NW electricity customers should be wary of proposed experiment

As a result of California’s failed experiment in electric power deregulation and Enron’s massive manipulation of the power markets, the Northwest has lost much of its low-cost electric power economic advantage. Thousands of regional jobs have been lost, schools have been forced to make cuts, and record numbers of low income customers cannot pay their power bills.

We are still transcribing Enron tapes and uncovering the multiple ways they committed their crimes. One recent revelation is that the design for the software used by the California “independent system operator” contained “billion dollar loopholes” for Enron and others to exploit. (The software designer actually sent Enron an e-mail saying that someone needed to take advantage of the loopholes – like a bank software designer sending e-mails to looters). Enron’s “Fat Boy” scheme, for example, involved overscheduling energy on transmission lines to inflate energy prices.

The California independent system operator was a new bureaucracy created to manage the transmission system as part of that state’s electric deregulation experiment. The “independent transmission operator” was encouraged and approved by the Federal Energy Regulatory Commission as part of FERC’s nationwide experiment in “electricity restructuring.”

Despite the wreckage and ongoing investigations, some are pushing for a new Northwest independent transmission operator to be called Grid West. But we don’t need to take this expensive risk.

The Bonneville Power Administration owns and operates more than 75 percent of the Northwest’s transmission system. If changes are needed, BPA can make them now. As a federal agency, BPA must answer to Congress and the citizens of the region. We need to keep regional control. We don’t need a new private bureaucracy that is “independent” – which just means it can ignore Congress and the citizens of the region.

Most publicly-owned utilities in the Northwest oppose Grid West because it places existing transmission rights at risk and because BPA can do a better job at less cost. We are also not convinced that the lessons of the recent failures have all been uncovered or learned.

The Superintendent of Tacoma City Light, Steve Klein, recently asked: “Would you buy an expensive, newly developed car with huge and ever-increasing operating and maintenance costs from a manufacturer that had not yet produced a model that ran properly?” He added: “You probably wouldn’t. Northwest utilities, however, are being pushed to buy into an unproven and expensive new model for transmission that we don’t need.” Klein said other FERC efforts to turn production and delivery of electricity into a short-term commodity market have led to calamities such as rolling blackouts in California and contributed to the 2000-2001 energy crisis in the Northwest.

Many former supporters of electricity restructuring are rethinking things. The free market Cato Institute now believes the regulated status quo is better than the restructuring experiment that has caused so much economic harm. The American Public Power Association recently issued a report, “Restructuring at the Crossroads,” on how costs of existing independent operators have spiraled out of control and have not performed as promised. In other parts of the country with new regional transmission organizations, operating costs have increased 143 percent in the last four years, far beyond initial estimates. (For details on those reports and for transcripts of Enron to date, go to www.snopud.com).

What should be done? First, do no harm. There is a bill in Congress that would allow BPA to transfer control over the region’s federal transmission system to a “regional transmission operator.” That legislation should be stopped. Second, our lawmakers should support efforts to make BPA transmission more responsive and transparent, so that BPA’s decisions can be reviewed and approved by the citizens of the Northwest. Third, if needed, BPA can help reform other regional transmission owners, by making reform a condition of access to BPA’s transmission lines – which they all need. Finally, be sure we have all the details of the schemes that caused the West Coast electricity crisis before the region takes part in another experiment.

Steve Marshall is the Snohomish County PUD’s assistant general manager for power and transmission services.