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Regional Review

Comprehensive Energy Review
Steering Committee

Thursday, September 19, 1996

Sheraton Airport, Portland, Oregon

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THE COMPREHENSIVE ENERGY REVIEW steering committee agreed to release for public review and comment a draft proposal for restructuring the Northwest energy system. All committee members were present. The audience was about 40-50 people.


Next Meeting: October 17 in Portland.


In This Issue:


OPENING REMARKS:

My fondest hope, said steering committee chair Chuck Collins, is that we have an "incredibly boring" meeting, and that as the fires of disagreement and controversy start to spread, we remember where we ended up at our last meeting. It's rather remarkable, he stated. Compromise is often praised in the abstract, but rarely accomplished in the concrete, Collins observed. It takes wisdom and courage, and this interim step has been a real credit to all of you, he said. Today we will compare the draft report with the decisions we made last time, Collins continued. Our objective is to get a document out to the region, he added.

Fine-tuning the Federal Power Marketing Proposal

John Saven explained changes in the federal power marketing section of the report, pointing out that the committee's discussions about the allocation system at the last meeting had not come to a precise conclusion. Meetings he held subsequently, with IOU, DSI, public utility reps and others, Saven said, resulted in two thoughts: 1) If we take a package to Washington, D.C. that talks a long-term solution, the region should demonstrate a long-term commitment. 2) Before we can "come to closure" on Phase 2 of the subscription process with respect to the IOUS and DSIs, there needs to be a commitment about what the publics would be willing to do. The IOUs and DSIS "weren't enchanted" with all the publics going short, and all the IOUs and DSIs going long, Saven stated.

The draft now contains an assumption that in Phase 1, public utilities with loads of 50 average megawatts (aMW) or more would, as a class, commit to long-term subscriptions of at least 60 percent of their total load being placed on BPA, Saven explained. For public utilities with loads under 50 aMW, there should be at least a 40 percent long-term commitment of their total subscription in Phase 1, he said. IOU and DSI loads in Phase 2 would have a 60 percent threshold, Saven added.

Each group would subscribe first for long-term contracts and then for short-term contracts. With the threshold commitments from the publics, the IOUS, and the DSIs, the hope is there would be about 5,500 aMW in long-term subscriptions, Saven said. That seemed to make sense, but I want to point out "there's no magic" in the 50 aMW figure used for the public utility subscriptions, he noted.

I also added language on the issue of what happens if a new public agency is formed, Saven stated. I thought that a new agency would have some standing to get power if power is available, but the people I met with did not agree on this, and I want you to know that, he said.

The Over-50 Crowd vs. the Under-50 Crowd

Rachel Shimshak asked about the idea of treating utilities over 50 aMW as a group. Saven explained the proposal is to treat them as a pool, and if you have one large utility taking 100 percent, and another that wants 40 percent, as long as it adds up to 60 percent in long-term commitments, it's okay. If it doesn't, some group members would have to decide to switch some short-term to long-term, so the group could meet the threshold. The idea, which he admitted is "evolving," stems from the need for a long-term commitment and the need for some flexibility between large and small utilities, Saven said.

I don't understand the difference between those under 50 and those over, but I don't think it's significant, said Gary Zarker, adding, let's see what comments we get on it. The point is to get some long-term discipline, and this furthers that more explicitly than what we had before, stated Zarker.

Bob Gannon questioned the use of the term "contractual entitlements" in the Phase 1 subscription process. He suggested using historic purchases instead. What did you mean by contractual entitlements? asked Brett Wilcox. Some public utilities are taking their historic blocks of power; others have rights to certain amounts of power, but are not taking that much, and they want to be able to go to the higher level, explained Saven.

We included in our BPA contract the right to expand our ability to take power up to 100 MW, noted Zarker. We would like our allocation to be based on the full amount we could take under that contract, he said. The term "entitlement" in BPA contracts captures this, and it encompasses factors like the weather, Zarker said, adding, I'm not comfortable using load averages as a basis for allocations.

