Download the full text version of the February 15 meeting.
Download the full text version of the February 15 meeting.THE COMPREHENSIVE ENERGY REVIEW STEERING COMMITTEE spent most of the day considering templates for an ideal power system. All members except Todd Maddock were present. The audience ranged from about 25-50 people.
Next Meeting: February 29 in Portland. Governors' representatives will report on public meetings; steering committee subgroups will work on templates.
Steering committee chair Chuck Collins said that after consultants Jim Litchfield and Bill Marcus present their templates for an ideal power system, the committee would break into three subgroups to work on developing their own templates. How often each subgroup
meets or holds conference calls between now and March 14 is up to you, Collins stated. The perfect product, he added, would be "each group with a consensus on a filled-out template." Collins then announced the subgroup members. Group 1: Al Alexanderson, Ken Canon, Rachel Shimshak, Gary Zarker, John Etchart, and Rick Applegate. Group 2: Sharon Nelson, Chuck Hedemark, K.C. Golden, Roy Hemmingway, Bill Drummond, Mike Kreidler, and Walt Pollock. Group 3: Bob Gannon, Jim Davis, Brett Wilcox, Jason Eisdorfer, John Saven, and Todd Maddock.
Kyle Simpson, associate deputy secretary for energy programs for the U.S. Department of Energy, commended the four governors for undertaking the comprehensive review and selecting such a high- quality steering committee. He noted that the administration and DOE threw their support behind this effort in September 1995. At the time, DOE was trying to explain to people in Washington, D.C. about changes coming that would affect operation of the Northwest electricity system. We wanted to encourage people in the region to take on this effort, said Simpson, and make certain that benefits accrue to all the people in the region.
DOE Deputy Secretary Charles Curtis has designated Simpson as federal liaison to the review. Simpson said his role is to ensure a two-way exchange of information between the region and Washington, D.C. It's a way to keep the review from having to deal with a dozen different people in D.C. and to facilitate direct communication -- it's a funnel going back to the administration, Simpson explained.
Simpson introduced Dan Adamson, DOE's special assistant for the power marketing administrations, and indicated that Adamson would be working with the review. Other parts of the administration with a particular interest in the review, according to Simpson, are the President's Council on Environmental Quality, the Office of Management and Budget, Treasury, the Department of Commerce, and the Environmental Protection Agency. We'll also be talking with Congress as we go down the road, he noted.
The administration thinks it is appropriate for the region to deal with these issues and bring opinions back to Washington on the role of the federal government and its generation and transmission assets, he said. We think the review should take the strong federal interest into account, Simpson stated. It is essential that the system continue to serve public purposes, including an economical and reliable power supply, fish and wildlife funding, energy efficiency and renewables technology, he said. We think the costs and liabilities of the federal system, including WPPSS, should continue to be borne by the beneficiaries of the system, Simpson added.
Simpson referenced testimony that Curtis delivered to a Congressional subcommittee February 1. (The Curtis testimony is available in Document Access.) Among other things, Curtis' comments concerned refining the boundaries of state and federal regulatory jurisdiction. Simpson noted that the Northwest has significant experience with interstate cooperation in energy matters, and that many activities, such as resource planning and encouragement of renewables and energy efficiency technologies, are done federally through BPA, or regionally, through the Northwest Power Planning Council.
DOE believes, said Simpson, that the trend toward the establishment of independent system operators and power exchange markets, particularly on a regional basis, is positive and ought to be nourished. He suggested that the preliminary state/federal regulatory framework that Curtis described to Congress might be useful to the review.
Simpson noted that there is uncertainty as to whether the Federal Power Act pre-empts state efforts to order retail wheeling. He said DOE supports federal legislation to eliminate any question of federal pre-emption and to permit states to make retail wheeling decisions. We'd like to hear your recommendations, he added.
DOE believes states should be allowed to impose a wires charge at the distribution level, said Simpson. In the mega-NOPR, the Federal Energy Regulatory Commission (FERC) tried to distinguish between "transmission" and "distribution" with respect to this issue, he noted. To clear up legal uncertainties, Congress may amend the Federal Power Act to provide an unassailable jurisdictional hook for a state-imposed wires charge, he said. We need to hear your recommendation on wires charges, Simpson told the committee. Congress should also clarify state authority on renewable and energy efficiency technologies, he said; we'd like a recommendation from the review on this, Simpson added. FERC's role is to regulate all discrete use of the interstate transmission grid, Simpson said, adding that DOE strongly supports FERC's open access rulemaking (the mega-NOPR). He pointed out that BPA has already taken action to move in this direction, by adopting, for example, a comparability policy for transmission. We encourage the review to ensure that transmission access structures in the Northwest meet the objectives of the mega-NOPR and that BPA is permitted to recover stranded costs, if necessary and appropriate, he said.
