The electricity that brightens your room with the flick of a switch traveled a long way to get there. Before it got to your outlet and before it traveled through your utility’s power lines, it likely traveled through the transmission equipment of the Bonneville Power Administration.
Generating and distributing electricity is a complicated process, with many steps and factors that affect what you pay for power.
BPA is the primary power source for publicly owned utilities in the Northwest, delivering carbon-free electricity generated at 31 hydropower plants in the Columbia River Basin and the Columbia Generating Station nuclear facility to utilities and residents throughout the region.
“We’re like the highway that’s taking the hydropower and other low-carbon power from generators and delivering it to utilities, who then deliver the power to end users, like homes or businesses,” says Kevin Wingert, BPA media relations specialist.
BPA faces many expenses when producing and delivering power, including fish and wildlife costs. Federally constructed dams and other facilities are required to mitigate their environmental impacts. While the facilities are built for various congressionally approved reasons—flood control, power, water quality, temperature and recreation—BPA is mandated to protect, mitigate and enhance fish and wildlife impacted by the power system.
Many programs benefit fish passage up and down the Columbia River, restore estuaries and other habitats, and conserve thousands of acres of land.
For homes and businesses nationwide, electricity costs associated with the physical generation of power depend on the cost of fuels.
A September report by the Labor Department indicated electricity prices nationwide rose 15.8% during the past year. That was largely due to an increase in the price of natural gas, which is used to generate about 40% of the nation’s power.
However, the primary fuel for the energy BPA delivers is water.
Rainy days and gray skies—often common in the Northwest—can put a damper on people’s days, but the good news is the precipitation that falls in the Columbia River Basin will flow through the region’s hydroelectric dams.
“The abundance of hydropower provides the region with low-cost, carbon-free energy that is the envy of many other regions throughout the U.S.,” Kevin says. “If you look at rate costs, we have some of the lowest rates in the nation, and that is a direct result of the hydropower.”
The heavy, well-timed flow of water in 2022 meant additional revenue for BPA.
Heavy snowpacks formed during the winter. A milder spring kept more of the snowpack frozen and ready to provide higher water levels during summer months, when the western power grid was under stress due to warmer temperatures.
High natural gas prices and various power plants going offline meant increased demand for hydropower. BPA was able to sell excess generation, which produced unexpected revenue.
As a not-for-profit federal agency, when BPA has profit from excess power sales and robust financial reserves, some of that cash can be used to reduce debt, make incremental capital investments, reduce rates or be directed toward any other power-specific purposes. These include maintenance, projects benefiting Columbia River fish or as a return to utilities in a method similar to rebates, dividends or capital credits.
At the end of fiscal 2021, BPA redistributed more than $13 million. After a successful 2022, BPA expects to redistribute $500 million, with about
$350 million going back to utilities throughout the 2023 fiscal year as credits that will lower utilities’ power costs.
“Basically, we would be using it in such a way as to reduce upward rate pressure and make the cost per megawatt-hour less for customers,” Kevin says.
BPA adjusts its pricing structure every two years. It is working on the fiscal year 2024-25 rate case. BPA has proposed a rate settlement that was unanimously approved by power utilities.
Buoyed by trends in the power market, the proposal would result in an overall decrease in power prices of about 1% across all rate classes.
The cost of each kilowatt-hour of electricity is not the only thing that affects electricity bills. Utilities and BPA also have expenses associated with building and maintaining transmission and distribution systems.
While water helps cool electricity prices, utilities are still exposed to the heat of supply chain shortages and maintenance costs. When fires, high winds or other natural events knock down power poles and damage the system, replacement parts must be acquired and installed.
“Materials we used to get in six to eight weeks are now six to eight months out,” says Thad Ballard, director of owner services at Wells Rural Electric in Nevada. “You used to get a quote for materials that was good for 30 days, and now it’s good for the day. If you don’t place the order today, that price is subject to negotiation again tomorrow.”
Even when generating electricity is relatively cheap, the cost of delivering that power varies based on each utility’s circumstances and the work needed on its distribution system.
Not-for-profit utilities such as Wells Rural Electric balance all the costs to calculate at-cost rates.
“We’re all looking out for the members,” Thad says, “but as members themselves who have the final say on rates, the board of directors really plays an important role in making sure that we’re operating as a not-for-profit cooperative.”