It would be interesting to do an analysis to see if a five-year average is very different from a "contractual entitlement," said Walt Pollock. I thought we were talking about something physically measurable, said Wilcox. People have "hundreds of arguments" about what their entitlement is, he added. Al Alexanderson wondered how the language would apply to DSIs that took a lot of power in later years, but not in the first three years. It could be a big difference, and we ought to know what it is, he said.

Obviously, we need to collect some data, said Collins. He suggested the language be left as is, and that BPA do some analysis. It may be a big difference or not -- let's find out, Collins said.

I like what you've done, K.C. Golden told Saven, but he asked, is there something holding this together more than the collective perception we need to come up with a long-term commitment? What happens if we don't get to the proportional level of long-term commitment we are shooting for? Golden inquired.

If the utilities and the DSIs want to hedge, they are taking a significant risk by waiting until the phase following the long-term subscriptions, replied Saven. "I think people will be judicious about trying to play a long-short game here," he added. If we don't meet the level, it goes to Phase 5 and it's wide open, said Collins.

Wilcox questioned the portion of Phase 2 that would take place following subscriptions by the DSIs and IOU residential and small farm customers, in which "other regional wholesale entities" would be allowed to subscribe up to the limits of their historical load. That seems like a different, separate phase -- I'd make it Phase 3, he said. Who would fit in that category? asked Bill Drummond. Any loads of IOUs beyond residential and small farms, replied Saven.

This paragraph gives me concern -- this is a new group of customers that comes in and gets access in Phase 2 before other publics, said Zarker. Before we bring in new IOU customers, we have to talk about new public loads as well. This should move to after new public loads, he suggested. We need to pose more explicit questions to the public about the priority between IOUs and DSIs and equity between other commercial/industrial customers and the DSIs, Sharon Nelson stated.

We could take this paragraph out of Phase 2, Saven said. After Phases 3 and 4 and prior to getting to Phase 5, we could deal with those customers and new public customers, he suggested. So in Phase 3, you open up for long-term subscriptions only, and Phase 4 is for short-term subscriptions only, Saven clarified.

Let's delete the paragraph in Phase 2, said Wilcox. It's covered in Phases 3 and 4 implicitly, he added. We need to rework some language, said Saven, suggesting that Phases 3 and 4 of the subscription process state that they are limited to Northwest loads and the native loads of subscribers.

I'm concerned about unfettered resale even within the region -- one small entity could buy it all up, said Pollock. Say Jim's [Davis] utility has sufficient resources to serve his native load; is he prohibited from Phase 3 participation? asked Drummond. I don't see it that way; if he wants BPA resources to serve his native load, okay; if he has his own resources and wants to do something else with them, that's okay too, replied Saven.

Gannon questioned limiting IOUs to their small farm and residential customers in Phases 3 and 4. This suggests, responded Saven, that if you have residential and small farm load, there's a priority in the pecking order for you, and if you have other loads, the order in which you stand in line is different. The committee agreed that Phases 3 and 4 should be limited to regional loads and that new publics would have priority before IOUs and DSIs in those phases.

The problem is that the rationale for the subscription process is not laid out, said Roy Hemmingway. We need to explain, said Wilcox, that Phases 1 and 2 are intended to carry out the allocation scheme in the Regional Act, and that Phases 3, 4, and 5 are to open it up with a priority to long-term purchasers to get the system subscribed. We'll provide more of a rationale in the report, Collins said.

Should we "red flag" things for public comment -- topics where we've had discussions, but haven't come to general agreement? asked Gannon. We can add those to the questions, said Collins. We owe that to the public, added Nelson.

Ken Canon questioned language, especially in the public purposes section of the report, that said the "steering committee recommends." What the committee is recommending is that this draft go out for public comment, he clarified. The committee agreed with Drummond's suggestion to substitute "proposes" for "recommends" throughout the report.

