Bpa Brass Misjudged On Plant Unfinished Facility Near Tacoma Has $115 Million Tab So Far

Documents obtained by The Oregonian show a long chain of misjudgments by the Bonneville Power Administration has cost its ratepayers at least $115 million for an abandoned power plant.

The unfinished power project, rusting amid weeds near Tacoma, is now part of a bitter legal battle being fought behind closed doors by the plant’s Nebraska-based developer, Tenaska Washington Partners II.

The Oregonian said 4,900 pages of documents it obtained under the Freedom of Information Act show the federal government approved the project despite warnings the natural gas-fired plant was unnecessary and too expensive.

The Tenaska plant was the first major project sponsored by Bonneville since the multibillion-dollar financial disaster caused by abandoning two nuclear plants planned by the Washington Public Power Supply System.

Although smaller in scale, the Tenaska deal also has ended with consumers paying for a power plant that will never will give them a spark of electricity.

Bonneville officials pulled the plug one year into the project after they said events beyond BPA control made the plant unnecessary.

But The Oregonian said its review of the documents showed the agency’s own analysts warned the plant was unnecessary and would lose $21 million a year. One warning came just three weeks before Bonneville officials approved construction.

The newspaper said the White House also warned Bonneville officials that a natural gas power plant was financially risky.

The BPA sells power generated by 29 federal dams in the Columbia River Basin and one remaining WPPSS nuclear plant. The federal agency receives its revenue from its customers, utilities and industrial plants in Oregon, Washington, Idaho and Montana.

But Bonneville officials projected in 1990 the Northwest would need a natural-gas-fired plant capable of lighting 180,000 homes. By law, the BPA must meet the energy demands of its customers.

The Northwest Power Planning Council, created by Congress in 1980 to oversee energy projections, agreed the plant was needed.

Although Bonneville is not allowed to own power plants, the agency can help finance them. After reviewing more than 100 proposals, Bonneville chose several projects.

The biggest one was a jet turbine fired by natural gas. The agency picked as its developer a partnership led by Tenaska Inc. of Omaha, Neb. The partnership also included Montana Power Co.

The Tenaska partnership would build, own and operate the plant in Frederickson, Wash., near Tacoma and along Bonneville high-voltage transmission lines.

In exchange, Bonneville would agree to spend up to as much as $2.3 billion over 20 years to buy the plant’s electricity.

The final decision to finance the plant fell to Bonneville administrator Randy Hardy - who is resigning in October after six years as the agency’s top official - and to deputy administrator Sue Hickey.

But The Oregonian said documents show that Hardy, Hickey and other Bonneville officials saw the energy business changing in ways that could make the Tenaska plant unneeded and too expensive.

The first warning came from the White House’s Office of Management and Budget on July 31, 1992.

The OMB said it was cheaper to have people pipe natural gas directly into their homes than to have Bonneville burn the gas to make electricity.

But Bonneville officials moved ahead.

On March 8, 1994, three weeks before the Tenaska contract was signed, a team of Bonneville financial analysts predicted the agency would lose $21 million a year on the plant.

Bonneville also faced losing customers, and that meant the agency might not need the plant.

As early as October 1993, Hickey, told the Northwest Power Planning Council that Bonneville expected to lose as much as 20 percent of its energy sales to new competition in the coming years.

As a result, Bonneville’s own analysts pleaded for caution. “(I)t may be in our interest to avoid new longterm commitments,” a Bonneville analyst warned in January 1994, three months before the Tenaska deal was signed.

But on April 1, 1994, Hickey signed the 20-year, $2.3 billion deal to buy power from the Tenaska partnership.