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Overview:

The Power Marketing Administrations (PMAs) are four federal agencies within the Department of Energy responsible for marketing hydropower—primarily excess power produced by federal dams and projects operated by the Corps of Engineers and the Bureau of Reclamation. The four federal PMAs, which market and distribute power to 60 million people in 34 states, are required to give preference to public utility districts and cooperatives, and sell their power at cost-based rates.

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History:

The federal power marketing program started in the early 1900s as a way to use excess power from federal water projects to repay their investment. The government needed to dispose of electric power produced by dams constructed largely for irrigation or flood control, and to promote electrification in small communities and farms, filling a void where private utility service would not have been profitable.

 

The Power Marketing Administrations (PMAs) were created to supply cheap power to poor, rural areas in the South and West, but now also service metropolitan centers such as Las Vegas and Los Angeles. The first PMA, Bonneville Power Administration (BPA), was established in 1937, followed by three more PMAs for marketing power generated at 133 federal dams across the county. (A fifth, Alaska, was divested in the 1990s.)

 

The purpose of BPA’s creation was to deliver and sell the power from Bonneville Dam. The first line that was established connected that dam to Cascade Locks, which was located three miles away. Between the 1940s and the 1960s, networks of high-voltage wire were constructed, which serviced the majority of BPA’s territory. During those decades, the BPA was authorized by Congress to sell and deliver power from additional federal dams along the Columbia and its various tributaries.

 

The creation of the Southeastern Power Administration (SEPA) was proposed during the 80th Congress (1947-48), but faced strong opposition from politicians and representatives of the utility industry. Following heated debate, its supporters prevailed. In 1950 SEPA was officially established within the Department of the Interior by its Secretary, Oscar Chapman, fulfilling a directive of the Flood Control Act of 1944 (pdf). The administration was moved to the Department of Energy (DOE) when President Jimmy Carter established that department in 1977. The SEPA’s headquarters were re-located in 1968 and 2001, and it is currently based in Elberton, Georgia, a rural community of 5,000 residents.

 

Southwestern Power Administration (SWPA), created in 1943, was also established within the Department of the Interior and subsequently moved into the DOE. Western Area Power Administration (WAPA) was created in 1977, concurrent with the establishment of the DOE. History of the Electric Power Industry (Edison Electric Institute)

 

Privatization

Modern efforts to privatize the energy industry—and PMAs—date at least to the Reagan administration. When Republicans took control of Congress in 1994, they set out to privatize the federal government, and the PMAs were at the center of their efforts. However, initiatives to privatize PMAs haven’t progressed far in Congress, with the exception of APA (see below and debate section on privatization). Others have suggested keeping the administration under federal control, but forcing the agencies to sell their power at market-based rates.

 

The George W. Bush Administration’s FYO8 budget proposal didn’t suggest PMA privatization or market rates, but it did include an Office of Management and Budget (OMB) proposal to use revenue from surplus power sales above $500 million to accelerate repayments of the Bonneville debt to the U.S. Treasury—rather than using it to keep rates as low as possible. Critics maintain that these higher rates would cause undue economic strain for BPA customers.

 

Alaska (APA) Divestiture

The fifth PMA, Alaska, was sold in 1995 after a termination and asset sale act passed in Congress. The move to divest was based in part on the argument that the regional needs ceased to justify the federal venture—which, according to proponents of the bill, had served its purpose, only filled a small market niche, and been replaced by other providers that emerged to service the region:

DOE08: Support the Sale of the Alaska Power Administration

Privatization Alaska Offers a Lesson in How to Sell Power (by Pam Kufahl, Transmission and Distribution World)

 

 

 

 

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What it Does:

The federal government markets power from 133 hydroelectric projects throughout the country through four Power Marketing Administrations (PMAs). The multipurpose projects, constructed and owned by the Bureau of Reclamation and the U.S. Army Corps of Engineers (Department of the Interior), include flood control, navigation, irrigation, and recreation operations. Forty-five percent of the nation’s hydroelectric power is produced as a by-product of these operations, and sold by PMAs to local public, private, and cooperative utilities at cost.

 

All four PMAs market federal power and provide low-cost electricity with preference to public customers (public municipal utilities and rural cooperatives, which in turn provide electricity to about a quarter of the nation’s retail consumers), but each is a “distinct and self-contained entity” within the Department of Energy (DOE), like a “wholly owned subsidiary of a corporation,” and each is affected by its own unique regional issues and conditions.

 

The PMAs overlay the transmission and distribution of utilities in 20 states, representing 42% of the continental U.S. Bonneville Power Administration, Southwestern Power Administration, and Western Area Power Administration collectively own and operate 33,700 miles of transmission lines and 594 substations. The Southeastern Power Administration does not own or operate any transmission facilities, but rather contracts with regional utilities that own electric transmission systems to deliver the federal hydropower to its customers.

 

Bonneville Power Administration (BPA)

Headquartered in Portland, Oregon, the BPA markets to the Pacific Northwest’s public and private utilities as well as to some large industries. The agency provides around a third of the electricity used in the Northwest and operates more than three-fourths of the region’s high-voltage transmission. Its service territory includes Idaho, Oregon, Washington, western Montana and small parts of eastern Montana, California, Nevada, Utah, and Wyoming. Although supported by the DOE, Bonneville is “not tax-supported through appropriations, but recovers all of its costs through electricity and transmission sales.”