The committee accepted Golden's suggestion to put the following disclaimer at the front of the report:

"The steering committee members are issuing this draft report in order to solicit and stimulate public comment. All recommendations are preliminary. Neither the governors nor the steering committee members have endorsed this draft or any of its parts in advance of hearing and fully considering the views of the region's citizens."

Jason Eisdorfer brought up the language in Phase 2 that says IOU and small farm customers could be represented by IOUs or non-utility aggregators that serve Northwest residential or small farm loads, as certified by state regulators. He suggested "or by the distribution company," instead of non-utility aggregators. Wilcox recommended "other entities that serve Northwest loads," and the committee agreed to that. This is an unsolved problem, commented Alexanderson. We agreed we were trying to get benefits to these customers, and we shouldn't preclude creating a monetary benefit from purchase and resale that would go to them, he said. If resale produces a monetary benefit, it's the benefit we are trying to get to the customers, not the power, Alexanderson said.

The Active BPA or the Passive BPA?

Pollock suggested rewording the report's introductory sentences on "Bonneville in the Competitive Market." Hemmingway objected to the language changes, saying "I want BPA to be a pricetaker, not a market maker." I have a political and economic concern about Walt's language, he said. BPA could be very aggressive or passive; I think we are better off with BPA passive, stated Hemmingway. He added, I wouldn't object to asking the question: How should BPA sell power that is sold at market prices?

The draft proposal changes BPA's role in a major way, observed Pollock. It's hard for many to accept that and adjust to the new role for BPA; I'm trying to make it as easy as possible, he said.

If we send a report to Congress saying BPA has an active role in the markets, I think we are "sending a bomb to Congress, and it's going to explode," declared Hemmingway. "Our report will be dead-on-arrival," he added. Hemmingway suggested the report ask: What constraints, if any, may be needed on BPA marketing of its products in competitive markets?

After BPA goes through five rounds of subscription and has firm power left, what should they do with it? That's the core question, said Canon. We're talking about more than firm power, noted Shimshak. The draft should explain to "outsiders" what the situation is with respect to firm and nonfirm power, suggested Wilcox. It should say the steering committee is concerned about BPA market power and influence in terms of both kilowatt-hours and dollars and ask for comments, he said. It could say that the committee thinks BPA's role in proprietary marketing should be as limited as possible, Wilcox added. We haven't debated that, and I'd like to before coming to a conclusion on it, said Pollock.

The market value of BPA is zero right now; we couldn't sell it for a dollar, said Hemmingway. The question is, do you want to constrain the federal government in some way in their market activity? He offered the U.S. Forest Service as an example, saying they "don't have a lot of vice presidents for sales," Hemmingway said. Congress wants us to answer the role of BPA, he reiterated.

Pollock and Hemmingway eventually compromised on this language: "The proposal would have the effect of disposing of much if not all of the firm power available from BPA on a long or intermediate-term basis. The fact that most of BPA's power would be subscribed at cost would limit BPA's market role. Any remaining firm power, and other power products would be sold at FERC-regulated competitive prices, where competitive markets exist. This approach is intended to provide a means for BPA to meet its financial obligations, but BPA's role in competitive markets must be further defined to respond to concerns about a governmental role as a participant in these markets."

The Hot Topic of Resale

Pollock offered three cautions: 1) Since resale has been historically tied to preference, there could be a problem if the ability to resell is unlimited. 2) An unlimited ability to resell makes it difficult to argue for retention of benefits in the region. 3) Ultimately, the question of WPPSS has to be part of the discussion of resale.

I thought we agreed to allow resale as long as the benefits stayed in the region, said Collins. I thought it was resale in the event of loss of load, said Golden.

Does anyone oppose reselling of power for loss of load? asked Collins. No one did. Are there any other circumstances we can agree on? he asked.

