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Power Prospects Depend on Where You Are by Mark Engler, Staff Writer Capital Press - September 20, 2002

PORTLAND -- the future prospects for inexpensive and reliable electricity in the region look bright -- as long as you're standing on the Oregon-California border looking northward.

"The fundamentals for electric power in the Northwest are excellent," said Steven Hickok, deputy administrator for the Bonneville Power Administration, said recently during a conference on Columbia river water and power issues.

In addition to hydroelectric output "we have unparalleled options in the potential of western Canadian gas, in the development of coal on our eastern perimeter from Alberta through the best in the world - to store and utilize the intermittent output of wind and solar generation through the giant storage batteries that are the hydro reservoirs of the Peace, Columbia and Snake River systems."

The potential is good for long-term energy price declines," absent new environmental regulatory intervention," Hickock said.

That's the good news, he said.

The bad news is that "incomplete" -- and in the case of California, "misdirected" -- reorganization of the power industry could in the future send retail prices lunging unpredictably upward again, or even raise the dark specter of blackouts, as happened during the 2000-2001 energy crunch.

Though Hickok predicts that pricing instability would be short-lived, he acknowledged that such assurance are of "no consolation to a business that has to maintain a positive cash flow and a competitive posture from quarter to quarter while it may be experiencing a sharp power-price jab."

Hickok delivered his comments as part of a two-day seminar, "The Mighty Columbia; The Organic Machine," which featured various presentations on water use, hydroelectricity production and migratory fish restoration.

The energy crisis of last summer faded with the fall rains, but that's about the only reason it did, Hickok said. Had the 2001 drought continued into last winter - and had BPA, investor-owned utilities and some regional municipalities not paid electricity-intensive industries to shut down during the drought -- the the Northwest lights "could have gone out in February."

In order to prevent that sort of thing from happening down the road, real long-term energy planning is going to have to occur, especially in California, where, Hickok indicates, he is anything but optimistic that energy policymakers have gotten their act together.

"California has failed abysmally" in its efforts to realistically restructure and reconnect retail and wholesale power markets so as to end the 'paralyzing confusion' that has befallen power producers and consumers alike.

"Each succeeding step that California has taken since the collapse of its major institutions of electricity service has demonstrated the depth of new and untapped reservoirs of lunacy," he said.

California still owes BPA $80 million for power the state consumed during the 2000-2001 energy crunch, said Hickok.

"California is careening wildly," he said. "It is a frightening spectacle."

Thought the situation is much better in the Northwest, Hickok said BPA, sate governments and the private sector still need to make solid commitments to build new power plants and reinforce the power grid.

Everybody agreed with that a year ago, when "prices were on the moon," but now interest in such projects seems to be drying up, he said. Out of 70 regional power plant projects under consideration just 12 months ago, only six have been completed, and just six more are under construction.

Such projects take money, which doesn't tend to flow as freely as glacial runoff.

"Bonneville needs access to capital," said Hickok. "It is rapidly approaching its congressionally-set borrowing ceiling, and may not be able to start construction on many of the large, multi-year projects that everyone agrees should be built."

The recent volatility in wholesale electric markets can happen again, and the "necessary ingredients" for future crises - drought, severe arctic cold, loss of generation capability, as well as a sharp upturn in the economy -- are all factors that could converge and strain the region's power system. An unforeseen uniting of such circumstances could have catastrophic results, the consequences of which might even be severe injury of loss of human life should power be lost at a most inopportune time.

"Extricating ourselves from this boom-bust exposure should be a high public policy objective," said Hickok. "The stakes are very high."

BPA provides approximately 45 percent of the Northwest's power, which comes from 31 federal hydroelectric projects, several nonfederal projects and one nuclear plant.