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Building BPA’s Competitive Financial Strength

The importance of power market design.

EDITOR’S NOTE: The Bonneville Power Administration is a major player in Western energy markets. The Energy Times recently talked with BPA Administrator Elliot Mainzer on the regional impact of bold new renewables and storage initiatives in California ahead of the landmark California Renewables Rush conference in San Francisco April 6 supported by virtually all major utilities in the state. This is the second of a two-part series. Last week: “California’s Energy Revolution in Western Energy Markets.”

THE ENERGY TIMES: On the transactive energy front, what impact will changes in California markets have?
MAINZER: I think that’s a great question. The transactive energy community has to do a better job of explaining how their work at the distribution level will interface with the new wholesale energy markets that are emerging - the energy imbalance market in particular - in the West. How does pricing at the wholesale level relate to pricing at the substation or distribution element level? California’s kind of on the leading edge of exploring these wholesale/retail pricing relationships, and that might shine some light for the transactive crowd.
THE ENERGY TIMES: You were at Enron when California deregulation about 15 years ago resulted in considerable pain throughout the West. Might history repeat?


Elliot Mainzer


MAINZER: Good market design is as important today as it ever has been. We saw back during the California power crisis how bad market design creates catastrophic impacts, and we’re still paying for that, 10-15 years later. Markets for electricity really only operate effectively when you have healthy resource adequacy margins. When you get into scarcity in electricity markets, because you have very low elasticity of demand for electricity, the price goes through the roof. We’ve seen what happens in poorly structured markets. Yes, there are still risks. There are risks in terms of operations. There are risks in terms of governance. But I certainly think we’re not where we were 15 years ago. There've been some really good lessons learned that are starting to be reflected in the emerging markets, but there is still work to do.
THE ENERGY TIMES: Elliot, you and I last talked shortly after you took over two years ago and you were at the beginning of your reign at Bonneville. What now excites you about BPA and its work?
MAINZER: Well, I am really focused - probably more than anything - on the long-term financial strength and competitiveness of the federal power system. Starting out with our people, we have a big push on safety, and workforce planning, and management excellence. We are investing as efficiently as we possibly can in the federal hydro and transmission assets. We’re spending about $1 billion dollars a year on our capital program to keep our assets healthy and to expand for renewables integration. Like many utilities, we are really trying to position ourselves to succeed in a world of increased distributed generation and more demand/response resources.
THE ENERGY TIMES: How are you addressing cyber and physical security matters?
MAINZER: We have major efforts in place internally on physical security, cyber security and business continuity. Of course one of the big risks up here as you well know is a big earthquake which would be really scary and really disruptive. These are things that we’ve been paying attention to for years as operators of critical infrastructure. I’m not sure that I necessarily see the world through a gloom and doom lens on these things, but they’re obviously issues we have to and will continue to pay very careful attention to, making sure that our networks and our physical assets are as secure as possible.



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