Eisdorfer mentioned a distinction between those who would use resale for load and those who would use it to make a profit. He suggested there could be circumstances in which you lose load on purpose, adding, I could use the DSIs as an example.

Either the power or the benefit has to stay in the region, said Alexanderson. So if I make a sale and flow the benefits to my members, they may be better off than getting the power, suggested Drummond. Preference is based on use of power, not on monetary benefits, cautioned Pollock.

The question is "whether chicanery breaks out," Collins stated. Can we say, "resale for loss of load or to maximize benefits to the end-use consumer in the region?" Collins asked. What does it mean to "monetarily keep the benefit in the region?" How do we make sure the benefit tracks into rates here and not into some corporation in Texas? asked Zarker.

If a buyer has an allocation early on, has no customers in the Northwest, and remarkets the power anywhere, with no ratemaking mechanism or accountability to Northwest customers, that's the problem we're trying to prevent, said Alexanderson. The IOUs already have all their power for residential customers -- if they bought an allocation, they could turn it into a billing credit to make it valuable to someone else, he added.

Golden suggested the question: Should subscribers be able to resell the power for which they have subscribed, and if so, under what circumstances? Zarker suggested: How can resale be done in such a way as to benefit the region? Alexanderson suggested: Should other resales be allowed if benefits are retained for regional consumers?

I thought we said options could not be resold, said Zarker. At his suggestion, the committee agreed to separate the report sections on "resale of power" and "resale of options." Applegate suggested asking the question: If there is a significant undersubscription after Phase 5, what will be the fallback? We can add that, said Collins, but "it's a new regional review." The committee agreed to include the question.

In the section on the residential exchange, Alexanderson suggested changing "the regional review acknowledges that" residential and small farm consumers of exchanging IOUs will be adversely impacted by the reduction of exchange benefits, to "the regional review is concerned that," and he suggested asking for comment on ways to ensure residential and small farm loads receive an equitable share of the benefits of the federal base system.

Gannon suggested that the report not propose a 1 mill-per-kwh option fee, but instead ask whether such a fee adequately balances risks and rewards to subscribers and the Treasury. Saven said he was not comfortable with the report not placing a value on an option. I thought we'd agreed to put it out for comment, he said.

Saven suggested language be added calling on BPA to take actions "that push the envelope of cost reductions." The committee agreed to add two questions proposed by Nelson:

The draft power market subscription recommendation places the residential and small farm customers of IOUs in the same priority class as the DSIs. Should these two customer groups be accorded the same priority of access to federal power?

The commercial and industrial customers of IOUs have, under the draft proposal, a lower access priority to federal power than the DSIs. Should the DSIs have earlier access to federal power than other industrial or commercial customers?

This prompted Wilcox to offer the following question, which the committee also accepted:

The DSIs have a lower priority than industrial and commercial customers of publicly owned utilities. Is this appropriate given that most DSIs are located within or adjacent to publicly owned utilities, or should they be allowed to be served by those public utilities, with a higher priority?

Treatment of Fish Cost Risk

Rick Applegate recommended getting public comment on revisiting the "fish cap" in BPA's rates under certain future market conditions. He suggested a question to the effect, should there be a re-opener of the allocation of fish budget obligations among customers and the Treasury in the event market power prices rise, resulting in higher costs to Treasury and greater relative benefit to customers? If we say we will re-open this, it means no one is going to subscribe, commented Wilcox.

We would be asking the question, should there be a threshold? said Collins. The issue is, according to Saven, if the window of exposure for financial liability beyond today is limited to 15 percent, is that a sufficient inducement for thinking about a long-term commitment to BPA versus other options?

Does anyone object to inviting comment on re-opening the fish cap in the case of a very profitable system, and asking what the threshold should be? inquired Collins. No one did. Wilcox and Applegate agreed to revise the section of the report dealing with the issue.

