Money, Power and Trade: What You Never Knew About the Western Energy Crisis

Fortnightly

If you think you've heard it all about the power crisis, consider this fact:

In early 1999, the administrator of the Bonneville Power Administration (BPA) alerted the Northwest Power Planning Council (NPPC) about a possible energy shortage in the Pacific Northwest. And in March 2000, just two months on the eve of the crisis, the NPPC confirmed the analysis, noting that there was a 24 percent probability of not being able to serve all of the load sometime before 2003. But the NPPC also commented that the BPA had painted an "overly bleak picture," since imports and exports, in conjunction with hydropower reserves, would prove flexible enough to deal with the situation. If even noticed, the warnings were dismissed by both the region and California.

Now skip forward another year. As recently as Feb. 16, after the crisis was known to all, the Washington Energy Facility Site Evaluation Council turned down an application by the National Energy System to construct a 660-megawatt gas-fired turbine at the border with British Columbia.

"On balance," said the state council, "the significant environmental and social costs of the facility, if located at the site proposed, outweigh the resulting energy benefits it would provide only to most competitive bidders of the Western states power grid."

Simply put, it seems the siting council feared that the plant owner might export the output out of the state, to power-hungry customers in California who were willing to pay more.

These two anecdotes speak volumes on the power crisis that evolved in California and out West. The one shows the importance of free trade, the other its total collapse.