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

Summary of June 18, 1997 Meeting

Portland Airport Sheraton
 

The Federal Power Subscription Work Group talked about products and services customers want to buy from the Bonneville Power Administration. About 30 people attended. The next meeting is July 2 in Portland at the BPA Rates Hearing Room.

Index (click item to move to topic)

TIMELINE AND SCHEDULING

Dick Adams, Executive Director of PNUCC, noted that the group's timeline has been revised. The date for completion of the task of "defining products and pricing principles" has been moved up a year, to mid-1998. The deadlines for "assessing obstacles" have accelerated accordingly. This is just to make sure "we're all on the same page on the timeline -- I've gotten feedback that we're not," he said. Adams brought up the group's meeting schedule, and it was noted that the Northwest Public Power Association's annual meeting is July 15-17. The group decided to eliminate its scheduled July 16 meeting. Adams said he would consult with other groups, like IndeGO and the Separation Work Group, about upcoming meetings and then distribute a revised schedule to be discussed at the July 2 meeting.

 

WPAG's WANTS

A Western Public Agencies Group (WPAG) representative presented a "draft products list." The first three items on the list -- full requirements service, fixed supply, and planned supply -- are "business relationships"; the other categories, such as control area services and storage, are products, he said. Things are changing so fast that what my clients think next week may be different than what's on the list, he added. We want to let BPA know as much as we can about what we want in order to get feedback about whether BPA is willing to offer these things, he said.

The work group's questions included whether WPAG's list of "wants" is intended to constrain BPA to the physical limits of its system in fulfilling contract obligations; how risk would be handled in the event "mistakes" are made; and what are the implications of the resale, pooling, remarketing service, and nonfirm energy products on the list. The WPAG representative noted the need to have transmission services and tariffs "congenial" with BPA delivering these products.

 

PPC PREFERENCES

A Public Power Council (PPC) representative presented a matrix of products and services in which PPC members have expressed an interest and distributed a glossary defining terms used in the subscription process. The matrix is a working document, she said, adding, we need to decide what business relationship lends itself to purchasing these products and services. There's a general assumption that loads will be met with reliable power services; "you can't color-code the electrons," and so we'll end up with "an accounting exercise" to determine who collects the revenues, she suggested. There's a general concern by public power utilities that having one supplier is problematic, and there's a lot of interest in flexibility, she stated. Where we are now is trying to understand how pricing and terms fit in with these products and services, she added. The group asked questions about the terms used on the matrix, such as "long-term enabling agreement," "direct assignment," and "loss compensation."

 

DSI DRUTHERS

A Direct Service Industries (DSI) representative said that the DSIs did not prepare a list of products. We thought if BPA had offerings that met utility needs, they would meet our needs, he stated. The DSIs want bulk power and the option to get load control services -- we want to purchase simple power products at known prices and have the scope of our obligations fully defined by contractual terms we enter into voluntarily, he said. The business relationship is more important than products and services, he added. We are not at all interested in being all or part of the backup for a risk management business BPA might get into, he stated.

We want bulk power and to negotiate the terms of the supply arrangement and the price, said another DSI representative. We have an interest in defining a delivery point and having the option of buying special services from BPA to meet our load shapes, he explained. The work group's questions involved the definition of bulk power, DSI interest in buying nonfirm energy, and resale.

One person commented that while others have tried to describe specific products in the subscription process, the DSIs haven't done that. Given the nature of the production process we have, we don't want to define a product narrowly, replied a DSI representative. We want "a plain vanilla product with a teeny, teeny amount of flavoring," he quipped. We don't know if what we want falls under the subscription process or not, but if all BPA sales are going to fall under the subscription process, we're here, responded another DSI representative. There are some products that BPA has or needs that come from customers, and at some point, we'll want to discuss those, noted a customer representative.

 

PGP's "SLICE OF THE SYSTEM" PROPOSAL

Representatives of the Public Generating Pool (PGP) presented a draft proposal for a "slice of the system" basic subscription product. We are trying to reconcile what we want in this process with the goals of the Comprehensive Review; we believe this is a way to manage some risk issues and control costs for BPA, said a proponent of the proposal. It's mostly a business relationship with a set of products associated with it, he added. This doesn't start with what customers want, but instead with what the system can produce and what products can be structured from it, explained a PGP representative. This is not what PGP utilities have decided they want to buy from BPA, he said. It could be a starting point for the subscription process that defines a product that could be offered to everybody, and it may help address the stranded cost issue, he added.

