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Federal Power Marketing Subscription
Sponsored by:
Bonneville Power Administration (BPA)
Pacific Northwest Utilities Conference Committee (PNUCC)

Summary of March 11, 1997 Meeting

Jantzen Beach Red Lion
 

BPA and PNUCC hosted a joint meeting March 11 to formally kick off the federal power marketing subscription process. The goal of the effort is to implement the federal power marketing recommendations of the region's Comprehensive Energy Review. About 75 people attended the session, and several had suggestions for the draft work plan. A work group will begin a series of meetings March 19 at 9 a.m. The first meeting is at the Lloyd Center Red Lion.

Index (click item to move to topic)

OVERVIEW

Dick Adams, Executive Director of PNUCC, welcomed participants. He said the purpose of the meeting is to share preliminary ideas for implementing the Regional Review's recommendations and to get reactions and answer questions about the proposed approach and preliminary list of issues. Adams called attention to the meeting handouts, which included a plan for public involvement.

 

TRANSITION BOARD ROLE

Idaho's representative on the Northwest Energy Review Transition Board, Todd Maddock, said the federal power subscription process is at the heart of implementing the Review's recommendations. He set the stage for the process by recounting the goals of the Review and outlining the charge the four Northwest governors gave to the Board. The question of how to deal with fish and wildlife (F&W) costs remains unanswered, Maddock observed, and the Board needs to embark on resolving it.

Maddock said the Board must assure that in the subscription process benefits of the hydro system are retained in the Northwest, benefits are aligned with risks, U.S. Treasury and third-party debt will be paid, and that the federal power marketing system fits within a competitive environment. He suggested that five-year budgets for F&W expenses be developed so subscribers can be confident about what those costs will be. "Today the work begins in earnest," Maddock said, assuring the audience that the process will be open to the public.

 

DRAFT WORK PLAN

Adams outlined the draft Federal Power Marketing Subscription Work Plan, explaining that it is the product of work by BPA staff, representatives of customer groups, and Transition Board staff. The goal of the work plan is to implement the Review's recommendations, and the measurement of success is "when BPA has a predictable, sustainable revenue stream that gives the agency financial stability, with no stranded costs," Adams said.

There are two phases set out in the work plan. Phase 1 is "collaborative," and BPA and the customers will identify their business and commercial interests. Phase 2 is for bilateral (two-party) negotiations, during which BPA will solicit subscriptions for federal power. Adams said the definition of "customer" goes beyond those who currently purchase wholesale federal power. It includes future customers as well--people who will sign power sales agreements down the road.

 

TIMELINE

The proposed timeline for the work plan extends from the first quarter of 1997 to the third quarter of 2001. Adams said while the timeline may suggest the tasks are sequential, the process is expected to be more "iterative"--issues will be revisited and refined as the work progresses. Other major categories of recommendations from the Regional Review--customer choice, public purposes, transmission, and F&W--are shown at the bottom of the timeline. This is to give a perspective on how the federal power subscription process will track with work in those areas.

Phase 1. The first task is for customers and BPA to define their business interests and needs, including products and services. This activity is to be completed in 1997. As part of this task, the work group will consider whether business relationships should be the same as in the past. In mid-1997, BPA and the customers expect that some of the issues will start to be resolved. In the fourth quarters of both 1997 and 1998, the timeline calls for assessing obstacles. We want to identify as early as possible any "showstoppers" in developing the federal power marketing subscriptions and try to find solutions, Adams explained. BPA and the customers will translate their work in Phase 1 into a set of principles BPA will use to offer the sale of its commodities. The tasks in Phase 1 could take until mid-1999.

Phase 2. BPA and the customers will conduct bilateral contract negotiations. The timeline indicates that negotiations could begin as early as the first quarter of 1998 and extend through the third quarter of 2000. There is an expectation that some customers will know what they want and be ready to negotiate within a year. Others may not be ready for a year or two. In Phase 2, BPA will also need to make a decision about a rate case and about how to fulfill its National Environmental Policy Act (NEPA) requirements.

The target for having new contracts signed is the third quarter of 2000. This will give BPA and the customers a year to react and readjust before the existing power sales contracts expire.

