Bonneville Power Administration (BPA)
Pacific Northwest Utilities Conference Committee (PNUCC)
Summary of March 18, 1998 MeetingAirport Sheraton Hotel, Portland, Oregon
BPA staff opened the work group meeting with a brief status report on the slice of the system product, and Council staff presented a proposed plan and schedule for a Transition Board report to Congress. The group hashed over a list of rate case issues and decided to schedule the first of several pre-rate case meetings April 1 and April 8. BPA presented a list of products and a product-pricing methodology. Forty-five people attended. Next meeting: April 15 at the BPA Rates Hearing Room.Index (click item to move to topic)
- Whither Goes the Slice
- Tallying Up Progress
- Rate Case Preparations
- More on Products and Product Pricing
- A Homework Assignment
Angela Wykoff of BPA reported on discussions between BPA and the Public Generating Pool (PGP) Administrative Committee regarding the slice of the system product. She said the PGP wanted a written statement outlining BPA's concerns with the slice, and BPA is in the process of responding. The slice proposal affects many parts of the agency, and it is taking a great amount of effort to pull all the information together, Wykoff explained. She said BPA would respond with a letter that is likely to be sent and widely distributed by the middle of next week. (Editor's note: this letter was mailed on March 18th.) On "the principle basis," we are not in disagreement with the PGP, but translating the principles into a working product is more difficult, Wykoff stated. She said the statement would explain the agency's concerns, as well as implications of the slice for non-slice customers and various aspects of BPA's operations. [See web page version of the March 18, 1998 Letter from BPA to Seattle City Light and other PGP members.]
Council staffer Wally Gibson offered a draft Transition Board work plan for preparing the Northwest chapter of national restructuring legislation. He indicated that House Congressional staff has a draft of restructuring issues out for comment and that reports from Washington, D.C., suggest restructuring legislation could be brought to the floor of the House by the end of April.
The work plan includes preparing a progress report that would go to Congress on April 9 and developing a legislative package that would be sent at the end of June, according to Gibson. We're proposing to include subscription in the April 9 report, but it may not be necessary to address subscription in the legislative package, he said. The Congressional staff made little mention of subscription in its list of issues, focusing instead on FERC-equivalent treatment for BPA and a stranded cost mechanism, Gibson said. Consultant Al Wright said the Transition Board did not think Congress would act on legislation in April, but wanted to respond to requests from the Northwest delegation. The board thought July 1 was soon enough for a legislative package, he added.
A customer representative asked if the board intended to have consensus on the draft legislation. What if there is none? He inquired. There were accusations that the Transition Board was not doing anything but mulling over the issues, Wright responded. This is a response to that -- the board has put a schedule together for preparing a submission to Congress, he said.
I'm concerned about the progress report, stated a customer representative. "Whom are we calling 'we'?" he asked. It would be appropriate to include issues that have been before the board, such as stranded costs, but river governance is not a topic on which I've had a chance to participate, he said. I would not want someone reflecting "my views" on these issues in a progress report, he stated.
"This plan seems deficient," commented a customer representative. It doesn't include an opportunity for parties to talk about what goes into the package, he stated. It is better for everyone to get together and talk than for the board to take "a Henry Kissinger" approach and speak to all the parties separately, he said. There are linkages between the issues, such as FERC-equivalent regulation and stranded costs, and subscription and the residential exchange, that can't be avoided in putting together a package, he pointed out.
The group asked how staff would prepare the progress report. Gibson said he would ask the subscription group to provide its own write-up for the report. We are not going to describe the positions of all parties and label them, Wright said. We'll describe the issues that have been identified, how far apart people are, along with whether we expect closure on each issue by July, he explained. The board has not talked about a public review of the progress report, but if you want, the board could provide some, Wright offered. One industry representative suggested there should be more consultation on the progress report than the board seems to be proposing.
The Subscription Work Group needs to spend time helping the board figure out what subscription issues to raise, an IOU representative said. He listed several issues he thinks Congress should be aware of: the residential exchange and the need for a statutory change "to swap the exchange for a purchase right"; if there are to be long-term renewable subscriptions; the "existing statutory bumping rights" of preference customers need to be addressed; and "the 7(i) mess."
