Bonneville Power Administration (BPA)
Pacific Northwest Utilities Conference Committee (PNUCC)
Summary of March 19, 1997 MeetingLloyd Center Red Lion
The Federal Power Subscription Work Group reviewed its plan of action and began identifying interests at its first meeting on March 19 in Portland. About 30 people attended. The group's next meeting will be April 2 at the Airport Sheraton Hotel in Portland.Index (click item to move to topic)
- Draft Work Plan Overview
- The Letter From Congress
- Questions and Comments on the Work Plan
- A "Work-In-Progress" Work Plan
- Where to Start?
- Identifying Business Interests
- BPA'S Business Interests
- Put It In Writing
- What's Coming Up Next?
Dick Adams, Executive Director of PNUCC, welcomed the participants. He noted that they are a "self-selected" group, with the goal of developing the subscription process called for in the region's Comprehensive Energy Review.
Syd Berwager, BPA's lead for this effort, went over the "Draft Work Plan for Implementing Federal Power Marketing Subscriptions," pointing out that the plan is aimed at coming up with products, services, and prices that address customers' needs. He said in the next nine months, the work group will meet to try to accomplish the first five tasks of Phase 1 -- Collaborative Discussion -- of the plan. Berwager noted that the work group's effort is part of BPA's public process in carrying out its National Environmental Policy Act (NEPA) responsibilities.
BPA hopes to make the subscription process succeed without legislation, Berwager said. If that is not possible, in Task 5, the work group will report out what legislation is needed, he explained. The group will also identify any obstacles it doesn't think it can resolve, Berwager said. In Task 6, scheduled for completion by July 1, 1999, the group will start to develop principles to be reflected in the contracts. After that, Phase 2 -- Bilateral Negotiations -- will begin, he said.
The group discussed a letter from 17 members of the Northwest Congressional delegation to the Northwest governors. The letter asks which recommendations of the Regional Review may require federal legislation, what specific issues need to be addressed in that legislation and sets June 1, 1997 as the deadline for a response. Some work group members suggested there isn't as much urgency to have legislation as the Congressional letter suggests, and that while other aspects of the Regional Review's work may require legislation, the "best way to sink the subscription process" is to move ahead on legislation in advance of the process.
Consultant Al Wright noted that since the Transition Board will be charged with helping the governors develop their response by June 1, the work group may want to provide input to the Board well before that date. He also said the Board may schedule additional meetings before June 1 to help in preparing the response to Congress.
The group asked Adams to work with Wright to come up with language about the subscription process to recommend to the Transition Board. Since it was agreed that the language should be given to the Board by May 1, Adams said he and Wright would put something together and bring it to the work group for reaction at the April 2 meeting.
If policy issues arise in the bilateral negotiations that weren't addressed by the work group in Phase 1, will they be brought back to the work group for resolution? There was discussion that Phase 1 was intended to cover the "waterfront" but the issue was noted.
Are the "ground rules" that the work group will adhere to the conclusions reached by the Regional Review? Several participants suggested that the work group should focus on what will make the subscription process succeed, and not "squash discussion" of things that are inconsistent with the Review's recommendations. Where there are changes to be made to allow BPA to offer competitive products, we ought to do that, said a customer representative. If it's a fundamental change, we can take it back and test it with the Transition Board, suggested a public interest representative.
Berwager described the timeline for the subscription process, noting that BPA would like to know what products and services customers need as soon as possible. Noting that a "feeding frenzy" is going to occur after 2001, when BPA contracts expire, one person said, it's an interesting exercise to sit here and ask what customers want, "but is it relevant?" Paul Norman of BPA replied, "we can't do business like Enron" because of who we are -- we need to be more upfront about products and services and how we will price them.
How will BPA identify who its customers will be? If customers are retail customers, it will influence the products and services are offered. Participants indicated the importance of having future participants involved in developing the subscription process.
Customer representatives emphasized the need for flexibility in setting up "the rules of the road" for subscriptions, so BPA can "respond to the landscape." We are testing the extent to which BPA can act like other suppliers, one individual observed.
After discussing the work plan, the group agreed that the Work Plan should continue to be a "work in progress". It was emphasized that the work plan serves as a general guide to moving forward. If needed, the work plan will be modified as the work effort progresses.
The group decided to begin with customers stating what they want from BPA in order to develop a complete list of products and services. I want "all the wants" together so we can see whether they are politically realistic, what they mean financially, and how the customers' stack up with BPA's wants, one customer representative stated. Another suggested the test for success is whether kilowatt-hours generated in the Northwest stay in the Northwest.
