The energy market events of August and the raging fires of September are reminders of the need to adjust climate policy, supply clean energy within the U.S. and why it is critical to modernize our Columbia River Treaty with Canada.
Washington, Oregon, Idaho and Montana electric consumers gave approximately $10 million to British Columbia over a recent August weekend, exemplifying what is outdated — and what can be modernized — in the Columbia River Treaty between the United States and Canada.
More broadly, the U.S. government has estimated that U.S. electric consumers are overpaying relative to the benefits of the treaty by up to $150 million a year and transferring clean energy out of the country (only to buy it back) at a time of drastically renewed need for clean, renewable energy to meet climate policy needs on the West Coast.
The U.S. government needs to secure a better deal from Canada for Northwest electric consumers to stop the chronic annual overpayment and transfer of clean energy. This is particularly urgent to us as leaders of nonprofit, consumer-owned electric utilities here in the Northwest. Our utilities and the communities we serve pay the costs of the treaty, and we rely on hydropower for carbon-free, affordable and reliable electricity.
Fifty-six years ago, the U.S. and Canada endorsed the treaty, which provided U.S. funding for the Canadians to build dams in the headwaters of the Columbia River. Under the treaty, the U.S. provides to Canada half the hypothetical benefits of increased hydro generation at downstream U.S. dams that result from the flows across the border created from those dams. This payment is known as the Canadian Entitlement. The method for calculating the amount was established in the 1960s.
The treaty has provided many benefits to both countries over the years. But just as technology such as telephones and televisions evolved since the 1960s, so must the calculation of the share of benefits that U.S. electric consumers receive from the treaty. Substantial increases in the amount of wind and solar, energy efficiency, fossil fuel generation retirements, and increasingly interconnected and responsive wholesale markets have dramatically decreased the value of treaty operations for our utilities.
Under the terms of the treaty, we send a large amount of power back to Canada’s British Columbia province each year, which it then sells on the wholesale power market. Given all the power system changes since the 1960s, the benefit calculation now tilts heavily against U.S. electricity consumers. This imbalance occurs both in terms of the total amount of power, which is about five times larger than the benefit received by U.S. electricity consumers, and also in how much flexibility B.C. has in when it receives the valuable, carbon-free hydropower of the Canadian Entitlement.
The current framework allows B.C. the right, on one day’s notice, to receive its electricity entitlement from the U.S. on any hour, or time of the month it requests. This is important because the value of electricity changes depending on the market conditions at time of delivery.
For example, B.C. took little of its electricity entitlement for the first half of the month. Instead, it loaded up in the second half when wholesale power prices skyrocketed due to a West Coast wide heat wave that peaked power demand, tightened power supplies and resulted in rolling blackouts in California.
In just those few days in August, U.S. electric consumers of the Northwest and California paid Canada an estimated $10 million for the right to receive power generated at U.S. dams.
To be clear, Canada is completely within its rights to take advantage of the treaty as the agreement stands today. Every year, it maximizes this advantage and has done so for decades.
Since September 2014, the U.S. government has had the contractual right under the treaty to give 10 years’ notice seeking a renegotiation of the power payments to Canada. The treaty framers on both sides of the border added this provision because they knew they couldn’t predict how power markets would evolve.
We urge our state congressional delegation and the U.S. government to exercise their contractual right to demand change to the power payment provisions of the treaty. It is time for a better deal. The U.S. needs its valuable, carbon-free hydropower back.