What sources will you use for information on river governance and fish and wildlife (F&W) funding? a public power representative asked. The governors have said that those issues fall under the Three Sovereigns process, Wright responded.
"This could be the road to the Transition Board's destruction," a participant observed. There is not enough consensus to report on, he added. The board has been at this for quite a while, Wright said. "Is it time to test whether the board is a socially beneficial entity?" he asked. A public interest representative suggested the board is testing itself. At the last meeting, the board said let's try and push ourselves to come up with some recommendations, he reported. "And as soon as they do, we'll all be back in D.C. disavowing them," a customer rep said.
"I doubt those four folks will throw their governors in harm's way," Wright responded. You can help by participating in putting something together by July, he added. There has been talk of a legislative proposal to require federal power marketing agencies (PMAs) to sell at market price, Wright said. You may want a defensive subscription piece that says the Northwest will assume some risk in exchange for cost-based prices, he suggested. A tribal participant observed that the work group does have consensus on some issues, particularly in the context of the national perspective on restructuring. She suggested the subscription report address the broad perspective, rather than the details.
Dick Adams of PNUCC offered a list of messages that could be included in the progress report and asked for comments. The group discussed which of the listed issues had been resolved. A customer rep cautioned that the write-up should not reflect "closure" on cost versus market-based pricing. Another participant suggested adding BPA's presubscription activities to the list. The report needs to point out which issues the group seems unable to resolve without legislation, he said.
I'd look for a simpler approach, an industry rep said. Mention the basic goals and what the group is doing in "an optimistic tone," with the message that progress is being made, he suggested. If you try to get into detail, it will be difficult for the group to agree, he advised. Another participant suggested the report point out how residential exchange customers will be treated, but others argued that the issue is unresolved.
If the newspaper accounts are correct, the delegation is under pressure to do something or "someone else will do it for you," a customer representative said. It is important to have something in the report that shows progress, she advised. The group voiced support for keeping the report to two pages, without a lot of detail on issues. Gibson said he would send drafts out by e-mail for the group's review.
Diane Cherry of BPA provided a schedule for pre-rate case activities, including a series of informal meetings in April and May followed by rate case workshops in the summer. She also handed out a list of issues to be addressed in a rate case. Cherry said the meetings and workshops would help BPA develop its initial rate proposal by September. The first meeting is "a brainstorming session" on the residential exchange set for April 1, she said. Some participants indicated the discussion should take place in the subscription work group, but Cherry said she did not want to delay the schedule. The participants agreed to go ahead with a meeting on the exchange on April 1 at 1 p.m.
Are you still planning on separate power and transmission rate cases? a participant asked. Cherry said yes, adding that the issues of cost-shifting and BPA conformance with the Federal Power Act have been raised.
The assumption has been that BPA could lay out a subscription and rate process that implements the Regional Review recommendations, an IOU rep pointed out. BPA has said it could implement the subscription recommendations without legislation, and now BPA needs to lay out "step by step" how to do this, he said. Cherry said BPA cannot ignore the rate directives in the Northwest Power Act. If we have settlements on the issues, we can do whatever you need, a BPA attorney responded. If people are willing to agree, there is nothing we can't do; if they can't, we have to follow the law, he added. You need a workshop on "how to torture the rate directives to make them fit," the IOU rep said. The assumption has been that all subscribers will be in the same position to subscribe, and I want to know how that will happen, he concluded.
We need to see if we all want the same objectives and then decide how "to wend our way through the legal maze" to accomplish them, another customer rep said. What if we talk about the existing rate schedule and see what needs to be changed to accommodate future transactions -- to determine which provisions are adequate and which are not, a participant suggested. The group decided to meet April 8 at 9 a.m. to focus on this issue in detail.
Kathy Hoffman of BPA presented a list of products divided according to subscription versus non-subscription, and cost-based versus negotiated prices. She said BPA is working on a partial service product, which is being contemplated as part of the core subscription offering, with a cost-based, posted rate. The products listed in the negotiated-price category would be tailored to customers and pricing would conform to the surplus power price-cap requirements, she pointed out.
