A Guide for the 

Northwest’s 

Energy Future

Council

Northwest

Power

Conservation

and

Council Document 2004-15

October 2004

1

Background

The Northwest is unique in how it plans its energy 

future. Through the Northwest Power and Conservation 

Council’s power plan, strategies to ensure the affordability 

and adequacy of the power system are developed in an open 

forum where the public can voice its opinion. Why is this so 

important? With the building of the region’s fi rst mainstem 

Columbia River dams in the 1930s, the Northwest would 

have access to inexpensive electricity for many years. But 

by the 1960s, increased demand led energy planners to believe that hydro-generating resources would soon be unable 

to keep up with the demand for electricity.

In the 1970s, the Bonneville Power Administration—the 

federal agency that markets the electricity generated at federal dams on the Columbia River—began working with public 

and private utilities in the region to develop major new generating resources, including several nuclear plants. But the 

projects proved to be hugely expensive and electricity rates, 

as a consequence, skyrocketed. Growth in electricity demand fell far short of earlier projections, in part because of 

the high rates. The region was left with an energy surplus in 

the early 1980s, eliminating the need for most of these new 

and expensive generating plants. Many of the projects were 

abandoned, and the region was left with the then-largest 

municipal bond default in U.S. history. Northwest customers 

continue to make payments on part of this debt.

Amidst the turmoil caused by this massive planning 

failure, Congress enacted the 1980 Pacifi c Northwest 

Electric Power Planning and Conservation Act authorizing 

the states of Idaho, Montana, Oregon, and Washington to 

form the Council as an “interstate compact” agency. The 

Act requires the Council to develop a 20-year power plan 

to assure the region of an adequate, effi cient, economical, and reliable power system; and to develop a fi sh and 

wildlife program to protect, mitigate, and enhance fi sh 

and wildlife affected by the dams. 

When the Council published its last power plan in 1998, 

the focus was on the changing energy industry and the 

trend toward deregulation. Deregulation, by introducing 

the risks and rewards of the marketplace, was expected to 

increase consumer choices and generation effi ciency, and 

encourage innovation. But the unpredictability of factors 

like weather and fuel prices greatly affects the market price 

of electricity; and uncertainties about the pace and nature 

of deregulation inhibited generation and conservation 

development—one of the important factors leading to the 

2000 - 2001 West Coast electricity crisis. 

In planning for the future, events can turn out very differently from what we expect or assume. Mindful of this, 

the Council has evaluated energy choices against a variety 

of risk factors such as natural gas prices, load, hydro generation performance, global climate change policies, and 

wholesale electricity market prices. This analysis illustrates 

the trade-offs between cost and risk for different choices. 

Through a rigorous examination of various energy options, 

and a healthy willingness to question given assumptions, 

the Council believes its new power plan offers sound guidance on how the region can secure its energy future.

The Fifth Power Plan: 

A Guide for the Northwest’s Energy Future
2

Conservation

With respect to resource choices, the Council recommends that the region increase its efforts to secure costeffective conservation immediately. The Council considers 

improved energy effi ciency to be a resource for meeting 

future electricity demand. Although conservation may result in small rate increases in the short-term, it can reduce 

both cost and risk in the long-term. The power plan calls 

for aggressive and sustained development of conservation: 

700 average megawatts between 2005 and 2009. 

Demand Response

The Council also recommends developing demand 

response programs—voluntary agreements between utilities 

and customers to reduce demand for power during periods 

of high prices and short supply. The Council recommends 

developing 500 megawatts of demand response between 

2005 and 2009. Demand response has proven helpful in 

stabilizing electricity prices and in preventing outages. The 

Council’s analysis shows that although it will probably be 

used infrequently, demand response reduces both cost and 

risk compared to developing additional generation.

Wind

Wind generation fi gures prominently as a resource 

in the next decade. The attractiveness of wind depends 

on a number of factors: tax credits, pollution controls, 

decreasing production costs, and large areas suitable for 

development. Over the next fi ve years, the power plan 

calls for gathering more experience and information about 

wind resources and their performance and cost within the 

regional power system. The Council recommends developing wind generation at a moderate commercial scale—between 50 and 100 megawatts per year—at geographically 

diverse wind resource areas to resolve the uncertainties associated with this resource and to prepare for its eventual 

large-scale development. The level of near-term development is consistent with the wind development identifi ed in 

the resource plans of regional utilities.