BPA Fast Facts

2012 Annual Report

A fish's role in the ecology debate: The $1 billion spent on salmon recovery may only be the start. A region weighs the economic and environmental issues (by Brad Knickerbocker, Christian Science Monitor)

 

Southeastern Power Administration (SEPA)

The SEPA was created in 1950 by the Secretary of the Interior under the Flood Control Act of 1944, and transferred to the Department of Energy in 1977. Headquartered in Elberton, Georgia, Southeastern is responsible for marketing electric power and energy generated at reservoirs operated by the U.S. Army Corps of Engineers to more than 495 preference customers—and servicing more than 12 million consumers—in Georgia, Florida, Alabama, Mississippi, southern Illinois, West Virginia, Virginia, Tennessee, Kentucky, North Carolina, and South Carolina. It is the smallest of the four PMAs and one of the smallest federal agencies in the country.

2011 Annual Report (pdf)

 

Southwestern Power Administration (SWPA)

Established in 1943 by the Secretary of the Interior, the SWPA is responsible for marketing power from 24 U.S. Army Corps of Engineers multipurpose dams in Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas. The SWPA provides service to 100 “preference” customers, which ultimately serve another eight million end-use customers. The agency operates 1,380 miles of high-voltage transmission lines, substations, and a communications system. Power scheduling and dispatching are conducted from the Springfield operations center, while staff work from offices in Oklahoma, Arkansas, and Missouri.

2011 Annual Report (pdf)

 

Western Area Power Administration (WAPA)

Western Area markets and delivers hydroelectric power and related services from multi-use water projects within 15 central and western states. The agency’s system carries electricity from 56 hydropower plants operated by the Bureau of Reclamation, U.S. Army Corps of Engineers and the International Boundary and Water Commission—with a combined capacity of 10,505 megawatts. The agency’s wholesale power customers provide service to millions of consumers in Arizona, California, Colorado, Iowa, Kansas, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Texas, Utah, and Wyoming. Western and its partners are separately managed and financed.

2012 WAPA Annual Report (pdf)

America and Power Before Western Area Power Administration (pdf)

WAPA 25 Years, Chapter 5: Privatization Threats and Restructuring Challenges (pdf)

 

 

 

 

 

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Where Does the Money Go:

The Power Marketing Administrations (PMAs) have spent more than $80 million on 1,428 contractor transactions during the past decade, according to USAspending.gov. The top five types of products or services purchased by PMAs during this time period were generators ($15,493,894), electric services ($10,518,302), aero and space research and development ($8,748,663), gas services ($7,933,728), and self-propelled warehouse trucks and tractors ($5,891,789).

 

The top five recipients of this contractor spending were:

1. Cummins Inc.                                                          $14,417,296   

2. TransCanada Corporation                                       $14,352,197   

3. Dell Inc.                                                                    $7,231,853   

4. TUG Technologies Corporation                                $5,891,789   

5. Adams Marketing Associates Inc.                            $4,539,988

 

Budget Issues

Beginning in 2007, the George W. Bush Administration implemented an initiative to charge the Southwestern Power Administration (SWPA), Western Area Power Administration (WAPA), and Southeastern Power Administration (SEPA) interest rates (at levels similar to those charged governmental corporations) on new capital investments occurring after September 30, 2006. The 2008 budget also reintroduced an initiative to for Bonneville to “apply net secondary market revenues in excess of $500 million toward the repayment of its outstanding treasury debt.” (Office of Management and Budget FY 2008)

 

According to the National Rural Electric Cooperative Association (NRECA), OMB’s “Agency Rate” for the three PMAs is an underhanded attempt to eventually raise rates and undermine the PMA system:

“OMB, once again, proposed a so-called “Agency Rate” for three PMAs (SEPA, SWPA, and WAPA) to raise their interest rates to the level that government corporations pay to borrow funds from the federal government. The OMB argues that this is needed to cover a ‘perceived risk’ to the U.S. Treasury for non-payment. This action is punitive and unnecessary. These three PMAs are not government corporations and do not borrow funds from the U.S. Treasury. They also have an enviable record of repayment. The OMB proposal would open the door for budget gimmicks each year to raise rates for the PMAs through administrative fiat, bypassing Congress’ traditional oversight authority of the PMAs. Congress quashed both of these proposals during the FY08 appropriations process.”

 

 

 

 

 

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Controversies:

Drummond Ousted for BPA Discrimination Against Veterans

The Department of Energy (DOE) discharged top officials of the Bonneville Power Administration (BPA) in 2013 for engaging in hiring practices that essentially kept veterans from getting jobs with the administration.

 

Discriminatory staffing methods used by the BPA between November 2010 and June 2012 led to the discharge of Administrator Bill Drummond, who had held the office for only six months, and Chief Operating Officer Anita Decker, who had been in that post since 2007. Even after the problem was discovered, the BPA officials did nothing to mitigate it, such as notifying the applicants who were affected.

 

BPA employees who spoke out about or helped the DOE investigate the BPA’s job-application process were also fired, suspended or reassigned. DOE inspector general Gregory Friedman placed all such actions on hold pending an investigation. Meantime, the BPA also lost the power to hire anyone on its own.

 

Elliot Mainzer, the BPA’s deputy administrator, was appointed as its new top executive on an interim basis.

Energy Department investigated for retaliating against whistleblowers (by Ruth Tam, Washington Post)

DOE appoints Elliot Mainzer interim leader of BPA; Bill Drummond’s fate unclear (by Ted Sickinger, Oregonian)

Drummond reportedly out in BPA management shakeup (by Suzanne Stevens, Sustainable Business Oregon)

 

I-5 Corridor Project

The Bonneville Power Administration (BPA), one of the nation’s four Power Market Agencies, have fought with residents of southwest Washington state for years over a proposed new transmission line.

 

BPA’s I-5 Corridor Reinforcement Project called for constructing a 500-kilovolt, 70-mile transmission line between Castle Rock, in Cowlitz County, Washington, and Troutdale, Oregon.

 

Without the new line, southwest Washington and northwest Oregon would be at risk of power outages within a decade, according to the BPA.

