The Northwest Energy Review Transition Board presented a revised contingent cost recovery proposal and indicated the next step is to see how it meshes with BPA’s soon-to-be-announced subscription proposal. All members were present. The audience was about 35.

• FEDERAL POWER ACT CONSULTATIONS ARE MOVING RIGHT ALONG -- Staffer Bill Hannaford reported that staff has been meeting with groups around the region to discuss what the effects of applying the Federal Power Act to BPA’s transmission would be on BPA’s organic statutes. We’ve met with considerable success and agreement about which parts of the statutes require modification and expect to complete this series of meetings by mid-October, he said. Then we’ll sit down and "carve out the parts" of the statutes needed for equivalent FERC oversight and circulate them for review, Hannaford explained. After that, we’ll start drafting legislation, he stated.

• COMMENT REVIEW OF LAST MONTH’S CONTINGENT COST RECOVERY PROPOSAL -- Staffer Ken Corum said the board received 11 sets of comments on the contingent cost recovery proposal it released in August. We received the most comment on the proposal to use projected levels of BPA reserves as the trigger for the cost recovery mechanism, he indicated. There were a lot of comments on Stage 4 of the proposal, particularly the role of the Federal Energy Regulatory Commission (FERC) in the "recovery of remaining unrecovered costs"; on the proposal to establish a target reserve level at the end of the first rate period that would take into account anticipated costs in the next period; and on the proposal’s caps of $100 million and $600 million, according to Corum.

• BOARD PROPOSES REVISED CONTINGENT COST RECOVERY PROPOSAL -- Staffer Dick Watson explained that the board took to heart comments that said four stages were too cumbersome and cut the "stages" in its new proposal from four to two. The board has decided to carry out a recommendation from the Regional Review by establishing a cost management advisory committee, made up of customers and others, he said.

In the revised proposal, Stage 1 would involve implementation of a capped rate adjustment mechanism for BPA power rates, and prior to its implementation, BPA would be required to show in a public hearing that it is doing everything feasible to manage its costs, Watson stated. The revised proposal’s Stage 2 is the previous proposal’s Stage 4, "Recovery of Remaining Unrecovered Costs," he noted. The new proposal says if after implementing Stage 1, projected reserve levels are at or below a second, lower trigger level that implies a high probability of Treasury deferral, Stage 2 would kick in. BPA would have to develop a plan, and if the plan includes a charge on transmission, that charge would be subject to review by FERC, and the standards for review would be the "just and reasonable" standard of the Federal Power Act and the requirement of the Northwest Power Act that "rates be set to assure payment of the Federal investment in the Federal Columbia River Power System over a reasonable number of years after first meeting the administrator’s other costs." FERC could approve the charge or order changes, Watson said.

The proposal also states that "any power costs recovered through transmission charges would be treated as a loan from BPA’s Transmission Business Line to its Power Business Line, to be repaid with interest as soon as conditions permit" and that interest would accrue at the cost of capital of investor-owned utilities. The caps in the previous proposal, of $100 million in any year, up to a cumulative total of $600 million, remain the same, Watson said.

• A FLURRY OF QUESTIONS AND COMMENTS -- Paul Majkut of BPA and Benton County PUD consultant Don Clayhold questioned using the cost of capital of investor-owned utilities as the interest rate in the proposal. Steve Weiss of the Northwest Energy Coalition suggested BPA needs to have its legislative authorities extended to prevent bypass and to be able to spread the cost burden more widely. Angus Duncan of the Columbia/Pacific Institute said there should be a process to get prior agreement on methodologies for calculating the probability of repayment, so they are clear and there has been public participation in their development. Jim Baker of the Sierra Club said the dollar caps in the proposal will bring attention to the region’s advantage in low-priced electricity and that fish advocates won’t support the caps without a salmon recovery plan or a process to get one. Jerry Leone of the Public Power Council said public power stands behind a uniform wires charge and using deferral as a trigger for the stranded cost mechanism. It’s good you’ve given back to the region, instead of FERC, determination of what stranded costs ought to be, she said. IOU consultant Jim Litchfield said the debate about using deferral as a trigger may be about "how it is packaged and sold," rather than substance. You can’t lock down the methodology in advance, he advised. Alfred Canada of Grants Pass, Oregon, questioned why the board is making this proposal when "there will be 1 cent per kilowatt-hour power (from solar photovoltaics) in copious quantities in the system for BPA to repeddle."

• NEXT STEP: WAITING FOR THE SUBSCRIPTION SHOE TO DROP -- The board decided to circulate a draft of the proposal, but not to make final recommendations until it sees what BPA proposes for subscription. We need to see how our thinking will dovetail with theirs, said Marilyn Showalter.

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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.