BPA Rates Hearing Room
October 13, 1998 Public Meeting
About 30 people attended the public meeting on the Slice of the System Proposal. Kristi Wallis (Facilitator) welcomed the participants. This is the last public meeting scheduled for the Slice Proposal. Part of the agenda for the meeting is to talk about next steps, and identify who might want to be involved in further discussions. BPA will review its proposal to date. The group will then categorize issues to be resolved. BPA's challenge is to have a basic proposal for the Rate Case. Other issues can be resolved in bilateral negotiations.
BPA's Record of Decision will include more definition of a Slice product, but will not include a detailed proposal such as the one being discussed at this meeting. BPA would like all participants to submit any comments they have on general, technical, policy or other concerns by the October 23 deadline. BPA will consider the comments it receives, then develop a final Record of Decision.
Handouts available at the meeting:
- Handout No. 1, Draft BPA Slice Proposal, the draft work-in-progress of BPA's Slice proposal. (PDF, 56 kb).
[Note: This link is to the October 16th version of the document that shows revisions (in red) from the October 13th Slice public meeting.]
- Handout No. 2, Typical Slice Requirements/Resources, a graph used to illustrate typical requirements and resource changes over a year. (PDF, 14 kb).
B. BPA's Slice Proposal
Angela Wykoff (BPA) stated that BPA reviewed the parts of the PGP proposal and considered each part in relation to a risk profile, contract provisions and price. BPA then picked some of the parts to form the BPA Slice proposal. This is what BPA is referring to as the Basic Slice Product. (See Handout No. 1.) The Basic Slice Product will be priced in the Rate Case, then if customers want different provisions than the Basic Slice Product offers, they can negotiate with their Account Executives.
The Basic Slice Product has these components (see Handout No. 1 for more detail):
- The product will be scheduled only.
- BPA may buy back monthly or hourly output in excess of a purchaser's net firm load requirements.
- There will be a testing period before implementation.
- The term will be 10 years.
- Customers purchasing the Slice product will pay short-term costs for relieving inventory constraints to firm non-firm or other actions described in the Subscription proposal.
- Customers would pay costs of implementation.
- Customers would pay or receive benefits from any cost shifts.
- BPA will not provide data that is proprietary.
Wykoff reviewed the major sections of the proposal and the revisions made since the last public meeting (see Handout No. 1). Wykoff also referred participants to Handout No. 2, which shows a graph of typical requirements and resources for a Slice product. Participants discussed the components as Wykoff reviewed each one.
BPA revised the proposal to allow the Slice to be scheduled by customers, but not to allow a dynamic signal. Phil Mesa (BPA) explained that more work had to be done to determine how the Slice would work if a dynamic signal is used. The Power Business Line would have to work with the Transmission Business Line about some issues; and issues about computer systems, hardware, software and telecommunications would have to be resolved. Algorithms to determine system capabilities (max-min generation, sustained peaking capability, storage accounts, etc.) would need to be written. Each Slice participant may have to develop a new computer system. Exceedances and errors must be addressed. These and other issues need to be resolved. The costs associated with developing a dynamic signaling capability would be most likely software, hardware and staff time. Participants suggested that the draft proposal include language about allowing dynamic signaling if worked out bilaterally. They also suggested that the storage account and technology available today may take care of some issues. Others cautioned that the costs should be directly associated with Slice, and not include costs of actions that BPA has to take to upgrade their system anyway or costs that BPA will incur for other products. Customer staff time could also be used to defer some costs.
BPA has revised the proposal so that BPA may contractually establish a mechanism to buy back the monthly or hourly output and capabilities in excess of the purchaser's net firm load requirements if and when necessary to assure service to BPA's other statutory or contractual commitments in the Pacific Northwest. Maureen Flynn (BPA) stated that other BPA products are tailored to avoid needing these mechanisms, but BPA needs this provision to offer Slice. Wykoff said that BPA is assuming that the situation would not occur frequently, and BPA would develop instances when the mechanism would trigger. BPA is also looking at a net load agreement at the beginning of the contract similar to Subscription. The time frame of the net load agreement has not been determined. Participants would like BPA to define the conditions when a buy back right would be available and if it would be after BPA tries to fulfill its obligations other ways. Wallis stated that the details of how it would be done on a real-time basis need to be worked out, and that there are other ways such as financial transactions to buy back. Schedule cuts are not the only mechanism.
Kevin O'Meara (PPC) asked if any pull back of Slice would be secondary to the Direct Service Industries' 1000 MW. Wykoff stated that the DSI issue is not meant to detract from the Slice product, but there must be more policy level discussion about this issue. She suggested that participants include any concerns they have about this issue in their comments.
BPA has revised the proposal to include a testing period before Day 1 of the contract so that all mechanisms are in place before the contract starts. The test would most likely be a virtual test, followed by an actual test. This test would be prior to 2001. The test would not preclude a Slice offer. If the test identifies a "fatal flaw" to the Slice product, then the customer would have other products still available.
Remaining issues include determining the point in time when the "snapshot" of the system will take place, buy back conditions, and replacement costs. The snapshot will likely take place after Subscription.
BPA is proposing a 10-year minimum term for the Slice product. BPA is open to bilaterally negotiating other arrangements and conditions that may allow purchases for a shorter duration, without increasing risks of revenue recovery. A 10-year minimum will balance costs and risks. The difference between a 5 and 10-year contract is the need for a 10-year planning basis for dealing with costs such as potential fish costs.
Lyn Williams (PGE) suggested that since the industry is changing, the product should include some provision to accommodate major industry changes in the next few years, and that this should be considered to be part of the risk.
