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Federal Power Marketing
Alternatives
BY
Investor Owned Utilities
Regional Review
Power Marketing Working Group
April 23, 1996
Givens
- BPA's customers have choices and will secure the lowest cost resources for consumers
- Legislatively separate BPA transmission
- Establish FERC review and oversight of BPA transmission the same as FERC regulation of IOU transmission
Principles
- Retain the "Value" of the Federal Base System ("FBS+") in the Region
- FBS+ will be coordinated to maximize power benefits after consideration of non-power constraints
- Allocations will be made on a one-time basis
- Allocations shall be a simple percentage ("slice of cake") of the FBS+
- Purchases may be sold or remarketed
- Provide for enhanced public purposes including:
- cost-effective conservation
- renewable development
- protection/restoration of fish & wildlife
- avoid adverse impacts on rural & exchanging customers
- Ownership of the FBS+ shall remain unchanged with COE, BOR & WPPSS
- Risks and rewards must be aligned
- No increased risk to taxpayers & bondholders
- No future power resource acquisitions or long term purchases should be added to the FBS+
- Clarify management authority, responsibility and accountability
- Restrict market power by limiting a single entity to <10% control of FBS+ resources
ALLOCATION MODEL PHASE 1 - PUBLIC PREFERENCE & DSI ALLOCATION
- Existing regional preference utilities, DSIs & Federal Agencies
- Allocations based on annual historic firm purchases from BPA as a percentage of the annual firm FBS+ energy capability
- Simple percentage of the output of the FBS+ ("slice of cake")
Current Surplus & Deficit
ALLOCATION MODEL PHASE 1 - PUBLIC PREFERENCE & DSI ALLOCATION
- Purchase price based on costs
- Scheduled repayment of Federal debt including WPPSS debt service
- Actual annual operations and maintenance
- Capital contributions for replacements and additions
- Purchase of power from FBS+ facilities on a slice of cake basis
- Allocation or power can be resold by purchasers
Debt Costs of the FBS
Debt Costs of the FBS chartALLOCATION MODEL PHASE 2 - REGIONAL PREFERENCE
Phase 2 Allocation to all regional utilities based on requests for power up to total historical loads reduced by their Phase 1 eligible loads
- If Phase 2 is oversubscribed there will be a pro rata allocation
- Phase 2 purchasers would purchase under the same terms & at the same costs as Phase 1
ALLOCATION MODEL AUCTION OF REMAINING FBS+
- Any remaining FBS+ is auctioned through a competitive bid
- Eligible entities:
- utilities - public and private
- direct service industries,
- wholesale power marketers
- Bidders must meet minimum financial reqmts
- Bids are for a "slice of cake" of the FBS+
- Asset purchases that can be resold
ALLOCATION MODEL AUCTION OF REMAINING FBS+
- Bidders will purchase a "slice of cake" & pay O&M and capital contributions for upgrades like other owners
- Proceeds in excess of costs will be distributed through
a fund to:
- achieve public purposes such as conservation, renewables, and low income energy assistance
- the Region's four states in proportion to population
AUCTION MODEL SMALL RURAL UTILITIES
- Each small rural regional utility is guaranteed the right to purchase a % of the FBS+
- Percentage based on annual historic firm megawatt hour purchases from BPA
- Rural price established up front, e.g. average bid price; favorable average bid price; lowest winning bid price; etc.
- May purchase an additional share of the FBS+ by bidding
AUCTION MODEL BID PRICE PURCHASES
- Eligible entities:
- utilities - public and private
- direct service industries,
- wholesale power marketers
- Bidders must meet minimum financial reqmts
- Individual parties control no more than 10%
- Purchase price based on bids
- Federal Government receives the sum of the winning bids
AUCTION MODEL BID PRICE PURCHASES
Proceeds in excess of costs will be used to repay previous losses including interest and remaining funds shall be distributed through a fund to:
- achieve public purposes such as conservation, renewables, and low income energy assistance
- to the Region's four states in proportion to population
- Bid can be structured to limit risk to treasury and bondholders
Governance
- Purchasers form an "Owners Committee" (OC)
- OC will direct management and staff
- OC will review and approve planned upgrades & maintenance program
- OC will vote on major financial decisions and establish operational guidelines
- Decisions to upgrade power generation facilities will be made by the OC
Current Governance Structure
Current Governance Structure chart
Proposed Governance Structure
Proposed Governance Structure chart
Oc's Scheduling & Operating Functions
- Hydro system coordination
- Meteorology
- Prescheduling
- Real time operations and scheduling
- Outage scheduling
- Information management
- Communication
- Contract administration & Administrative
Public Purpose Goals
- Ensure provision of low cost, reliable electricity to all customers in an environmentally responsible manner
- Restructuring BPA must address public purposes:
- cost-effective conservation
- renewable resource development
- protection/restoration of fish and wildlife
- avoid adverse impacts on rural & exchanging customers
Conservation Principles
- Energy efficiency has a long term societal value
- Competition has lowered marginal costs making less conservation cost-effective
- ESCOs are competing with others to provide valuable energy services
- Utilities are not the only providers of conservation
- Delivery of energy efficiency needs to be insured in transition to competitive markets
- The approach must be market neutral
- Funding & delivery mechanism must apply equally to all market participants
- Target for region wide energy efficiency is market failures & market transformation
- The approach should be a transition to competitive markets and must sunset
Conservation Delivery Approach
- Market failures & market transformation
- systems benefit charge
- new not-for-profit entity to direct efficiency investments
- funds distributed through competitive bid to ESCOs, utilities, vendors or agencies to transform markets and avoid market failures
- charge based on customer meters
- charge is transitional and sunsets after 10 years but can be renewed if substantial market failure exist
Oregon Conservation Working Group
- Work in progress proposal for addressing market failures and needed market transformation
- System benefits charge on meters:
- non-demand meters = $0.75 per month
- demand meters < 1MWa = $2.60 per month
- greater than 1MWa load = $500 per month
- Estimated funds in Oregon of $20 million/year - $200 million total
Conservation Delivery Approach
Energy efficiency acquisition and customer service
- Stimulate competitive market in energy
services
- Encourage ESCOs to compete to provide energy services
- Rely on energy service charges to recover efficiency investments
Principles for Renewables
- Honor existing commitments for renewable projects and continue to build capability for renewables to respond to the market
- Costs of renewable acquisitions must be an obligation of the generators that own and market their output
- Transmission system should not be used to spread renewable costs to others
Renewable Proposals
Encourage renewable development through:
- Tax credits at federal and state levels
- Specific tax exemptions (e.g. Washington sales tax)
- Streamlined low cost siting requirements
- Alternatives to promote renewables
- encourage green pricing option at wholesale (BPA to Salem)
- encourage green pricing at retail (local utility to customer)
Fish & Wildlife Principles
- Regional Governing Board develops coordinated river system plan
- Federal dam operators implement plan & assure F&W obligations are met
- Power financial obligations capped consistent with scientific requirements
OTHER ALTERNATIVE RIVER REGULATORY REQUIREMENTS
- Corp/Bureau/NMFS (current situation)
- Establish a "FERC type" set of license requirements similar to non-Federal dams & rely on FERC to resolve disputes
- Establish a new single Federal Entity to balance multi-purpose uses
Rural & Exchange Customers
- Competition will lower cost of energy to rural customers, offsetting potential T&D increases
- Lower voltage facilities may be transferred to the customers providing local control & access
- Market will not threaten "universal service"
- Smooth or limit price impacts during transition
- Benefits of federal power should be shared with all the region's electric customers
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Last modified: April 30, 1996
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