Preference Power Under Pressure: The Pacific Northwest's Federal Hydropower Bargain and Its Enemies
A new report details how Bonneville Power Administration allocates limited federal hydropower among 130+ public utilities and co-ops. The mechanism is preference power, a New Deal legacy under constant erosion by market-rate proposals.
A recent article in the Bulletin, the magazine of the Northwest Public Power Association, describes how the Bonneville Power Administration (BPA) collaborates with more than 130 public utilities, regional bodies, and cooperatives to allocate limited federal hydropower through its Provider of Choice long-term contracts.[1] The piece is a useful window into a system most ratepayers never see: preference power, the legal entitlement that directs federally generated hydropower to public bodies and cooperatives first, written into the Bonneville Project Act of 1937 and the statutes governing every federal Power Marketing Administration.
Preference power is the New Deal's oldest surviving market intervention. It was designed as a yardstick, in Franklin Roosevelt's 1932 Portland speech: a public benchmark that reveals what power should cost when profit is not extracted. The BPA system, built by the dams of the Columbia River, delivers electricity at cost to 130+ preference customers, keeping rates among the lowest in the nation. But the mechanism has enemies. For decades, investor-owned utilities and their allies have proposed repricing federal hydropower at 'market rates,' a euphemism for capturing the rent that preference power now returns to communities. The Provider of Choice process, as the article notes, involved 'moments of disagreement' but produced contracts through 2044.[1] That is a victory, but it is temporary.
The historical twin of today's market-rate fight is the 1920s Power Trust's campaign against municipal ownership, documented in the FTC's 84-volume utility propaganda investigation. The National Electric Light Association funded textbooks, planted editorials, and paid professors to denounce public power as Bolshevism. The arguments today are softer but structurally identical: that preference power is an unfair subsidy, that markets allocate more efficiently, that the federal government should exit the power business. The repeal of the Public Utility Holding Company Act in 2005 opened the door for financial buyers to acquire regulated utilities and stack leverage above the operating company, where state commissions struggle to see it. The same logic drives the push to reprice federal hydropower: extract the rent, distribute it to shareholders, and leave ratepayers with the bill.
Who wins and who pays is not mysterious. The winners are the investor-owned utilities that would buy federal power at market rates and resell it at a markup, and the infrastructure funds that would acquire the transmission rights. The losers are the 130+ public utilities and cooperatives that serve rural and small-town customers, and the millions of ratepayers who would see their bills rise. The concrete alternative is not hypothetical: it is the system that exists, defended. Preference power is a legal entitlement, not a favor. It can be strengthened by codifying the yardstick logic in state law, by intervening in federal rate cases to oppose market rate repricing, and by building the political coalition that defeated the Power Trust a century ago: public power advocates, cooperatives, labor unions, and climate justice groups who understand that public ownership is the fastest path to a renewable grid.
The Northwest's Provider of Choice contracts buy time until 2044. But the fight is permanent. The lesson of the New Deal is that democratic control of electricity is not a gift; it is something you build, defend, and rebuild. The tools still exist in statute. The question is whether we will use them before the next repeal closes the door again.