Recommendations Average Megawatts

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023

40000

35000

30000

25000

20000

15000

10000

Range Forecast of Electricity Demand

This graph shows the range of forecasts compared to historical consumption. Electricity demand dropped by 2,800 average 

megawatts between 2000 and 2002 because of electricity price increases and the economic slowdown.

History

5th Plan Range

5th Plan Medium

The Council’s power 

plan comprises a resource 

development strategy to 

ensure the region’s power 

supply with the least 

cost and least risk; and 

recommendations on key 

policy issues that affect 

the power system.
3

Prepare for New Power Plants

The region currently has a modest power supply surplus 

due to reduced demand and new generating plants constructed over the past three years. However, independent 

power producers rather than regional utilities own most 

of the surplus capacity, which is available to the region 

at market prices. The Council believes the region should 

secure sites and permits to be able to begin constructing 

new coal-fi red generating resources as early as 2010; and 

signifi cant amounts of additional wind generation shortly 

thereafter. Later in the 20-year planning period, some additional gas-fi red generation may be needed. Transmission 

upgrades should be identifi ed so all these resources can be 

built and brought on line quickly when required. If major 

transmission upgrades are needed, pre-construction planning, siting, and permitting will have to begin well before 

actual construction of the power plants.

Key Policy Issues

Along with the Council’s recommended resource development plan—the least cost, least risk development plan 

according to the Council’s analysis—the power plan includes 

recommendations on key policy issues confronting the 

region. These include transmission operation and planning 

issues, the establishment of resource adequacy standards, 

and the future role of the Bonneville Power Administration in 

power supply.

With respect to Bonneville’s role, the Council recommends that the agency sell the electricity from the existing 

Federal Columbia River Power System to eligible customers at cost. Customers that request more power than the 

existing system can provide should be required to pay the 

additional cost. The Council recommends that Bonneville 

implement this change through new long-term contracts to 

be offered in 2007. The Council also believes that Bonneville must continue its commitment to support conservation, 

renewable energy, and fi sh and wildlife mitigation.

An adequate power system has the capability to cover 

times when the region experiences a poor water year, 

unexpected load growth, or the failure of new resources to 

be developed as planned. It means we have a cushion of 

surplus power when an unexpected event occurs. 

Annual - Average Load/Resource Balance (under the driest conditions)

2500

2000

1500

1000

500

0

-500

-1000

-1500

-2000

-2500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 

Medium load growth forecast

Medium Low load growth forecast

Medium High load growth forecast

Megawatts

Since 2000, over 4,500 megawatts of generating capacity has been built in the Northwest. This, combined with the loss of 

load shown in the demand forecast graph, has led to a surplus of generation. The bars in this graph show the amount of generation in excess of load for three demand forecasts. The graph indicates that under the most likely range of load growth, new 