 

Since 2009, southwest Washington residents and property owners have opposed the project, calling it “the beast.”

 

Residents suggested an alternative route, which the agency rejected.

 

The alternative route went farther north and east than any of the four routes BPA was considering. Citizens argued that their route, which they dubbed the “grey line,” would affect fewer homes and property owners than other proposed BPA routes.

 

But according to the BPA, the environmental and financial consequences of the grey line outweigh the benefits. A final decision about whether to build the project and what route it will take will be made by 2014.

Bonneville Power Administration to take controversial transmission line project to summer events (Oregonian)

Draft Environmental Impact Statement Comment Summary (Bonneville Power Administration)

Bonneville Power Administration eliminates citizen-proposed route for I-5 corridor project in southwest Washington (by Kristine Guerra, Oregonian)

 

Chu’s Suggested Changes Stir Controversy

In March 2012, Secretary of Energy Steven Chu announced an ambitious and controversial plan directed at changing the way the nation’s Power Marketing Administrations (PMAs) operate and help provide electricity.

 

Chu called for the PMAs to take a leadership role in creating a more secure and sustainable electric sector nationwide. 

 

The U.S. must “transition to a more flexible and resilient electric grid” and have “much greater coordination among system operators,” according to Chu.

 

The energy secretary also instructed the PMAs to upgrade their transmission infrastructure, in part to enable more alternative energy sources to travel over the grid.

 

In addition, Chu wanted rate structure changes that provide incentives for energy-efficiency programs, demand-response programs (paying customers to cut usage during periods of high demand), integration of variable resources (such as wind and solar), and preparation for greater use of electric vehicles.

 

Industry groups and conservatives reacted negatively toward Chu’s ideas.

 

The American Public Power Association said the proposed changes threatened “to impose drastic economic burdens on PMA federal hydropower customers.”

 

Republicans in the U.S. House introduced legislation designed to block Chu’s suggested changes—which also included giving two of the PMAs a revolving fund to use for modest capital improvements to help keep the lights on—from going into effect. The Republican bill cleared the House in July 2013.

Memorandum for Power Marketing Administrators (Secretary of Energy)

Energy Secretary Chu Directs PMAs To Implement Costly “Reforms” (by Mike McDowell, Heartland Consumers Power District)

Chu Uses Power Marketing Administrations to Implement Green Agenda (by Romina Boccia, PA Pundits International)

Proposed Changes to the Power Marketing Administrations Would Increase Rates For Federal Power Customers (American Public Power Association)

Chu Memo on Federal Hydropower Reflects ‘Religious Fervor of the Radical Left,’ GOP Lawmaker Says (by Penny Starr, CNS News.com)

House appropriations bill would block proposed changes to power marketing administrations; Senate calls for public process (Public Power Daily)

House Passes Rep. Gosar’s Amendment To Keep Energy Costs Affordable (by Paul Gosar, Western Free Press)

 

BPA’s Financial Problems

The Government Accountability Office (GAO) issued a report in 2004 on the financial problems of the Bonneville Power Administration (BPA), which provides nearly half the power in the Pacific Northwest and controls three-fourths of the area’s transmission lines.

 

The GAO said it conducted its investigation because BPA had experienced significant financial troubles. Its cash reserves at the end of fiscal year 2002 had fallen to $188 million, and the BPA estimated in February 2003 that it had a 74% chance of missing its debt payment that year to the Department of the Treasury.

 

BPA did manage to make its Treasury payment in 2003. However, its financial condition at the time was “still far from robust,” the GAO reported.

 

Auditors made several recommendations for BPA to consider. One such suggestion, in light of its problems with long-term contracts that led to losses, said BPA should, “as a way to lend credibility to and reinforce BPA’s actions, study the feasibility of issuing a rule under the Administrative Procedure Act to define the rights to purchase the firm output of the existing federal power system [the amount of power that can be generated during a critical water year] and set the terms of incremental rates for any power sold beyond that amount.”

 

The BPA should also “define the rights to purchase the firm output of the federal power system so that customers who demand additional power from BPA are charged incremental rates that fully reflect the additional costs BPA incurs in acquiring or otherwise providing such power,” according to the GAO.

 

The BPA generally agreed with the GAO’s findings and recommendations. Some of the GAO’s suggestions must have been implemented. In 2013, Moody’s Investors Service called 2001 one of the most challenging years for the BPA but a few years later—2006—it had one of its best.

Bonneville Power Administration: Better Management of BPA's Obligation to Provide Power Is Needed to Control Future Costs (Government Accountability Office)

Bonneville Power Administration: On the Hunt for New Capital Sources (Moody’s Investors Service)

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Suggested Reforms:

 

 

 

 

 

 

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Debate:

Should the Power Marketing Administrations be privatized or deregulated?

Predictable tensions arise over deregulation of the power industry, which proponents claim will increase competition, while critics argue that it will consolidate market power in the hands of a few large corporations and raise costs to the most vulnerable consumers.

 

Required to sell excess power at cost-based prices, the Power Marketing Administrations (PMAs) have historically filled a service gap by providing to residential and small business consumers, low-income households, and rural areas—which are not profitable markets for investor-owned utilities and private companies. A “preference clause,” which applies to all federal utilities, directs the agencies to give first pick to municipal and cooperative utilities, and then sell to investor-owned utilities or directly to private companies. Thus the agencies have also provided a “yardstick” for pricing, and maintained competition.

 

However, proponents of privatization claim the energy is sold well below the cost of production and that government subsidies (and thus, taxpayers) make up the difference. The agencies’ self-descriptive rhetoric anticipates the privatization argument by offering that the projects are not tax funded and more than recover the cost of operations.

