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Slice of the System

SUMMARY of
September 3, 1998 Public Meeting

BPA Rates Hearing Room
 

A. Introduction

About 40 people attended the public meeting on the Slice of the System Proposal. Kristi Wallis (Facilitator) welcomed the participants and announced that there were new developments about the Slice proposal to discuss. Angela Wykoff (BPA) announced that BPA had made a recent decision to include a Slice product in its initial Subscription proposal. The product will be as the PGP has proposed with some modifications. BPA has concerns about implementation and other issues, but is willing to show a Slice product in the initial proposal now and work on the concerns. The Administrator will not make a final decision until the Record of Decision. Dennis Parrish (Seattle) recognized this development as a positive step toward this product being on even par with other products. He acknowledged the work that BPA and others had done to get to this step.

Handout available at the meeting:


B. Review of Slice Proposal and Concerns about the Proposal

Wallis referred participants to Handout No. 1. Wallis revised the handout to reflect changes made at earlier meetings and to add her interpretation of concerns about different elements of the proposal that she has heard. She walked through the elements of the proposal to gather more concerns or modifications to address the concerns. Participants discussed the components as Wallis reviewed each one.

General

The Slice product would be a percentage share of FCRPS. When the FCRPS would be determined (i.e., the snapshot of the system taken) has not been determined. The exact makeup of the system, including any acquisitions for load growth, has not been determined. Wykoff said the expectation is that Slice customers would participate in system augmentation, results of the Subscription process and the Rate Case, and would be subject to decisions made in those processes. Slice participants will be part of the Subscription settlement (allocation) process and Slice will use the same treatment as in that process.

These issues were identified as needing clarification and resolution:

  • Definition of FCRPS/FBS, what's in and what's out.
  • Paying for replacements and replacement power (optional as determined by Slice customer, or required).
  • Cost shifts. A list of examples of cost shifts needs to be developed.
  • Cost shifts (if any) would be part of contract discussions after the Rate Case and may include a correction factor for positive or negative cost shifts. A correction factor could be decided in the Rate Case.
  • A monthly (or other period) true-up may be different from this correction factor.
  • True-up and other operational issues need to be discussed.
  • An unauthorized increase charge is an issue of adequate compensation.

Term

Wallis reviewed the proposal of a 5-20 year term. She stated some participants expressed a concern that the term of the product be consistent to cover potential future risk. Wykoff stated that BPA's main concern is for future fish costs post-2006, and that the term might need to go beyond 2006. BPA is considering a term of 10 years or more. After discussion, these issues remain about the term of the proposal:

  • BPA requires a 10-year term but would consider other suggestions.
  • Risks other than future fish costs need to be considered such as nuclear decommissioning, and removing Snake River dams.

Eligibility to Purchase

Wallis asked the PGP to clarify whether there would be an annual mapping of a customer's percentage of Slice. Lon Peters (PGP) said that the proposal would include a constant percentage over the life of the contract. This percentage would not include load growth, and would not exceed a customer's 5(b) rights. The percentage would be applied to the capability of the system. Wallis listed some concerns about the way the percentage might be mapped:

  • Would there be a limit on the percentage based on firm components of the FELCC or would it be based on other components?
  • Would Slice customers receive more than they might be entitled to?
  • Would there be a way to recall a Slice customer's right?
  • There is still an issue about how to bring the Slice product in line with requirements.

After a discussion it was clear that there is confusion about the definition of requirements and how BPA will determine 5(b) rights. Maureen Flynn (BPA) suggested using the philosophy of "equitable comparability" used for other products be used for this product also. Implementation questions remain for how the percentage would be used over time. BPA has a concern about the remaining requirements customers, if they would be underserved, and if there would be any cost shifts.

Product Description

Wallis referred participants to the fifth bullet on Handout No. 1, which relates to the question of a Slice customer's actual daily take and the use of a storage account. Peters said that the Slice customer would assume the risk of spill, but the lack of market spill and marketing decisions would not be included. Jonah Tsui (PRM) suggested that one solution is to apply the minimum-maximum to BPA and the Slice customer and whoever does not take the minimum then would spill.

Another issue identified is the ability to pool requirements power. Tom Miller (BPA) said that BPA's current policy is that requirements power cannot be pooled; that is, combining delivery or sale of power is not allowed. This raised the question of whether people were considering combining products or pooling products, which could be a different issue. A consistent definition of pooling needs to be determined to continue this discussion.