As for timing of the review, Simpson noted that Congress is currently holding hearings on industry restructuring. The comprehensive review's work "will position the Northwest quite well to make strong recommendations that can be crafted into legislation in the next Congress," he said. I look forward to working with you, Simpson added.
Collins commented that options regarding the federal presence in the Northwest could be more difficult to evaluate without close liaison and involvement of the Treasury Department. He said the committee may consider moving something that doesn't generate tax dollars into the taxable arena. If Treasury could look at different tax treatments and explore the feasibility of some of the things the review might recommend, it would be helpful, he observed. We need a link with Treasury early on to tell us what they would entertain or not entertain, Collins suggested -- can you help us with that? he asked.
There are pressures to try to get the government out of businesses it doesn't need to be in, Simpson replied. He pointed out DOE just recently received authority to sell the Elk Hills Petroleum Reserves in California. We've been talking with Treasury over the past year, and there's a willingness to look at what you are describing, he added.
I read in the trade press that Treasury was balking at the TVA refinancing plan, Nelson commented. She said the state regulatory commissions had met with BPA recently to discuss splitting the agency into generating and transmission units. FERC doesn't regulate BPA, she pointed out, so it would take a change in the law to realign regulatory responsibilities in order for BPA to become something else, she said. Simpson responded that some things will require educating members of the administration. Maybe we could bring some people out to talk with you, he suggested.
Alexanderson asked about state authority to impose wires charges. He said BPA's special status allows it to deliver power in ways that "trump state authority" to tax in service territories. Have you thought about that inconsistency? he asked. "A little bit," Simpson replied, adding, if you have opinions about this in the review, that's what we're interested in.
Gannon asked about DOE's position on customer choice. Simpson replied that states should determine what kind of retail service they want. We'd like not to impose anything federally, but to enable a framework in which those choices can take place, he said.
There's a real feeling that regional decisions should be made in the region, Wilcox said. He asked how DOE control of BPA would likely shape up in the future. The role of BPA and DOE has changed in the past year, Simpson replied. BPA is no longer necessarily the least-cost power supplier. Instead of arguing about how to divide the growing pie, people are arguing about dividing a diminishing pie, and that draws the federal interest back into the game, he said. We used to think BPA could meet its obligations without federal interference, Simpson noted, but now we're getting pressure from agencies like Treasury, OMB, and NMFS. It all culminated in September around the DSI contracts, he added.
"We've tried not to micromanage BPA," Simpson stated. We've tried to define the new paradigm and let BPA work with regional interests. We can only hold that position as long as the region comes up with a plan "to move BPA into the future," he stated.
Collins reminded the committee that on March 14, we want to have issues sorted into three categories: those we agree on, those we disagree on, and those we need more information on. Working groups will then be appointed to obtain information needed and to try to resolve areas of disagreement, he said.
"It's time for the committee to roll up its sleeves and dig in," commented Portland energy consultant Jim Litchfield as he kicked off a joint presentation about templates for an ideal power system with Bill Marcus, an energy consultant from California. The presentation featured a series of overheads backed up by audience handouts.
Litchfield outlined the features of the template. They include: 1) the "knowns," background facts -- "what has happened you can't change"; 2) the givens, "what we believe will happen"; 3) goals, "what you want"; 4) the general structural changes that would satisfy the knowns, givens, and goals; 5) a desired structure consistent with the givens that incorporates the structural changes needed to achieve the goals; and 6) transition issues, "how to get from here to there."
Litchfield identified the "knowns" as:
Gas prices have gone down dramatically, but continue to be uncertain. I see a lot of things in the knowns and givens columns I disagree with, commented Nelson. I'll take that into consideration when I fill out my template, she added.
Litchfield went over 17 "goals of restructuring" in four categories: economic efficiency, competitive markets, equity and fairness, and environmental and public policy. There's no mention of equitably addressing the stranded cost issue, observed Shimshak, adding, it's a goal we should strive to achieve. We put it in as a transition goal, Litchfield responded. We need to deal with it -- that's a good example of the kind of thing you should challenge us on, he added.
