BPA Rates Hearing Room
June 19, 1998 Public Meeting
About 20 people attended the third public meeting on the Slice of the System Proposal. Angela Wykoff welcomed the participants and stated that the purpose of the meeting was to continue the background and education process for new participants, and to continue to clarify the current Public Generating Pool (PGP) Slice proposal. BPA will make assumptions about costs with guidelines from the PGP so the process can continue. Paul Norman talked about issues that are still outstanding for the Subscription process and the Rate Case such as allocations of federal power, Residential Exchange, Cost Recovery/Stranded Costs, Transmission and Power Rate Cases, Fish Costs, the Slice proposal, and other products for partial requirements customers. BPA would like to resolve these issues before a Power Rate Case. BPA's Administrator may make a decision this month about the schedule for Subscription and the Rate Case.
BPA would like to move toward a definition of the Slice proposal that meets the five principles initially outlined for Slice and other products by early August. The definition should be consistent with all other products and should be developed enough to be reflected in the Rate Case. If the proposal meets the principles, the Administrator will make a decision whether to offer a Slice product.
BPA has scheduled additional meetings on the Slice proposal. Times and locations are on the Slice web page. The next meeting will be July 1 at the Portland Airport Sheraton Hotel from 1:30-4:00 p.m. The agenda includes implementation issues such as what kinds of data, hardware, signaling, etc. would be required to implement the proposal. Wykoff suggested that participants may also want to bring their technical people to the meeting.
The meeting scheduled for July 23 will focus on legal issues such as risk sharing, costs, principles, and implications of Slice to non-Slice customers. BPA plans to have a preliminary analysis completed by then. A legal subgroup has been formed and participants are invited to have their legal representatives join that subgroup.
Wykoff reviewed the list of handouts available at the meeting:
- Handout No. 1, BPA's Interpretation of the Public Generating Pool Slice Proposal (PDF, 33 kb), is the updated Slice Worksheet.
- Handout No. 2, Cost Estimate of PGP Proposal (PDF, 12 kb), is an updated budget line items spreadsheet.
- Handout No. 3 is a description of some legal issues (PDF, 58 kb) to consider for the Slice proposal. Some issues may have changed since this was written.
- Handout No. 4, Slice Unresolved Issues and Questions of a Larger Scope (PDF, 19 kb), is a list of large scope issues that is updated periodically.
- Handout No. 5, Definitions (PDF, 69 kb), gives pertinent definitions, from the Northwest Power Act, of renewable resources, sale of power, and public purposes.
- Handout No. 6, Information Provided by BPA to the Slice Purchaser (PDF, 15 kb), was originally from the PGP and describes their information needs for implementing Slice. BPA's responses are underlined in the document.
- Handout No. 7, Slice - Potential Impact on BPA Short Term Marketing (PDF, 70 kb), contains copies of Allen Burns' overhead projections.
B. Mapping Requirements to Slice Percentages
Maureen Flynn (BPA) stated that BPA has more analysis for this issue (see Handout No. 4, Item 8), but will discuss it at a later meeting. Participants noted several issues that need to be discussed: the type of power sale, whether a 5(b) or 5(c) sale; if the Slice could be substituted for residential exchange; whether Slice would reduce the nonfirm available for firming; and impacts of Slice on the non-firm market.
C. Comments on the PGP Proposal
BPA revised the Slice proposal worksheet (Handout No. 1) based on discussion at the June 8 meeting, and checked the changes made with the participants. A summary of the discussion under each section follows. Most comments in this summary were clarifications from those representing the PGP proposal.
The term will depend on a risk assessment of how much knowledge BPA has about fish costs and other risks. All the details are unnecessary. Angus Duncan wondered whether BPA would be left with all the long-term risk if all Slicers had 5-year contracts. Lon Peters (PGP) said that longer-term contracts are intended and that there is the same interest for certainty as with all other products, and to keep the resource in the region.
