The Bonneville Power Administration (BPA) is a nonprofit federal power marketing administration based in the Pacific Northwest that is congressionally mandated to market and transmit the power created by all the federally owned hydroelectric projects on the Columbia River. BPA has marketing responsibility for 31 dams as well as the Columbia Generating Station nuclear plant. BPA also operates and maintains 15,000 miles of high-voltage transmission lines in its service territory. BPA’s territory includes Idaho, Oregon, Washington, western Montana, and small parts of California, Nevada, Utah, and Wyoming. Although BPA is part of the U.S. Department of Energy, it is self funding and covers its costs by selling its products and services. As with many water and power utilities, its top issues include maintaining its infrastructure, adapting to a changing market, and balancing environmental concerns with fulfilling its mission.
In this interview, Administrator Elliot Mainzer tells Municipal Water Leader about how his organization provides affordable, reliable, carbon-free power to municipal, public, and investor-owned utilities across the Northwest.
Municipal Water Leader: Please tell us about your background and how you came to be in your current position.
Elliot Mainzer: I have a background in business and environmental studies and have been working at Bonneville for over 17 years. I started at BPA in 2002 and spent my first 10 years working in different parts of the organization, including energy trading, transmission policy and rates, customer service engineering, and strategic planning. I worked on a variety of regional issues, including wind energy integration, market design, and technology innovation and was fortunate enough to develop collaborative working relationships with a wide variety of regional partners, including our customers, tribes, environmental organizations, regulators, and the members of the Northwest’s congressional delegation. Bonneville provided me with many opportunities to learn and grow. After several years as the executive vice president of corporate strategy, I served briefly as the deputy administrator and then took on the role of administrator and chief executive officer in 2013 during a time of significant external and internal challenges for BPA. Over the past 6 years, my leadership team and I have taken important steps to manage costs and sustain BPA’s role as an engine of the Northwest’s economic prosperity and environmental sustainability.
Municipal Water Leader: Please tell us about BPA and its history.
Elliot Mainzer: Bonneville was established through the Bonneville Project Act of 1937 during the administration of Franklin Delano Roosevelt. BPA was initially established to market and transmit power from Bonneville Dam, and eventually Grand Coulee and the other federal hydroelectric projects on the Columbia River, and give preference and priority in the use of electric energy to public bodies and cooperatives. We were a big part of the recovery from the Great Depression and the electrification of the rural Pacific Northwest. From the 1930s to the 1970s, the hydroelectric system continued to expand. Today, there are 22,000 megawatts (MW) of federal hydro capacity on the Columbia River. The dams that supply the power are owned and operated by the Bureau of Reclamation and the U.S. Army Corps of Engineers. Bonneville serves as the exclusive marketing agent for the power from the Federal Columbia River Power System. Our core customers, known as our preference customers, are the municipal utilities, public utility districts, rural electric cooperatives, and other public power customers spread throughout the Pacific Northwest. We are currently selling power to our preference customers under long-term contracts that expire in 2028. Today, BPA owns and operates over 15,000 miles of high-voltage transmission, including lines that run up to Canada and down to California. You can think of us as the backbone of the Northwest’s high-voltage grid.
BPA is a self-funded power marketing administration. We do not receive federal appropriations. Rather, we cover the capital and operating costs of the federal system through sales of power and transmission. We deliver on our public purposes by operating a commercially successful business.
Municipal Water Leader: How many dams are in Bonneville’s system?
Elliot Mainzer: We have marketing responsibility for 31 federal dams. We’re also the exclusive marketing agent for the 1,100 MW Columbia Generating Station, a nuclear power plant in Richland, Washington, that was built in the 1980s and is owned and operated by Energy Northwest.
Municipal Water Leader: How many people get power from Bonneville?
Elliot Mainzer: We sell wholesale power directly to 136 preference customers and also sell surplus electricity and transmission capacity to six Northwest investor-owned utilities and other wholesale market participants in California and other western states. Those customers then deliver the power to millions of end users. Our preference customers cover a broad range of size and geography and include Seattle City Light, the Snohomish County Public Utility District (PUD), and Tacoma Power in the Interstate 5 corridor of Washington; Franklin PUD and Benton PUD in the Tri- Cities region of Washington; Eugene Water and Electric Board in Oregon; Idaho Falls Power in southeastern Idaho; Flathead Electric Co-op in western Montana; Lower Valley Energy in southwestern Wyoming; and the Wells Rural Electric Company in Wells, Nevada. We provide surplus power and transmission for investor-owned utilities, including PacifiCorp, Portland General Electric, Puget Sound Energy, Avista, Idaho Power, and Northwestern Energy. We also transmit energy for independent power producers, including wind and solar developers and natural gas providers.
Municipal Water Leader: What are some of Bonneville’s current top issues?
Elliot Mainzer: Our major focus at the moment is adapting to changes in the electricity market and sustaining our financial strength. There has been quite a bit of new legislation and policy advanced throughout the region in recent years requiring utilities to use much higher concentrations of clean energy. Bonneville, of course, provides power from a carbon-free hydroelectric system. We are looking for new ways to not only meet the needs of our preference customers but to better capture the value of the clean, flexible attributes of our hydro resource. To this end, we have been establishing some new trading partners and helping open up a new market for clean and flexible capacity.
We have also had to adapt to reductions in wholesale electricity prices over the last 5–7 years. We’ve made significant progress on managing our costs and maintaining our competitiveness and working with our customers and constituents to make sure that we stay on a healthy financial trajectory.
