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Contracting Economy Sparks BPA Expansion by Charles Pope The Oregonian, May 24, 2009

Grain elevator would be the first new facility in U.S. in 25 years

WASHINGTON -- In the three months since President Barack Obama signed the $787 billion stimulus bill into law and Washington began disgorging money, the ride has been bumpy.

Federal auditors say oversight isn't muscular enough to ensure every dollar is spent wisely. And some states are groaning under the administrative requirements to monitor and account for the $49 billion directed their way.

"I am afraid that my 38 years of federal enforcement experience informs me that some level of waste or fraud is, regrettably, inevitable," Earl Devaney, the government's chief auditor for stimulus spending, told a Senate committee in April. In Oregon, one of the biggest recipients of stimulus dollars has not been a target of criticism. The Bonneville Power Administration has gained $3.25 billion in additional borrowing authority, a move that even lawmakers who opposed the stimulus bill have welcomed.

The money will go to upgrade and expand the BPA's sprawling power-generating network. The work is expensive, and supporters say it will help the nation satisfy its increasing appetite for energy and provide jobs for the hard-hit Northwest. Unlike most stimulus dollars, which add directly to the deficit, the BPA must repay with interest whatever it uses.

"You get direct, immediate jobs in construction, and the second wave of jobs comes with the wind product," said Rep. Peter DeFazio, D-Ore., who voted against the stimulus bill but supports giving the BPA extra money.

The projects would provide work for more than a decade, but BPA officials could offer no estimates for jobs or even precise cost because many won't get under way for years.

"Without some sort of rate increase (by the BPA), there would have been no way to create a quarter-billion dollars to make this investment right now," DeFazio said.

Among those projects the BPA plans to finance with government money is a 70-mile upgrade of transmission lines along the Interstate 5 corridor spanning northwest Oregon and southwest Washington. The projected cost is $342 million. Another would connect a station in The Dalles to another in Goldendale, Wash., 28 miles away. That work is estimated to cost $115 million.

The BPA has formally announced only one project: a 79-mile transmission line that will link substations in Oregon to wind generators in Washington and Oregon. The $340 million project will create 700 jobs.

Bonneville officials say most of the other projects would require fewer than 700 workers, but precise numbers won't be known until the projects get closer to reality. It will take years because the BPA must first complete environmental review, negotiate rights of way and comply with a thicket of laws and regulations.

The BPA operates 31 hydro dams with a transmission system that spans 15,000 miles. Much of the system is aging and slowed by choke points. The money also will be used to help preserve salmon and habitat along with other activities. BPA officials say the risk to taxpayers is small and the benefits are large.

"Last year, BPA made its 25th consecutive annual Treasury payment in full and on schedule," BPA Administrator Steve Wright told a House subcommittee in March.

Even with demonstrable needs and a solid record, it took the BPA nearly a decade to persuade Congress and the federal government to provide more money.

The $3.25 billion is actually a boost to a current line of credit with the federal government that the BPA has used since 1974 to finance expensive projects. Prior to that, the BPA relied on annual appropriations from Congress, which made it difficult to plan and finance long-term projects.

"This means real immediate jobs in the hardest hit sector -- construction," DeFazio said. "There are secondary jobs in construction and renewable energy and benefits to the region's ratepayers. It's a lot of good stuff."

At the same time, there are questions about the immediate effect on Oregon's suffering economy. Wright and DeFazio both insist the benefits are real and, more important, the cost is low because the BPA must pay back with interest whatever it uses from the account.

What is clear is that running a power system that generates nearly half the power consumed in Oregon, Washington, Idaho and Montana is an expensive proposition. Without the $3.25 billion in new money, the BPA had too little capital to do much of the work it now hopes to complete.

Because the BPA is a quasi-government operation, it cannot borrow money from private sources. That leaves only the federal Treasury as a source.

But to tap that source, the BPA must win permission from the White House and Congress.

That was a serious challenge during the Bush administration, which generally opposed expanding credit. There were problems on Capitol Hill, too. The money sought by the BPA came from a limited pot of money and there was serious competition for those dollars. In recent years money that the BPA might have used was diverted to other places, often at the direction of the most politically powerful lawmakers.

Those problems vanished this year.

First, Obama arrived in Washington with a mandate to boost the amount of power generated from renewable sources.

Second, the economy unraveled. In response, Obama and Congress approved the stimulus bill. It gave preference to any project that promised to create jobs, a test the BPA could meet with at least one large project.

The result was that the economic meltdown became a golden opportunity for the BPA.

Wright calls it a miracle, acknowledging that additional borrowing authority would not have been granted so early in a new administration without the downturn.

"It's not an overstatement. It's the truth," he said.

BPA Energy Projects

The Bonneville Power Administration will use federal stimulus money to help finance regional electrical transmission projects in the coming years. They include:

• $340 million McNary-John Day line: 79-mile transmission line from wind-generating projects along the Columbia River. The BPA estimates 700 jobs will be created.
• $115 million Big Eddy: 28-mile transmission line that starts east of The Dalles and runs to Goldendale, Washington.
• $342 million Interstate 5 corridor*: 70-mile transmission line would run from substation near Wilsonville or Troutdale up to Castle Rock, Washington.
• $99 million Little Goose area*: 40-mile transmission line from a new substation proposed near Pomeroy, Washington, to the BPA;'s existing Lower Monumental Substation east of Pasco, Washington.

* To be determined after public input and environmental review.
Source: Bonneville Power Administration