Bonneville Power Administration (BPA)
Pacific Northwest Utilities Conference Committee (PNUCC)
Summary of July 2, 1997 MeetingBPA Rates Hearing Room
The Federal Power Subscription Work Group discussed the scope of work for the region's proposed review of the Bonneville Power Administration's costs. Several members of the work group raised issues that need to be addressed as the Public Generating Pool (PGP) fleshes out its "Slice of the System" proposal, and the group asked BPA to prepare "crisp definitions" of the products customers have said they would be interested in purchasing. About 35 people attended. The next meeting is July 23 at the Portland Airport Sheraton.Index (click item to move to topic)
- Revised Schedule
- Questions and Skepticism on the BPA Cost Review
- Dissecting the Slice
- We Need Crisp Definitions
- What's Coming Up Next?
Dick Adams, Executive Director of PNUCC, called the work group's attention to a revised schedule of meetings. The new schedule calls for two Wednesday meetings each month through December. The group agreed with the revisions.
A Northwest Power Planning Council staffer explained that the Council and BPA have put together a plan for reviewing BPA's costs, and he handed out copies of a scope of work and timetable for the review. A management committee, made up of a senior BPA manager, the Council's "Power Four" committee, and four or five outside members, will conduct the cost review. Consultants may also be hired to help with the work. The schedule calls for the management committee to make final recommendations to the BPA Administrator in January 1998.
Consultant Al Wright noted that Todd Maddock of Idaho is the Council's lead person for the review and that Sue Hickey is the lead for BPA. The focus now is on looking for outside experts to participate in the review, he said.
Work group members asked several questions about the review. Customers wanted to know whether the review would address the "threshold question" of what BPA should be doing, as well as consider how BPA could be more efficient in carrying out its current duties. Wright said he thought there could be elements of both questions in the review, but he noted that BPA may not have as much discretion as some other entities to decide what it will and will not do.
Customers also asked about plans to consult with those outside the management committee, and Wright said the management committee would contact customers and others to get input. He noted that many people have said they don't want "a Big Tent" process. A group member expressed concern that experts coming from outside the Northwest would not be knowledgeable about BPA's "complicated system."
There is "a healthy skepticism" in the region that this is only "a PR exercise," according to one DSI representative. The time frame is too short to accomplish anything significant, he said. Wright encouraged the skeptics to express their concerns to the management committee and to help build reasonable expectations for the process.
A PGP representative reported that the "Slice of the System" proposal was a major topic of discussion at that group's recent meeting. There was support for continuing to develop the idea, he said. In addition, he offered some clarification of the proposal. The "slice" would be one item on the menu, not the whole menu, and PGP expects BPA would offer a full requirements product for those who want it, he said. The proposal's proponents said they had begun to talk to BPA about its feasibility and to start to address some of the issues raised at the last work group meeting.
Adams suggested that the work group's discussion focus on issues that PGP and BPA need to consider as they develop more details on how the "slice" could work. Customers' questions included: Wouldn't there be potential for cost shifting? Would a portion of the federal power system be reserved for this type of transaction? What are the assumptions about costs, and what costs would be associated with the "slice"?
A DSI representative said a fundamental question is how the "slice" would work in terms of efficient hydro operations. He suggested the customers who opt for the "slice" would want the ability to control operations with regard to how they use the associated power. Proponents of the proposal responded that the Pacific Northwest Coordination Agreement (PNCA) would still exist. The PGP is not interested in destroying value in the system, a utility representative responded.
A Public Power Council (PPC) representative asked how the "slice" would feed into PNCA and whether those who opt for this product would incur additional charges if they request associated services, such as storage. An investor-owned utility (IOU) representative suggested the PGP proposal raises the question of "the objective function" of the hydro system. The PNCA now maximizes firm energy load carrying capability (FELCC) and that maximizes value, he said. In a competitive system, maximum value depends on individual circumstances -- "one centralized choice does not fit all," he observed.
