BPA opts to join controversial energy market despite criticism that it will raise rates

The Bonneville Power Administration, the region’s largest transmission grid operator, has made the final call to join a new energy market based in Arkansas over one based in California – a controversial decision that critics say could have major implications on electricity costs in Oregon and across the region.

For months, Pacific Northwest governors, lawmakers, utility regulators and renewable energy proponents have pressed BPA to reconsider its plans, which the agency initially announced in March. They argued that BPA joining the Southwest Power Pool day-ahead market could result in much higher power costs and larger monthly bills for millions of customers, less grid reliability and more difficulty integrating clean energy.

BPA, a self-sustaining agency that is part of the U.S. Department of Energy, markets hydropower from 31 federal dams in the Columbia River Basin and supplies a third of Northwest electricity, mostly of it to publicly owned rural utilities and electric cooperatives. It also owns and operates 15,000 miles – 75% – of the Northwest’s high-voltage transmission lines.

Oregon’s two largest utilities, investor-owned Portland General Electric and Pacific Power, have gone the other route. They have both signed agreements to join California’s day-ahead market instead. And they have argued that once BPA leaves the Western market, the available energy they can purchase would diminish, leading to higher prices for customers across the region.

In announcing the decision Friday, BPA said it stood by its analysis that the Southwest day-ahead market is superior to the California one. A day-ahead market is a mechanism where electricity is traded a day in advance of its generation and delivery, allowing grid operators like the BPA and other participants to sell off excess power or buy additional electricity and schedule delivery in advance.

Nita Zimmerman, BPA’s chief business transformation officer, told reporters that the California market’s governance structure favored California consumers while the Southwest market would allow BPA to remain more independent.

“The market design, the governance, the elements within the SPP Markets+ market are more desirable for BPA,” said Zimmerman. “We’ve looked at the production cost models. We’ve also looked at the governance and the market design. And we’ve made the decision that we feel is best for our region and for our rate payers at this time.”

Critics, including U.S. Sens. Ron Wyden and Jeff Merkley, D-Ore., said they were disappointed and worried about BPA’s choice. They pointed to BPA’s own modeling showing that the California day-ahead market would be much more cost-effective.

“I have repeatedly stressed that BPA should take its time to get this decision right, which will impact Oregonians for decades. Despite concerns from my fellow senators and the governors of Oregon and Washington, BPA has made a rushed decision,” Merkeley told The Oregonian/OregonLive.

Renewable energy proponents echoed the sentiment over concerns that the Southwest market, which is smaller than California’s, has a more limited portfolio of clean energy resources.

“We believe BPA’s decision to participate in Markets+ will limit the economic and environmental benefits to the region,” said Ben Otto, an energy consultant with NW Energy Coalition, a Seattle-based nonprofit that promotes clean energy across the Northwest. “We are concerned that BPA is not being accountable to all its regional customers and its obligations to manage public assets for broad public benefits.”

But Doug Johnson, a spokesperson for the agency, said that while there would be higher upfront costs in joining the Southwest market, costs would lower over time. And while the California market’s implementation fee is low, its ongoing market participation fee is double that of the Southwest market, he said.

BPA’s Zimmerman said the agency did not yet have a timeline for when it will leave the Western energy market and plans to look at implementation steps next before setting a date.

— Gosia Wozniacka covers environmental justice, climate change, the clean energy transition and other environmental issues. Reach her at gwozniacka@oregonian.com or 971-421-3154.

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