When presenting to a crowd at College of Idaho in October, economist Tony Jones said the Bonneville Power Administration—the agency that markets electricity from dams in the Pacific Northwest—could be facing a “death spiral.”
That’s a term Jones used to describe a cycle where the federal agency is unable to offer competitive market prices for energy, which would lead its customers to find other sources of power. BPA would then need to raise rates even higher to cover fixed costs, which would lead to yet more customer loss.
Jones is one of four authors of a recent report that digs deeper into BPA’s steady slide into financial dire straits. The report, titled “The Bonneville Power Administration 2018: Threatened, Endangered, or on the Brink of Extinction?” is authored by Jones, environmental journalist Steve Hawley, TV producer Jim Norton and environmental activist Linwood Laughy.
“Planning to sell more surplus electricity in a saturated market with flat or declining demand and falling prices fails to meet the test of a sound business model,” the authors write.
The authors explain that BPA covers its costs primarily through electricity sales to utilities under long-term contracts that are set to expire in 2028. Many or most of these contracts predate the rapid onset of solar and wind power in the Pacific Northwest and California.
“Between 2008 and 2009, the open market price of power dropped from $90 to $25,” the authors write. “Not only has this price not rebounded, but continued installation of wind and solar farms, along with further advances in conservation and efficiency, lead most planners to believe market prices will continue at this level, or lower, for decades to come.”
According to the report, BPA intends to hold its 135 contract customers to the terms of their contracts until 2028 even through power is now available on the open market for less, and while the agency projects further increases in its rates.
“This report verifies what IRU has been saying for years,” said IRU Executive Director Kevin Lewis. “Four low-value, high-cost dams on the lower Snake River have decimated Idaho’s iconic salmon and steelhead species without providing any real benefit to the power market. Business as usual isn’t an option.”