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MEMORANDUM

TO: Followers of the Comprehensive Review

SUBJECT: Synopsis of House Resources Hearing on BPA and the Comprehensive Energy Review

On Tuesday, May 21st, the House Resources Committee's Subcommittee on Water and Power Resources held a hearing on the "Bonneville Power Administration Operations and the Status of the Comprehensive Review of the Northwest Energy System." The subcommittee's chairman, Congressman John Doolittle (R-CA), presided. Other subcommittee members in attendance were Congressman Wes Cooley (R-OR), Congressman Peter DeFazio (D-OR), Congressman Doc Hastings (R-WA), Congressman Calvin Dooley (D-CA), and Congresswoman Helen

Chenoweth (R-ID). Chairman Doolittle gave an opening statement and asked one or two questions and then turned the gavel over to Congressman Cooley, who chaired the majority of the hearing. Congressman Dooley asked no questions, and stayed for only a short time.

Witnesses included Jack Robertson, Deputy Chief Executive Officer of the Bonneville Power Administration, Alvin Alexanderson, Senior Vice President/General Counsel for Portland General Electric, K.C. Golden, Energy Policy Consultant, Richard J. Brown, General Manager of Ravalli County Electric Cooperative, and John Carr, Executive Director of the Direct Services Industries. The witnesses' written testimony, submitted for the official hearing record, is available. Please give me a call if you would like copies.

Several major issue areas were addressed during the hearing. The followingis a brief description of the discussion.

Comprehensive Review: Every witness had positive things to say about the Comprehensive Review. It was generally thought to be progressing well, and substantive recommendations are expected to result from the process. The subcommittee members appeared to be aware of the purpose of the Comprehensive Review and seemed supportive of the region's efforts to define the future direction of the region's energy system. Both John Carr and K.C. Golden said they hoped Congress would not take any action until the Comprehensive Review was concluded. Al Alexanderson said that Congress should quickly enact legislation once the Comprehensive Review finishes its work

Transmission: Several subcommittee members were aware of the FERC's "mega" NOPR (Notice of Proposed Rulemaking) and the prospect of open access to transmission and an enhanced competitive market. The Members also were aware of the desire by many to separate Bonneville's generation and transmission businesses, and that Bonneville's transmission rates had increased quite significantly over the last few years. The witnesses, including Jack Robertson, endorsed the need to separate Bonneville's transmission and generation activities. He said that, absent legislation, Bonneville would separate its transmission and generation functions, but keep them under the same roof. Robertson also indicated that Bonneville would conform to the direction contained in FERC's NOPR.

Is Bonneville Taking Actions Today that Will Preclude Future Options?: There was widespread concern among subcommittee members that Bonneville was currently engaged in activities that would nullify future recommendations by the Comprehensive Review and future actions by Congress. In particular, this discussion focused on whether Bonneville is signing long-term contracts that will commit it to deliver electricity beyond the year 2001. Robertson tried to assure the subcommittee that Bonneville was not signing contracts for periods longer than five years. (Although the timing of some of those five year contracts may result in contract periods extending beyond 2001.)

Bonneville's Energy Services Business Line: There was unanimous distress among the subcommittee members concerning Bonneville's proposal to enter the energy services business. They thought it was inappropriate for Bonneville to compete with private industry. Jack Robertson tried to defend the initiative by saying that the total amount of energy services business in the region is approximately $200 million per year, and that Bonneville was only seeking to participate in about 10 percent ($20 million) of that market. He also said that certain sectors of the energy services market, such as rural areas, were not being pursued by private industry, and that Bonneville would not necessarily be competing with anyone in those areas. Finally, Robertson said that Bonneville was trying to stimulate the transformation of the market for conservation and that its proposal was intended to further the goals of the Northwest Power Act, but at less cost to the ratepayers. Robertson also said that Bonneville will submit its energy services proposal to the Comprehensive Review for its examination.

Public Purposes: There was significant discussion of how the region will achieve its public purposes objectives (conservation, renewables, rural and low income assistance) in a competitive marketplace. Congressman DeFazio was especially interested in this issue. While all the witnesses said that they supported maintaining public purposes, there were differing opinions on how to do it. John Carr, for example, said that the region should try to protect the Northwest's values through competitive markets. If that fails, then alternatives should be pursued. K.C. Golden said that the region needs to rethink Bonneville's role in a competitive environment, and to articulate clearly its public purpose missions. There also was discussion over how public purposes would be financed. Two possibilities, a transmission charge and a distribution charge, were discussed. Congressman DeFazio was adamant that he would oppose a system benefits charge (which I interpreted as being a distribution charge) because it wasnothing more than a tax on electricity. DeFazio also said that a system benefits charge may be inequitable because some users who have historically benefited from the system could probably avoid paying it.

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