generating resources are unlikely to be needed until the end of the decade.
4

Levelized cost in cents Energy in

 per kilowatts/hour average megawatts

1 Commercial New & Replacement Lighting 1.22 245

 2 Commercial New & Replacement Infrastructure 1.42 11

 3 New & Replacement AC/DC Power Converters 1.49 156

 4 Residential Dishwashers 1.6 10

 5 Agriculture – Irrigation 1.6 80

 6 Commercial New & Replacement Shell 1.62 13

 7 Industrial Non-Aluminum 1.7 350

 8 Residential Compact Fluorescent Lights 1.7 535

 9 Commercial Retrofi t Lighting 1.84 114

 10 Residential Refrigerators 2.1 5

 11 Residential Water Heaters 2.2 80

 12 Commercial Retrofi t Infrastructure 2.2 105

 13 Commercial New & Replacement Equipment 2.22 84

 14 Chemical Recovery Boiler Upgrades (incremental cost) 2.34 280

 15 Residential New Space Conditioning— Shell 2.5 40

 16 Central MT Wind for local load, fi rmed and shaped 2.59 100 (typical project)

 17 Residential Existing Space Conditioning – Shell 2.6 95

 18 Commercial Retrofi t Shell 2.87 9

 19 Residential HVAC System Effi ciency Upgrades 2.9 65

 20 Commercial New & Replacement HVAC 3.03 148

 21 Residential HVAC System Commissioning 3.1 20

 22 Eastern WA/OR Wind 3.23 100 (typical project)

 23 Commercial Retrofi t HVAC 3.29 117

 24 Commercial Retrofi t Equipment 3.45 109

 25 Landfi ll Gas Energy Recovery 3.75 150

 26 Montana pulverized coal for local load 3.81 400 (typical project)

 27 Goldendale CCCT (Cost to complete) 4.17 248

 28 Eastern WA/OR Integrated coal gasifi ciation w/o carbon dioxide separation 4.29 425 (typical project)

 29 Residential HVAC System Conversions 4.3 70

 30 Residential Heat Pump Water Heaters 4.3 195

 31 Eastern WA/OR Pulverized Coal or MT Coal w/ TX to Mid-C at embedded cost 4.31 400 (typical project)

 32 Grays Harbor CCCT (Cost to complete) 4.31 640

 33 Montana First Megawatts (Cost to complete) 4.39 240

 34 Residential Hot Water Heat Recovery 4.4 25

 35 Mint Farm CCCT (Cost to complete) 4.55 286

 36 Eastern WA/OR CCCT 4.71 610

 37 Animal Manure Energy Recovery 4.83 50

 38 Residential Clothes Washers 5.2 135

 39 Wood Residue Energy Recovery (non-cogen) 5.54 25

 40 MT Coal Steam w/ TX to MidC at cost of expansion 6.04 1000 each sized to capacity

 41 Central MT Wind w/ TX to MidC, fi rmed and shaped 6.08 1000 capacity of 500 KV

 42 MT Integrated coal gasifi ciation w/ TX to MidC and carbon dioxide separation 6.9 1000 transmission expansion

Resource Supply Forecast (beginning with least cost)

Historical and Forecast Natural Gas Prices 2000$ Per MMBtu

8

7

6

5

4

3

2

1

0

197319761979198219851988199119941997200020032006200920122015201820212024

1986-99 Average = $2.15

Average 2005-25 Medium Forecast = $4.11

$5.10

$4.50

$4.00

$3.50

$3.00

History

Natural gas prices have risen signifi cantly and are expected to remain at high levels in the future.

 each sized to capacity

 capacity of 500 KV
5

Recommended Action Items: Next Five Years

1) Develop resources now that can reduce cost and risk to the region

· 700 average megawatts of conservation, 2005 - 2009

· 500 megawatts of demand response, 2005 - 2009

· Secure cost-effective cogeneration and renewable energy projects

· Develop cost-effective generating resources when needed

2) Prepare to construct additional resources

· Develop and maintain an inventory of ready-to-construct projects

· Resolve uncertainties associated with large-scale wind development

· Encourage use of state-of-the-art generating technology when siting and permitting projects

· Plan for needed transmission

· Improve utilization of available transmission capacity

3) Confi rm the availability and cost of additional resources that promise cost and risk mitigation benefi ts

· Oil sands cogeneration

· Coal gasifi cation

· Carbon sequestration

· Energy storage technologies

· Demonstration of renewable and high effi ciency generation with Northwest potential

4) Establish the policy framework to ensure the ability to develop needed resources

· Carry out a process to establish voluntary adequacy targets for the Northwest and the rest of the Western system

· Work through the Grid West, Regional Representatives Group process to address emerging transmission issues 

within the next two years

· Revise the role of the Bonneville Power Administration in power supply, consistent with the Council’s May 2004 

recommendations

5) Monitor key indicators that could signal changes in plans

· Periodically report on the regional load-resource situation and indicate whether there is a need to accelerate or 

slow resource development activities

· Monitor conservation development and be prepared to intensify efforts or develop alternative resources, if necessary

· Monitor efforts to resolve uncertainties regarding the cost and availability of wind generation, and prepare to 

develop alternatives, if necessary

· Monitor climate change science and policy for developments that would affect resource choices

The power plan includes analysis that evaluates alternative regional adequacy standards and how they would interact with the Western system, with the goal of establishing an 

effective regional adequacy standard.

The move toward deregulation and the opening up of 

wholesale electricity markets, along with changes in technology, changed the character of the traditional transmission system making it more diffi cult to manage. Efforts to 

establish an organization to assess the long-term requirements of the transmission system and a mechanism to 

encourage investments to meet those requirements are 

underway. The Council supports the work to resolve these 

problems and is an active participant in efforts to improve 

the regional transmission system.
PRSRT STD

U.S. POSTAGE PAID

PERMIT NO. 11

PORTLAND, OR

851 S.W. Sixth Avenue

Suite 1100

Portland, Oregon 97204

Telephone: 503-222-5161

Toll free: 800-452-5161

Web site: www.nwcouncil.org 

A Guide for the 

Northwest’s 

Energy Future

A Guide for the 

Northwest’s 

Energy Future