The committee agreed to several language changes for the fish cost section, including adding that customer exposure may be $225 million to $250 million above the current level. Applegate suggested asking: Is the authority and composition of the proposed Customer Advisory Committee correct? Is its authority adequately distinguished from authorities reserved to other river uses, such as fish and wildlife management?

Public Purposes: The Power Plan and the Davis "Avalanche"

The committee deleted the first question in this section regarding efforts to sustain the region's commitment to conservation, renewables, and low-income energy services beyond what the market will accomplish. Eisdorfer suggested adding the question: Can a non-uniform, non-mandatory system benefits charge pass the test of not being anti-competitive?

Jim Davis suggested saying the goal for "residents of the Northwest who must live on limited incomes" is to ensure "electricity prices are as low as possible and that energy efficiency and other customer services, such as level payment mechanisms, remain in place until supplemented by other approaches."

Jim's language adds something, said Chuck Hedemark. It is a local control issue, he added. The goal is to reflect that poor people will suffer in a more competitive market, stated Zarker. It isn't a local control issue, he said. Collins said Davis and Nelson, who suggested different wording, would "huddle" on language for this.

Eisdorfer suggested adding these questions: Is it reasonable to assume utilities will voluntarily continue low-income energy assistance funding in the face of intense competition? Is it reasonable to assume that state governments will begin funding these programs when they currently contribute nothing? Is it reasonable to assume federal energy assistance funding levels will remain constant?

It bothers me to ask rhetorical questions for the purposes of an argument, said Alexanderson. I've got a problem with the tone of those, commented Collins. Testing the assumptions is worth doing, offered Golden. Hedemark said the review needs to make sure there is a coordinated regional plan in place to make sure that what needs to happen, happens. We could ask, is state funding appropriate? said Zarker. We said each state would resolve this and that we would approach state legislatures on it, he added. Collins suggested Eisdorfer rework the questions, and later Eisdorfer suggested: How should low-income mechanisms be funded in light of increasing competition?

Davis said he had three pages of proposed revisions to the public purposes section. I tried to make the preamble more "neutral." I wanted to change the tone because the current tone, and specifically the use of the "wrapping paper" of the power plan, is an "invitation to disaster," he continued.

I have problems with some of the language in the section too, Shimshak said, but I tried to use restraint in proposing new language. I'm not sure how to deal with his proposed changes, she said, in response to a question from Collins.

One issue Jim raises is that the report refers to numbers in the unadopted Northwest Power Planning Council power plan, noted Collins. My concern is the numbers in that plan are suspect; BPA is also concerned about the credibility of the numbers, said Davis.

Why hasn't the Council acted on the plan? asked Collins. We're waiting for the outcome of the regional review, replied John Etchart.

It's a drafter's choice issue, said Wilcox. That's why we added the disclaimer on the front end, added Shimshak.

I'm not here to make life miserable, but these are important issues, said Davis. We've got an "avalanche proposal" here, stated Collins. I like a lot of Jim's language, but we'll be here three hours debating it, said Hemmingway.

I'm uncomfortable with blessing the Council plan without a full range of discussion, commented Drummond. The problem is, we used the plan as a reference, but we didn't endorse it, said Collins.

We could send staff back to redraft the section with my proposals, suggested Davis. I don't think we can accept long rewrites at this time, said Zarker. I've got some too, but if we all do it, we're not going to get there, he stated.

Let's leave the language as is, but say that the plan has not been adopted and that there are areas of disagreement surrounding the numbers, suggested Applegate. Such a disclaimer would say the review hasn't reviewed or endorsed the plan, said Collins. That doesn't get me where I want to go, responded Davis. "It was clearly a mistake to plan a one-day meeting," remarked Collins.

We should give staff the discretion to write it and to take or leave Davis' recommendations, suggested Wilcox. It's a hard burden on them, he added. Collins agreed, and staff said they would work with Davis on it.

