Reports & papers Bonneville Cost Review (CR98-2)

Bonneville Cost Review Public Comment Meeting February 11, 1998 Ridpath Hotel, Spokane, Washington

Todd Maddock chaired the second public comment meeting on the Bonneville Power Administration (BPA) Cost Review Management Committee's draft recommendations. Committee members John Etchart, Mike Kreidler, and Jim Curtis attended. Fourteen people presented comments, including a public power panel and a public interest group panel. The audience was about 35.

Maddock explained that the cost review effort was begun by the four Northwest governors, who asked the Northwest Power Planning Council to establish a cost-control forum to make recommendations to ensure BPA operates at the lowest cost possible and to help BPA's power subscription process succeed. He noted that another public comment meeting would be held that evening in Richland, and that written comments would be taken until February 20. The management committee will meet February 23 to make final decisions, and the cost review recommendations will be presented to the governors, the BPA Administrator, and Congressional committees in early March.

Harlan Warner of Okanogan County PUD told the committee, "in general terms, I support the 12 recommendations in the draft report." For months, BPA has been meeting with customers stressing the importance of subscription, he stated. Subscription is very important, but BPA is saying "trust me -- we'll be competitive -- just sign up," Warner said. We've done that in the past, and we have concerns about doing it again, he stated. If BPA is going to be cost-effective, it should put in writing in its power sales contracts that its power prices will be at or below market, and we'll sign up, Warner suggested. If it turns out BPA's rates are not at or below market, BPA should let us out of the contracts so we can buy in the market, he said. If BPA does it this way, it will work, Warner stated.

I support the two Supply System recommendations, said Warner. WNP-2 can be competitive, but I have concerns about recommending that if the plant is not competitive, it should be shut down, he stated. I propose that a cost review be done for both the Corps and the Bureau to determine which of them is more cost-effective; whichever it is should take over operation of all the federal projects, Warner recommended.

I'm also concerned about the recommendation to use excess WNP-2 operating revenues to build up the decommissioning fund, Warner stated. If there are excess revenues, they should be invested in an operating reserve to give the plant financial flexibility, he said.

We support the recommendation to remove subsidies, but we are concerned about the treatment of the General Transfer Agreements (GTAs), Warner stated. GTAs are not subsidies, he said.

We support reducing corporate overheads -- a lot can be done in that area, and good management is the key, Warner stated. I have a great concern about spending $90 million on Enterprise software, he continued. We "highly question" that recommendation, Warner said, adding that the software would be obsolete before it provides a payback and would require BPA to have a continuous training program for its employees. He said waste has occurred in BPA's fish and wildlife (F&W) program and added that the cost review should have addressed F&W costs.

Kreidler asked him to clarify his recommendation about WNP-2 decommissioning. There is already a decommissioning fund, replied Warner. I don't see the value of using excess revenues to make a larger decommissioning fund, but a larger operating reserve could help WNP-2 meet market conditions, he stated. The concern is if we decide to shut WNP-2 down early, the decommissioning fund is inadequate for the job, Kreidler said.

Bob Crump of Kootenai Electric Cooperative, Inc. said his utility serves mostly residential customers in a fast-growing part of northern Idaho. Many of our areas are intertwined with Washington Water Power (WWP) territory, and as a result, we've been in competition for many years, he stated. People talk about the advent of competition -- "we've been there and done that," Crump said.

Our rates are often compared to those of WWP, which has the lowest rates of any investor-owned utility in the country, he continued. Our customers want competitive rates, Crump said. Kootenai Electric buys 30 percent of its power from non-BPA suppliers, and we decided to do that for two reasons: price -- BPA's priority firm rate was above the market; and risk, he stated. To continue to purchase all our power from BPA and continue funding F&W special interest costs is too risky, Crump said. Why should our customers pay for salmon recovery when WWP customers who live next door to them pay nothing for it? he asked.

The draft recommendations are "an excellent first step," but there is more difficult work to be done, Crump stated. If the region wants to keep the Columbia River system benefits in the region post-2001, BPA's price and costs need to come down -- it's that simple, he said.

