THERE WAS a time when many Northwesterners thought we could watch
California's energy crisis from a safe distance.
We have since learned that a major energy crisis does not stop at the
Golden State's borders but, instead, rolls over the Northwest like a tidal
wave, wreaking havoc with our economy and overwhelming our carefully crafted
As one Northwest utility official put it, "We learned that everyone else is
the tail. California is the dog."
To understand why the Northwest is now facing its own energy crisis and how
the energy problems in the Northwest and California each affect each other,
one must understand how the Northwest gets its power.
In the Northwest, falling water is our primary fuel. Depending on the
available snowpack, hydroelectricity produced at more than 200 dams in the
Columbia River basin generates between 60 and 75 percent of the region's
electricity. About two-thirds of this hydropower comes from 29 dams owned and
operated by the two federal agencies, the U.S. Army Corps of Engineers and the
Bureau of Reclamation.
By taking advantage of the region's geography and climate, the Columbia's
hydroelectric dams have produced some of the least expensive electricity in
the nation, power that has been the economic backbone of the region.
However, the Columbia's hydrosystem also has two curses.
One is that water conditions can vary greatly, and right now the Northwest
and California are in the middle of an extreme drought. The second is the
dams' negative impact on salmon. These dams operate under a federal salmon
recovery plan established under the Endangered Species Act that calls for more
water to be sent over spillways to help push the salmon downstream instead of
through the dams' power-generating turbines.
That power is sold at cost and transmitted to Northwest consumer-owned
utilities by yet another federal agency called the Bonneville Power
Administration. These "cost-based" rates cover the expense of repaying the U.S.
Treasury for the cost of developing these hydropower projects, moving the
power over massive transmission lines, and supporting efforts to restore the
dwindling salmon runs.
Under federal law, Northwest consumers get preferred access to the
relatively low-cost power. Any surplus power can be sold, most often to
California's municipal and investor-owned utilities.
This Northwest "regional preference" to federal power was part of the deal
that led to the construction of the massive transmission lines, called "the
intertie," which first connected the Northwest with California and the
Southwest in the late 1960s.
For decades, the intertie worked almost flawlessly and to everyone's
During the summer, when air conditioners caused California's power use to
peak, many California utilities would supplement their needs by turning to the
Northwest. In the winter, when Northwest electric furnaces are turned on for
space heating, California utilities would return the favor and ship their
surplus power north.
Recently, the BPA has had to purchase large blocs of power on the wholesale
market to meet its contractual obligations to its Northwest customers.
The same exorbitant wholesale prices that began to plague California last
year have also affected the Northwest, meaning that the BPA has been running
out of money, and is now in danger of defaulting on its debt obligations to
California's deregulation plan has affected energy relations between the
two regions in other ways. For example, the BPA has historically sold surplus
power to California for relatively low prices. However, the state's
deregulation law made it almost impossible for California utilities to enter
into favorable long-term contracts.
Instead, power had to be purchased at the much higher "market clearing
price" on the short-term spot market.
The BPA has taken extraordinary steps to help California keep the lights on.
At times, the agency even declared energy emergencies, which allowed it to
temporarily override salmon protections and use the water to generate power
for California rather than sweep salmon over the dams. California officials
have praised the BPA for its cooperation, but Northwest environmentalists and
tribal leaders complain that the BPA has been helping California address its
energy crisis by selling salmon down the river.
The Northwest will be helped by FERC's decision yesterday to extend limited
temporary price restrictions it had imposed in California in the spring to
other Western states during severe shortages. The order should also be good
for California. Without consistent price restrictions throughout the West,
power marketers would simply skip California during an emergency and sell at
higher prices elsewhere.
But not everyone is happy with the decision. Many critics say the rates are
still too high, and some critics said in s published report that the "order
rewards inefficiency by pegging price ceilings to the costliest California gas
The half-hearted response from FERC, along with continuing supply shortages
and other problems make it likely that California will continue to face
rolling blackouts and high utility bills -- even though they may not be as
high as we once feared.
The Northwest may follow suit next winter.
Some in our region fear that some desperate California political leaders
might try to wrest control of the BPA and a large portion of the Columbia
Basin's hydropower. The 6,600 megawatts of hydropower from the Columbia's
federal dams would only offer a few drops in the bucket for California's
massive 50,000-megawatt system, but its loss would devastate the Northwest
The four Northwest governors (of Washington, Oregon, Idaho and Montana) and
more than 40 state legislators met in February and agreed to explore ways to
ensure that the Northwest does not lose its regional preference to the
Northwest governors have had some productive meetings with Gov. Gray Davis
and his staff this year regarding power sharing, and there are encouraging
signs that trust is growing at this and other levels.
Just last week, officials from the BPA, California's Department of Water
Resources, and the California ISO agreed on a plan that outlines when and how
the BPA may be able to help California during the expected summer shortages.
We will soon find out whether our two regions will succeed in collaborating
with or cannibalizing each other as we enter the next phase of the West Coast
Ultimately, California's experience with energy deregulation makes the case
for a strong and supportive federal role in the energy markets. It also
reinforces the view that electricity should be treated as an essential service
and be sold at cost by utilities that are owned and controlled by the public,
rather than as a commodity and sold at the highest price.
In fact, something like a California power authority that places California
in charge of its own destiny makes more sense to me all the time.
Jeff Hammarlund is an adjunct associate professor and research fellow at the Mark Hatfield School of Government at Portland State University where he teaches graduate courses on energy policy. He is also president of Northwest Energy and Environmental Strategies consulting firm.
©2001 San Francisco Chronicle