Another key issue that we’re working on is modernizing our assets and system operations. We’re investing over $800 million a year to sustain and expand the core assets of the federal power and transmission system. We’re also engaged in a significant technological modernization of our system, investing in new digital technologies, automation, and what we call state-awareness tools.
The way that energy is traded in the western United States is also changing. A few years ago, the California Independent System Operator (ISO) in Sacramento established the Western Energy Imbalance Market, which allows many of the utilities in the West to exchange energy with each other on a real-time, 5-minute basis. Earlier this year, we signed an implementation agreement with the California ISO to allow us to potentially join that market in 2022. We still have some final steps to complete before deciding whether to go live. Things are looking positive, and we’re encouraged by the way the market is creating value for consumers.
We continue to work actively with stakeholders throughout the Pacific Northwest to make progress for salmon on the Columbia River. The fundamental challenge is to craft solutions that balance the needs of salmon with affordability, reliability, our ability to meet the multiple statutory purposes of the Federal Columbia River Power System. We’ve been working on a court-ordered environmental impact statement known as the Columbia River System Operations Review, which we will complete in 2020. I am hopeful that through careful listening, collaboration, and creative thinking, the Northwest can ultimately come together around a long-term plan for salmon recovery that maintains power system reliability and affordability and meets the needs of the many people who depend on the dams for their livelihoods.
Finally, because we are a large transmission provider, it is important for us to try to understand the future needs of the grid. As we see large-scale renewable energy development, coal plants being retired, and changes in technology, we need to anticipate the kinds of generating and demand-side resources that are going to develop over the next decade. We need to get ahead of those changes through planning and expanding our transmission system so that we can continue to provide reliable service. I often say that transmission is the gateway to the future. As the backbone of the region’s high-voltage transmission system, we need to make sure that we are flexible and responsive to the future needs of the region.
Municipal Water Leader: What have been the recent changes in electricity prices, and why are they changing?
Elliot Mainzer: In last decade, we’ve seen a general reduction in the wholesale price of electricity with intermittent price spikes reflecting short-term shortages. This has been driven by a significant increase in the amount of natural gas available in this country and the consequent reduction in natural gas prices. Historically, natural gas prices have tended to set the price of electricity in the wholesale market. There have also been significant buildouts of wind and solar energy and occasional periods of oversupply, which has had a dampening effect on wholesale electricity prices. We’re also still dealing with the after-effects of the Great Recession of 2008. Certain sectors and loads have not recovered from that economic hit. All those changes in supply and demand have affected the spot price of wholesale power.
However, it is important for people to understand that the comparison between the product we provide to our preference customers and what they can buy on the wholesale spot market is an apples-to-oranges comparison. The firm power product we provide to our preference customers and deliver via transmission is a fully reliable, around-the-clock source of affordable, clean, flexible capacity that, for many of our customers, follows their load up and down throughout the entire course of the year. It also comes with strong commitments to energy efficiency and fish and wildlife protection, and of course, it is a virtually carbon-free product. While we’re big supporters of wind and solar energy and have worked hard to get them on the grid, those resources are variable. Their output fluctuates with the time of day and with wind patterns and doesn’t provide firm, dispatchable capacity. The firm, dispatchable, carbon-free, round-the-clock product we provide is different from what you find on the spot market. We also establish the price of our service every 2 years, rather than every day or month, providing additional price stability—something that was highlighted last March when the spot price of power skyrocketed to $1,000 per megawatt-hour (MWh) during a period of high loads and tight supplies. At approximately $36/MWh, firm federal power is a solid deal for our customers.
As decisions are made to remove large numbers of coal plants and pass new policies that make it more difficult to build gas plants, the fundamentals of the market and regional supply-demand balance are shifting again. As supplies tighten up, wholesale electricity prices will respond accordingly, but it is becoming harder to guarantee what we refer to as resource adequacy—making sure that we have enough power capacity in the energy system to keep the lights on all the time. Resource adequacy is an economic, political, and moral challenge that the region has fortunately begun to address with a strong sense of urgency.
Municipal Water Leader: You mentioned that you are investing $800 million a year in your infrastructure. Does that come from your revenue, or is it federal money?
Elliot Mainzer: Our overall capital program is focused on sustaining and maintaining the core federal assets: the dams, turbines, rotors, generators, transmission towers, and control centers where we operate the transmission system. We also invest capital in information technology, facilities, and fish and wildlife programs. The money to cover the costs of the capital that we invest in federal assets is all collected from our customers. Although we are able to borrow through the U.S. Treasury, we do not receive appropriated dollars from Congress for the investments we make in the federal system. Every dollar we spend is recovered through our rates and paid for by our power and transmission customers.
We’re also spending about $25 million every 2 years on an ambitious grid modernization initiative. That effort is focused on the application of modern technology and automation to system operations so that we can effectively participate in the emerging markets that are much more computerized than was historically the case.
Municipal Water Leader: What is your message to Congress?
Elliot Mainzer: For over 80 years, Bonneville’s role has been to serve as a steward of important federal infrastructure that serves as a fundamental underpinning of the health and vitality of communities in the Pacific Northwest. Our goal is to continue meeting our stewardship responsibilities and to maintain our role as an engine of the Pacific Northwest’s economic prosperity and environmental sustainability for years to come. We place great value on our strong working relationships with Congress and our colleagues throughout the federal government. Their ongoing support will continue to be a vital part of our success in the future.