A public interest representative asked why the slice approach is better than a contract right for services. What would happen if the system is derated? Would this increase the tensions between the power system and other river interests? he asked. We should be looking for ways to defuse or diminish these tensions, he added. One customer representative said he was anxious to see if there is more to the proposal than shielding some customers from certain costs of the system.
We are not far enough along to answer many of the questions, a proponent of the proposal said, and he suggested the work group's discussion continue after the PGP has spent more time talking to BPA. He noted that there was a lot of "can-do attitude" when the PGP representatives met with BPA, and he said that was appreciated.
Wright observed that developing the "slice" product would entail a lot of effort. He suggested that the proponents should be clear that someone wants the product before significant time is invested in refining and developing the proposal. A proponent said PGP is interested in seeing the idea developed, and an IOU representative indicated that private utilities might be interested in such a product.
Paul Norman of BPA said the agency has "serious misgivings" about the proposal, but is approaching the idea constructively and intends to see if it can be shaped into something workable. One of BPA's concerns is how to deal with such a product in a rate case, he explained.
Kathy Hoffman of BPA handed out a compendium of products and services she prepared from lists that members of the work group submitted in the first few meetings. She proposed that the group adopt the glossary of terms attached to the handout so that all participants are using common definitions. BPA has not removed any of the customers' suggestions from the list, she noted.
Hoffman said she wanted the work group's help in getting around any barriers that stand in the way of BPA offering each of the services, and she wanted to know if there is agreement that BPA is on the right track internally with this list of products and services. BPA is aiming to have a final iteration of the list by September, Hoffman explained.
During the ensuing discussion, work group members said they felt they had already defined the products and services they are seeking and that it is now up to BPA to determine whether the agency can provide them. Hoffman indicated it is difficult to define the products without some further clarification from customers. A DSI representative suggested that BPA work with individual customers rather than have more discussions with the work group as a whole. BPA needs to go to the customers who submitted the idea and have them define things, he said. That information could then be brought back to the group, he proposed.
Norman said BPA is sensitive about working with individual customers rather than with the group as a whole. Customers have expressed concerns about "side deals" and bilateral talks, he added.
"Crisp definitions" of products and services need to come from the individuals who want them, others replied. This is complicated and individuals have to address their own needs, a public utility representative stated. He suggested that as BPA talks to customers, it may turn out that products or services that have been given the same label are determined to be separate items. A PPC representative said a very important component of the discussion is for customers to be able to find out what's available on the federal system and in what quantity. For example, how much firm energy, capacity, and storage is there? she queried.
Norman said he felt the group wanted a clearly defined set of products to consider. We need to go away, define the products, and determine if we can offer them, he concluded. That's right, a DSI representative said. Define them and decide if you can provide them; pricing will be another issue, he added. Norman said BPA would have something for the next meeting, but he said he was not certain all of the definition work would be completed that soon.
A group member suggested that BPA consider whether its existing ratemaking process will work in "today's world." He said BPA should analyze whether it needs to redefine its rate process. A DSI representative predicted that BPA would be doing much of its business in the future in face-to-face negotiations with customers. Will customers accept that there are different prices for the same products? an IOU representative asked. The question will become what products will we have "posted" prices for, Norman observed.
Some participants expressed a desire to have a discussion of pricing principles. A DSI representative suggested that a discussion "in the abstract" might not be useful and that BPA should lay out a proposal. He said BPA would need "to close the gap" between cost and market-based prices.
A customer representative suggested that the group continue its discussion of the business relationship proposals, revisiting a paper submitted by the DSIs, as well as the PGP "slice" proposal. Wright suggested that anyone with ideas on the business relationship should have proposals together by the next meeting. Customers will work on business relationship proposals and discuss them July 23.
BPA will contact individual customer representatives to clarify and develop more detailed descriptions of products and services. At the next meeting, BPA will make a progress report on this effort.
Archive of content originally posted or last updated on: July 8, 1997.
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