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BPA update on resolving regional dialogue issues
[BPA letterhead]
February 27, 2004
Dear Customers, Constituents, and Other Regional Stakeholders:
I want to give you an update on Bonneville Power Administration's (BPA's)
plans for resolving the Regional Dialogue issues concerning our power
supply role post-2006. Last fall BPA and the Northwest Power Planning and
Conservation Council (Council) hosted a series of informal discussions
with customers and other regional stakeholders on this topic. The Council
then issued a paper entitled "The Future Role of the Bonneville Power
Administration in Power Supply" and asked for comment. The Council more
recently initiated a series of meetings to help them develop their
recommendations to BPA, which they plan to complete at the end of April
2004. The Council's issue paper, as well as their plans over the next
couple of months to discuss Regional Dialogue issues, can be found on their
website.
In a letter to the Council dated December 9, 2003, Administrator Steve
Wright provided BPA's views in response to the Council issue paper. That
response is available on BPA's Regional
Dialogue website. In late June, BPA will issue a draft policy
statement that is informed by the Council's comments, as well as by
comments received from customers and other stakeholders in the region.
That's a summary of recent progress on the process, but what about
the substance of the Regional Dialogue? Nearly all of BPA's regional
power sales contracts continue through 2011, which BPA intends to honor.
Despite this, BPA has uncertainty of over 3,000 aMW regarding how much
power it will supply at its lowest embedded cost rates for the 2007-2011
period. As stated in our December 9, 2003, letter to the Council, BPA
believes our first priority must be to resolve issues for the 2007-2011
period. Time is getting short to resolve these issues.
As we currently see it, those issues are the following, subject to
change based on input we receive. The set of issues listed below is
consistent with the issues defined by the Council:
- Long-Term Power Obligations: Establish BPA's policy for its
total load obligations at the lowest embedded cost rates. We expect to
propose that these obligations be limited to close to the firm output
of the existing Federal system. This part of the policy would extend
past 2011.
- Tiered Rates: Determine whether BPA should propose a tiered
rates construct to implement the other Regional Dialogue policy
decisions. Specific rate design decisions would be reserved for the
rate case.
- New Publics and Annexed Loads: Determine the conditions under
which newly formed public utilities or IOU loads annexed by public
utilities will be served at the lowest embedded cost rate.
- Conservation and Renewables: Address BPA's general approach
to carrying out its conservation and renewable resource
responsibilities.
- New/Different Products: Establish how BPA should respond to
customer requests to modify, (a) the amounts they are obligated to
purchase under existing contracts from 2007-2011, and/or (b) the type
of product they purchase. This would include requests to increase or
decrease Slice purchases from 2007-2011.
- Cost Controls: Propose mechanisms to provide customers and
others with greater assurance regarding cost management by BPA and its
partners, and more input to cost decisions.
- Service for Expiring Five-Year Contracts: Identify whether
BPA will provide products to public utility customers with contracts
expiring on September 30, 2006, that vary from their existing service,
and whether 2007-2011 service will be offered at the lowest PF rate or
at a different rate established in the next rate case.
- Post-2006 Service to Direct Service Industries (DSI)/New Large
Single Loads: Determine whether BPA will offer Federal power to
DSI loads. If so, determine the amount of power BPA will offer to sell
to DSIs from 2007-2011, and the terms and conditions of such service.
The draft policy statement will also address treatment of new large
single loads, including treatment of former DSI loads that may become
loads of public utilities.
- Residential Exchange: Determine how BPA will implement terms
of existing IOU contracts for 2007-2011, including whether BPA will
provide IOUs power or financial benefits over the remaining term of
the contracts.
We hope that our proposal in June will be informed by strong
recommendations from the Council, customers and other interested parties.
To the extent possible, we strongly prefer that our proposal reflect
regional agreements on these issues, and will continue working closely
with all parties between now and June to that end.
Longer-Term Issues
Resolution of the issues listed above still leaves key long-term
questions unanswered. For instance, what is the long-term role of the
Slice product after current contracts expire in 2011? Also, how much
benefit and in what form will residential customers of investor-owned
utilities receive after current contracts expire in 2011? We have not yet
decided when these longer-term issues will be resolved and captured in new
contracts for the post-2011 period. Again, our priority now is on
resolving the more pressing 2007-2011 issues, though our intention is that
our 2007-2011 decision not overly prejudice the post-2011 direction with
the exception of the first issue. We will discuss the timeline for
resolution of the longer-term issues with our customers, the Council, and
others in the region.
Refining BPA Strategic Objectives
As BPA focuses on the Regional Dialogue issues, we are also refining
our overall Agency Strategic Objectives. Defining clear objectives and
managing rigorously to them was a central theme of BPA's Report to the
Region that was issued in April 2003. These objectives are relevant to
many of the issues that will be addressed in Regional Dialogue. As we hold
Regional Dialogue discussions over the coming months, we will also brief
you on BPA's Strategic Objectives and ask for your feedback.
Regional Dialogue Process and Timeline
After the Council provides us their recommendations, but before we
issue our Regional Dialogue draft policy statement in late June, we plan
to hold informal discussions with interested customers, constituents, the
Council, and others to discuss our proposal. Once the draft policy
statement is issued, a series of public meetings will be scheduled
beginning in July to provide opportunities for everyone to comment
formally on all aspects of the draft policy statement. Informal
discussions on specific issues will also continue. The Administrator
intends to make final policy decisions and sign a record of decision in
the fall of 2004. These policy decisions will guide BPA's post-2006 rate
proposal, potential contract amendments, any new contracts with direct
service industries, the development of post-2006 conservation and
renewable resource programs, and BPA's cost management approach.
Updated information will continue to be posted on BPA's Regional
dialogue website. I strongly encourage your active participation to make
sure that your views are heard and considered. I look forward to
productive regional discussions over the coming months. In the meantime,
if you have any questions on this process, please contact your Account
Executive or Helen Goodwin, Regional Dialogue Project Manager, at
503-230-3129. You can also contact Alex Smith, Vice President of
Requirements Marketing at 503-230-7640, or me at 503-230-5399.
Sincerely,
Paul E. Norman
Senior Vice President
Power Business Line
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