When you talk about free entry, you also need to emphasize "free exit," Nelson said, referring to the goal that says competitive markets must have free entry of suppliers and buyers, market power limited by law, open access to information, price discovery, and risk management through futures/hedging. You have to squarely address that, she stated. Nelson also suggested adding a bullet for "freedom of contract."
"Exit" can also mean that people go out of business, Canon commented. "Merrill Schultz once told me that markets and evolution have the same basic driver -- death," Litchfield quipped in response. Both Nelson's and Canon's points are important and should be taken into account in devising a template, he added. Canon asked if the equity and fairness goals were for the utility industry or society as a whole? The latter, replied Litchfield.
But the test, asserted Collins, is what the steering committee wants to do. We need to make our goals as sharp as possible, he said. The governors all mentioned mitigating harm to small and rural customers, he said, referring to one of the equity and fairness goals, but we don't do this in housing, he observed. There's room for you to challenge to what degree the electrical system should serve social needs -- the degree to which you want to be "Don Quixotes," Collins added.
Is the template limited to the future, or is there an historical aspect that influences it? Saven asked. What's important to you will influence how you fill out your template, Collins said. If you can't find a path to the "castle in the sky," then it's unrealistic, said Litchfield. The path has to have characteristics that you judge to be equitable and fair, he added.
We didn't explicitly look at the past, replied Marcus, but what we put down on the template relates to the thoughts of different parties and issues we thought the steering committee should address. One of the most important things we have to wrestle with are the transitional issues, commented Wilcox, and this approach helps us to do that.
When we talk about equity and fairness and environmental and policy goals, I see an overlap, Davis said. He pointed out that fish appropriations in the last Congressional budget helped BPA, but not the mid-Columbias. There needs to be equity in environmental goals, he said, adding that the federal system got relief, but the mid-Columbias did not. I think that's why you're here, responded Litchfield. The fairness question is, are we making one party a perfect competitor while others are hamstrung? he said.
A "castle in the sky" with 25 different goals is too complex, commented Golden. We're already onto path issues, not goal issues. I'd like to see a short set of things that indicate where we really want to end up -- where we really want to go, he said.
K.C.'s point is good; he's saying the goals are too diffuse to be formative, and that we need a smaller set of goals to define the issues more precisely, Collins stated. You are free to cross out all of Litchfield's and Marcus' goals and start over, he reminded the committee.
Applegate asked Marcus about his template's conclusion that this is not the forum to address balancing the river's multiple uses. How did you conclude that? Applegate inquired. I thought navigation and irrigation subsidies would be hard for this group to address, Marcus replied, but I've since thought irrigation is a policy issue that should be dealt with. I think both the irrigation and navigation subsidies have an impact on the power system, and that this is the forum to look at them, Applegate stated.
"The basic structure we have now is dysfunctional," Litchfield said. He went on to describe the structural changes required by the knowns, givens, and goals of the template. These included: Vertical integration is inconsistent with customer choice, competition, and efficient use of capital. Functional unbundling will be required to prevent self- dealing. Concentration of generation may require divestiture to limit market power. Wholesale competition only provides big customers with choices. Multiple players are making markets efficient.
Public purposes will have to be assigned differently than they were in the past.
Saven inquired if an issue like local control should be under environmental and policy goals, or is there another place for it? It's probably a goal, but one that "we just blew by," Litchfield said. They didn't deal with it, commented Collins, which may show they're not interested in it, but some committee members may be very interested in it. Remember these are illustrations, not points of departure, said Collins.
I hope you see this as "a slap of cold water after a warm bath of looking at goals," said Marcus, as he began his presentation. I think this template is one of the tougher take-home exams I've had since college, he noted.
Marcus made several points geared to "Knowing Why You Want to Restructure Before You Do It." He advised the committee to "be clear on goals" and conflicts among goals. Ask yourselves, he said, do we need restructuring at all to get to the goals?
If the goal is to reduce power costs, restructuring can get you there, said Marcus, but energy efficiency may be the best way to reduce costs. He suggested the committee look at some "less trendy" ideas for regulation of IOUs, such as tough performance- based ratemaking standards.
He pointed out that the B.C. Utilities Commission rejected most of the restructuring proposals it recently considered. Here in the Northwest, he acknowledged, "Clark County and the DSIs may have let the genie out of the bottle, and it may be hard to put it back."
