Transition Board Transmission Work Group
Meeting 2
April 15, 1997

The work group had its second meeting at the Northwest Power Planning Council’s offices, with about 50 attending. Al Wright chaired the meeting.

The main business on the agenda was a discussion, led by Bonneville personnel, of a number of issues that Bonneville has identified as requiring resolution as part of separation of its transmission function from its power marketing business. The general intent was to bring the group to a common base of understanding of the issues, not to resolve them at this meeting. Some issues generated more discussion than others; topics that touched on recovering a component of Bonneville power costs from transmission revenues were the most vigorously discussed.

The discussion followed the topics in "Issues to be Addressed in Legislative Separation," attached. One category of topic is the special responsibilities of Bonneville which will need to be allocated to the separated functions or given to another entity, such as treaty and environmental obligations and current contracts. Another category is other statutes that need to be taken into account in defining the separated entities, such as the priority given to Federal power on the Federal transmission system (though this priority is not currently asserted by Bonneville). Another category is questions of the organization and governance of separated entities; Paul Majkut will provide the group with a report put together last year on structural alternatives, which will be distributed to the group by e-mail before the next meeting.

The group spent most of the afternoon discussing alternatives framed by Bonneville for separating the current single Bonneville fund into two components. Several in the group commented that the alternatives discussed couldn’t entirely resolve the conflict between: 1) assuring that Bonneville’s financial obligations are met and 2) removing the motivation of operators of a separated Bonneville transmission entity to favor Bonneville’s power marketing entity. The staff were given the task of coming back at the next meeting with a clearer statement of the purpose being served by the by the separation of funds, the problems encountered in that separation, and a draft of the group’s understanding (after its discussion at this meeting) of the other issues. The next meeting of the work group is scheduled for 9:00 AM, May 6, 1997 at PGE, Plaza Level meeting room, World Trade Ctr II (121 S.W. Salmon). The group will continue its discussion based on the staff’s draft.

Issues To Be Addressed in Legislative Separation

(Transmission Issues)

1. Separate finances

• one cap/fund with administrative fund separation, or
• separation of Treasury borrowing authority into two funds/caps (power and transmission) with interfund loans and common debt management practices (flexibility to defer TBL Treasury payments to support Supply System bond payments; preserve priority of payments under Transmission System Act regardless of separation)

2. Sufficient access to capital (access to Treasury or private market borrowing or equity infusions)

3. Obligations to Bondholders

• preserve security of Supply System and other bonds(including net billing arrangement)
• preserve tax exempt status of Supply System and other bonds

4. Transmission budget and construction (of major facilities, out-of-region facilities) approval by Executive Branch and Congress

5. Statutory priority of Federal power to Federal transmission system (16 U.S.C. §§838d, 839f(i)(3))

6. Statutory priority of Northwest load to Federal transmission system (16 U.S.C. §824k(i)(5))

7. Ability of TBL to protect PBL rights under existing power sales contracts (Energy Policy Act, sec. 211(c))

8. Allocation of Treaty responsibilities between TBL and PBL (including Canadian Entitlement return, backup, and hydro coordination)

9. Rates

• Apply Federal Power Act standards and FERC rules to to TBL's rates? Which ones?
• Process for establishing and revisiong transmission rates (7(i) case?)

10. Limitation on power-related costs (including fish and wildlife costs) that may be included in transmission revenue requirement? TBL as vehicle for assessing BPA's stranded costs?

11. Implementation of Public Responsibilities: e.g., retention of FCRPS benefits in Northwest; electric reliability; repayment of taxpayers and bondholders; transmission access; implementation of environmental responsibilities including mitigating power system impacts on fish; public decisionmaking.

12. Assignment of assets and existing contractual obligations and rights between TBL and PBL

13. Approval to capitalize, join or become ISO

14. Formation issues: creation of a separate legal entity (e.g., gov't. corp; federal agency)

• governance
• financial practices (budget laws and appropriated fund status)
• procurement
• personnel
• property management, including acquisition/disposition of property (e.g., transmission facilities)
• condemnation powers
• torts, contracts, judicial jurisdiction, payment of judgments, other issues of sovereign immunity, etc.
• legal representation
• binding arbitration
• other powers and applicability of laws normally applicable to Federal agencies (APA, FOIA, etc.)

15. Placeholder for power issues (e.g., subscription, preference)

16. Separation issues/impacts on PBL/New BPA

• Linkage to TBL separation: PBL governance issues
• Timing of legislative issues while subscription process continues through 1997 and ability of subscription process to resolve/redirect issues such as stranded costs, residential exchange, access to retail markets, fish)