F&W costs haven't been addressed, and the spending is "a bottomless pit," Crump stated. F&W costs need to be analyzed for efficiency, and there needs to be accountability in those programs, he said. Our customers are not opposed to spending for salmon recovery, but I've heard people saying that BPA can now spend another $160 million for fish because of the savings from the cost review, Crump stated.

Kootenai Electric supports each and every recommendation, Crump continued. The Supply System, the Corps, and the Bureau should reduce their costs and increase productivity, he stated. It may be possible for BPA to meet its Treasury obligations and not make sales to Northwest utilities, Crump said. Some public interest groups are saying that BPA can sell power to the Southwest market, he indicated. If we do that, we don't keep the benefits of the Columbia River power system in the Northwest, and we put BPA at the mercy of the market, and I don't think we want to go there, Crump concluded.

If BPA's price is lower but includes F&W costs, you wouldn't buy from other suppliers because their costs don't include F&W, would you? asked Kreidler. Not all customers in the Northwest are paying for F&W, replied Crump. If BPA power is attractively priced, we'd buy BPA power, but we oppose "paying for things that don't do any good," he stated. Some would say if we hadn't spent the money we have on fish, think where the fish would be now, Kreidler observed. The cost review is trying to make sure BPA has competitive power prices in the post-2001 period when customers have the choice to go wherever they want, he said. We can't revisit past salmon spending now, but in the future, we should make sure that spending is cost-effective, Crump stated. We agree on that, said Kreidler.

Mike Henry of Lincoln Electric Cooperative, Inc. said Lincoln serves about 3,500 customers in northwest Montana and purchases about 85 percent of its power from BPA. We've made a post-2001 commitment to BPA through the Hungry Horse process, he noted.

We commend the committee for recognizing that for BPA, success means its prices have to be at or below market to keep the hydro system benefits in the region, Henry said. The $159 million savings proposed in the cost review will help ensure that subscription will be successful -- "if the price is right, customers will come," he stated.

A critical recommendation, according to Henry, is getting the Corps, the Bureau, and BPA working together to maximize the value of the Columbia River power system. We can't have three entities "doing their own thing," he said. We're very concerned about the costs associated with the GTAs, Henry said. We are concerned that the cost review did not address this issue and that those costs may be directly assigned to customers, he stated.

We recommend you address the F&W program in the same kind of cost-cutting review as you've done with this, Henry said. We are concerned about the costs of Enterprise software, he continued. The question is, will you get $90 million worth of benefits from it? "I'd like to live to see some of the benefits," Henry stated.

We strongly support the recommendations, but as a small customer, we want to make sure the cost reductions don't shift costs back onto small customers, he said. You talked in the report about "returning BPA to its roots," Henry noted. We are part of BPA's roots, and we want to continue to be, he said.

With respect to the GTAs, you want to keep the benefits, and the problem is you can't tell if the GTAs are affected by these recommendations? asked Etchart. The GTAs were taken out of BPA's baseline budget, so we don't know where they went, replied Henry. We don't think it is fair that customers end up paying those costs, he added.

Is there sensitivity on the part of small customers about the proposed reductions in BPA's marketing department? asked Curtis. We want cost reductions, and if we have to give up the BPA office in Missoula, okay, replied Henry. We would like some BPA presence in Montana, but we know we have to have lower costs, he said. Compared to us, BPA is overstaffed, Warner observed. We've been belt-tightening for several years, with an eye to being competitive, Crump said. It would be unfortunate if we didn't have the same BPA service as in the past, but cost is important, and I'm willing to sacrifice, he stated.

As for the GTAs, the question I have is, how would the Independent System Operator (ISO) affect them? said Crump. If we go to an ISO with one transmission charge, the problem may go away, but BPA has to think about the issue, he stated.

