NORTHWEST ENERGY REVIEW TRANSITION BOARD MEETING SUMMARY

The Northwest Energy Review Transition Board declined to intervene in a Subscription Work Group controversy over the "slice of the system" proposal. The board heard from staff on progress toward developing a Northwest chapter for national restructuring legislation and on the "strawman" proposal for FERC-equivalent regulation of BPA transmission. Two members were present; Mike Kreidler and Roy Hemmingway were absent. The audience was about 40.

Next Meeting: April 23 in Portland.

• BOARD DECLINES SLICE CONTROVERSY -- Transition Board chair John Etchart said the board was asked to adjudicate the controversy over the "slice of the system" proposal, a power product that is under discussion in the Subscription Work Group. We’ve talked it through as a board, and we do not intend to go into the proposal here, he stated. All parties have agreed to continue working, and we encourage them to do so and to resolve the issue, Etchart added.

• PROGRESS ON THE NORTHWEST CHAPTER -- Council staffer Ken Corum gave an overview of the draft progress report on developing the Northwest chapter for national utility restructuring legislation. The report will go to members of the region’s Congressional delegation to give them an update on efforts to implement the recommendations of the Regional Review, he explained. We have addressed six major areas, Corum said: the role of BPA’s transmission system; treatment of BPA’s potential stranded costs; definition of subscription for BPA power after 2001; control of BPA’s operating costs; governance of the Columbia and Snake River hydro system; and future fish and wildlife budgets. The draft report contains the following:

The Transmission Work Group decided the most practical option is functional separation of BPA’s business lines, with regulation by FERC that is "equivalent" to FERC’s regulation of investor-owned utilities (IOUs).

The work group came to think of the stranded cost issue not as a single problem, but as one or more of five relatively distinct problems. The problems may have different causes and may require different remedies. The debate on recovery mechanisms focuses on two issues: fairness and impact of the mechanism.

The Subscription Work Group has made progress in developing federal power products and services, and dealing with contractual issues. The prospects for a successful outcome appear likely.

The Cost Review panel recommended $147 million in cuts from BPA’s power business line budget. The panel also recommended BPA be exempted from certain federal laws related to procurement and other administrative functions; specific legislative proposals are included in an appendix to the report.

The Three Sovereigns are discussing ways to coordinate governmental actions affecting Columbia River fish and wildlife. A draft agreement was released March 30.

Several agencies are developing the costs of future fish and wildlife scenarios, and BPA is aiming to produce rates that will not foreclose any of the mainstem "system configuration" scenarios now under discussion in the region.

The board will take comments on the draft progress report until April 24 and will forward the report to Congress in late April.

• IOU YARDSTICK MEASURES LITTLE PROGRESS -- Consultant Jim Litchfield said he and his IOU clients recently went back to re-read a letter they sent to the Transition Board on January 15, 1997. There are numerous outstanding issues that point to the need for legislation for a solution, Litchfield stated. There is a desire to preserve the Northwest Power Act, although it no longer fits our needs, he said. The IOUs believe the scope of the Northwest chapter needs to be broad, Litchfield stated. There are a lot of issues left unaddressed, and we need a comprehensive solution, he concluded.

• STRANDED COST STRAWMAN IN A HAIR SHIRT -- The stranded cost proposal "ran into a snag," consultant Al Wright said. The delegation staff feels it got "blind-sided" when the Three Sovereigns released their draft agreement, and "they were sensitized about getting adequate lead time on these things," he explained. The strawman will be released after a Congressional staff briefing, Wright said.

Why are the Three Sovereigns not responsible for their own discussions with the delegation? asked John Jones of the Northwest Gas Association. They need to take care of their own business and not bring the responsibility to this board, he stated.

•TRANSMISSION STRAWMAN POINTS WAY TO FERC EQUIVALENCY -- In drafting the strawman, we needed to answer the question, do you modify BPA’s organic statutes, or do you write BPA into the Federal Power Act (FPA), Wright explained. We went the FPA route, he said, adding there are things applicable to IOUs that we don’t think are applicable to BPA. The strawman calls for the following exceptions to the FPA: FERC has to allow total cost recovery; nothing in FERC’s regulation can affect the security of third-party debt; Congress can override a FERC order to build transmission; cost shifts should be phased in; the legislation is effective in October 2001 to protect BPA’s existing power contracts; and BPA should not be mandated to join an ISO.

Please Note: This summary is based on detailed reports of the meetings of the Northwest Energy Review Transition Board. The reports are prepared by Resource Writers Northwest and distributed by the Northwest Power Planning Council. The Pacific Northwest Utilities Conference Committee (PNUCC) contributes financial support for these reports. To request a copy, please call the Council at 1-800-452-5161 and ask for Public Affairs.