Ask yourself, suggested Marcus, if what's happening is a response to gas costs. If gas were $3/MMBtu and we had a carbon tax, I think people who want out now would be clamoring to come back onto the system, he said. I think many restructuring efforts may have been done for the wrong reasons, he added, for example, to grab benefits for a small group of customers or to "give some customers the ability to avoid the costs of past utility mistakes." The journey is as important as the end point, said Marcus. One of your criteria is to look at the path to restructuring. There are pitfalls even for people of good will, he noted. You need to look at how forgiving your system is for making mistakes and how hard it is to make mid-course corrections if necessary. Marcus described a table of current functions of the electricity system. Pollock suggested that the box labeled "dispatch, spot and futures markets" be split into two separate boxes, and at Collins' urging, it was decided the committee's template would separate them. "Why are customers at the bottom?" asked Nelson. It's a very supply side perspective, she observed. We could turn it upside down, Marcus suggested.
Are we buying into each of these charts by being silent? Nelson inquired. You're not buying into any of this, responded Litchfield. This is our opinion, which you can use to step off into what you want to do, he said.
Marcus discussed current federal power functions, and the roles of IOUs and public generators, full requirements customers, independent power producers (IPPs) and energy services companies (ESCOs), and marketers and brokers, whom he called the "Louis Dreyfuses of the world." Aren't the marketers and brokers in a demand aggregation role as well as a supply aggregation role? asked Hedemark. They could be, replied Marcus; at present, they are mainly going to existing customers, but they would be in that kind of role if there were direct access, he added.
Marcus presented structural template #1, "his" template, which boiled down to eight tiered boxes, six arrows, and an octagonal "post-it" labeled "spot and futures markets." It was, he said, derived from three goals and based on an assumption that small customers will not have practical choices. The goals are: cost reduction, improved efficiency of generation and transmission, and to prevent or mitigate harm to small and rural customers.
I've broken the system into several pieces in the template, Marcus said -- generation is separate from transmission, and transmission from distribution. The spot and futures market would be formed by operation of the generation system and some of the market makers, he noted. Different entities would perform the functions of generation, supply aggregation, dispatch, and the spot and futures markets, he explained. The arrow between distribution and energy services shows a money flow, he said. The arrow between energy services and customers refers to services delivered, he said.
You're saying these three goals lead you to arrange the boxes this way? asked Collins. Yes, replied Marcus -- these goals yield this set of boxes. So the arrows describe who's dealing with whom in this brave new world? asked Pollock. Yes, Marcus responded, they are the flow of dollars and sometimes services.
It's obviously more complicated than these graphics, said Litchfield, but we did this to show the functions pulling apart and that markets will form. It is an "artist's view" of how the system might break apart, he commented.
Litchfield said the key to "his" template is that all customers have access to transmission and distribution facilities. Generation, transmission, and distribution would be legally separated, and active spot and futures markets would form and provide information and price discovery, he explained.
Our templates are similar, Litchfield observed, except Bill said customer choice would not materialize so distribution should be left as a monopoly function, while I propose breaking distribution apart like transmission. Under the Litchfield scenario, a distribution company (DISCO) has to offer a portfolio of resources. A customer can go to an ESCO or can call up an Enron or Dreyfus and work a deal with them, Litchfield said.
Don't you need a box for "public purposes" on the template? asked Applegate. We were looking at functions that make the lights come on, Litchfield replied. These are the basic physical functions of the power industry, and public purposes weren't a part of that, he said. As we get into this, I think we will want public purposes captured, Applegate stated. If you think it's important, then we need to look at where to assign them, Litchfield responded.
The difference between you is, Bill doesn't think the distribution function would break up and would maintain a local utility's obligation to serve -- is that right? asked Wilcox. "I'm an agnostic on direct access, not a strong opponent," replied Marcus. I think it is hard to do it right, and if it is done right, many who like it now may not like it later, he added.
I'm struck by the extent of agreement between you, commented Wilcox. There is more commonality in the ideal structures than there is on the paths, said Marcus. In filling out the boxes, the major difference was direct access, he added. The distinction, said Litchfield, is whether customers can implement their choices. "Bill and I were surprised at the extent of the similarity," he acknowledged.
Litchfield said the fundamental questions are: What is the future role of federal generation (the Federal Base System) in competitive markets? Should the regional transmission system be better coordinated? What are the appropriate roles for distribution companies? How can reasonable transition policies be chosen and implemented?