Eligibility to Purchase
The BPA Slice Product is only for qualified customers for their Pacific Northwest net firm load requirements. It will be offered only during the Subscription period. The issue of whether it can be purchased to allow for replacement of Residential Exchange needs to be discussed further. Williams stated that this product does not have the disadvantage of residential load and she would like more discussion.
Wykoff noted that mapping issues are still being discussed within the broad framework of Subscription. Dennis Parrish (Seattle) stated that this product is more an energy product than a capability product. Lon Peters (PGP) stated that the mapping should reflect that Slice does not have a capacity component, that Slice is not the same as the capacity used in other products. Flynn stated that some mapping methods are available such as monthly peaking capability. How to plan, calculate in advance and measure after the fact is still an issue.
Another remaining issue is how purchasers need to demonstrate that they will have the resources to cover deficiencies between their loads and Slice. Peters asked if this would be any different from other products? Tom Miller (BPA) stated that the statutes require customers to declare resources. Resources can be based on shared capability. Mapping is one component of this question. BPA needs to understand the integration of other products and resources. BPA has not defined what would relieve BPA of its obligation to serve. The contract will have some mechanism. Parrish was concerned that this would mean regional load/resource planning. Dick Arkills (Pend Oreille PUD) asked if declaring resources would reduce the right to buy. Miller stated that in the months of declared resources this would be the case. Wallis suggested that these questions would be answered in the sequencing of the mapping. Wykoff asked participants to think about a block product as a proxy for mapping. Could the entitlement for a block product be translated into a percentage for a Slice product? BPA is looking for consistent entitlement calculations. Peters suggested more clarity on whether the Slice is associated with PF1 and 5(b) rights.
The Basic Slice Product does not include dynamic signaling. Remaining issues include the kind of down payment needed to negotiate dynamic signaling, and what Slice purchasers can use the Slice for, especially that portion that exceeds requirements. Miller explained that there may be portions in excess of requirements and the question is whether those portions can be resold and how this might affect BPA's risk. Wallis said this is an issue that needs more discussion. There are also many questions about costs for dynamic signaling, when costs would be identified and paid, what percentage customers would pay, if dynamic signaling is phased in, if customers can do some of the work, and how the accounting will be done.
The Basic Slice Product cannot be purchased in combination with other core Subscription products if that combination results either in new BPA risks or costs of service, or shifts risks or costs from one product to another. The product can be purchased in combination with annual firm blocks. Some customers would like to have access to a Slice product in combination with Actual Partial Service. BPA is investigating if this can be done. There are some complex issues yet to be resolved. There may be overlapping risks if customers want this combination. Jonah Tsui (PRM) said he did not understand the overlapping risk if a customer must declare a new 5(b)(1) resource and must declare it as flat or the shape of load. Wykoff said that BPA is looking into this question and was anticipating a flat block. BPA is open to considering a shaped block if the risk to BPA is unchanged.
Costs to Purchasers
BPA revised the proposal to include Slice purchasers paying a portion of costs of short-term power purchases (for relieving the inventory constraint and for enhancing Slice capabilities). Short-term purchases need to be defined. This will be part of the implementation process. Wallis said that in earlier discussions participants suggested that there be some mechanism that could not be gamed by any party and that a sliding scale might be an option.
Wykoff said that there was some concern about using an annual versus a more frequent true-up. Some are concerned about BPA being a banker between true-ups. Participants were concerned about certain costs such as the Low Density Discount, the conservation discount, the residential exchange, double-counting of costs or discounts, and triggering 7(b)(2). Barney Keep (BPA) said that these costs and discounts are being worked on, and BPA is considering how to translate the rate design for a Slice product with these issues in mind. Wykoff said BPA risk management staff are also looking at planned net revenues for risk. Staff are also looking at how credits (WNP-3, 4(h)(10)(c), FCCF) would be applied to purchasers, and if purchasers must demonstrate that they can cover an unexpected major expense over the course of the contract.
Risks and Cost Shifts (Replaces Risks Purchaser's Accept)
There is still an open question on risk costs. BPA needs to analyze the risks for cost adjustment purposes.
Basis for Payment
BPA needs a cost shift analysis. BPA is working on how to do this.
BPA revised the proposal to include FCRPS resources at the time of the snapshot. When the snapshot is taken is still an issue. Participants would like more definition of system improvements, replacements and other terms used. Wykoff suggested that contract negotiations can define these terms and participants have said they would cover these costs at prior meetings. BPA will likely decide which acquisitions would be included by the end of the Rate Case, when Subscription arrangements are finalized.
Transmission, Generation Reserves
No changes were made.
Scheduling and Accounting
Dynamic scheduling could be allowed through bilateral negotiations only. The time frame for the storage true-up and concerns about where the Slice purchaser would take delivery remain as issues.
Forecast and Data Needs
BPA would provide a 50-year study. Tsui would like to see historical information be made available. BPA needs to see Slice purchasers' pre-schedule. Knitter (Grant) would like to see more numerical than descriptive information, and would like a data exchange after the fact.
There is no new information on this issue. Wallis will try to set up a conference call or meeting soon to discuss it. Miller noted that a draft Dispute Resolution document for Subscription would be mailed soon.
C. Next Steps
Wykoff said that she would like participants to let her know if BPA has missed any big issues. BPA would like comments on the Initial Proposal by October 23. Wykoff will put the revised draft document on the web site for their use. The following issues need to be resolved:
- BPA Buy Back
- When the snapshot is taken
- Resource reserve issues
- Implementation issues
- Operational and technical issues.
BPA will put together a complete list of issues by category that need to be resolved. Customers will focus on their comments to BPA between now and October 23. After October 23, they will try to work on the snapshot issue. Some common issues could be handled in joint negotiations after the Record of Decision and Rate Case.
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