The concept is that BPA would offer a basic subscription product to all customers defined as a share of the total capability of the existing hydro-thermal system. Each customer would execute an umbrella agreement defining its share and specifying other rights and obligations. Each customer "subscribes" to a specific share or percentage of the system, which translates into megawatt and megawatt-hour rights by month as well as storage rights. Customers could subscribe individually or aggregate shares into groups of purchasers. If the entire system is not subscribed, then BPA would market remaining capability at negotiated prices.

Customers and BPA asked a lot of questions about the proposal. How does it compare to the 100 percent load factor product? How would it relate to fish costs and fish flows? How would daily operating decisions be made? It was pointed out that the mid-Columbia system was used as a model for developing the concept.

There were also questions about exit rights; the risk or benefits to the U.S. Treasury; whether aggregators could get a "slice"; whether there would be limits on how much an entity could buy; and the difficulty of turning such an arrangement into a power bill. A bill would have two pieces, noted a PGP representative: 1) the percentage of the annual revenue requirement, and 2) everything else, which would be separate products.

"Enormous difficulties are being glossed over here," commented a BPA representative. The federal system and the mid-Columbia system are not the same; this isn't a product -- it's an operational right to the federal system, and making it work operationally is a huge challenge, he continued. This is an ownership-like right to the federal system -- it's a fundamentally different concept than BPA selling a set of products, he stated.

"Why this construct?" asked a public interest representative. Because of all the risk discussions we've had -- we're trying to provide some level of stability for the system, replied a PGP representative. We see the need to sit down with those who operate the system and talk through the issues -- our intent today was to introduce the idea and get the questions about it on the table, he added. It's likely that the system would operate like it does today, but that the decisionmakers would be different, observed a utility representative.

This is a proposal that imposes a view of how BPA and the system ought to be operated that is substantially different than the outcome of the Comprehensive Review, said a customer representative. We need to discuss if this is in the boundaries of what the federal power subscription effort was charged to do by the Review, he added.

This is a definition of a role for BPA to define products and subscribe them out; it is "perfectly consistent" with the Review, a PGP representative replied. The Review made some initial recommendations that don't meet the market test, said another customer representative. We can't stay "in the Comprehensive Review box" -- it has been found to not have a large following among customers, he added.

A BPA representative said that the cost analysis attached to the proposal is "egregiously wrong"; for example, cost reductions are double-counted. The group agreed to talk more about this proposal at its next meeting.

 

OPUC PUTS AN OAR IN

An Oregon Public Utility Commission staff representative said he would be going before the commission next week to talk about the subscription process. The commissioners are concerned about what will happen to the residential exchange, and one commissioner is sure we need legislative changes, he noted. He distributed a two-page set of "subscription process questions" of concern to the PUC. "It's a whole new world out there," and we need to think about questions such as, what happens when an aggregator takes over customers of an IOU and a preference utility? he said. We will brief the commission every two months, he added. Is the PUC comfortable with the Review's recommendation on the residential exchange? he was asked. The opinions of the three commissioners vary on that, he responded.

 

WHAT'S COMING UP NEXT?

  • More Discussion of Products. Adams said if there are others who want to describe products and services they should let him know so he can schedule time at the next meeting. Adams noted that the group would continue its discussion of the "slice of the system" proposal on July 2. He also suggested that group members start thinking about which products or packages of products that BPA should be asked "to go off and price."
     
    A participant inquired if the IOUs are going to make a presentation on products they want. We subscribe to "the Chinese menu idea -- there are plenty of goodies being thrown around, and we'll decide if and what we want," responded an IOU representative. What's very important to the IOUs is a good understanding of the business relationship between BPA and its customers and who will bear the risks, he added.
     
  • BPA Will Provide Feedback. At the next meeting, BPA will offer some feedback on the products and services customers have said they want, Syd Berwager of BPA stated. We can tell you if any of these are products BPA cannot or will not offer and provide feedback on any problems we see, he said. We can indicate whether these are products we can start designing and establishing the systems needed to offer them; we're further off on determining at what price we could offer them, stated Berwager. We are mindful of the dangers of putting out a price target that everyone could spend nine months shooting at, he added. BPA has a commitment to having pricing principles by July of next year, Berwager pointed out.
 
Adjourn
   

Archive of content originally posted or last updated on:  June 20, 1997.
Content originally provided by:  Syd Berwager, BPA Power Business Line.
Content currently provided by:  PBL Requirements Marketing - PS.
Page maintained by:  BPA Web Team.
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