Kreidler noted that the Council has recently taken several actions to promote more efficiency in F&W costs. He cited the creation of the Independent Economic Analysis Board, the recently commissioned audit of BPA contracting, and the Independent Scientific Advisory Board as examples. Concerning the GTAs, Kreidler said that as part of its public responsibilities, BPA has supported rural areas with low-density discounts. If others like Enron don't have such discounts, the question is, should BPA have them? he asked. There's room for a debate in the region about public agencies and where their responsibilities lie with respect to conservation, F&W, and rural service, Kreidler continued. Is BPA going to be "lean and mean" like a private enterprise, or is it going to fulfill public responsibilities? he asked.

Sara Patton of the Northwest Energy Coalition (NWEC) said her organization is working for a clean, affordable energy future. She pointed out that recently there have been new projections of power prices in the 2002-2006 period that look higher than had been previously thought. We hope that means you'll reconsider some of the recommendations you've made, Patton said. Actually, we hope you'll reconsider them in any case, she added.

When it needed to cut costs several years ago, BPA "slashed its world-class conservation program," Patton stated. That was done in the hope utilities would pick up the funding, but with some notable exceptions, they have not, she said. According to a study by the Washington State Department of Community, Trade and Economic Development, utility investment in conservation is being cut in half, Patton noted.

As part of its "emergency" moves to cut spending, BPA asked for and got a cap on its F&W spending, she noted. BPA must look at its core missions and responsibilities under the Northwest Power Act and the Regional Review, Patton continued. You should rethink your recommendation to cut funding for the Northwest Energy Efficiency Alliance (NEEA), she told the committee. It's the "brightest and most efficient light" in energy efficiency in the region, Patton stated. It deserves to be continued, and it's a strong basis for BPA to rebuild its leadership in conservation, she said.

You should erase the recommendations you made about legacy conservation contracts, Patton urged. The low-income weatherization contracts were to help the most vulnerable in society get to the restructuring era, and you need to continue the extension of that funding, she said.

As for the recommendations about the Council, it's a bad idea to cut the capacity of the only entity in the region devoted to the long-range view, Patton said. Utilities and power providers are taking the short-term view, she stated. The cuts in renewable resource funding also take away BPA's leadership role, Patton said.

I view the recommendations about WNP-2 "with cautious optimism," Patton continued. But she added that the report orders cuts in conservation and renewables, while the cuts at WNP-2 are to be studied. There's a need to look at the other subsidies in the system, said Patton. The cost review didn't look at irrigation, navigation, or aluminum company subsidies, and that was disappointing, she stated.

Public participation in the cost review hasn't been near the level that the Council has done in the past, Patton noted, adding that two of the public hearings are being held during working hours. It's a bad precedent for BPA, she stated. The public interest community and the public support BPA as a public entity that delivers clean, affordable power, and wild salmon, Patton continued. If BPA fails in its public responsibilities, there's no reason for the region to have such an entity -- we need to help BPA get back to being that public entity, she concluded. Don Andre of the Spokane Neighborhood Action Program, a community action agency, said the cost review recommends actions that would eliminate the core responsibilities of BPA under the Northwest Power Act. It ignores subsidies and large opportunities for cost savings in the region, he said. It drastically reduces the breadth of the Council, Andre stated.

Studies have shown that children in low-income households are likely to be underweight after the winter months, indicating that families may choose to heat rather than eat in the winter, he pointed out. There are 165,000 homes in Washington state that need weatherization, Andre said. In July 1996, BPA signed contracts with the states for low-income household weatherization, he stated. These were to be "the bridge to restructuring," but the bridge hasn't reached the other side, and the river has widened, Andre said. Reneging on contract responsibilities is the wrong action, he stated. And it's the wrong time and place because low-income weatherization accomplishes cost-effective conservation and meets other critical needs, Andre said.