No Easy Task to Shift the Balance of Power (by Pam Radtke Russell, CQ Weekly)

 

Con:

Public Citizen advocates maintain the traditional role of the PMAs, which they view as necessary to keep prices down and prevent anticompetitive practices, is the only thing standing in the way of market consolidation and privatization of the industry. The group also argues that deregulation puts added pressure on natural resources (like dams and other hydro facilities), and that privatization would lead to uncapped exploitation of the environment and decrease incentives for stewardship.

 

Public utility companies and rural cooperatives oppose privatization for obvious reasons. The National Rural Electric Cooperative Association notes that privatization proposals would “interrupt long-standing contractual arrangements between PMAs and their customers, increase electric rates to millions of rural Americans, and disrupt the economic structure of the some of the most economically depressed regions in rural America.”

United States House of Representatives Committee on Resources Subcommittee on Water and Power: Role of the Power Marketing Administrations In a Restructured Electric Industry Testimony of Wenonah Hauter, Director, Public Citizen's Critical Mass Energy Project

 

Pro:

On the other side of the debate, Friends of the Earth (FOE) argues that PMAs are an unnecessary middleman between consumers and electricity supply, and that they distort the market by selling (at cost) to select customers, while those without access to federal power are forced to develop higher-cost services—and thus advocates introducing market pricing. FOE contends that PMAs cause unnecessary environmental destruction and encourage customers to waste electricity by selling at below-market rates. (FOE cites a 1997 General Accounting Office [GAO] study listing federal indebtedness for the five PMAs [four plus Tennessee Valley Authority] at $24.4 billion, and costing the U.S. Treasury at least $400 million each year.) Taxpayers, they argue, pay for the bureaucracy, and the government would raise more money by retaining ownership of the project facilities but selling the right to market the energy at market rates.

 

In addition, conservative factions (like CATO, Heritage and Reason) support privatization of the power industry, claiming that the purpose of federally subsidized electricity—to achieve the electrification of rural America—was achieved in the 1960s, thus making PMAs an unnecessary drain on the federal budget.

Paying for Pollution: How Taxpayers Subsidize Dangerous and Polluting Energy Programs (Green Scissors Report)

Time To Pull the Plug on Federally Subsidized Electricity (by Ben Lieberman, Heritage Foundation)

Power Politics: Supporters of federal power privatization have learned a lot from failures in the last Congress (by Ed Carson, Reason)

Privatization of the Power Marketing Administrations (by Clyde Wayne Crews, Competitive Enterprise Institute)

WAPA 25 Years, Chapter 5: Privatization Threats and Restructuring Challenges (pdf)

Government For Sale (by Tom Shoop, Government Executive)

Should the Federal Government Sell Electricity? (Congressional Budget Office) (pdf)

 

 

 

 

 

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Former Directors:

 

Christopher Turner, Southwestern Power Administrator

Chris Turner earned a bachelor’s degree in electrical engineering from The Citadel in 1982, followed by a master’s degree from Georgia State University. He was hired by Georgia Power, where he worked for 17 years as an engineer and supervisor. In 2000, Turner joined Southern Company Energy Marketing (later Mirant), a wholesale generating company. In 2003 he joined PacifiCorp, and in 2006 he worked at Seattle City Light. He then went to Pacific Gas and Electric in 2008, serving as Director of Electric Operations. He was appointed as Southwestern Power administrator in July 2012.

 

 

Kenneth Legg, Southeastern Power Administrator

Kenneth Legg was appointed administrator for Southeastern, effective July 6, 2008. The second native Oklahoman to head the Southeastern Power Administration, Kenneth Legg was born and raised in Bartlesville, Oklahoma, and graduated from Oklahoma State University with a degree in electrical engineering. He began his career in 1974 as an engineer with the U.S. Army Corps of Engineers Tulsa District and then became an electrical engineer at the Southwestern Power Administration in 1978. He was promoted to public utilities specialist in 1980 and then became assistant to the administrator in 1988. He was serving as Director of Engineering and Planning for Southwestern before moving to Elberton in 2003 to become assistant administrator, Division of Power Resources.

 

Mark Gabriel, Western Area Power Administration

Mark Gabriel holds a Bachelor of Arts degree in political science from Fordham University in New York, New York. He completed the coursework for a Master of Science degree in administration and management from St. Michael’s College in Burlington, Vermont. Gabriel oversaw the expansion of Halcrow, a 158-year-old British firm, into its North American energy practice. He has also served as senior vice president for energy with R.W. Beck, a national engineering-based consulting firm. He subsequently served as the senior vice president for Black and Veatch Management Consulting, and chief executive officer and president of Power Pundits LLC. Gabriel joined WAPA as its administrator in April 2013.

 

Elliot Mainzer, Bonneville Power Interim Administrator

Elliot Mainzer, the BPA’s acting deputy administrator since February 2013, was appointed as its new top executive on an interim basis when Bill Drummond was discharged in July 2013. (See “Drummond Ousted for BPA Discrimination Against Veteran” controversy.) Mainzer has been with the BPA since 2002. As deputy administrator, he handled BPA’s finance, strategy, legal, public affairs, risk management, compliance, governance and internal audit functions and served as the principal policy and strategy adviser to the BPA administrator. He has held a variety of management positions within the agency’s power, transmission and corporate organizations, including trading floor manager, manager of Transmission Policy and Strategy, as well as executive vice president of Corporate Strategy. In the latter post, he led the agency’s strategic planning process and provided policy leadership and cross-agency coordination on renewables integration, market design, climate change and integrated planning. He lives in Portland, Oregon, with his wife and twin boys.

