Draft for Discussion Purposes Only
February 17, 1998
Introduction - These subscription principles are a product of collaborative discussions within the Business Relation Subgroup, a subset of the Subscription Work Group, and are intended to guide contract development. The actual bilateral contract negotiations will be determinative of the provisions of a particular transaction between BPA and its customers.
- Contract Types
A customer may choose among the type of power sales contracts (umbrella/subsidiary or commercial) that BPA is offering. BPA will not limit subscription rights based on the type of contract the customer chooses.
- Power Sales
BPA intends to carry out the Comprehensive Review recommendations. BPA also intends to get its 2001-2006 cost structure closely in line with market prices. Thus, BPA anticipates that Subscription will be successful. If Subscription is not successful, BPA may have to pursue other options to recover its costs.
- Contractual Rights to Cost Based Power
A customer will know the price at which it will purchase power from BPA for up to five years, since such price may be either stated in the power purchase contract or established in a published BPA rate. The customer will be free to choose between an embedded cost based published rate or a negotiated price for inclusion in their contract. In responding to a customer interest in a negotiated arrangement, BPA is free to give highest priority to negotiating arrangements which give BPA the highest probability of covering its costs.
Any regional customer purchasing firm power from BPA pursuant to a commercial contract or an umbrella/subsidiary contract for a negotiated period of time will be offered the option of including a provision in the contract which will secure the price at which power may be purchased from BPA in the future.
BPA and any regional firm power customer wishing such a provision will bilaterally negotiate the following:
Customers have the right not to include such a contractual price protection in their BPA power contract. However, without such contractual protection, they may pay a higher cost based price for the purchase of BPA power when their initial contracts expire than customers who have such contractual price protection.
- The mechanism used to contractually determine the price at which power can be purchased from BPA in the future (Note - the mechanism may require a 7(i) rate process.)
- The duration of the price protection, and the quantity of power to which it applies; and
- The price to be paid to BPA for including such a provision in the contract.
- Product Availability
A customer may choose to buy products for which there are published rates, or to negotiate customized products, which may include combinations of one or more products available from BPA.
(Note: Since there has been no resolution of what BPA products should be sold at negotiated prices, and since the option approach to long term price certainty does not rely on the cost versus negotiated distinction, further discussion of pricing is unnecessary and has been deleted.)
- Addressing Load Loss
BPA wants customers who are purchasing under take or pay contracts to have contractual options for dealing with the economic consequences of load loss for which such customers are contractually responsible. BPA intends to make the following choices available to customers for the purpose of dealing with load loss:
The foregoing BPA load loss protection products or approaches will be subject to bilateral negotiations between the customer and BPA.
- The customer may negotiate a load loss protection package with BPA for a price;
- The customer may have BPA remarket the excess power and credit the revenues to its account;
- If purchasing surplus, excess federal power or power under the FPS rate, the customer may elect to resell the excess power on its own;
- Customers purchasing requirements power may negotiate to have the contractual right to convert such purchases to surplus or excess federal power (only in the amount of the load loss) and resell that amount of excess power.
Web page posted on February 26, 1998.
Information provided by: Syd Berwager, BPA, firstname.lastname@example.org.