The committee then considered and acted on some of Davis' suggested changes; for example, language was deleted that said the Regional Technical Forum would set regional goals.

Drummond questioned the language on existing and new renewable resource projects, noting that the geothermal projects are not in BPA rates. There'll be "raging testimony" on this, predicted Collins. The committee did not take Drummond's suggestion to add "cost-effective" to the existing and new renewables projects discussion. "It's a red herring," said Shimshak.

Saven suggested deleting "Renewable resource market transformation activities should focus initially on the development of solar, wind, and geothermal renewable resources." We should add "hydro" or take the sentence out -- it's too prescriptive, he said. The committee deleted it and assented when Shimshak recommended asking questions about what resources should be included as renewables.

Competition: Cut Out the Cheerleading and the Negativity

I wasn't happy with this section, said Eisdorfer. He suggested adding a sentence to the "goal" language stating concern that the benefits of a competitive market will flow unevenly to different classes of customers and that some small consumers may even suffer harm. The committee approved adding, at Eisdorfer's urging, a sentence stating concern that a utility with both an unregulated competitive business and regulated distribution business would shift costs away from the competitive portion and onto captive customers.

The committee discussed language in the report that said legal divestiture of energy services at a utility is not required, provided regulatory safeguards are in place. Opinions differed on exactly what the committee had concluded. Eisdorfer asked to add a question about the adequacy of regulatory oversight if legal divestiture is not required. The committee agreed to that and his other suggestions for questions.

At Nelson's suggestion, one of the competition questions was changed to: Is open access for all retail consumers to competitive electricity markets the best means to get the benefits of electricity deregulation to all customer classes; would you suggest some other approach?

Zarker asked staff to expunge the "cheerleading and unsupported assertions" in the early part of the section. This does not capture the complexity of getting to the outcome by 2001, he added. The question I have is, does anyone care about things happening at that pace? asked Zarker. Do we really know what it takes to get there? I'm not comfortable that this is doable, he said. Collins recommended asking, "given the safeguards that the document suggests are important, is the pace recommended feasible?"

The staff should use language that is hortatory, not mandatory or prescriptive, as much as possible, said Nelson. The committee agreed to several changes suggested by Golden, including adding that it is recognized that putting such a competitive market in place will require "ongoing market maintenance procedures."

Drummond suggested that requirements about information that distribution utilities must provide on bills were too extensive. "It's insane," Collins agreed, but he said, we adopted this language. We may amend it after the comment period, he added.

Canon said he was concerned about the "negative tone" in the competition section, especially in contrast to other parts of the report. He asked staff to remove the negative tone from the text at the same time they are carrying out Zarker's suggestion to remove any "cheerleading" comments.

Transmission Gets Only A Few Changes

Among the few changes made, Applegate asked for "non-transmission costs" to be changed to "stranded debt, fish and wildlife protection and enhancement investment costs, or other costs." The change is so we don't "reach the conclusion that fish is a non-transmission cost -- I'm not ready to say that's so," he indicated.

Gannon asked for deletion of "revenue requirement" in the sentence that said: "legislation should also subject BPA's transmission revenue requirement to FERC regulation that is equivalent to FERC regulation of IOUs." Golden added the question: What composition of the IGO governing board would best ensure independent operation of the transmission system? Zarker added: Can we operate with one IGO, or can we successfully operate with multiple IGOs?

GAO Study Roils the Waters (Again)

Zarker said that the section of the report dealing with "Future Role of a Four-State Regional Body" needed redrafting because it deals with governance in one piece, while the committee had discussed it as two separate matters. We had a recommendation about river governance, he added.

The letter I wrote to the governors on river governance and the language on a General Accounting Office (GAO) study of FBS nonpower cost allocations should have been in this report, said Hemmingway. I thought the letter to the governors and the letter to the Congressional delegation were things we would take comment on, said Applegate. I've drafted language that would provide context if we are going to put them in the report, he added.