Bill Drummond (Official Bio)

Elliot Mainzer (Official Bio)

 

Bonneville Power Administration

Bill Drummond                       February 2013 – July 2013

Steve Wright                           September 2000 – February 2002 (Acting)

March 2002 – Feb. 2013

Judith A. Johansen                  June 1998 – Sept. 2000

Jack Robertson                        October 1997 – June 1998

Randall W. Hardy                   October 1991 – Sept. 1997

Jack Robertson                        August 1991 – Oct. 1991

James J. Jura                            July 1986 – Aug. 1991

Peter T. Johnson                      May 1981 – July 1986

Earl Gjelde                              February 1991 – May 1981

S. Sterling Munro                    January 1978 – February 1981

Donald P. Hodel                     December 1, 1972 – December 19, 1977

H.R. Richmond                       September 8, 1967 – October 19, 1967

David S. Black                        August 31, 1966 – September 7, 1967

Charles F. Luce                       February 15, 1961 – August 30, 1966

William A. Pearl                      January 15, 1954 – February 14, 1961

Paul J. Raver                           September 16, 1939 – January 14, 1954

Frank Banks                            May 4, 1939 – September 15, 1939

Charles Carey                          Feb. 2, 1939 – May 4, 1939 (acting)

James D. (J. D.) Ross              October 10, 1937 – March 14, 1939

 

Western Area Power Administration

Tim Meeks                              2007 – 2012

Mike Hacskaylo                      1998 – 2007

J.M. Shafer                              1994 – 1997

Bill Clagett                              1985 – 1994

Bob McPhail                           1977 – 1984

 

Southeastern Power Administration

Jon Worthington                     2006 – 2008

Charles A. Borchardt              1995 – 2006

John A. McAllister, Jr.            1989 – 1995

Harry C. Geisinger                  1981 – 1989

Harry F. Wright                      1978 – 1981

Jan Fortune                             1969 – 1978

Charles W. Leavy                   1952 – 1969

Ben Creim                               1950 –1952

 

Southwestern Power Administration

James K. McDonald   2011 – 2012

Jon C. Worthington    2008 – 2011

Michael A. Deihl         1995 – 2007

Forrest E. Reeves        1994 – 1995

J.M. Shafer                  1988 – 1994

Ronald H. Wilkerson     1984 – 1988

William H. Clagett      1984

Richard B. Risk, Jr.     1981 – 1984

James B. Hammett      1977 – 1981

Peter C. King              1969 – 1977

Douglas G. Wright      1943 – 1969

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Founded: 1937 (Bonneville)
Annual Budget: $85.2 million (FY 2014 Request)
Employees: Southeastern Power Administration, 44 (FY 2013); Western Area Power Administration, 1,431 (FY 2013); Bonneville Power Administration, 3,175 (FY 2014 Request); Southwestern Power Administration, 44 (FY 2013)
Power Marketing Administrations
Wright, Steve
Administrator
Steve Wright, the administrator of the Bonneville Power Administration, graduated from Central Michigan University in 1979 with a B.A. in journalism and received his masters in public affairs from the University of Oregon in 1981. He began his career at BPA in 1981 in the conservation office. Between 1987 and 1990 he managed the California office, and before that the Washington, D.C. office (1990-1998). From 1998-2000 he was Senior VP for BPA Corporate, and was thereafter appointed Acting Administrator. He became BPA Administrator in 2002.
 
 
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Bookmark and Share
Overview:

The Power Marketing Administrations (PMAs) are four federal agencies within the Department of Energy responsible for marketing hydropower—primarily excess power produced by federal dams and projects operated by the Corps of Engineers and the Bureau of Reclamation. The four federal PMAs, which market and distribute power to 60 million people in 34 states, are required to give preference to public utility districts and cooperatives, and sell their power at cost-based rates.

more
History:

The federal power marketing program started in the early 1900s as a way to use excess power from federal water projects to repay their investment. The government needed to dispose of electric power produced by dams constructed largely for irrigation or flood control, and to promote electrification in small communities and farms, filling a void where private utility service would not have been profitable.

 

The Power Marketing Administrations (PMAs) were created to supply cheap power to poor, rural areas in the South and West, but now also service metropolitan centers such as Las Vegas and Los Angeles. The first PMA, Bonneville Power Administration (BPA), was established in 1937, followed by three more PMAs for marketing power generated at 133 federal dams across the county. (A fifth, Alaska, was divested in the 1990s.)

 

The purpose of BPA’s creation was to deliver and sell the power from Bonneville Dam. The first line that was established connected that dam to Cascade Locks, which was located three miles away. Between the 1940s and the 1960s, networks of high-voltage wire were constructed, which serviced the majority of BPA’s territory. During those decades, the BPA was authorized by Congress to sell and deliver power from additional federal dams along the Columbia and its various tributaries.

 

The creation of the Southeastern Power Administration (SEPA) was proposed during the 80th Congress (1947-48), but faced strong opposition from politicians and representatives of the utility industry. Following heated debate, its supporters prevailed. In 1950 SEPA was officially established within the Department of the Interior by its Secretary, Oscar Chapman, fulfilling a directive of the Flood Control Act of 1944 (pdf). The administration was moved to the Department of Energy (DOE) when President Jimmy Carter established that department in 1977. The SEPA’s headquarters were re-located in 1968 and 2001, and it is currently based in Elberton, Georgia, a rural community of 5,000 residents.

 

Southwestern Power Administration (SWPA), created in 1943, was also established within the Department of the Interior and subsequently moved into the DOE. Western Area Power Administration (WAPA) was created in 1977, concurrent with the establishment of the DOE. History of the Electric Power Industry (Edison Electric Institute)

 

Privatization

Modern efforts to privatize the energy industry—and PMAs—date at least to the Reagan administration. When Republicans took control of Congress in 1994, they set out to privatize the federal government, and the PMAs were at the center of their efforts. However, initiatives to privatize PMAs haven’t progressed far in Congress, with the exception of APA (see below and debate section on privatization). Others have suggested keeping the administration under federal control, but forcing the agencies to sell their power at market-based rates.