Cost to Purchasers
Under the "Costs Excluded" bullet, Peters referred to Handout No. 2. He suggested moving Wheeling and Power Marketing to the "Included" column for purposes of analysis because marketing now includes some scheduling and load economic forecasting, it is not much money, and there is not much marketing. No. 10 under "Costs Excluded" was deleted. The question mark after financial reserves was deleted. The customer will not pay for costs of financial reserves because the customer is taking the risks. The Cost Recovery Adjustment on the Power side would not be paid. Shaping is outside of the allocation because the customer is doing its own shaping.
Risks Purchasers Accept
Unforeseen fish and wildlife costs and changes in a biological opinion are assumed to be in. The unforeseen maintenance costs would be included in an annual true-up. Costs of replacements, betterments and additions would be borne by Slice purchasers, including actions such as replacing a turbine with a less efficient turbine that is less harmful to fish. The participants requested a definition of repayment reform and also suggested that the last bullet be removed, and the Slice customers be treated as all other customers would be.
Basis For Payment
The percentage share would be based on revenue requirements less the costs to cover various risks and financial reserves. The second bullet is covered by the annual maintenance true-up. The "could" in the fifth bullet should be changed to "would." Peters opined that the last bullet referred to price differences whether a Slice was purchased by a preference customer or a non-preference customer. The last bullet will be changed to read "Possible adjustment because of statutory rate directives."
The third bullet will be changed to "Excludes resources acquired for specific customers under other agreements." Peters stated that although resource acquisitions for public purposes would not be excluded, the general rule would be that long-term contract commitments for new resources would be excluded from the cost of Slice. The date in the fourth bullet is not necessarily firm.
D. Residential Exchange
With time available before the next presenter the group discussed some issues surrounding the Residential Exchange. An Investor Owned Utility (IOU) customer is interested in using Slice to convert the exchange to a power sale. Which product to buy, the potential of using a 5(b) sale and releasing residential rights, and how to calculate such a sale were identified as issues.
Tom Miller (BPA) stressed that a 5(b) purchase for an IOU is second priority for BPA. BPA would have to do an analysis to determine a Slice product for preference customers first, then a product for IOUs. This is a sequencing issue. Miller thinks it would be different from other products because of preference. BPA would determine if preference customers are taking a Slice product first. The results of the subscription process may also affect what could be allocated to Slice. If Slice has different costs and assumptions, then the process could be more complicated.
A mechanism to see the benefits of a Residential Exchange Slice product flow through to the residential customers was suggested. Some thought the state Public Utility Commissions ensure that the benefits flow through, others were convinced another mechanism would be required. Miller stated that 5(b) purchases do not have the same obligations to flow through benefits as 5(c) purchases. In this case, a statutory obligation would be traded for a contract obligation. BPA is not sure it would work as a 5(b) purchase.
BPA has not thought about publics who might want to be exchangers.
E. Information Needs and Critical Marketing Information
Wykoff introduced Allen Burns to discuss information sharing. BPA has its own view of marketing conditions and has some concerns about the kinds of information that customers might want. Burns described the volatility of the electricity commodity market and showed an example (see Handout No. 7). Many variables drive the market and the market is not the same each year. Some work done at Grand Coulee that required drafting the reservoir and refilling it affected forward-looking prices on the market. Prices rose and fell in a few weeks. How BPA responds to the information it has affects how much revenue BPA will have. Releasing information could affect BPA's revenues if other utilities do not release similar information. This could impact BPA's rates. Peters stated that PGP did not want marketing information.
Gary Zarker (Seattle City Light) was concerned about the information BPA has and how BPA uses it in the market. He wondered if BPA manipulates the market at the expense of some in the Northwest, or in violation of law. He suggested that there is a perception that operators have information before others do. This issue was suggested to be discussed in the Subscription process.
Policy discussions about who is best at distributing public benefits in the region were deferred to another forum.
F. Next Steps
The next public meeting is scheduled for July 1, from 1:30-4:00 p.m. at the Portland Airport Sheraton Hotel. Operation of the System and Implementation Issues are on the agenda.
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