The second half of the meeting was a participant "brainstorming" of product and service wants. The group noted and discussed when a suggestion diverged from the recommendations of the Regional Review. The following list is a sampling of what participants said they want:
- Simple, straightforward contracts that define the rights of both parties in an uncomplicated way.
- A range of products competitive within the market.
- A cost-based, fixed price commitment.
- A product that covers BPA's costs.
- The ability to buy power at a known price for a specific period of time, with some options.
- The ability to buy control area services; to resell power; to displace; and to buy short-term products without option fees.
- The ability for utilities to purchase from BPA through some type of alliance, rather than individually.
- Relief from strict take-or-pay obligations.
- Different contract lengths, from one to 20 years.
- Shorter rather than longer contracts.
- The shorter the contract, the firmer the pricing.
- A fixed price for five years and a rolling five-year fixed price.
- A structured nonfirm relationship with BPA, or a "mix and match" between firm and non-firm products.
- A basic full-service package for small utilities.
- No mandatory option fees.
- Power delivered, at the cost of transmission service, with no pancaking.
- A market-based product a utility can use to retain existing loads or to compete for loads inside and outside its service territory.
- A low-density discount.
- "Puts" and/or "call" options to be available.
- All products and services (not just energy and capacity) to be offered through the subscription process.
- BPA to have cost controls.
- BPA to be able to price some output firmly for more than 10 years.
- BPA negotiators empowered to make the decisions.
- BPA to have a limited role in the market -- it should be "a dull federal marketer."
- Prices for F&W and "anything else BPA has" to be known when parties sit down to negotiate contracts.
- A guarantee that those who sign a long-term commitment will get what they sign up for, regardless of what happens to BPA.
- Similarly situated citizens of the region, such as residential and small farm customers, to have similar rights and opportunities to buy power.
- If there are stranded costs after the subscription process is over, those who incurred them to pay for them.
- A subscription process with a good balance of risks and rewards and able to fit into a retail environment.
- The subscription process to define a way to deal with the needs of "non-historical aggregators."
- Customers to commit to assume some amount of risk in order to get long-term benefits.
- More discussion about the terms on which a utility that leaves BPA could return -- at market or at cost-based rates?
Berwager reviewed a six-page handout of BPA's business interests. BPA's purpose, he said, is to "meet our public responsibilities through commercially successful businesses." The principal long-term benefit that subscription can provide to customers is low-cost federal power. The major goal of subscription from BPA's perspective is to stabilize BPA's revenues and secure its financial integrity over the long term, Berwager said. Customer satisfaction is crucial to the success of the subscription process, he said.
The group briefly discussed BPA's plans for signing long term contracts before the subscription process is developed. (Some customers have contacted BPA requesting contracts extending beyond 2001, in response of retail customer needs.) Some in the group expressed concern that if people signed up now, and subsequently found that the subscriptions offer "a better deal," that they shouldn't be allowed to have "two bites of the apple." It was suggested that contracts stipulate "no conversions."
Participants also exchanged views about whether activities like conservation should be linked to the buying of federal power in power sales contracts. The 3 percent nonbypassable requirement for public purposes in the Regional Review was put in "to take care of that," a utility representative stated. Another person suggested the matter be considered on an "outcome" basis -- if the best outcome is through contracts, then do it there; and if a 3 percent fee is better, then impose the charge. In any case, the obligation has to be met, he said.
A question was raised about who pays for new resources in the event of load growth. The Regional Review's direction was to generally that the costs for additional BPA resources would be covered by the purchaser of the load growth service through a bilaterial contract.
The group agreed that work group participants (not just those who spoke at the meeting) should write up their list of "wants" and fax or E-mail them to PNUCC by noon on March 26. PNUCC will collate them and send out the full list in advance of the April 2 meeting.
- More Work on Business Interests. We'll revisit the business interests discussed today, and look at others, said Adams. Maybe we will be able to identify specific meetings where we can "drill in deeper" on particular topics, he suggested.
- Crafting A Response to Congress. The work group will take a look at ideas for the governors' response to the letter from the Congressional delegation. Before our next meeting, we'll talk to the Transition Board and find out what they want, Wright said.
- Early Reading From BPA On Customer "Wants." One participant asked that at the next meeting or shortly thereafter, that BPA's legal staff, without taking a formal position, provide initial reactions as to which of the interests and ideas expressed are "easy to do," and which might require more elaborate discussion or legislation. Let's separate the "no-brainers"
Archive of content originally posted or last updated on: March 25, 1997.
Content originally provided by: Carolyn Whitney, BPA Power Business Line.
Content currently provided by: PBL Requirements Marketing - PS.
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