Transition Board Mtg Summary -- November 20, 1997 Mtg.

*Northwest Energy Review Transition Board*	John Etchart, Montana
851 S.W. Sixth Avenue, Suite 1100 Portland, Oregon 97204-1348	Roy Hemmingway, Oregon
Phone 503-222-5161 or 1-800-452-5161 FAX 503-795-3370	Mike Kreidler, Washington
	Todd Maddock, Idaho

NORTHWEST ENERGY REVIEW TRANSITION BOARD MEETING SUMMARY

Thursday, November 20, 1997
Spokane Valley Doubletree, Spokane, Washington

The Northwest Energy Review Transition Board wrestled with transition cost issues and heard presentations on BPA’s transmission surcharge study, IndeGO, and FERC-equivalent regulation of BPA transmission. All members were present except Roy Hemmingway, who participated by telephone. The audience was about 35.

Next Meeting: December 18 in Portland.

• WHAT WOULD A BPA TRANSMISSION SURCHARGE LOOK LIKE? -- Brian Silverstein of BPA presented the results of a transmission surcharge study. BPA has not determined the surcharge is necessary or appropriate, he noted. The study found that some customers have no near-term alternative to BPA transmission and would be subject to a substantial surcharge, Silverstein reported. About 20 percent of BPA’s existing transmission load could avoid a charge by leaving the grid, he said. There is a potential for up to $200 million per year in additional revenues from a transmission surcharge, according to Silverstein.

A small surcharge would hit the region about in proportion to how loads are distributed east and west of the Cascades, Silverstein said. With a large surcharge, most of the opportunities to escape the transmission system are on the east side, he noted. If the surcharge were as high as 2.5 to 3 mills, it might be economic to build a cross-Cascades line or new generation, Silverstein said. Some customers have told us that a 1 to 2-mill surcharge would cause them to bypass BPA, he reported.

• INDEGO PROPOSAL IS GOING PUBLIC -- Bill Pascoe of Montana Power said that a proposal for IndeGO would be available on the IndeGO website next Wednesday. Four technical workshops will be held: Dec. 2 in Salt Lake City, Dec. 3 in Denver, Dec. 9 in Portland, and Dec. 11 in Seattle, and 12 public meetings are planned in January, he said. We will take written comments until early February, and if enough utilities want to go ahead, we would file with FERC at the end of March 1998, Pascoe said.

• TRANSMISSION, SUBSCRIPTION, AND COST REVIEW UPDATES -- Consultant Al Wright said the Transmission Work Group is getting back up and running after a hiatus in October due to transition cost meetings. We hope to have a transmission package to meet the Transition Board’s January-February deadline, he reported. The Subscription Work Group is discussing principles, implementation, and pricing, Wright said. Dick Adams of PNUCC said the group is still thinking it will need no legislation to implement subscription. Todd Maddock reported the Cost Review Management Committee has made it clear BPA needs to make more sizable cost reductions "to test what its core functions are." The group will look at more options in December and make final recommendations in January, he said.

• THE IOUS’ TWELVE STEPS TO FERC-EQUIVALENT REGULATION -- Consultant Jim Litchfield described a 12-section proposal from the investor-owned utilities for "draft legislation to achieve equivalent FERC regulation of BPA transmission." He said the IOUS felt the need to respond to a request from Senator Gorton. According to Litchfield, the goals are to separate BPA’s transmission from its power marketing activities; give FERC the authority to regulate separation; ensure all BPA receipts are available to meet BPA’s financial obligations; and limit BPA’s sales to wholesale except for the DSIs served historically.

The purpose of the draft legislation is to implement the Regional Review’s recommendations, stated Litchfield. It would subject BPA to all provisions of the Federal Power Act that apply to public utilities, he said. FERC would have jurisdiction over BPA’s sales of surplus power and could tell BPA to grant transmission access, Litchfield said.

Is this an IOU-only proposal? asked Roy Hemmingway. It was presented to Senator Gorton with the support of the DSIs, answered Litchfield. We thought the model was to try to work things out in the region without taking them back to Washington, D.C., said Hemmingway. You should be cautious about seeing this as a proposal with a life of its own, he continued. We need one Northwest proposal, Hemmingway stated.

• THE PPC RESPONDS -- Jerry Leone, manager of the Public Power Council, said the IOU proposal would strip BPA of the ability to move dollars between its transmission and power functions and invite WPPSS securities litigation and Treasury default. It would strip BPA of its ability to impose a wires charge of general applicability and give BPA’s customers "an out" from stranded costs, she said. The IOU proposal is an unacceptable starting point for future discussions of the Transmission Work Group, Leone added.

Angus Duncan of the Columbia/Pacific Institute said he thought the IOUs’ detailed response to Senator Gorton was ill-advised. Steve Weiss of the Northwest Energy Coalition said relying on FERC Order 888 would let too many slip out from under stranded costs. Ken Canon of the Industrial Customers of Northwest Utilities offered a "core/non-core alternative" for stranded costs and subscription. Consultant Roy Sampsel said a three sovereigns’ work group has put together draft principles on stranded costs.

• QUO VADIS TRANSITION COSTS AND TRANSITION BOARD? -- We’ve waited to have a stranded cost proposal developed and blended, but we don’t have it, said Transition Board chairman John Etchart. We have the obligation to try to bring some consensus on this, and we need to do it in a timely fashion, Maddock said. The board decided to devote its December 18 meeting to the issue of stranded costs.

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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 Inc. 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.