I understand that the committee took action on this, and I said at the time that I did not support the recommendation for a study of subsidies, said Saven. When we discussed the issue, there was a body of information not in front of us, he continued. GAO has just published an audit, which it did for Congressman George Miller, of Bureau of Reclamation projects in 17 western states, Saven said. The study goes through September 1994, and looked at 133 projects.

The study said, according to Saven, that irrigators are generally current on repayment of obligations. It noted that 8,700 contracts are involved, and that the contracts are predicated on the irrigators' ability to pay, which is set at the beginning of the contract. It doesn't give the government unilateral authority to change the contracts, he noted.

GAO has just looked at the issue for the western U.S., and if people think the principal beneficiaries are not paying enough, it isn't in the ballpark of what we have the ability to change, Saven stated. I want to ask the committee what it hopes to get out of doing this, he continued. "This is a real sharp stick," and there will be a strong reaction to this, Saven said. It will put me in the position of being in an adversarial position with respect to work this committee has done, he added.

We all have issues in the review that are "sticks" to our constituencies, said Applegate. John's memo on the GAO study is a comment, but it is not an argument for leaving something out of our report, he added. The GAO report looked at repayment; it doesn't cover the other activities I brought up to this committee, said Applegate. There are other issues that are "hot buttons," he continued; for example, my constituency feels that way about the idea of continuing the fish cap in the long term, Applegate said.

Here's the difficulty, said Collins. John is asking us to suspend a rule we've used all day; that is, that we don't change anything substantive. He has some pretty interesting information, Collins allowed. I'd like to give some more thought to this issue so that we around the table at least have an understanding of where this may take us, said Pollock. We should take some time "before uncorking this," he added.

The only way we can take more time is to put it in the draft, said Hemmingway. We had an "extraordinarily acrimonious debate" on this subject, and I proposed a compromise to end that -- we are "perilously close" to re-opening it, he warned.

We did try to compromise, Nelson agreed. We could request it of GAO in the context of the report and take public comment on it, she said. We could clearly identify it as a discussion proposal -- does that help? asked Collins.

No, the purpose of the review is to see whether there is an opportunity to come to consensus about some "building blocks," replied Saven. A number of folks I represent will be pressed to deal with the balance of this package, he continued. The question becomes, what do you get out of doing this, and are we going down the wrong path? There are contracts in place, and if you want more dollars, you'll have to break those contracts. We have information from the GAO study we didn't have before, Saven stated. I'm making the best case I can to keep this group together, he said.

The tribes and the fish advocates agreed we should be much more aggressive in what we are doing, said Applegate. If we pull this off the table, we'll make consensus impossible, he warned. A compromise has been arrived at for the purpose of public comment, and we should stick with that, Applegate said.

When I proposed that GAO do it, I didn't know it had been done, said Davis. The GAO studied Reclamation, not Corps projects -- it hasn't been done, Hemmingway stated.

Are we going to take off the table a position we reached laboriously by compromise -- one that you, John, were clear that you couldn't support, said Collins. There's going to be testimony about it. The bell's been rung; how do you unring it? he asked.

If there is a broader issue about the nature of these projects, and if the governors want a process to deal with the projects themselves, so be it, said Saven. Rick has raised these issues for months, Collins noted. The proposed letter may have a tone that presumes something is wrong, but I don't know that it does, he added. How many thought we were going to send a letter to the governors on this? Collins asked. Some raised their hands.

If the intention is to do something on this issue, I'd rather have it in the report than send a letter, said Saven. It sounds like you have agreement to put it in the report and get comment, Mike Kreidler said.

I was at a rural utilities service hearing recently, and I can tell you that rural interests are seething about a lot of things, including what we are doing in this review, stated Nelson. But I don't see that as a reason to pull back -- we are trying to "get these issues teed up in the right venues so they can be decided by the right people," she added. Asking for comment will help us know what's politically feasible -- the more information, the better, said Nelson.