Curtis asked about the commitment Andre said BPA made for legacy conservation contracts. When those contracts were signed, it was understood that the work could not get done in the two-year period, Patton explained. I talked to Terry Esvelt of BPA, and the extension of time was said to be no problem, she stated. It was not additional funding, but an extension of time, Patton noted. Low-income weatherization agencies juggle DOE dollars, state dollars, and weatherization dollars, she explained. There are many intersecting sources of funds, and the agencies try to do their best for each low-income household, Patton stated. BPA said there would be an extension and that it would be amenable to program changes to use the dollars most efficiently, and we've relied on BPA's promise, she said.

I thought the cuts for legacy conservation programs reflected historic underfunding, said Kreidler. Commitments made to utilities for legacy conservation funding should be honored, stated Patton. The low-income program is different, she said. It didn't start until mid-1996, and there was an expectation we could expend the funds later, after the two years, Patton stated. The low-income program accounts for $500,000 of the $4.5 million cut proposed in the recommendation, she pointed out. It would be bad to take the risk at $500,000 a year of cutting the low-income program, instead of taking the risk of the market, given some of the new price projections we've seen, Patton said. At the last conference call of the public interest groups with the BPA Administrator, I thought this was resolved, stated Ralph Cavanagh of the Natural Resources Defense Council. These are dollars that are already allocated, and the region has made a commitment, he added.

Ralph Cavanagh of the Natural Resources Defense Council told the committee, I'm not here to circle the wagons around particular programs, but I do concur with all that my colleagues on the panel have said. The draft report represents a "a frontal attack" on the Regional Review, which all of you served on, he said. We need to turn back this challenge to the Review, Cavanagh added.

The report from the Regional Review "is my bible," Cavanagh stated. When I was back in Washington, D.C. last week, I met with people working on restructuring legislation, and when the discussion got to the Northwest, I would hold up the report from the Regional Review and say "it's a done deal," he explained. As a result, people from Ohio, Virginia, and Texas aren't trying to reinvent the Northwest -- they are buying that we have a durable regional consensus, according to Cavanagh. I'm here to find out if I've been telling the truth, he said.

If we "cherrypick items" from the Regional Review, it falls apart, Cavanagh stated. In 1996, I spent a lot of time trying to convince skeptical colleagues to support the recommendations of the Review, he said. I'm trying to find out today, will you rise to the challenge of defending the Regional Review? Cavanagh asked. If not, I'm done, and so are all of the people who worked on the Review, he said.

The NEEA, one of the Regional Review's most important recommendations, stated Cavanagh, is a regionwide institution with superb leadership, and in the mind of the Administration, it's the model for regionwide market transformation. He pointed out that NEEA received the 1997 Energy Conservation Award of the National Energy Resources Organization and that the Regional Review said NEEA should have at least a 10-year horizon. The cost review report repudiates this and instructs NEEA to make no commitments after 2001, Cavanagh stated. The question is, "is a deal a deal or not?" he said, holding up the Regional Review report.

The deal in the Regional Review was for $15 million a year to carry out existing commitments for renewable energy projects, Cavanagh noted. The cost review report takes $3 million a year away from that, he said. Rachel Shimshak of the Renewable Northwest Project testified at Monday's public hearing that the $15 million left in the budget is what's needed, Cavanagh stated. If the other committee members ask, he said, tell them that every other wholesale supplier is developing renewable capacity and that renewables are doing the best in California's competitive market. It's a commercial opportunity for the Northwest, Cavanagh said. The Regional Review already made the cuts in renewables, he stated.

With respect to the cuts in the Council's budget, I suspect the corporate members of the committee said the Council should do its share since BPA is being cut, Cavanagh said. The Council is already "on a trajectory" to become a $6.2 million-a-year organization, based on its own initiative, but the committee "wants to knock it back to $4.5 million," he stated. Taking funding away from the Council won't make BPA more competitive, Cavanagh said.

I'd like "a robust discussion" of whether the Council would do better if it had four members, instead of eight, and about whether it should move staff from regional offices to the central office, Cavanagh stated. But the cost review committee isn't the group to do it, he said. You should recommend that the Council's structure be dealt with in a Phase 2 of the Regional Review, and you should "make Chuck Collins chair it for his sins," said Cavanagh.