 

The George W. Bush Administration’s FYO8 budget proposal didn’t suggest PMA privatization or market rates, but it did include an Office of Management and Budget (OMB) proposal to use revenue from surplus power sales above $500 million to accelerate repayments of the Bonneville debt to the U.S. Treasury—rather than using it to keep rates as low as possible. Critics maintain that these higher rates would cause undue economic strain for BPA customers.

 

Alaska (APA) Divestiture

The fifth PMA, Alaska, was sold in 1995 after a termination and asset sale act passed in Congress. The move to divest was based in part on the argument that the regional needs ceased to justify the federal venture—which, according to proponents of the bill, had served its purpose, only filled a small market niche, and been replaced by other providers that emerged to service the region:

DOE08: Support the Sale of the Alaska Power Administration

Privatization Alaska Offers a Lesson in How to Sell Power (by Pam Kufahl, Transmission and Distribution World)

 

 

 

 

more
What it Does:

The federal government markets power from 133 hydroelectric projects throughout the country through four Power Marketing Administrations (PMAs). The multipurpose projects, constructed and owned by the Bureau of Reclamation and the U.S. Army Corps of Engineers (Department of the Interior), include flood control, navigation, irrigation, and recreation operations. Forty-five percent of the nation’s hydroelectric power is produced as a by-product of these operations, and sold by PMAs to local public, private, and cooperative utilities at cost.

 

All four PMAs market federal power and provide low-cost electricity with preference to public customers (public municipal utilities and rural cooperatives, which in turn provide electricity to about a quarter of the nation’s retail consumers), but each is a “distinct and self-contained entity” within the Department of Energy (DOE), like a “wholly owned subsidiary of a corporation,” and each is affected by its own unique regional issues and conditions.

 

The PMAs overlay the transmission and distribution of utilities in 20 states, representing 42% of the continental U.S. Bonneville Power Administration, Southwestern Power Administration, and Western Area Power Administration collectively own and operate 33,700 miles of transmission lines and 594 substations. The Southeastern Power Administration does not own or operate any transmission facilities, but rather contracts with regional utilities that own electric transmission systems to deliver the federal hydropower to its customers.

 

Bonneville Power Administration (BPA)

Headquartered in Portland, Oregon, the BPA markets to the Pacific Northwest’s public and private utilities as well as to some large industries. The agency provides around a third of the electricity used in the Northwest and operates more than three-fourths of the region’s high-voltage transmission. Its service territory includes Idaho, Oregon, Washington, western Montana and small parts of eastern Montana, California, Nevada, Utah, and Wyoming. Although supported by the DOE, Bonneville is “not tax-supported through appropriations, but recovers all of its costs through electricity and transmission sales.”

BPA Fast Facts

2012 Annual Report

A fish's role in the ecology debate: The $1 billion spent on salmon recovery may only be the start. A region weighs the economic and environmental issues (by Brad Knickerbocker, Christian Science Monitor)

 

Southeastern Power Administration (SEPA)

The SEPA was created in 1950 by the Secretary of the Interior under the Flood Control Act of 1944, and transferred to the Department of Energy in 1977. Headquartered in Elberton, Georgia, Southeastern is responsible for marketing electric power and energy generated at reservoirs operated by the U.S. Army Corps of Engineers to more than 495 preference customers—and servicing more than 12 million consumers—in Georgia, Florida, Alabama, Mississippi, southern Illinois, West Virginia, Virginia, Tennessee, Kentucky, North Carolina, and South Carolina. It is the smallest of the four PMAs and one of the smallest federal agencies in the country.

2011 Annual Report (pdf)

 

Southwestern Power Administration (SWPA)

Established in 1943 by the Secretary of the Interior, the SWPA is responsible for marketing power from 24 U.S. Army Corps of Engineers multipurpose dams in Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas. The SWPA provides service to 100 “preference” customers, which ultimately serve another eight million end-use customers. The agency operates 1,380 miles of high-voltage transmission lines, substations, and a communications system. Power scheduling and dispatching are conducted from the Springfield operations center, while staff work from offices in Oklahoma, Arkansas, and Missouri.

2011 Annual Report (pdf)

 

Western Area Power Administration (WAPA)

Western Area markets and delivers hydroelectric power and related services from multi-use water projects within 15 central and western states. The agency’s system carries electricity from 56 hydropower plants operated by the Bureau of Reclamation, U.S. Army Corps of Engineers and the International Boundary and Water Commission—with a combined capacity of 10,505 megawatts. The agency’s wholesale power customers provide service to millions of consumers in Arizona, California, Colorado, Iowa, Kansas, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Texas, Utah, and Wyoming. Western and its partners are separately managed and financed.

2012 WAPA Annual Report (pdf)

America and Power Before Western Area Power Administration (pdf)

WAPA 25 Years, Chapter 5: Privatization Threats and Restructuring Challenges (pdf)

 

 

 

 

 

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Where Does the Money Go:

The Power Marketing Administrations (PMAs) have spent more than $80 million on 1,428 contractor transactions during the past decade, according to USAspending.gov. The top five types of products or services purchased by PMAs during this time period were generators ($15,493,894), electric services ($10,518,302), aero and space research and development ($8,748,663), gas services ($7,933,728), and self-propelled warehouse trucks and tractors ($5,891,789).

