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

Summary of November 5, 1997 Meeting

BPA Rates Hearing Room
 

The Federal Power Subscription Work Group discussed a proposed approach to implementing subscription and a new list of BPA power products. About 35 people attended. Next meeting: November 19 at the Rates Hearing Room in Portland.

Index (click item to move to topic)

KEEPING THE PUBLIC INFORMED

Carolyn Whitney of BPA announced that there will be a public meeting November 25 in Spokane at the Airport Ramada Inn to provide an update on the subscription process. The meeting will begin at 9:30 am. The morning session will report progress on products and services and the BPA-customer business relationship and describe the schedule ahead. The afternoon session will give attendees the opportunity to ask BPA staff and others specific questions about the subscription process and products. Potential subscribers and stake holders should attend. (Notes from the meeting will be posted to the WEB.)

 

IMPLEMENTATION STRAWMAN SENT BACK TO THE DRAWING BOARD

Dick Adams of PNUCC presented the latest approach to implementation, which featured two "open seasons" for BPA and customers to negotiate contracts, with a 7(i) rate case to be held after the first negotiation period. Under this approach, BPA's presubscription sales would continue until bilateral negotiations begin, and if customers' requests for presubscription sales exceed existing ceilings, "it would be appropriate to meet these requests," he explained. Phase I would include definition of products and prices and solicitation workshops in which "BPA holds conversations" with customers about products and services. Phase II would include the two (six to nine-month) negotiation periods for subscription sales, ongoing BPA non-subscription sales, and one or possibly two 7(i) rate cases, Adams said.

Presubscription Jitters. Participants asked what would happen if BPA bumps up against the presubscription sales limits. The idea is that BPA would move forward and make the sales -- they wouldn't just stop, but exactly how we don't know yet, Adams replied. Was it made clear that the "Hungry Horse Reservation" was not included when the Transition Board approved the presubscription sales limits? a utility representative asked. At the last meeting, BPA made it clear that the 220 MW for the Hungry Horse Reservation would not be counted against the 500 MW ceiling, stated consultant Al Wright, but "that blew right by the board," he added. If BPA runs out of presubscription power, it's just a sign that subscription sales will start earlier, commented a customer representative.

The problem is that the Oregon PUC has said that residential exchange loads cannot act on subscription before 1999, so BPA needs to keep some power aside for residential customers, a public interest rep said. That's why the Transition Board made the decision on presubscription sales, he continued, to keep subscription from being opened before everyone has the same chance to sign up. There are "mechanical ways" to deal with "the oversubscription/undersubscription conundrum," such as making early sales contingent on what residential customers decide to do, another public interest representative suggested.

A participant asked about the treatment of stranded costs in the presubscription contracts. The contracts do not give the signer protection from future stranded costs, replied Syd Berwager of BPA. BPA is getting "PF-equivalent" revenues, and if we do enough of these contracts, we can cover our costs, he said. BPA should take full market risk and ensure there are no stranded costs associated with the sales, if we are to have a level playing field, said an IOU representative. If BPA finds there are stranded costs associated with the sales it has made, unlike the IOUs, BPA has a mechanism to spread those costs to everyone in the region, he said.

Sorting Out Subscription Products and Sales. Adams said the approach calls for BPA and its customers to complete discussions on products by June 1998. BPA would announce price targets for "core products" based on projected power revenue requirements for the post-2001 period. BPA would then try to meet or beat the price targets in a 7(i) process, he said. A customer rep asked whether contracts would become effective when signed or not until 2001. Adams replied it is assumed the contracts would start in 2001. What are "core products?" he was asked. Products that BPA has published prices for -- requirements, for example, rather than spinning reserves or storage, Adams said. If a customer wants to negotiate a contract that has both core and non-core products, "would BPA invent a price" for the non-core products? asked an individual. Yes, probably based on the market, said Berwager.

Adams said the draft approach calls for two open-season periods to offer customers opportunities to negotiate with BPA on power contracts and that "the rates established for the contracts negotiated may differ for each period depending on the amount of power subscribed and whether the subscription amounts exceed the size of the Federal Base System (FBS), requiring BPA market purchases." The idea of having two periods, he said, came from the notion of trying not to "force all customers to go through the same hoop." But we also "needed to get closure" so BPA and its customers know they have the power -- that the system is not oversubscribed -- and can go to a rate proceeding, Adams added.

If a customer doesn't sign a contract in the first season, can it sign a contract in the second season, based on the price that comes out of the first rate case? asked a customer rep. Yes, Berwager replied. One reason for having two seasons, said a BPA staffer, was that some customers want to sign up early. I think most public utilities won't sign up early and won't sign replacement contracts that don't kick in for three years, said a public utility rep. They will wait until 1998 or 1999, particularly since the Washington legislature has yet to take up restructuring legislation, he stated.