I agree the Regional Review has great symbolic importance -- it was a compact arrived at through considerable effort by all constituencies, said Etchart. I would urge the cost review committee that where we depart from the Regional Review, we do so only after the most serious consideration, he stated. I agree if the outcome of the cost review, which is the child of the Regional Review, is the undoing of the Regional Review's result, it is a problem, Etchart said. In the cost review, we had people from the private sector looking at what BPA could cut out to become a lean and mean competitor, said Kreidler. The question now is where to go with this report, he stated, adding the cost review meetings were private, but that "there is an accountability aspect to this." The governors are under the assumption they will receive the report and offer comment, Kreidler continued. The governor in Washington has already raised concerns about the conservation and renewables recommendations, he said. We agreed to put the draft out and begin the debate about what a public agency's responsibilities should be -- what is its soul -- what is its social conscience -- and what justifies it being public, Kreidler stated. It's good to start the debate, but Washington will want to revisit the issue of public responsibilities, he said.

It's healthy to talk about public responsibilities, agreed Cavanagh. The public impression is that the Regional Review's report "is in play," he noted. I think the corporate people understand the idea "a deal's a deal," Cavanagh said. You should just "wave this report at them" and tell them that, he urged.

The cost review is an offshoot of the Regional Review, stated Maddock. We handled the cost review the way we did because we wanted to test the question, "can we change the paradigm of operation at BPA?" The opportunity for comment has been helpful and will help create recommendations that won't destroy the spirit of compromise of the Regional Review, he said.

Bill Arthur of the Sierra Club said his organization represents some 35,000 members and that the Sierra Club has been involved in restoring F&W resources in the Columbia River for many years. BPA can and ought to be a vital part of the 21st century, but it must have as part of its mission environmental protection, F&W restoration, and investment in energy efficiency -- otherwise it has no purpose, he stated.

Some of your recommendations, such as reducing corporate overheads and giving BPA the ability to do direct financing, make sense, Arthur stated. But others "strike at the core of BPA's mission and are plain wrong," he said. The proposals to eliminate BPA funding for energy conservation and renewables vitiate the Northwest Power Act, according to Arthur. "They are penny-wise and pound-foolish and are flatly illegal," he said. Eliminating BPA's role in conservation and renewables is contradictory to the Regional Review -- that role is what makes BPA a unique and valuable part of the Northwest, Arthur stated. Don't abandon BPA's role in directly acquiring conservation, he urged. States and utilities haven't taken it on, and so BPA should be the acquirer of last resort, Arthur said.

I strongly disagree with cutting the Council's budget, Arthur stated. We can engage in a debate about reconfiguring the Council's role, but he said the cost review recommendations "cut at the core of the Council's role." We have to have "an honest overseer of BPA," Arthur stated. We "don't need BPA running amok," he added.

I applaud the recommendations that WNP-2 should "fly or fall" on the market, he continued. It's been "an economic dog for a long time," Arthur said, adding that he recommends the region "do a mercy-killing" of the plant and get on with it.

BPA's financial concerns can be addressed by looking at subsidies, he suggested, stating that the aluminum companies "have walked from their fair share of the cooling tower." We need to revisit numerous subsidies, such as those for irrigation pumping, that were identified in a study by Congressman Peter DeFazio's office, Arthur recommended.

Your proposals will damage efforts to protect F&W, he told the committee. We are revisiting the MOA and whether there can be an extension of the cost cap, Arthur noted. There has been waste in the region's F&W investment, and no one wants to see that, he said. But we won't roll forward the MOA with some cost number and freeze the program in place, stated Arthur. I don't know how you achieve the goal of maximizing the value at hydro projects without an agreed-on salmon program, he said.