 

The top five recipients of this contractor spending were:

1. Cummins Inc.                                                          $14,417,296   

2. TransCanada Corporation                                       $14,352,197   

3. Dell Inc.                                                                    $7,231,853   

4. TUG Technologies Corporation                                $5,891,789   

5. Adams Marketing Associates Inc.                            $4,539,988

 

Budget Issues

Beginning in 2007, the George W. Bush Administration implemented an initiative to charge the Southwestern Power Administration (SWPA), Western Area Power Administration (WAPA), and Southeastern Power Administration (SEPA) interest rates (at levels similar to those charged governmental corporations) on new capital investments occurring after September 30, 2006. The 2008 budget also reintroduced an initiative to for Bonneville to “apply net secondary market revenues in excess of $500 million toward the repayment of its outstanding treasury debt.” (Office of Management and Budget FY 2008)

 

According to the National Rural Electric Cooperative Association (NRECA), OMB’s “Agency Rate” for the three PMAs is an underhanded attempt to eventually raise rates and undermine the PMA system:

“OMB, once again, proposed a so-called “Agency Rate” for three PMAs (SEPA, SWPA, and WAPA) to raise their interest rates to the level that government corporations pay to borrow funds from the federal government. The OMB argues that this is needed to cover a ‘perceived risk’ to the U.S. Treasury for non-payment. This action is punitive and unnecessary. These three PMAs are not government corporations and do not borrow funds from the U.S. Treasury. They also have an enviable record of repayment. The OMB proposal would open the door for budget gimmicks each year to raise rates for the PMAs through administrative fiat, bypassing Congress’ traditional oversight authority of the PMAs. Congress quashed both of these proposals during the FY08 appropriations process.”

 

 

 

 

 

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Controversies:

Drummond Ousted for BPA Discrimination Against Veterans

The Department of Energy (DOE) discharged top officials of the Bonneville Power Administration (BPA) in 2013 for engaging in hiring practices that essentially kept veterans from getting jobs with the administration.

 

Discriminatory staffing methods used by the BPA between November 2010 and June 2012 led to the discharge of Administrator Bill Drummond, who had held the office for only six months, and Chief Operating Officer Anita Decker, who had been in that post since 2007. Even after the problem was discovered, the BPA officials did nothing to mitigate it, such as notifying the applicants who were affected.

 

BPA employees who spoke out about or helped the DOE investigate the BPA’s job-application process were also fired, suspended or reassigned. DOE inspector general Gregory Friedman placed all such actions on hold pending an investigation. Meantime, the BPA also lost the power to hire anyone on its own.

 

Elliot Mainzer, the BPA’s deputy administrator, was appointed as its new top executive on an interim basis.

Energy Department investigated for retaliating against whistleblowers (by Ruth Tam, Washington Post)

DOE appoints Elliot Mainzer interim leader of BPA; Bill Drummond’s fate unclear (by Ted Sickinger, Oregonian)

Drummond reportedly out in BPA management shakeup (by Suzanne Stevens, Sustainable Business Oregon)

 

I-5 Corridor Project

The Bonneville Power Administration (BPA), one of the nation’s four Power Market Agencies, have fought with residents of southwest Washington state for years over a proposed new transmission line.

 

BPA’s I-5 Corridor Reinforcement Project called for constructing a 500-kilovolt, 70-mile transmission line between Castle Rock, in Cowlitz County, Washington, and Troutdale, Oregon.

 

Without the new line, southwest Washington and northwest Oregon would be at risk of power outages within a decade, according to the BPA.

 

Since 2009, southwest Washington residents and property owners have opposed the project, calling it “the beast.”

 

Residents suggested an alternative route, which the agency rejected.

 

The alternative route went farther north and east than any of the four routes BPA was considering. Citizens argued that their route, which they dubbed the “grey line,” would affect fewer homes and property owners than other proposed BPA routes.

 

But according to the BPA, the environmental and financial consequences of the grey line outweigh the benefits. A final decision about whether to build the project and what route it will take will be made by 2014.

Bonneville Power Administration to take controversial transmission line project to summer events (Oregonian)

Draft Environmental Impact Statement Comment Summary (Bonneville Power Administration)

Bonneville Power Administration eliminates citizen-proposed route for I-5 corridor project in southwest Washington (by Kristine Guerra, Oregonian)

 

Chu’s Suggested Changes Stir Controversy

In March 2012, Secretary of Energy Steven Chu announced an ambitious and controversial plan directed at changing the way the nation’s Power Marketing Administrations (PMAs) operate and help provide electricity.

 

Chu called for the PMAs to take a leadership role in creating a more secure and sustainable electric sector nationwide. 

 

The U.S. must “transition to a more flexible and resilient electric grid” and have “much greater coordination among system operators,” according to Chu.

 

The energy secretary also instructed the PMAs to upgrade their transmission infrastructure, in part to enable more alternative energy sources to travel over the grid.

 

In addition, Chu wanted rate structure changes that provide incentives for energy-efficiency programs, demand-response programs (paying customers to cut usage during periods of high demand), integration of variable resources (such as wind and solar), and preparation for greater use of electric vehicles.

 

Industry groups and conservatives reacted negatively toward Chu’s ideas.

 

The American Public Power Association said the proposed changes threatened “to impose drastic economic burdens on PMA federal hydropower customers.”

 

Republicans in the U.S. House introduced legislation designed to block Chu’s suggested changes—which also included giving two of the PMAs a revolving fund to use for modest capital improvements to help keep the lights on—from going into effect. The Republican bill cleared the House in July 2013.

Memorandum for Power Marketing Administrators (Secretary of Energy)

Energy Secretary Chu Directs PMAs To Implement Costly “Reforms” (by Mike McDowell, Heartland Consumers Power District)

Chu Uses Power Marketing Administrations to Implement Green Agenda (by Romina Boccia, PA Pundits International)

Proposed Changes to the Power Marketing Administrations Would Increase Rates For Federal Power Customers (American Public Power Association)

Chu Memo on Federal Hydropower Reflects ‘Religious Fervor of the Radical Left,’ GOP Lawmaker Says (by Penny Starr, CNS News.com)

House appropriations bill would block proposed changes to power marketing administrations; Senate calls for public process (Public Power Daily)

House Passes Rep. Gosar’s Amendment To Keep Energy Costs Affordable (by Paul Gosar, Western Free Press)

 

BPA’s Financial Problems

The Government Accountability Office (GAO) issued a report in 2004 on the financial problems of the Bonneville Power Administration (BPA), which provides nearly half the power in the Pacific Northwest and controls three-fourths of the area’s transmission lines.

