry in the United States is in the midst of significant restructuring. This restructuring is the product of many factors, including national policy to promote a competitive electricity generation market and state initiatives in California, New York, New England, Wisconsin and elsewhere to open retail electricity markets to competition. This transformation is moving the industry away from the regulated monopoly structure of the past 75 years. Today we are served by individual utilities, many of which control everything from the power plant to the delivery of power to our homes or businesses. In the future, we may have a choice among power suppliers that deliver their product over transmission and distribution systems that are operated independently as common carriers.
There is much to be gained in this transition. Electricity consumers are already benefiting from competition in a number of significant ways. Competition in the natural gas industry has helped lower the cost of electricity produced by gas-fired generating plants. Competition among manufacturers and developers of combustion turbines has contributed to the availability of less expensive, more efficient power plants that can be built relatively quickly. Surplus generating capacity on the West Coast combined with increasing competition among wholesale suppliers has reduced the price utilities must pay for power on the open market. Broad competition in the electricity industry that extends to all consumers could result in lower prices and more choices about the sources, variety and quality of their electrical service.
But, there are risks inherent in the transition to more competitive electricity services. Merely declaring that a market should become competitive will not necessarily achieve the full benefits of competition or ensure that they will be broadly shared. It is entirely possible to have deregulation without true competition. Similarly, the reliability of our power supply could be compromised if care is not taken to ensure that competitive pressures do not override the incentives for reliable operation. How competition is structured is important.
It is also important to recognize the limitations of competition. Competitive markets respond to consumer demands, but they do not necessarily accomplish other important public policy objectives. The Northwest has a long tradition of energy policies that support environmental protection, energy-efficiency, renewable resources, affordable services to rural and low-income consumers, and fish and wildlife restoration. These public policy objectives remain important and relevant. Given the enormous economic and environmental implications of energy, these public policy objectives need to be incorporated in the rules and structures of a competitive energy market.
In some respects, the transition to a competitive electricity industry is more complicated in the Northwest because of the presence of the federal Bonneville Power Administration. Bonneville is a major factor in the region's power industry, supplying, on average, 40 percent of the power sold in the region and controlling more than half the region's high-voltage transmission. Bonneville benefits from the fact that it markets most of the region's low-cost hydroelectric power. It is hampered by the fact that it has high fixed costs, including the cost of past investments in nuclear power and the majority of the costs for salmon recovery. As a wholesale power supplier, Bonneville is already fully exposed to competition and is struggling to reduce its costs so that it can compete in the market. The transition to a competitive electricity industry raises many issues for the Bonneville Power Administration and the region. In the near term, how can Bonneville continue to meet its financial and environmental obligations in the face of intense competitive pressure? In the longer-term, when market prices rise and some of Bonneville's debt obligations have been retired, how can the Northwest retain the economic benefits of its low-cost hydroelectric power when the rest of the country is paying market prices? And finally, what is the appropriate role of a federal agency in a competitive market? The question is not only whether Bonneville can compete in the near term, but also, should it be a competitor?
Without Regional Consensus...?
While participants on the Comprehensive Review Steering Committee represented, by design, many divergent interests, they were fundamentally interconnected through one unifying value. Collectively, they share an abiding interest in the stewardship of a great regional resource Ð the Columbia River and its tributaries. The river is the link that brought all the parties together and unites them in a single, overriding goal. That goal is to protect and enhance the assets of this great natural resource for the people of the Pacific Northwest.
The federal power system in the Pacific Northwest has conferred significant benefits on the region for more than 50 years. The availability of inexpensive electricity at cost has supported strong economic growth and helped provide for other uses of the Columbia River, such as irrigation, flood control and navigation. The renewable and non-polluting hydropower system has helped maintain a high quality environment in the region.
But while the power system has produced significant benefits, these benefits came at a substantial cost to the fish and wildlife resources of the Columbia River basin. Salmon and steelhead populations have been reduced to historic lows, and many runs are or are about to be listed under the federal Endangered Species Act. Resident fish and wildlife populations have also been affected. Native Americans and fishery-dependent communities, businesses and recreationists have suffered substantial losses due in significant part to construction and operation of the power system. The region's ability to sustain its core industries, support conservation and renewable resources, and restore salmon runs is clearly threatened if we cannot reach a consensus regional position to bring to the national electricity restructuring debate. Without a sustainable and financially healthy power system, funding for fish and wildlife restoration could be jeopardized.