 

COMMENTS ON THE TIMELINE AND APPROACH

Maddock said the Transition Board is concerned about the length of the timeline. Events in Congress may not allow for the amount of time indicated on the chart, he said. Others noted that power marketers are already contacting utilities, and the process needs to be completed more quickly than outlined.

Syd Berwager, BPA's lead in developing the process, said that when the timeline was designed, there was "give and take" between the customers and BPA. BPA wanted to move faster, and the customers said it is hard to make decisions before retail access is available, he said. Berwager indicated he did not foresee BPA and all customers waiting until the process is complete to begin to fill their power needs.

Commenters said the subscription process may need to include a mechanism for dealing with stranded costs. The work group was also encouraged to reach out to potential future customers of the federal system, such as power marketers and aggregators. The importance of BPA's retail wheeling policy was also mentioned. BPA and PNUCC were urged to hold some meetings outside the Portland area and to post information on the Internet.

[NOTE: For purposes of meeting BPA's NEPA scoping requirements, a recap of specific comments on the approach and timeline is included at the end of this report as Appendix A.]

 

PRELIMINARY LIST OF ISSUES

Berwager briefly explained each item on the preliminary list of issues the work group will consider. They are:

  1. Take-or-pay contracts and relief from this obligation.
  2. Subscriptions to BPA power and retail access.
  3. Resale rights for purchased power.
  4. Payment and amount of option fees in a market environment.
  5. Reconciling the rights and obligations between those who buy power at cost and those who buy at a negotiated price.
  6. Timing of issues.
  7. Right of first refusal for renewal of subscriptions.
  8. Level of subscription right.
  9. Products for subscription.
  10. Inducement for long-term contracts.
  11. Contingency for potential over-subscription.
  12. Relationship to other BPA products.
  13. How aggregators will fit into the subscription process.
  14. Appropriate sharing of costs and risks with the U.S. Treasury.
  15. Bilateral resource acquisition and requirements obligations under NW Power Act.
  16. Exchange customer rights post-2001.
  17. Ability for customers to place load growth on BPA post-2001.
  18. Future obligation of BPA to serve at cost if customers leave.
  19. Customers' ability to control future costs.
  20. Need for certainty on F&W costs post-2001.
  21. Need for certainty on stranded costs.
 

COMMENTS ON THE PRELIMINARY LIST

Several members of the audience had comments about the list. One customer observed that if the goal is to retain benefits for the Northwest and priority is given to existing preference customers, the process should be designed to encourage those customers to sign. A member of the public said that system upgrades and assuring reliability are necessary. Other suggestions included: cap BPA's costs in the contract and allow customers an "off-ramp"; and allow the work group to offer administrative changes or recommend actions on policies such as retail wheeling and stranded costs.

Questions from the audience included: Would BPA offer customers storage capability? How will the process be integrated with BPA's marketing plan? Will the work group be free to recommend changes to legislation to make the process work? Is BPA looking at the Review's recommendations to see if they are consistent with current legislation?

[NOTE: For purposes of meeting BPA's NEPA scoping requirements, a recap of specific comments on the list of issues is included at the end of this report as Appendix B.]

 

PROPOSED NEPA PROCESS

Charles Alton of BPA explained that BPA plans to use its Business Plan EIS (.gif, 40 kb) to satisfy NEPA requirements for federal power subscriptions (.gif, 19 kb). The EIS is designed to support a number of decisions about products, rates, marketing policies, and contract terms, and several alternatives were considered when the Business Plan EIS was developed.

BPA will review the EIS to assure that it adequately documents any environmental impacts of implementing a subscription process. If it does not, BPA will prepare a supplement analysis and determine if there are significant new impacts. This may or may not lead to a supplemental EIS.

 

WHAT'S COMING UP NEXT?

Adams called attention to the schedule of work group meetings in the proposed work plan. Participants in the group will "roll up their sleeves" to accomplish the work plan, he said. The group is open to anyone with the time and interest to get involved. The first meeting is March 19, and the group plans to meet every other week through August.

 
Adjourn
 

APPENDIX A: PUBLIC COMMENTS ON APPROACH AND TIMELINE

Angus Duncan, Columbia/Pacific Policy Institute for Energy and the Environment: The Review's recommendations did not preclude a mechanism for stranded cost recovery. The objective is to have subscriptions and power sales that allow BPA to meet its obligations. If that requires a stranded cost mechanism, one has to be devised.

