U.S. tells California Not to Count on Cheap Federal Power

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U.S. tells California Not to Count on Cheap Federal Power Source: Knight Ridder/Tribune Business News Publication date: 2000-10-18

Oct. 18--PORTLAND, Ore.--Buffeted by the competing priorities of saving salmon and providing cheap power for the Pacific Northwest, the nation's largest power seller ---- the federal government ---- last week told California not to depend on federal power for electricity imports for the next several years. Growing demand in the Northwest has hit the government's Bonneville Power Administration at the same time a salmon restoration program is kicking in that will cost $700 million per year and limit the agency's flexibility to turn on the juice from its vast system of hydroelectric dams.

"Don't count on hydro for the next several years," said Steve Oliver, the federal agency's vice president of bulk power and transmission. For years Northwest power has been abundantly cheap and available to Californians in the summer.

Environmental groups say they are just getting started on the task of restoring the West's rivers after years of neglect. Fresh from a series of victories in limiting the damage from hydroelectric systems in the Pacific Northwest, a new push is under way to breach, or knock down, dams on the Snake River, Colorado River and in California's huge system of privately owned dams in the Sierras.

Power management officials say the environmental restrictions threaten to remove thousands of megawatts of electricity generation from the Western power markets just when the region is expecting heavy growth in demand. A megawatt will power about 1 million homes.

Bonneville has already handed California an expensive lesson this summer in the state's vulnerability to shortfalls in the supply of power from surrounding regions and in the cost of environmentalism. The agency, part of the U.S. Department of Energy, controls the power sales from a network of 29 hydroelectric dams in Washington, Oregon, Idaho and Montana.

Fearing low water levels, Bonneville cut its exports to California this summer by about 4,000 megawatts to less than half its traditional levels. California imports up to 30 percent of its electricity on days of high demand.

Coming after several good water years that drowned the markets in cheap power, this year's shortfall emboldened the companies that generate and trade electricity in California to raise their prices to historic levels.

Now the fall runs of migratory salmon are causing the agency to release water from its dams just as the winter heating season begins in the Northwest.

The "spills" of water on behalf of salmon have gradually increased over the years to remove an average 2,000 megawatts from hydro production, Bonneville says, and new salmon restoration efforts this year will cut output an additional 400 megawatts.

Environmental groups have succeeded in sharply ratcheting up efforts by operators of dams to stabilize river levels in order to save fish. They say the measures are long overdue and dispute the cost in power production.

"There's a long history of the environment being clobbered by these facilities," said Daniel Kirshner of the Environmental Defense Fund.

"People have taken advantage of the 'let's blame the environmental movement' this summer," Kirshner said. "It's an attempt to attribute ill effects to environmental restoration that is dead wrong."

The agency has been saving its remaining water to push through its generators during afternoon periods of peak demand. To make up the difference, Bonneville has been aggressively buying electricity from California during the dead of night, driving up prices on state markets for so-called "off-peak" power from normal prices below $25 per megawatt hour to more than $80 per megawatt hour.

Officials predict that tight supplies will persist for years. About half of the region's power comes from Bonneville's hydroelectric system, and rainfall remains unpredictable in the face of demand that is growing at 2 percent a year.

Bonneville and state power managers have begun contingency planning against the possibility of rolling blackouts this winter as the grid strains under demand from electric heaters, which are common in the Northwest after years of abundant, cheap power.

Dick Watson, head of planning for the Northwest Power Planning Council, estimates that there is a 24 percent chance of rolling blackouts in the region by the winter of 2003.

"We've been predicting this for years, but people are paying attention this year," Watson said. "Prices and markets speak more loudly than planners ever have."

Bonneville is also having trouble meeting its long-term contracts for cheap power, which has raised hackles among California policy-makers.

The agency has been accused of holding back supplies and profiteering in the power markets ---- selling power to its customers in the Northwest for an average 2.4 cents per kilowatt hour while at the same time selling to California at prices that exceeded 21 cents for weeks at a time.

Under the terms of a federal flood control law that dates to 1944, Bonneville must sell electricity at its cost to the 132 municipally owned utilities in the Pacific Northwest, and give preferential treatment to investor-owned utilities and industrial customers in the region.

Profits from the sale of electricity by Bonneville will likely top $500 million this year on total revenues of $2.5 billion, said David Mills, the manager of the agency's power trading floor. Sales to California totaled $142.7 million as of the end of August. The agency's financial statements indicate that cash reserves could top $1 billion.

Now political pressure is mounting to change the way the agency operates its power sales.

Rep. Brian Bilbray, R-San Diego, has introduced federal legislation that will end preferential treatment for customers in the Northwest.

California's two U.S. senators last week asked Energy Secretary Bill Richardson to block Bonneville from signing new power sales contracts until Congress reviews the terms under which low-cost federal power is made available. Two congressmen from the Northeast asked the General Accounting Office to investigate charges of profiteering by the agency in California power markets.

California is having troubles of its own deciding the future of its hydroelectric system.

Pacific Gas & Electric, the giant Northern California utility that operates the world's largest privately owned hydro system, has faced resistance to its plan to sell its network of 174 dams to an unregulated subsidiary.

Environmentalists have held up the sale because of fears that an unregulated power company might neglect projects to restore salmon and steelhead in the state's rivers.

California's hydroelectric system provides about 20 percent of the state's power. In contrast to Bonneville, this year has been a good one for water flows in the state, said Daniel0 Nix, deputy director of analysis for the California Energy Commission.

But energy output is expected to gradually decline over the next 15 years because 45 percent of California's dams are due for relicensing, and the federal government generally tightens up fish restoration measures.

A study by the U.S. Department of Energy concluded that California will lose 362 megawatts during the next 10 years because of the contentious relicensing process.

Power company executives have complained that the new environmental restrictions threaten the stability of the West's interconnected power system.

New turbine technology that reduces the number of fish kills can reduce the need for more drastic measures, said David Tuft, spokesman for the National Hydropower Association, a Washington, D.C., trade group.

"What is unfortunately true is that environmental regulation has gained the upper hand," Tuft said. "Electric generation really takes a back seat to other uses."

The operators of Bonneville's dams have to balance fish restoration, recreation, irrigation, flood control and other uses ahead of power generation, says Nix.

"Hydro is about number eight on that list," Nix said.

Jim Lichatowich is a respected fish biologist in Washington state and author of "Salmon Without Rivers."

Lichatowich said that mitigation measures, which have expanded to include protection of river banks, reduction in logging and keeping cows out of fragile rivers, have a long way to go in accounting for a recent resurgence in fish populations.

"There has been a conspiracy of optimism," he said. "We've bet the farm on too many of those technological fixes and they haven't proven out in the long run."

"It's possible that there have been 50 years of selection against the fish that are susceptible of being killed by dams," Lichatowich said. "It's not clear whether they've actually improved things or whether they've killed off all the fish that are susceptible to being killed."


-- Martin Thompson (mthom1927@aol.com), October 19, 2000

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