The governors of Idaho, Montana, Oregon and Washington, in their charge to the Comprehensive Review, and the Steering Committee in their deliberations, recognized that the electricity industry is changing, whether we like it or not. The Comprehensive Review is not an initiation of change, but a response to change. It is an effort to shape that change, to the extent shaping is possible, to ensure that the potential benefits of competition are achieved and equitably shared, environmental goals are met, and the benefits of the hydroelectric system are preserved for the Northwest. The region's ability to shape the change in the Northwest electricity industry depends on its ability to develop a regional consensus. If the Comprehensive Review fails to result in a consensus for regional action, the electricity industry will still be restructured. A return to the historical industry structure is not an option. Many of the comments received during the public hearing process on the Steering Committee's draft recommendations made it clear that this is not a widely appreciated fact.
What is the likely evolution of the regional electricity market in the absence of effective regional consensus.
For wholesale power markets, federal policy advancing competition is already in place. The Energy Policy Act of 1992 and Federal Energy Regulatory Commission (FERC) Order 888 express a strong commitment to opening access to the transmission system to make possible a competitive wholesale power market. Transmission will remain a FERC-regulated activity and will be strictly separated from generation to ensure that transmission owners cannot interfere in the efficient operation of the wholesale power market. Northwest utilities are already in the process of forming an independent transmission grid operator, called IndeGO. The purposes of the independent transmission grid operator are to ensure adequate separation of generation and transmission and to align incentives to ensure efficient and reliable operation of transmission. Bonneville is participating in the IndeGO discussions and has already administratively separated its transmission activities from its energy marketing. Further development of IndeGO will continue regardless of the Comprehensive Review.
Given the strong federal policy commitment to a competitive wholesale power market and an intensifying need for federal revenues, it is likely that without strong regional support for a different outcome, Bonneville's electricity eventually would be sold at market prices. Further, the incongruity of a federal agency as a full participant in a competitive market could result in limitations on Bonneville's market presence. This could be accomplished in many different ways, including auctioning the power, requiring Bonneville to market its power at prices that are tied to a market index, or limiting Bonneville's marketing of products and services. However it is done, any cost-based regional benefits that are derived from public or regional preference are likely to be reduced.
Current electricity policy at the federal level reserves retail market competition decisions to the states. However, recent congressional initiatives leave the degree of future state control in question. In any case, the pressure for retail access and its momentum are not in question. In the absence of either fairly strong federal legislation or coordinated regional policy, individual states are likely to move at different rates toward various forms of retail access policy with large power consumers tending to get first access. Unless adequate safeguards are in place to ensure that the owners of monopoly distribution systems cannot unfairly influence consumers' retail energy service choices, the development of competitive retail energy service markets for all consumers will be inhibited. Inconsistent policies among states within an integrated electricity market will lead to market advantages for some areas, a less efficient market, and arbitrage opportunities for electricity traders and marketers.
Utilities under competitive pressure to retain their customers will find it difficult to support the various social and environmental goals they have supported in the past. Competitive markets will support some social and environmental activity, and recent legislative proposals in Congress suggest that some programs could be mandated at the national level. However, absent action to place the funding of such activities with the separate and regulated elements of the market (transmission or distribution), emphasis on conservation, renewable energy sources and low-income support will decline. The greater the differences among states and utilities in the funding of these activities, the more distorted and less efficient will be the electricity markets.
The "base case" just described has some undesirable features. However, the region has the ability to manage the transition to competition to avoid or mitigate the undesirable features if it can reach consensus on the key features of the energy system.
The Comprehensive Review
The governors of Idaho, Montana, Oregon and Washington convened the Comprehensive Review of the Northwest Energy System to seize opportunities and moderate risks presented by the transition of the region's power system to a more competitive electricity market. The governors appointed a 20-member Steering Committee that is broadly representative of the various stakeholders in the power system to study that system and make recommendations about its transformation. The members of the Steering Committee are listed in Appendix B. Each governor has a representative on the Steering Committee to make certain the public is educated about and involved in the Comprehensive Review. In establishing the review, the governors stated:
"The goal of this review is to develop, through a public process, recommendations for changes in the institutional structure of the region's electric utility industry. These changes should be designed to protect the region's natural resources and distribute equitably the costs and benefits of a more competitive marketplace, while at the same time assuring the region of an adequate, efficient, economical and reliable power system."
Since January 1996, the Steering Committee has held 30 day-long meetings. In addition, almost 400 people have been involved in more than 100 meetings of various work groups reporting to the Steering Committee. Hundreds of citizens attended the 10 public hearings that were held throughout the region on the Committee's draft report. More than 700 written comments were received. This report is the product of that work. It is a recommendation for restructuring the Northwest electricity industry to meet the challenges and seize the opportunities inherent in the competitive transition.
The main features of the recommendations of the Steering Committee of the Comprehensive Review of the Northwest Energy System are summarized in the following sections. More detailed discussion of the recommendations is presented in the following chapters. For purposes of organization, this report is presented in six main topic areas: federal power marketing; governance of the Columbia River system (a related topic to federal power marketing); conservation, renewable resources and low-income energy services; consumer access to the competitive market; transmission; and future power system roles for a four-state regional body. Issues related to federal power marketing; conservation, renewable resources and low-income services; consumer access to the competitive market; and transmission were analyzed and discussed in work groups during the review process. Although described as distinct parts, this is an integrated set of recommendations, the parts of which are interdependent.
Federal Power Marketing the Bonneville Power Administration
The Steering Committee's goals for federal power marketing are to: 1) align the benefits and risks of access to existing federal power; 2) ensure repayment of the debt to the U.S. Treasury with a greater probability than currently exists while not compromising the security or tax-exempt status of Bonneville's third-party debt; and 3) retain the long-term benefits of the system for the region. The recommendation is also intended to be consistent with emerging competitive markets and regional transmission solutions. The mechanism proposed to accomplish these goals is a subscription system for purchasing specified amounts of power at cost with incentives for customers to take longer-term (15 to 20 year) subscriptions. Public utility customers with small loads would be able to subscribe under contracts that would accommodate minor load growth. Subscriptions would be available first to regional customers in a specified multipart priority order, starting with preference customers, then the direct service industrial customers of Bonneville and the residential and small farm customers of those investor-owned utilities currently participating in Bonneville's residential exchange, followed by other regional customers. Non-regional customers could subscribe after in-region customers. Within each phase of the subscription process, longer-term contracts would have priority over shorter-term contracts if the system is oversubscribed.
Longer-term subscribers would have the right to purchase power at cost for the term of the contract. While the cost of the power from the federal system is currently somewhat above market prices, the costs are generally expected to be below market prices in the future. Short-term subscribers also get the right to purchase power at cost. If they wish to be assured the ability to renew their contracts at cost, they must pay an option fee for the term of their contracts to compensate the U.S. Treasury for the risk of shorter-term contracts. A sliding-scale option fee, ranging between 2 mills per kilowatt-hour for a five-year contract to 0 mills for a 15-20 year contract has been proposed.
The longer-term subscribers assume more risk than current Bonneville customers from the effects of year-to-year variations in weather, future power system cost increases and changes in market conditions. For example, if we were to experience lower than expected market prices that are below Bonneville costs for an extended period of time, the subscribers would still be obligated to pay Bonneville's costs. At the end of their subscription period, short-term subscribers would be able to let their subscriptions lapse and buy at market prices. If they let their subscriptions lapse, however, they would not be able to buy at cost in the future, should that become desirable.
The Steering Committee recognizes Bonneville's existing fish and wildlife obligations and intends that none of its recommendations affect existing trust obligations or treaty rights. The Steering Committee further recognizes that the region will need to provide most of the required fish and wildlife funding, but supports assistance and cost sharing by the federal government. The Committee recommends detailed multiyear fish and wildlife budgets be developed in government-to-government consultations by federal, state and tribal authorities. These budgets would be incorporated into Bonneville rate projections, allowing shorter-term customers certainty regarding fish and wildlife costs. If market prices are above costs, the Treasury would share in these benefits by getting some percentage of the difference between market prices and the cost. The Treasury's share would be applied to accelerate repayment of the federal debt.
Competition raises the possibility of stranded costs previously incurred fixed costs that cannot be recovered at market prices. If successfully implemented, the subscription system should greatly reduce the possibility of Bonneville experiencing any stranded cost. However, if unmitigable stranded costs remain, a mechanism for recovery of those costs will be required.
Subscribers may resell power in cases of loss of load and/or to the extent allowed by existing law. Other commercial transactions by the subscriber would not disqualify the purchase of federal power. The benefits of purchases for residential and small farm customers of exchanging investor-owned utilities should be passed on to end users.
The recommendations would have the effect of disposing of much if not all of the firm power available from Bonneville on a long- or intermediate-term basis. The fact that most of Bonneville's power would be subscribed at cost would limit Bonneville's market role. Any remaining firm power and other power products would be sold at Federal Energy Regulatory Commission (FERC)-regulated prices or at competitive prices, where FERC determines that competitive markets exist. To the extent consistent with its obligation to repay Treasury, Bonneville should return to its historic role of marketing power generated by the Federal Columbia River Power System, rather than becoming an aggressive marketer of products and services in the emerging competitive power market. Bonneville should develop a quantitative marketing plan. The plan should be presented to a transition board reporting to the Governors.
In addition, it is recommended that Bonneville would not acquire resources to serve its customers' load growth except on a direct bilateral basis where the customer takes on all the risk of the acquisition. Similarly, it is proposed that Bonneville would not sell directly to new retail loads, beyond the existing direct service industry loads, although it may sell through intermediaries whose transactions would be subject to state or local jurisdiction.
The Committee recommends that the governors of Idaho, Montana, Oregon and Washington appoint a transition board to oversee implementation of these and other recommendations. In particular, the board should periodically determine whether the subscription process is making adequate progress or whether another approach is necessary.
Columbia River System Governance
The Steering Committee concluded that we cannot expect to achieve both the degree of cost stability the electricity industry requires to maintain the benefits of the Columbia River power system for the region and achieve sustainable fish restoration unless we ensure predictability, accountability and effective governance for the fish and wildlife interests of the river. In short, an effective conclusion of our effort is not possible without an improved system of river governance that pursues fish restoration as a high priority.
The Steering Committee was asked by the Northwest governors to focus on the restructuring of the electricity system and to address the financial stability of the federal power system. The Committee has done our best to recommend changes to the federal system that accomplish that goal. It fully recognizes that there are other important, related issues and decisions, including those affecting fish and wildlife, that must be resolved before a truly comprehensive package can be achieved.
The Steering Committee considered a number of matters related to the governance of the river and the power system. The role of the Northwest Power Planning Council in river governance was not addressed, but needs to be. The Governors should hold the Council or its successor accountable for ensuring that the region is making the most cost-effective use of fish and wildlife funding. River governance is a fundamental part of any effective response to changes in the electric utility industry. Until governance deliberations move forward through a government-to-government consultation among federal, state and tribal authorities, the prospects for a consensus on the regional response to utility restructuring are diminished and controversial. The Steering Committee requests the governors to initiate a broadly based discussion of improvements in river system governance that would provide more effective decision-making for this complex ecosystem and all of its competing uses.
Conservation, Renewable Resources and Low-Income Energy Services
The Northwest electric utility industry has a long and successful history of developing cost-effective conservation and supporting the development of renewable electricity sources, such as wind, geothermal and biomass energy. In addition, the utilities have played a major role in delivering weatherization to low-income households and helping low-income households with their energy bills. Competitive pressures, however, are expected to make significant changes in the ways utilities carry out these activities in the future. The goal of the Steering Committee's recommendations is to provide for maximum local control in the implementation of conservation, renewables and low-income energy services, while establishing an effective minimum standard that ensures stable funding for these purposes.
To ensure that cost-effective conservation, renewable resource development and low-income weatherization are sustained during the transition to competition and beyond, the Steering Committee recommends that by July 1, 1997, and annually thereafter for a period of 10 years, 3 percent of the revenues from the sale of electricity services in the region ($210 million in 1995) be dedicated to those purposes. After 10 years, this commitment should be re-evaluated. Three percent of revenues is roughly 65 percent of what was spent for these purposes by the region's utilities and Bonneville in 1995.
The Steering Committee recommends that by July 1, 1999, each of the Northwest states enact legislation that ensures that all electric utilities operating within its borders are meeting the minimum standard for investment in the development of conservation and renewable resources and provision of weatherization and energy-efficiency services to low-income consumers. Utilities should demonstrate compliance with the minimum standard by July 1, 1999. Public utilities may satisfy the standard in aggregate. If this minimum standard is not being met, the legislation should provide for the assessment of a uniform system benefits charge that ensures the collection and investment of funds for these purposes. Due to the rapid emergence of competitive pressures, the Committee strongly recommends prompt legislative action. Legislation implementing these requirements should be implemented simultaneously with open retail access.
The Steering Committee proposes that between two-thirds and five-sixths of the funds be retained by local distribution utilities to carry out locally initiated cost-effective conservation, low-income weatherization and energy-efficiency services and renewable energy projects. Conservation projects implemented and funded by large consumers should be credited against the local conservation target, not including low-income energy-efficiency services. Local utilities would also offer, or allow other electricity service providers to offer, "green" power to their consumers Ð power from renewable assistance energy sources. The Steering Committee recommends that utilities maintain their current level of low-income energy assistance until states adopt alternative mechanisms for providing these services. The report recognizes and affirms the energy system's historic role in providing energy assistance and proposes that states now provide this assistance by establishing a "Universal Electrical Service Fund" to provide energy bill assistance. This fund could be supported by federal Low-Income Home Energy Assistance Program (LIHEAP) funds, state or local government funds, other funds and/or by a retail distribution system access fee or meters charge.
Some conservation and renewable resource activities benefit from regional planning and coordination. Consequently, it is proposed that between one sixth and one third of the funds be used by a regional non-profit entity with utility, government, consumer and public interest membership. Its functions would be to bring about changes in the markets for targeted energy-efficiency products and services that will improve their market share; to plan and contract for research and limited demonstration of renewable energy technologies, and to support the development of several megawatts annually of renewable generating capacity. A regional technical forum would be established to track regional progress toward the achievement of regional goals and provide feedback and suggestions for improving the effectiveness of conservation and renewable resource development programs. Funding for these activities should be collected in part through Bonneville wholesale rates to the extent regional firm loads are served by power from Bonneville.
How the funds are collected is a matter for state or local decision, as appropriate. The Steering Committee expects that methods of collection that are competitively neutral and affect all participants in the market equally will be found to be preferable.
Consumer Access to the Competitive Market
The goals of the recommendations on retail markets and customer choice are to encourage a more efficient power system, lower electricity costs, increased product choice and greater product innovation for all consumers. These goals were adopted subject to a commitment to maintain the reliability and safety of the electrical power system. The Steering Committee concluded that this goal could best be accomplished by putting in place a competitive electricity market that is driven by consumer choice. However, there is concern that the benefits of a competitive market may flow unevenly to different classes of consumers and that some small consumers may even suffer harm. The report recommends safeguards intended to help mitigate these concerns.
The Steering Committee recommends that regulators and local utility boards and commissions offer open access for all customers that desire it no later than July 1, 1999. The Committee recognizes that some of these regulatory bodies may choose to phase in full retail access. In these cases, a similar phase-in of the recommendations on conservation, renewable resources and low-income energy services may be effected.
Direct access may occur prior to July 1, 1999, however, for direct retail access to be implemented promptly, several activities must be accomplished. These include the identification of any stranded costs and, if any stranded costs are determined to exist, the creation of a stranded cost collection mechanism; unbundling and cost-based pricing of delivery services; pilot programs to explore aggregation for small commercial and residential customers; the exploration of market index pricing options for residential and small commercial customers; and implementation of public purposes funding, energy assistance funding and consumer protection mechanisms consistent with this report's recommendations.
To achieve a competitive retail electricity market requires separation of the distribution and electricity marketing functions of current retail utilities. This is necessary to ensure that consumers will have unimpeded access to alternative electricity suppliers, and vice versa, over the wires of the distribution utility. The distribution utility would continue to be a regulated monopoly responsible for the reliable and safe delivery of electricity from electric service companies to consumers over local distribution wires. Electricity service companies will offer a variety of electricity products and services (e.g., firm or interruptible power, power from renewable resources, peak or off-peak power, fixed or spot-market prices) to consumers on a competitive basis and may, in fact, offer other products unrelated to electricity markets. The electricity services portion of current integrated retail utilities could compete in this market if the distribution utility function is sufficiently separated from the electricity services business to ensure that control of distribution is not used to advantage the electricity services business.