Steve Weiss, Northwest Conservation Act Coalition (NCAC): Talking about stranded costs is very important; it needs to be done in this or a parallel process. Customers should be broadly defined. If there is not consensus, this process may fail. We have to reach out to the marketers and the aggregators, who will be customers and competitors of BPA. Residential customers also need to be included, as do the PUCs and state agencies.

Lloyd Marbet, Don't Waste Oregon: I endorse the comments of Angus Duncan and Steve Weiss. You need to show how issues "below the line"--customer choice, public purposes, transmission, and F&W--will be integrated into the process. They can't be left out.

Jeff Nelson, Springfield Utility Board (SUB): BPA should be proactive in its retail wheeling policy. It will drive what products will be offered. Don't preempt stranded investment discussions.

Keith Knitter, Grant PUD: Meetings should be scheduled in locations other than Portland.

Art Robare, McMinnville Power & Light: Post proceedings on the Internet.

 

APPENDIX B: PUBLIC COMMENTS ON THE LIST OF ISSUES

Geoff Carr, Power Resource Managers: There is a question of how to have an option fee in a competitive environment. There will be "a whole slew of level-playing-field issues."

Jim Sherrill, Parkland Light & Water: The goal is to retain the benefits of the hydro system for the Northwest, and the products should be designed for those who are on the top of the list to subscribe. If those at the top are the existing preference customers, we need a subscription process that encourages them to subscribe.

Larry Felton, Okanogan PUD: Subscribers with take-or-pay contracts to federal power now have the flexibility to use the system to meet winter peaks. Will that continue?

Berwager's Response: You're suggesting flexibility in the products we offer. We've contemplated a take-or-pay product that would follow customer load.

Terry Aschbacher, Electric Clearinghouse: How will the subscription process be woven into the marketing plan?

Berwager's Response: The marketing plan is envisioned to marry the subscription process with what BPA will do with power and products outside of the process.

Eric Hiassen, Eugene Water & Electric Board (EWEB): Is the work group free to offer changes to legislation in order to have a subscription process that works?

Berwager's Response: The group could do that. We're starting with the philosophy we should try to make it work without legislative changes.

Paul Murphy, representing Direct Service Industries: It is critical to develop incentives for BPA to control its own costs. The right to recover costs has the adverse effect of causing costs to rise. The customer obligation should be capped in the contract, and there need to be off-ramps if costs are not controlled.

Jim Deason, representing EWEB: The work group should be able to recommend administrative actions and changes to policies such as retail wheeling and stranded costs.

Jeff Nelson, SUB: There are mechanisms BPA can use to give customers an incentive to subscribe. For example, BPA could signal it will meet or beat the market in the years 2001 to 2006.

Joel Merkel, Northwest Irrigation Utilities: Is BPA's legal counsel going through the recommendations to check their consistency with legislation? I'm referring to public and regional preference.

Berwager's Response: I assure you we are.

Angus Duncan, Columbia/Pacific Institute: How constrained is the process to being consistent with the Regional Review?

Berwager's Response: Our intent is to implement the recommendations of the Regional Review. That doesn't mean we might not identify modifications that we would revisit with the Review.

Steve Hickok's Response: We are looking to implement the Regional Review recommendations without making legislative changes. We did not find any legal "show-stoppers," but this group could.

Paul Locke, member of the public: System upgrades and maintenance are absolutely necessary and must be figured into the cost. The process must assure reliability.

Dick Heitman, Inland Power & Light: We're a long-standing 100 percent customer of BPA, and we would like the opportunity to continue. We have a goal to be a competitive supplier. We're told to wait until 2012 when the WPPSS debt is retired, but we have to make sure we're around in 2012. I have concerns my board won't wait several years and face uncertain fish costs. The process has to take that into consideration. Let's figure out how to have BPA at market in 2002 so we don't have to go somewhere else.

Steve Weiss, NCAC: If customers don't sign up, they'll give away preference rights and never get them back. It will also invite Congress to impose stranded cost recovery. Any utility that makes a decision too soon may lose.

 
 

Archive of content originally posted or last updated on:  March 18, 1997.
Content originally provided by:  Carolyn Whitney, BPA Power Business Line.
Content currently provided by:  PBL Requirements Marketing - PS.
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