We're concerned about cuts in BPA's marketing program, Arthur said. If the subscription process fails, marketing will be needed to sell power out of the region, he stated. Too many of these recommendations "shred the fabric" of BPA's core mission, Arthur said. You should tell your colleagues, he urged, that BPA is at a crossroads in determining its mission for the 21st century and that it "is in the crosshairs of the energy deregulation debate," he stated. If you want to save BPA, let's make cost reductions that make sense, said Arthur. Let's look at the sacred cows and the subsidies and retain conservation, renewables, and F&W responsibilities, he stated. We need a real salmon recovery plan to give predictability to the utilities and to BPA, Arthur said.

The subscription process will fail because of the risks and uncertainties associated with not knowing salmon costs, he predicted. "People won't sign up for a black box," and short-sighted cost-cutting won't solve that, Arthur concluded.

DOE has told us that a transition cost mechanism must be in place before subscription goes forward, noted Kreidler. Finding that mechanism presents a challenge so we can minimize uncertainty, he said.

I want to underscore one of your concerns that is similar to what the first panel said, stated Etchart. That's the need for more efficiency in F&W spending, he said. As for WNP-2, if there's one good management story in the region, it is the Supply System's effort to bring costs more in line with the market, stated Etchart. How is "a mercy-killing" in anyone's advantage? he asked. We're skeptical they can bring the costs to below the market, Arthur replied. We can live with separating it out and letting it meet the market test, he added. But we prefer to move there faster because that's where we think it's going to end up, Arthur said.

Kreidler and Arthur discussed the efficiency recommendations for the Corps. I thought they might be "code" for revisiting issues like spill, said Arthur. They are not at all, responded Kreidler, noting that the statistics for the Corps have not been that good. That's why we support direct contracting authority -- the Corps "has been a disaster," said Arthur. But if this sends a signal to "raise the bar" on flows and spills, "we'll be doing battle," he warned.

Chuck Eberdt of the Washington State Association of Community Action Agencies said "I want to condemn the notion of doing away with conservation." You should be aware that the low-income weatherization program we agreed to with BPA is streamlined and computerized, he stated. The extension of the contract is important to thousands of households, including seniors and families with small children in all four states, said Eberdt.

Recently I've been to public meetings to discuss changes in the electricity industry, he noted. I was impressed by comments the public made, Eberdt said. I contrast what they said to what we heard earlier today, he stated. People are willing to bail out from BPA if there is an incremental-cost disadvantage for the short term, and these are the same people who have benefited from low-cost power for years, Eberdt said. I heard the public talking about pride in the Columbia River system, and the pride in BPA and public power is because those institutions will do things that other institutions won't do, he continued. I encourage people to remember BPA's purposes -- conservation and renewables and the foresight they represent over the long term should not be abandoned, Eberdt said.

Teri Ottens, Idaho Local Government Energy Coordinator, said while local governments in the Northwest recognize that cost reductions are necessary for BPA to survive in a deregulated energy market, the cost review's recommendations to eliminate conservation market transformation initiatives and renewable resource projects after 2001 "go too far and are beyond the scope of the review." The city and county associations of Idaho, Montana, Oregon, and Washington represent well over 800 governmental units, many of which operate electrical utilities, she stated. We have long been involved in energy-related issues, including conservation and renewables, and "are fully in support of these programs," said Ottens. She offered seven reasons why they oppose the "drastic steps" recommended by the review: -- Under the Northwest Power Act, BPA is charged with public purposes and has a current legal duty to continue to provide them. BPA has been a leader in helping the Northwest use energy efficiently, "one of BPA's most important and cost-effective services." -- Positions on deregulation adopted by local governments recognize BPA's role and call for BPA to maintain a place in the Northwest deregulated energy arena, including the provision of public involvement and public purpose services. -- The Regional Review and the Idaho Governor's Task Force on Public Purposes specifically support these efforts and spending by BPA on public purposes and conservation. Eliminating conservation funding may save money in the short term, but could raise rates for consumers in the long run if a comprehensive conservation plan is abandoned completely. -- The recommendations ignore BPA's F&W programs, an area that may hold significant cost savings. -- The regional conservation and renewable programs were developed with BPA as a full partner in a yearlong process of making decisions and setting priorities. Without BPA's continued support, these regionally set priorities may be in jeopardy, just as many conservation programs and their results are beginning to be recognized. -- Small utilities depend on many BPA services for energy and cost analysis, conservation program assistance, and information on building and energy codes. -- Local governments have partnered with BPA for over 15 years to accomplish major progress in energy conservation. These programs have saved millions of dollars, and if eliminated, will have serious impacts on statewide energy codes, residential and commercial building practices, and market transformation efforts under way with the NEEA.