 

The GAO said it conducted its investigation because BPA had experienced significant financial troubles. Its cash reserves at the end of fiscal year 2002 had fallen to $188 million, and the BPA estimated in February 2003 that it had a 74% chance of missing its debt payment that year to the Department of the Treasury.

 

BPA did manage to make its Treasury payment in 2003. However, its financial condition at the time was “still far from robust,” the GAO reported.

 

Auditors made several recommendations for BPA to consider. One such suggestion, in light of its problems with long-term contracts that led to losses, said BPA should, “as a way to lend credibility to and reinforce BPA’s actions, study the feasibility of issuing a rule under the Administrative Procedure Act to define the rights to purchase the firm output of the existing federal power system [the amount of power that can be generated during a critical water year] and set the terms of incremental rates for any power sold beyond that amount.”

 

The BPA should also “define the rights to purchase the firm output of the federal power system so that customers who demand additional power from BPA are charged incremental rates that fully reflect the additional costs BPA incurs in acquiring or otherwise providing such power,” according to the GAO.

 

The BPA generally agreed with the GAO’s findings and recommendations. Some of the GAO’s suggestions must have been implemented. In 2013, Moody’s Investors Service called 2001 one of the most challenging years for the BPA but a few years later—2006—it had one of its best.

Bonneville Power Administration: Better Management of BPA's Obligation to Provide Power Is Needed to Control Future Costs (Government Accountability Office)

Bonneville Power Administration: On the Hunt for New Capital Sources (Moody’s Investors Service)

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Suggested Reforms:

 

 

 

 

 

 

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Debate:

Should the Power Marketing Administrations be privatized or deregulated?

Predictable tensions arise over deregulation of the power industry, which proponents claim will increase competition, while critics argue that it will consolidate market power in the hands of a few large corporations and raise costs to the most vulnerable consumers.

 

Required to sell excess power at cost-based prices, the Power Marketing Administrations (PMAs) have historically filled a service gap by providing to residential and small business consumers, low-income households, and rural areas—which are not profitable markets for investor-owned utilities and private companies. A “preference clause,” which applies to all federal utilities, directs the agencies to give first pick to municipal and cooperative utilities, and then sell to investor-owned utilities or directly to private companies. Thus the agencies have also provided a “yardstick” for pricing, and maintained competition.

 

However, proponents of privatization claim the energy is sold well below the cost of production and that government subsidies (and thus, taxpayers) make up the difference. The agencies’ self-descriptive rhetoric anticipates the privatization argument by offering that the projects are not tax funded and more than recover the cost of operations.

No Easy Task to Shift the Balance of Power (by Pam Radtke Russell, CQ Weekly)

 

Con:

Public Citizen advocates maintain the traditional role of the PMAs, which they view as necessary to keep prices down and prevent anticompetitive practices, is the only thing standing in the way of market consolidation and privatization of the industry. The group also argues that deregulation puts added pressure on natural resources (like dams and other hydro facilities), and that privatization would lead to uncapped exploitation of the environment and decrease incentives for stewardship.

 

Public utility companies and rural cooperatives oppose privatization for obvious reasons. The National Rural Electric Cooperative Association notes that privatization proposals would “interrupt long-standing contractual arrangements between PMAs and their customers, increase electric rates to millions of rural Americans, and disrupt the economic structure of the some of the most economically depressed regions in rural America.”

United States House of Representatives Committee on Resources Subcommittee on Water and Power: Role of the Power Marketing Administrations In a Restructured Electric Industry Testimony of Wenonah Hauter, Director, Public Citizen's Critical Mass Energy Project

 

Pro:

On the other side of the debate, Friends of the Earth (FOE) argues that PMAs are an unnecessary middleman between consumers and electricity supply, and that they distort the market by selling (at cost) to select customers, while those without access to federal power are forced to develop higher-cost services—and thus advocates introducing market pricing. FOE contends that PMAs cause unnecessary environmental destruction and encourage customers to waste electricity by selling at below-market rates. (FOE cites a 1997 General Accounting Office [GAO] study listing federal indebtedness for the five PMAs [four plus Tennessee Valley Authority] at $24.4 billion, and costing the U.S. Treasury at least $400 million each year.) Taxpayers, they argue, pay for the bureaucracy, and the government would raise more money by retaining ownership of the project facilities but selling the right to market the energy at market rates.

 

In addition, conservative factions (like CATO, Heritage and Reason) support privatization of the power industry, claiming that the purpose of federally subsidized electricity—to achieve the electrification of rural America—was achieved in the 1960s, thus making PMAs an unnecessary drain on the federal budget.

Paying for Pollution: How Taxpayers Subsidize Dangerous and Polluting Energy Programs (Green Scissors Report)

Time To Pull the Plug on Federally Subsidized Electricity (by Ben Lieberman, Heritage Foundation)

Power Politics: Supporters of federal power privatization have learned a lot from failures in the last Congress (by Ed Carson, Reason)

Privatization of the Power Marketing Administrations (by Clyde Wayne Crews, Competitive Enterprise Institute)

WAPA 25 Years, Chapter 5: Privatization Threats and Restructuring Challenges (pdf)

Government For Sale (by Tom Shoop, Government Executive)

Should the Federal Government Sell Electricity? (Congressional Budget Office) (pdf)

 

 

 

 

 

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Former Directors: