Subscription WorkGroup (Work in Progress)
 
Handout at April 15, 1998 Meeting
 

BPA PRODUCT DIFFERENTIATION

PURPOSE

As part of its participation in the Subscription Work Group, BPA has developed an approach for pricing the products that it will offer for the post-2001 period, and a proposed application of that approach to the product list developed in subscription. The purpose of this paper is to share and test the approach and its application with customers and other regional parties.

INTRODUCTION

BPA has assembled a list of 16 products that are expected to meet most of the varied needs of its customers for the post-2001 period. Price is an important feature of BPA products. As with all suppliers in the marketplace, how BPA assigns costs and prices for products will influence whether potential customers will want to buy the product and whether BPA can cover its costs, including the cost of risk associated with individual transactions. In addition, unlike most suppliers, BPA must follow specific statutory guidance in setting its prices.

In order to reflect its business interests and statutory guidance in pricing its products, BPA must consider a number of factors in pricing its products:

CATEGORIES OF PRODUCTS

BPA is striving to deliver the benefits of the FCRPS as widely as possible to regional loads in accordance with preference and priority. BPA has proposed that its products would fall into one of three categories depending on the type of service and flexibility desired by the customer.

RISK SHARING WITHIN THE PF RATE

Some customers are looking for the flexibility to make economic choices. To the extent customers are looking for flexibility that is not available under posted-rate products, BPA is planning to reflect the costs of the risks associated with such flexibility in the price of that service. Some risks are assumed to be so minimal that they will be rolled into the PF Rate, such as the risk of small generating resource fluctuations. Other risks, though small in quantity, may be of a larger nature, such as the risk of Retail Access Load Loss for even the smallest customers, or the risk of excessive load growth for customers who are not placing their full load on BPA. The primary reason for a distinction between the Core and Customized Subscription Products is to keep from spreading the costs of those risks to customers who are not causing BPA to incur those risks.

Cost basis for Core Subscription Products
(and for firm energy portion of Customized Subscription Products)

Revenue forecasts for sales, such as Non-Subscription Products, will be credited against BPA's overall Revenue Requirement, before determining the cost of firm energy. BPA expects the great majority of its sales volume and revenues to come from the sale of Core and Customized Subscription Products.

Cost Basis for Negotiated Elements of Customized Subscription Products

The specific price established for any transaction would be negotiated based on the amount of flexibility the customer desired, opportunity costs, the level of business risk being assumed by BPA, and other factors that arise during the negotiations.

 
Return to April 15, 1998 Subscription Workgroup meeting notes
 

Web page posted on May 11, 1998.
Information provided by:  Kathy Hoffman, BPA Power Business Line.