I feel torn, but I don't see how we can pull it out of this draft, said Collins, adding, "we'll probably pay hell for it." Etchart recommended the report say the steering committee "may ask" the governors to ask the Congressional delegation to request a study.

The cost allocation issue is "big and broad," and we can't deal with it by December, commented Pollock. The question is whether the matter should be referred to the governors, said Collins.

In our discussions, the GAO was cited as an example of an independent investigation, Todd Maddock pointed out. I agree with what John [Etchart] said, he added. It's not necessary to identify GAO as the only way to deal with this, Maddock said.

The GAO is the best body, responded Hemmingway. It has better access and a reputation for independence, and it would be a study we don't have to pay for, he said. Let's change the language to say the "committee may request," suggested Collins. Would you accept this? he asked. I accept, said Applegate, but he said, there's been too frequent efforts at this table to try to make this issue go away. We shouldn't shirk from looking at all the things that affect the power system, he added.

Are we going to try to balance this study by having a characterization of the benefits as well as the costs? asked Davis. Otherwise, we're only looking at half of the equation, he said.

We'll get lots of testimony that will address that, said Collins. Do you object to looking at the benefits? Drummond asked Applegate. There are many outcomes to a study of benefits, Applegate replied. For example, he said, if the benefits are large, it may raise the question of why are you subsidizing these activities. Drummond suggested the report indicate that a study of benefits, as well as costs, may be requested.

Nelson recapped the language as, the steering committee may request the Northwest governors to consider requesting the Congressional delegation to request the GAO to investigate the cost allocations and benefits of the nonpower purposes of FBS projects.

Coming Up Next: Public Hearings and New Meeting Dates

Shimshak recommended that all committee members attend at least one or two of the upcoming public hearings. Etchart noted that the governors' reps will try to attend all the meetings.

How can we get this done by December 5, given how today went? Collins asked the committee. Staff suggested the committee meet on both November 14 and 15. I don't see us doing it in two days, said Collins. It's not uncommon for staff to whittle down the non-contested issues while the hearing process is going on, noted Nelson. December 5 is the only date all four governors can get together, Hemmingway pointed out.

The committee agreed to keep the two October meeting dates (Oct. 17 and Oct. 31) as planned, and to hold November 14 and 15, as well as November 21 and 22, for steering committee work. Staffer Jim Middaugh noted that the October 17 meeting is one of the public hearing dates. You can invite the particular folks that you want to hear from, he suggested.

Shimshak asked if, once today's changes are incorporated, the draft report would be sent out directly without further committee review. The answer was yes. Staff said the draft would go out around the end of the next week.

IN CLOSING:

Collins noted that this was Walt Pollock's final steering committee meeting and thanked him for his participation. We'll miss your "sage advice, good humor, and expertise," Collins said.

Meeting Adjourned

Steering Committee Members: Chair Chuck Collins, Colsper West Corporation; Al Alexanderson, Portland General Electric; Rick Applegate, Trout Unlimited; Ken Canon, Industrial Customers of Northwest Utilities; Jim Davis, Douglas County (WA) PUD; Bill Drummond, Western Montana Electric Generation and Transmission Cooperative; Jason Eisdorfer, Citizen's Utility Board of Oregon; John Etchart, Montana Governor's Representative; Bob Gannon, Montana Power; K.C. Golden, energy consultant; Charles Hedemark, Intermountain Gas; Roy Hemmingway, Oregon Governor's Representative; Mike Kreidler, Washington Governor's Representative; Todd Maddock, Idaho Governor's Representative; Sharon Nelson, Washington Utilities & Transportation Commission; Walt Pollock, Bonneville Power Administration; John Saven, Northwest Requirements Utilities; Rachel Shimshak, Renewable Northwest Project; Brett Wilcox, Northwest Aluminum Company; Gary Zarker, Seattle City Light.

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