He sketched out possible changes in federal ownership and marketing. The alternatives included: BPA becoming a federal competitor in west coast generation markets; the allocation of federal power to others for remarketing; and regionalization or privatization of BPA.
One alternative, the WAPA model, would allocate federal power to utility customers through long-term contracts. What happens to nonfirm power under that model? Drummond asked. The full output of the federal system would be in the allocation, Litchfield replied. Nelson asked if the preference customers in the WAPA model were regional or public preference. Public, Litchfield replied. From a template standpoint, there are many hybrids you could play with; this is just one coarse look, Hemmingway commented.
Under another alternative, the output of the Federal Base System would be allocated to a customer co-op. Would DSIs be a customer? asked Shimshak. They could be, answered Litchfield -- the problem will be to find enough people to sign up for long-term contracts. Would this be a competitive entity? asked Pollock. Yes, it would be the same size and have the same market power issues as BPA, Litchfield responded.
Did you consider the role of California if there is an effort to move away from the federal system? asked Applegate. Most of this is "Northwest-flavored," replied Litchfield. We didn't look that much at California, but we know they will be a market player, he said. Keep in mind, in all these alternatives, there's a tension between the coordination of the system and getting more players into the marketplace, Litchfield stated.
Another alternative envisioned transferring ownership of the federal hydro system to the Northwest states, with Treasury as the preferred shareholder in the Northwest power system and the WPPSS debt the responsibility of the states. I'd worry less about the WPPSS debt than the decommissioning of WNP-2 later on, Drummond commented. An alternative would be the spinoff of WNP-2 as a separate generating company, although the question of what happens to the debt would arise, Litchfield said. When I pay that debt off, said Drummond, I'm done, but the plant will stay with us a long time. Decommissioning is the obligation of the licenseholder, commented Pollock, while the debt is the obligation of the U.S. government, and the bond covenants provide for that. You can't transfer debt like this implies, he said.
I presume you are taking into account a regional distribution of WPPSS debt costs or a negotiated regional buydown -- is the debt as finite as you are presenting? asked Kreidler. It may be, replied Litchfield. If you are looking at privatization, there are many financial issues like future tax treatment that would need to be addressed, he added. You're treating a $7 billion debt as come hell or high water, but it may not be, said Kreidler. I treated it as hell or high water, replied Litchfield.
Can you explain why all these alternatives are discussions of BPA? asked Saven. This is a regional review, but your presentation seems to focus almost exclusively on BPA -- is that intentional? he asked. We didn't mean it to be that way, but no matter what, we have the federal system in the middle of this, and it has to be dealt with, replied Litchfield. BPA has the widest range of things that can be done with it, Marcus noted.
Litchfield discussed transmission alternatives, ranging from having a Transmission Coordination Agreement to divestiture (reaggregation under a single owner, such as a TRANSCO). Most of the debate, he said, concerns the pros and cons of an independent grid operator or an independent pool and grid operator.
Litchfield's recommended structure had these features: Provide customers choice through direct market access. Legal and financial unbundling of generation, transmission, and distribution functions. BPA power allocated to customers, using the WAPA model. Bonneville transmission is separated out and becomes the start of a Northwest independent grid operator. Bilateral transactions as the general rule, with spot and futures markets for price discovery. ESCOs and generating companies (GENCOs) have direct access to customers, but compete with each other.
Pollock asked Litchfield he got from the alternatives to those choices. It doesn't matter, interjected Collins. They aren't a point of departure; we are free to sit down and do what we want. If we're not careful, we'll end up debating the Litchfield proposal, warned Collins. I want to emphasize that "this is a bottoms-up deal"; you can do anything you want, said Collins. Break Up BPA, Advises Marcus
Marcus said his major concern with respect to generation alternatives is market power. Many future arguments about restructuring and transition will be battles over market share unless generation is divested, he suggested. You should break up BPA generation into a number of pieces, Marcus recommended, and require IOUs to divest generation from transmission and distribution. For IOU divestiture, he suggested stock spinoffs, selling strategic resources, and putting generation up for auction. You should figure out how to shape a BPA privatization option, he counseled, because it might happen regardless of your preferences.