Richard Heitman of Inland Power & Light Company said Inland serves about 30,000 mostly residential customers in 13 counties. We have been a 100 percent BPA customer for all of our 60 years, and we plan to remain a BPA customer for the next 60 years, he said. We're confident BPA is "the best show in town," and we'll continue to do business with them, stated Heitman. You have to balance the comments of those who represent those who pay the bill with those who represent the social interests, he told the committee.

Concerning the cuts in BPA's power marketing, Heitman said, our customers expect price and customer service. We're a partner with them like BPA is a partner with us, he said. There probably are efficiencies that can be gained, but I'd be disappointed if BPA eliminated its power marketing and customer service, Heitman stated. We need folks to work with us to meet our customers' needs -- I'd hate to see it go away completely, he said.

Several of the recommendations require legislative changes, Heitman noted. Opening up Northwest issues to federal legislation is risky and could make things worse rather than better, he said. If the Northwest Power Act hadn't been passed, BPA would be selling under market now, Heitman stated.

I was encouraged by the recommendation to get BPA, the Corps, and the Bureau to work together and save some money, he said. It's a great idea -- the Bureau "is on board" -- let's get the Corps on board, Heitman stated.

The Supply System's regulators will have something to say about the recommendations for WNP-2, he said. The question with respect to separating WNP-2 from the Federal Columbia River Power System is how difficult is it to market nuclear power in this day and age, Heitman stated. Nuclear power "has a bad taste" in this region due to WPPSS, and you may want to think about that, he suggested.

Heitman called reducing corporate overheads "a great idea," adding that "we've turned over all the rocks" at Inland and found efficiencies. Most of what we found were little things that added up, he said. BPA has to operate under outdated civil service laws, he acknowledged. But "rifleshot legislation" to remedy that may not be worth the risk, Heitman said.

When BPA was formed, one of its purposes was to provide access to electricity to people who lived in rural areas, he continued. I have a concern that the low-density discount may be perceived as a subsidy, Heitman stated. We need to weigh the costs and benefits to the hundreds of thousands of farm families that receive those benefits, he said. There may be some room for improvement there, Heitman stated, suggesting a methodology be developed to make sure only true rural low-density systems get the benefits. "Don't take my benefit away, like you've heard the other folks say," concluded Heitman.

The Supply System thinks WNP-2 can be marketed at 20 mills in 2000 and that they can compete, said Kreidler. It's in our best interest if they are successful -- it will help cover decommissioning costs, and that's no small sum, he added. The power certainly will be needed, and I hope it works out that way, stated Heitman.

Mike Baker of Modern Electric Water Company said his company provides electricity and water service to 9,500 customers in the Spokane Valley. We're one of BPA's newer customers, he noted. The cost review recommendation package is a very good step, said Baker. All parties have to make some sacrifices to make BPA competitive, he stated.

I have a concern about reducing BPA's marketing staff, Baker stated. To eliminate the account executives would be a step backward, he said. We're all looking at price, but there has to be customer service too, Baker stated. The account executives are invaluable in explaining issues to us, he added.

I know F&W costs were not in your scope, but I would like to have seen your recommendations on them because they would have been based on business decisions, not political decisions, Baker said. BPA has some responsibility for F&W, but a minimal amount, he continued. Fish restoration should perhaps be funded through a meters charge if it is valuable to everyone in the region, Baker stated.