What is the policy or legal basis for differentiating between the cost and the negotiated-rate products? a preference customer rep asked. We need to know what principle is being used, he said. These are products that are over and above what we need to meet firm requirements load, a BPA attorney said.
Why do certain products not have a cost basis? BPA was asked again. What is the rationale for putting products into one group or the other? Non-subscription products with a negotiated price fall under Section 5(f) of the Northwest Power Act, and subscription products with a cost-based price are defined by Sections 5(b)(c) and (d), a BPA attorney replied. Non-subscription products respond to what customers said they were looking for in the subscription exercise, and what they were looking for went beyond requirements service, he added. Is this a done deal? a customer rep asked. "This is our current thinking," BPA staff responded.
An industry rep asked about products labeled as cost-based, with a negotiated price. This indicates flexibility in the rate schedule, a BPA attorney responded. There may be a cost-based component, but also room for negotiation, he said. One participant asked about the renewable resource product. Is this a requirements product? How does it differ from the renewable resource product that BPA says it is required by statute to provide? he asked. The costs of acquiring renewable resources are part of BPA's overall revenue requirement, a BPA staffer responded. We were asked to provide a green product, and it is a component of the rate structure, she said.
Cherry explained a diagram illustrating how the cost-based rates fit with the negotiated products in meeting BPA's overall revenue requirement. If you have a large number of revenue credits from sales of negotiated products; it will lower the subscription rates; if not, the subscription rates will be higher, a customer observed. What if you set the rates too low -- how do you deal with this uncertainty? he asked. We address that issue in every rate case when we forecast secondary sales, a BPA staffer responded. But this time the list of non-subscription products is so much larger, he pointed out. We still think the bulk of our revenues will come from the firm energy portion of the products, the staffer replied. We don't expect to take each product and figure out the amount of revenue it will provide, she said.
Let's remember where this list of products came from, Syd Berwager of BPA said. We are now identifying where each product fits -- is it a subscription product or not, he pointed out.
Maureen Flynn of BPA described the objectives of the partial service product as follows: to assure adequate attention is given to offering requirements service to both generating and non-generating customers; to design a partial service subscription product that will not increase the agency's business risk beyond that associated with a full service product; and to enable generating customers to dedicate resources to follow or help follow their own load.
Flynn described partial service as "a net requirements product that comes in two flavors" -- net actual load or planned, in which the purchase amount is designated. A customer would specify its resource demand by heavy and light load hours per month for the term of the rate, Flynn explained. A participant questioned whether a customer would be able to make that projection for a five-year period. For BPA to live with a five-year commitment on a posted rate, there has to be a reciprocal commitment from the customer, Flynn said.
An industry rep asked whether the offering would replace the "simple partial" and "moderate partial" load products on the current list. Flynn said that was the goal. I'd urge you not to do that, another customer rep said. I'm not remotely interested in the standard product, but I am interested in these partial offerings, he said. The product list should be an array of options, he added.
If a customer wants BPA to serve its net load but buys some product from another resource provider, would this fall under partial service? a customer rep asked. Yes, Flynn said. Would this be offered only for a five-year term? asked another participant. There would be a posted rate for a five-year term and that would apply to customers who fix, for the contract period, the amount bought from the other provider, a BPA staffer replied.
If we were to offer a partial service product that allows a customer to delay a resource decision, BPA would see more business risk, Flynn stated. You want a resource decision that is coterminous with the rate commitment, so if someone wants to make changes in the resource decision each year, offer a one-year contract, a customer rep suggested. If you get a year's notice on a resource, your risk is next to nothing, he stated. You could indicate that the five-year commitment is preferred, but you will consider other options, he advised.
BPA said it would provide a statement of the principles it used to categorize products as cost-based or negotiated rates. A customer asked for the statement to be sent out ahead of the next meeting so participants could be prepared to discuss it.
Adams asked the group to give some thought to what issues remain to be dealt with before "we can declare victory." Our goal is to be done in the next few months, he said, adding that participants should contact either him or Syd with suggestions for what it will take to wrap up the subscription work.
Archive of content originally posted or last updated on: March 23, 1998.
Content originally provided by: Syd Berwager, BPA Power Business Line.
Content currently provided by: PBL Requirements Marketing - PS.
Page maintained by: BPA Web Team.