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

Transition Board Transmission Work Group

Meeting 5
June 3, 1997

Al Wright chaired the work group’s fifth meeting, hosted by PGE at 2 World Trade Center in Portland. About 30 people attended.

The meeting continued the discussion of what Bonneville can do to recover costs if revenues from a business line are insufficient. Al Larsen answered questions about a letter from Laurence Cable. The letter expresses concern that separation of Bonneville’s transmission and power marketing business lines, depending on how the separation is structured, could provoke litigation based on perceived reduction in the security of the bonds for net-billed projects. The letter generally supported the paper presented by Bonneville at the group’s May 20 meeting (see Bonneville’s paper, and Paul Murphy’s paper presenting his position). Mr. Larsen pointed out the conclusion in the letter that Bonneville has an absolute obligation to pay the net-billed debt, and rejected any implication in the preceding discussion or the other papers that Bonneville’s only recourse in the event of a revenue shortfall is to raise power rates or defer Treasury payments.

Members of the group have different opinions regarding the risk to net-billed debt holders. Several people pointed out that the possibility of deferring payments to the Federal Treasury means that Bonneville’s revenues would have to drop drastically before net-billed debt holders faced a real threat to their payments. Other members’ view is that whatever we might think the actual risk is, the perception of risk by bondholders, bond counsel or plaintiff lawyers is crucial, and that perception is hard for this group to anticipate.

The discussion moved to alternative models for dealing with Bonneville under-recovery of power marketing revenue requirements. The group identified 4 general models, with several possible variations:

1. Borrowing

2. A broadly-spread transmission charge ("peanut butter")

3. A directed transition charge

4. A tax

The staff will bring a somewhat-fleshed-out version of this list back to the next meeting. Others should do the same, along with arguments for preferred alternatives.

Bonneville presented an expanded comparison of FERC regulation of Bonneville and FERC regulation of other transmission providers. They also presented estimated shifts in costs to their transmission customers, based on likely FERC actions if FERC regulation of Bonneville became equivalent to investor-owned utilities. John Saven would like to see more detailed estimates of possible cost shifts, and will call a meeting of interested people to discuss what is possible along those lines.

A group coordinating with Paul Murphy will be meeting to discuss a possible proposal that avoids legal separation but could accomplish most of our goals. The group hopes to bring a product to the next meeting of the whole group.

Bonneville is working on the "elasticity" study of their transmission, that is, a study that estimates the degree of build-around or other reduction in use of their system that could result from raising transmission rates. Bonneville intends to hire a contractor to examine the specifics of the study and corroborate its conclusions, since Bonneville wants to avoid making public information such as the cheapest opportunities to build around its system.

The next meeting of the work group is scheduled for 9:00 AM, June 17, 1997 at the Northwest Power Planning Council office at 851 S.W. 6th Ave. Portland.