BPA has some responsibility for public purposes, but it is minimal, he said. This should be done at the local level, not regionally, according to Baker. All subsidies -- irrigation, navigation, and the low-density discount -- should be looked at, he suggested. As we move to true deregulation, it seems like giving a low-density discount to utilities who qualify for it is an unfair advantage, said Baker. He concluded by saying he supports the public power panel's position on the GTAs.

Curtis asked about his comments on the low-density discount. Baker said its purpose is to help utilities serve rural customers where there are high distribution costs. In a deregulated world, utilities will collect a wires charge to cover the cost of local distribution, he stated. If they recoup costs that way, they oughtn't to be eligible for a discount in their wholesale power costs, Baker said.

Hobart Jenkins said he was there "wearing the hat of the lowly, silent consumer." I was surprised to learn today that the Regional Review "had been immersed in holy water" -- I'm sorry I missed the ceremony, he stated. I've been deregulated in telephones and airlines, and I've benefited so much that now I'm spending more on them than ever, Jenkins said.

I've heard there's a groundswell for all the things BPA funds, he continued. But we consumers ask why should we, who buy power from BPA, pay 100 percent for those who don't pay anything, Jenkins stated. Why should we from Idaho send money to the I-5 corridor when they don't buy anything from BPA? he asked. I've heard the states and utilities haven't stepped up to the plate to fund things, but maybe their constituencies don't want to pay for them, Jenkins stated. It's a philosophical question, he added.

I like this report, I like what the Council has done, and I'm proud of the work you've done, Jenkins said. The consumer "can't be Daddy Warbucks for everybody's social scheme," he commented. Why does everyone go to BPA? asked Jenkins. Is it because "BPA has bigger pockets while others have zippers?" he inquired. Last time I looked at the Columbia River, I saw more than power being generated, Jenkins stated. I saw boats and barges, and I also heard that Portland was saved from a big flood, he continued. Why don't the other river users help pay -- why is BPA the only pocket? Jenkins asked.

Bonnie Mager of the Washington Environmental Council said the public interest panel had voiced most of her comments, and she thanked Kreidler for his comments about public agencies versus private agencies. In a time when "the whole world has been convened to reduce greenhouse gases," the cost review's recommendations "pose a great threat," Mager said. BPA has the responsibility to look to the future, a future that will include global warming, she stated.

BPA should champion conservation and renewables, which are forward-looking programs, Mager said. The recommendations to cut these programs reminds me of something I heard the mayor of Chattanooga say recently -- "eliminating them would be like trying to get to Minnesota by driving to Seattle," she stated. It would set us back in our efforts to get clean air and water and to deal with global warming, Mager said. She concluded by suggesting that all meetings be held in the evening so more people could attend.

Laura Ackerman said she is a citizen who lives and works in low-income neighborhoods in Spokane. People need energy conservation, Ackerman stated. Energy conservation and renewables are not luxuries -- they are necessities, she said. I was disappointed that I didn't see any cuts in the subsidies for aluminum companies and irrigation, Ackerman stated. She mentioned a recent Spokesman-Review article that talked about efforts to push "eco-tourism" in northern Idaho. In light of that, we have to look at our obligations to salmon, Ackerman stated. I'm also concerned about the reduced role for the Council recommended in this review, she said.

I'm not against making BPA or the F&W budget efficient, but some of your proposals "seem to lack vision," and vision and creativity will keep BPA true to its mission, commented Ackerman. There's a lot of public support for saving salmon, but unfortunately, those recommendations have been lost, she stated.

Before adjournment, Kreidler reflected that in the two public meetings that have been held, no one has spoken much about keeping the long-term benefits of the federal hydro system in the Northwest. In the Regional Review, retaining those long-term benefits was a major focus, he observed.

Members of the Cost Review Management Committee, created by the Northwest Power Planning Council and the Bonneville Power Administration, are: Todd Maddock, chair; Curtis Bostick, Joyce Cohen, Chuck Collins, Jim Curtis, John Etchart, Steve Hickok, Mike Kreidler, Robert Lane, Rosemary Mattick, and William Vititoe.

^ top