Putting such a competitive market in place will require a significant transition and ongoing market maintenance procedures. There is a danger that, until competitive markets have fully developed for all consumers, some of the benefits of increased competition may be realized primarily by large consumers at the expense of small consumers. Therefore, the Steering Committee calls for active government oversight of the transition and active ongoing programs to facilitate and encourage the development of meaningful market access for all consumer classes and to prevent unwarranted cost shifts among consumer classes. Specifically, the policy calls for licensing of new electricity service providers, applicability of consumer protection laws, formal complaint processes, consumer information programs, and a "provider of last resort" to ensure continued affordable service to all consumers. To further minimize cost shifts to small consumers, policies should be adopted to provide utilities a fair opportunity to recover costs of previous investments that may be stranded by the opening of the market. This is viewed as a transitional problem only, and incentives must be included for utilities to mitigate any stranded costs they potentially face.
Transmission is the "highway system" over which the products of electrical generation flow. If there is to be effective competition among generators, transmission facilities should be operated independently of generation ownership. An independent grid operator (IGO) regulated by the Federal Energy Regulatory Commission with broad membership, including Bonneville and the region's other major transmission owners, is proposed as a means of ensuring independence of transmission operation and improving the efficiency of transmission operation. An independent grid operator should also have clear incentives to maintain reliability and encourage efficient use of the transmission system.
The independent operation of Bonneville's transmission facilities is particularly important to effective competition among generators in this region because Bonneville's facilities make up a large part of the regional transmission system. To ensure this independence, it is recommended that Bonneville be legally separated into two organizations a power marketing organization to market the power from the federal power system and a transmission organization to carry out the transmission functions. The separation of these functions should be structured so that it does not jeopardize or diminish the legal obligation and ability of Bonneville to meet fish and wildlife and other obligations. A separated federal transmission owner (e.g., the Bonneville Transmission Corporation) could lease its assets to an independent grid operator, or could be an independent grid operator and operate other participants' assets if FERC and the other participants agree.
Legislation will be required to accomplish these goals. While legislation is under consideration, Bonneville should move quickly to achieve as much administrative separation as possible, and to participate in efforts to form an independent grid operator that could operate both federal and non-federal transmission assets.
Future Power System Role for a Four-State Regional Body
When the Northwest Power Act was passed in 1980, the authors contemplated an extended time of electricity shortage and the need for increasingly costly large-scale power plants. The Northwest Power Planning Council was established with two representatives from each of the Northwest states (Idaho, Montana, Oregon and Washington) to provide the states and the public a role in determining the region's future need for electricity and how that need could best be met. The Council was also charged with furthering the goals of: encouraging conservation and renewable resources; helping assure an adequate, efficient, economical and reliable power system; providing environmental quality; and protecting, mitigating, and enhancing the fish and wildlife of the Columbia Basin.
The Power Planning Council has been credited with many improvements in electricity planning. However, in an era in which market forces will play the primary role in determining what plants are built and what can be charged for their output, the Council's resource acquisition planning role is no longer relevant. The Steering Committee believes, however. that the remaining goals are still important to the citizens of the region. The issue is how they are to be achieved in the context of a competitive market.
There is much that is unknown about the competitive future we are about to embrace. As the Northwest transitions toward a competitive electricity industry, there are roles that the region would want carried out by a regional body. These roles do not involve resource acquisition planning, regulation or implementation. They do involve monitoring and analyzing the transition to a competitive electricity market and informing policy-makers and the public. This will help ensure that the transition to a competitive market is accomplished efficiently and fairly throughout the region and that the public values the Northwest has sought from its power system are preserved and enhanced.
These roles include:
Conservation and Renewables working with regional interests to devise ways of overcoming market barriers, participating in market transformation activities, providing guidance in meeting the region's conservation and renewable goals and working with the regional technical forum to track regional progress;
The Competitive Marketplace providing information, evaluation and analysis of the evolving marketplace to ensure full, fair and effective competition throughout the region; and
Public Participation and Involvement informing and involving interested members of the public on matters that affect them, their environment and their economy.
The funding of the Northwest Power Planning Council has been through a charge on Bonneville Power Administration rates. If federal legislation affecting the role of the Northwest Power Planning Council or a similar regional body is pursued, the question of the level and sources of the funding should be addressed.
To view the complete Act visit the Northwest Power Planning Council site.