Linkages

The PGP proposal is for a product that cannot be combined with Full Service or Declared Resource Products. The PNGC would like this amended so that a partial requirements customer could buy a mix of partial requirements products to serve its requirements load. The PNGC's suggested amendment brought out these concerns:

  • Buying more that one requirements product is an issue.
  • Could a customer declare Slice as a resource?
  • If products are combined, would any overlap? How would they be priced?
  • Could a customer's entitlement be overrun? How would this impact an expanding entitlement?
  • Would there be duplication of service and other complexities?

Wallis suggested that further definition of the Slice product was needed before this discussion could continue.

Costs to Purchasers

Barney Keep (BPA) suggested that other costs need to be added:

  • WNP-3 exchange contracts
  • Ancillary services
  • 4h(10)(c) credits (in or out)
  • Low Density Discount
  • Conservation placeholder (this is a new development)

Phil Mesa (BPA) stated that there are some short-term power purchases that BPA makes to manage the system (for example, increasing the capability of the system in the future with a prior power purchase). If those purchases result in increases in system capabilities, then the Slice purchasers would benefit and their participation in the cost would be appropriate. It is not clear how these purchases would be separated and how to account for them. Wallis suggested a discussion with system operators as a way to define this issue.

Wallis outlined transmission costs (see Handout No. 1, page 5) as a concern. Which transmission costs are paid for by which parties in an integrated system is the issue and the Slice customer does not want to pay twice for the same service. This issue will be considered in the Rate Case. Also, the industry is working to standardize basic charges in the next few years.

Covering risk and the costs associated with risk is still an outstanding issue. BPA's concern is for planned net revenues for risk. BPA needs to look at what it needs to be. Participants suggested that performance bonds and other industry mechanisms could be used to cover risks, or that the biggest risk is marketing and that is embedded in BPA's rates.

Risks Purchaser's Accept

Participants have not agreed on the way to value risk or to value the assumption of risk by customers. Some are concerned that risk would be passed back to BPA or other customers in some way.

Basis for Payment

The Slice product must be made consistent with rates directives and this may result in different cost treatments. This issue needs to be explored.

Resources Included/Excluded

Wallis suggested that more discussion is needed about the Residential Exchange and purchases made for BPA's public purposes. Long-term sales need to be added in.

Scheduling and Accounting

Dynamic scheduling and a concern about adequate compensation needs to be discussed. Implementation costs would be different for scheduling vs. dynamic signal.

Forecast and Data Needs

BPA considers its forecasting information proprietary. Non-proprietary information would be available to Slice purchasers.

Dispute Resolution

BPA is concerned that all day-to-day decisions about operations not be opened up to dispute. BPA would like dispute resolution for very limited situations. No standard provisions have been developed yet.


C. BPA's Concerns

Wallis summarized the list of BPA concerns that were discussed during the meeting.

  • A correction factor for cost shifts will be discussed in the Rate Case and would be a two-way street.
  • The term for the product is to be in 10-year increments to adequately cover risks. (Slice customers have proposed 5-year terms with different risk provisions to adequately cover risk.)
  • How to structure Slice as a Requirements Product is open, but is still an issue. The product must be implementable. It will be part of the overall resolution of Subscription issues and how section 5(b) fits in. BPA must meet the load obligation of everyone and if there is overdelivery, must purchase to deliver to others. This must be addressed. The basis of observation, whether annual or other is an issue.
  • Aggregation of Products (Pooling) - There must be a consistent application. More work needs to be done.
  • Net Revenues for Risks - Risks need to be identified and more time is needed to see that they are adequately covered.
  • Dynamic Signal - BPA is not prejudiced on this issue but more work needs to be done.

D. Next Steps

The next meeting was scheduled to be after BPA's Initial Proposal is released, i.e., September 28. (Note: Events occurring subsequent to the meeting make it likely that the meeting date and time will be changed. Please refer to the schedule section of the BPA Slice web page.)

 

Archive of content originally posted or last updated on:  October 15, 1998.
Content originally provided by:  Angela Wykoff, BPA Power Business Line.
Content provided by:  Timothy Roberts, Slice Product Manager, 503-230-5450, tcroberts@bpa.gov.
Admin Assistant, Kimberly Brown, 503-230-3639, kabrown@bpa.gov.
Page maintained by:  BPA Web Team.
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