Basically, I agree with Jim on transmission recommendations, Marcus said. Distribution companies should be portfolio managers for their customers, with renewable and energy efficiency components included, he added. You should separate delivery of energy efficiency services from current utility functions because of conflict of interest and market power, he said.
Applegate asked why he didn't have a slide "on the environmental side?" I'm not clear about dealing with the details about fish, Marcus replied. He added, "the people who created the garbage of WPPSS need to clean it up -- it's a moral issue."
Energy efficiency is a critical independent goal and shouldn't fall into "the green ghetto," said Marcus. It has as much or more potential than restructuring to reduce utility bills, he added. "Do it smarter and cheaper, but do it!" he recommended with respect to reinventing energy efficiency service delivery. Do more on loans and less on rebates; do more to get stronger building and appliance standards and their enforcement, he advised.
He suggested administering energy efficiency funds outside the current utility structure, encouraging more competition to provide energy efficiency, the melding of aggregation and ESCO functions under direct access, and giving ESCOs access to utility billing envelope and customer data.
Marcus suggested that the best deals under direct access should not be given to industrial customers first, and that maybe small customers should get the first advantages. Metering requirements need to be flexible because they can make or break programs for small customers, Marcus said. New aggregation and brokering businesses will be needed to deal with small customers, and new market players will have to be regulated, he advised. There will need to be new rules for disclosure, consumer education, and consumer protection, he added.
The transition is critical to achieving your goals, Marcus reiterated. He identified these transition issues: Cross-subsidies among utility functions that harm consumers and competitive markets. Transmission rules and rate design that disadvantage specific technologies or advantage existing generators over new entrants. Survival of the renewables industry. System operations and balancing of multipurpose uses of the hydro system. Stranded investment and windfall profits treatment. BPA requirements contracts and other Northwest Power Act directives. Patchwork solutions to provide customer choice could cause market failures.
Marcus suggested that if direct access is deemed the way to go, the comprehensive review should recommend the timing and conditions for customer choice. The states will need to coordinate the legislative and regulatory changes, he said. "We'll be herding cats" to some extent, he speculated.
Marcus recommended a non-bypassable system benefits charge, regardless of market structure, to create an energy efficiency trust fund. It would support market transformation, rebates, loans, and code enforcement and training. Jim thinks the fund and charges should be "time limited," while I think they should be ongoing, Marcus noted. Marcus said he and Litchfield agreed on some, but not all objectives for renewables.
Marcus raised several low-income service issues likely to arise under direct acess. He recommended bringing the publics under standardized state assistance rules. He warned of redlining and of suppliers charging higher rates to customers in poorer areas. Such problems might be solved by pooling the costs of collections and bad debts, he said.
According to Marcus, stranded investment should be split between ratepayers and shareholders (where shareholders exist). With BPA, "we have met the shareholder and he is us," he quipped. He recommended a fixed transition period for stranded investment, and that no new investments or O&M costs go into stranded costs. Two issues he suggested the committee consider are: How to treat windfall profits for utilities from assets with costs below market price? Should some or all of the WPPSS debt costs be assigned to the publics and DSIs who leave the Bonneville system?
At the next meeting, Collins said the governors' representatives will talk about what they heard at the public meetings. He indicated that Senator Gorton has been asked to send someone to talk about the survey his office conducted and what they learned from it. You'll have about four hours to work in subgroups on the templates at the next meeting, Collins said.
At the March 14 meeting, Collins said each subgroup would appoint a representative to present its conclusions on the templates. We'll try to figure out "what the chicken entrails look like at that point," he observed. It may be a mess, or it may be quite focused, and there may be things that can come off the table because we agree on them -- that's how I see it, said Collins.
Pollock asked if the GENCO in a template could include more generation than BPA has. Collins said, I think that's right. He added, if it seems to you the templates are creating a bias, then let's deal with that.
The small groups will identify things we agree on and disagree on, but what we agree on may depend on what others agree to, said Shimshak. You're saying that if you give away a position in a subgroup, and it becomes a point of disagreement in the large group, then you've got a problem? asked Collins. Yes, essentially, she replied.
When is the ultimate decision to be made by this group? Canon inquired. This is the first part of the process, and an interchange among subgroups may be helpful -- we don't have to foreclose things at this point, Canon added.
The way it works in labor negotiations, Collins observed, is that "there's no deal till there's a whole deal." But we have to start down the path to what that will look like, he said.