There's a good chance BPA's price would be below market, resulting in oversubscription, said a participant. Would BPA cut everyone back, bump people "in different tiers," or acquire more power? participants asked. This could mean a more expansive role for BPA than the Comprehensive Review envisioned, a public interest rep commented. A utility rep noted that having different rates for each period and requiring BPA to purchase power is inconsistent with the Review's recommendations. We now see that what the Review recommended is a problem and that there are better ways to deal with oversubscription, said a public interest rep. My objection to the two rate cases is that my clients might have to pay a rate that is not based on what BPA's current resources are, said a public utility rep. It could let BPA "dump additional resources into the rate pool" and we object to that, he added.

Maybe there should only be one open season, suggested a participant. This approach had a window for those who want to sign up early, premised on the idea you could have contracts with offramps, said a BPA staffer. The second window was for eligible customers who didn't participate in the first window, he continued. Now we are hearing it doesn't work to interpose the rate case between the two windows, which "puts us back to square one," he said. The question is, what is the proper sequencing of the rate case with subscription? he asked. If this isn't a mechanism for implementation that will work, what is? he inquired.

The group agreed that the people who drafted this approach would meet again (November 13) and "take another shot at it." Public customers have to come to grips with whether we need a window earlier and how we make sure customers who wait don't lose opportunities, said a customer rep.

 

BPA PRESENTS STANDARD PRODUCTS

Berwager handed out a list of "Standard Power Product Descriptions," noting that previously the products were called "sample," but now BPA is trying to "hone in on what is 'the standard'." This is the standard from which you would start in negotiations with BPA and the standard on which price would be based, he said. Berwager suggested the group review the products for discussion at the next meeting. He recommended Kathy Hoffman at BPA as a contact for questions about the standard products.

Berwager said BPA's current thinking is that the first five products would be subscription products: full service, firm power block, basic declared resources, variable load factor, and renewable resource. The products would have an embedded-cost element, and how much customers can buy at the lowest price cost-based rate in the future would be affected by how much they had bought previously, he explained. The full service and firm power block products would be the "core subscription products," with an embedded-cost posted rate, according to Berwager. The other three products would have subscription rights and embedded costs for the firm energy component, but the flexibility elements of these three products would be priced at the market rate, he said. The rest of the products on the list would not be subscription products and would be priced at market or opportunity cost, Berwager said.

Participants said the "constraints" on the cost-based products and the five-year minimum signup period for some products need further discussion. They wanted to know why BPA wouldn't collect full cost for the renewable product. If we buy a new renewable for 10 years, we would expect the contract purchase would be 10 years to avoid a mismatch, replied a BPA staffer. If customers want to buy a product from BPA that meets the definition of "green" in state legislation, we would negotiate that as part of a subscription package, said a BPA staffer in response to a question. Do you anticipate acquiring the renewable before or after the demand? asked a utility rep. Some resources, such as small hydro, we already have and can meld; for others, we would acquire them after we have a contract to provide the full amount, was the reply.

Some products raise the question of BPA "looking behind the meter" to determine the cause of load loss, said a customer rep. Customers don't want BPA to second-guess why loads are lost and who bears the risk, he added. The mechanics of remarketing and terms of resale also need to specified, another person noted. BPA was asked if it would offer the non-subscription products if the market was below its cost. We have the discretion whether or not to offer them, Berwager replied. Would BPA be obligated to offer the first five products? he was asked. BPA is obligated to provide the first four if the party is requesting requirements service to which it has a statutory right, Berwager said.

Why is the slice of the system product not on the list? asked a utility rep. It is not a product that BPA has decided to offer -- we're still discussing it, replied Berwager. If you wind up with customers getting similar services for various prices, doesn't that change whether they are subscribers or not? asked a customer rep. I see subscription rights in terms of amount (in megawatt-hours), price (tied to embedded costs), and length (minimum duration), said Berwager. The details aren't worked out, but there's a link between the amount of energy you buy and the amount you can buy in the future, he stated.

If a lot of sales to large public utilities are at negotiated rates, it would be a marketing opportunity for BPA to negotiate an option fee also, observed a participant. You could buy at market, but pay an option fee to hang onto your rights -- it would be totally separable from power, suggested a public interest representative.

 

WHAT'S COMING UP NEXT?

  • More Discussion of Products and Implementation. Look for more work on BPA's power products and the latest revised approach to implementing subscription.
     
  • Subscription Contract Principles. BPA handed out new principles and asked for comment on them at the next meeting.
     
  • Grappling with the Price Algorithm. A customer representative distributed a paper on the "umbrella agreement price algorithm" and asked for comments.
     
  • Slice. Possible report on the slice of the system proposal.
     
 
Adjourn
   

Archive of content originally posted or last updated on:  November 13, 1997.
Content originally provided by:  Carolyn Whitney, BPA Power Business Line.
Content currently provided by:  PBL Requirements Marketing - PS.
Page maintained by:  BPA Web Team.
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