I like the work the consultants did, said Saven. I'm concerned about how to deal with the transition issues, he continued. There's room to come up with a whole host of transition issues, especially equity issues -- how do we get those out on the table? he wondered.
In my small group, Nelson said, I'll concentrate on the wholesale market and the role of the federal agency in the wholesale market. I'm willing to try, but for us to try to invent the ideal structure for the Northwest, we may be wasting a lot of time, she said. For example, divesting privately owned companies of their assets -- "this group isn't competent to recommend such things," Nelson stated. I hope in the small group meetings we can make a scope that is doable and practical, she concluded.
I hope that we can get back to the big group as soon as possible, commented Applegate, adding, "I think certain issues need that."
Dick Fiddler, interim policy director for the Northwest Conservation Act Coalition, suggested the review should "get all the generators on a level environmental playing field." It's tough enough to do that in the context of the Northwest Power Act, he said. BPA has fish constraints, but we are concerned about how to bring constraints to bear on people who are building combustion turbines, he added.
Fiddler recommended that the review "take the long-term view." Conservation requires that, he said, and we didn't hear today which structures inherently promote it and which don't. You can't rely on the market to deliver conservation, Fiddler added. Finally, he said, he would have liked to hear how, if BPA is a GENCO, it can be designed so it isn't in "a perpetual squeeze about fish costs." These are the issues that were the focus of the public meeting I attended in Seattle recently, Fiddler said.
Austin Collins of the Gray Panthers told the committee "you people are doing a good job here, except you need to get someone to read you the history." What you're talking about, he said, is what George Norris fought so hard for when the Bonneville Project Act was passed. Collins recommended that someone needs to look at the Residential Exchange and recommend how it can be changed so "two or three entities aren't able to steal $6 billion like they did between 1981 and 1995."
Marcia Anderson of Save Our Wild Salmon in Oregon presented a new report, "The River of Red Ink," which she said is a common-sense guide to saving taxpayers' dollars and restoring Northwest salmon. It recommends cutting "nine wasteful subsidy programs" in the Columbia River Basin to save $2.3 billion over the next five years, she stated. I urge you to consider it, concluded Anderson.
Tim Newton of Powerex, a subsidiary of B.C. Hydro, told the committee that B.C. went through an exercise similar to what you are doing. He cautioned about the difficulties associated with restructuring BPA in light of its commitments to others. Operations between Canada and BPA have been handled well, with "a few minor bumps," he noted. The optimization of the river is handled well by the Pacific Northwest Coordination Agreement -- it helps to operate Canadian storage in concert with the rest of the system, he stated.
Newton said a good example was last week during the floods in the U.S. Northwest, when "we went from 90,000 cubic feet per second (cfs) to 15,000 cfs in a few days." That's how important the relationship is, and we want to see that considered in the review, he said. Pollock thanked B.C. Hydro, noting that "at a moment's notice," they reduced output from Canadian projects to keep flood waters down in Portland. Asked what the cost was, Newton replied, the expense was environmental -- some fish eggs were dewatered.
Glen Swift encouraged the committee "not to be concerned with reality and legal ramifications." The trick is to put together something everyone can sign onto and then a way will be found to make it work, he said. For your goals, think in the broadest terms, he urged. It's important to think about the relationship with Canada, and with the Corps of Engineers and Bureau of Reclamation, he said. Ask what is best for the region as a whole, and best for the regional economy and environment, and work back from that, Swift urged.
The three subgroups met during the last hour of the meeting. Afterwards, the committee reconvened briefly. Collins urged anyone with materials to share with the committee to get them to Steve Crow.
Wilcox said he is circulating a paper "Thoughts on Restructuring the Northwest Electric Power Industry," and would like to discuss it at the next meeting. While I take responsibility for the ideas, Eric Redman wrote it, he said. It's not a DSI paper, he added. Pollock noted that a two-page summary of federal legislation on restructuring has been given to the committee. Collins said Tom Foley had filled out a template and sent it in, and that it should be circulated.
Kreidler mentioned he is looking forward to reading "A River of Red Ink," and seeing the numbers the report came up with. Hemmingway noted that any subgroup meetings outside the regular steering committee meetings will require public notice.
Kreidler said that he and others are going back to talk to people in Washington, D.C. the first week of March. That needs to be tightly coordinated, Collins said, adding, it would be nice to have some steering committee members participate. If you go back representing this group, there needs to be some buyoff by this group, Collins stated.
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.
Last modified: February 21, 1996
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