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Northwest Energy Review Transition Board
John Etchart,

Montana

851 S.W. Sixth Avenue, Suite 1100

Portland, Oregon 97204-1348
John Savage,

Oregon

Phone 503-222-5161 or 1-800-452-5161 

FAX 503-820-2370
Tom Karier,

Washington

Todd Maddock,

Idaho


 
Thursday, July 1, 1999
NORTHWEST ENERGY REVIEW TRANSITION BOARD
Governor Hotel, Portland, Oregon

 

HEADLINES____________________________________________________________

I. Greetings and Introductions
II. Review of House Staff "Northwest Chapter" Discussion Draft
III. Transition Board Decision on its Report on Recommendations to Effect FERC Oversight of Bonneville Transmission
IV. Staff Proposal for a Dialog on a Northwest Regional Transmission Organization (RTO)
V. Other
 
 

I. Greetings and Introductions.

Transition Board Chairman John Etchart welcomed everyone to the meeting; he led a round of introductions, and a review of the agenda.

II. Review of House Staff "Northwest Chapter" Discussion Draft.

Wally Gibson said that, about a week ago, Transition Board staff received a draft of a Northwest chapter for the national deregulation legislation from the House delegation staff -- "Staff Draft: Title X -- Bonneville Power Administration." This draft chapter was accompanied by an invitation to a meeting of all of the Northwest stakeholders with House delegation staff on July 11-12.

Gibson said Transition Board staff have prepared a draft response letter to the House staff, as well as a redline draft of their legislation, incorporating the substantive comments from the Transition Board’s report, Report on Recommendations to Effect FERC Oversight of Bonneville Transmission. The latter is a cleaned-up version of what you talked about last meeting, Gibson said; we’re asking you to approve this draft as an official Transition Board document. Anyone have a problem with what the staff has produced? Etchart asked. No objections being raised, Etchart called for a motion, which was made by Todd Maddock and seconded by Tom Karier. Motion passed unanimously.

Can you give us just a bit more background? Etchart asked. Gibson explained that Transition Board staff received a request for specific comments; Mark Walker talked to Glenda Becker, who agreed that a redline version of the draft legislation would be an appropriate way to convey the Transition Board’s comments. So they asked us for comments, we produced this redline version and a cover letter? Etchart asked. That’s correct, Gibson replied.

Generally, the delegation staff draft is quite similar to the existing Administration bill, Gibson continued. There are some changes; Transition Board staff was asked by the delegation staff to meet the parties for several days to iron out internal differences -- that meeting took place, and yielded at least two substantive changes, items the Transition Board had been concerned about in the Administration’s bill. We highlight those changes on the first page of the cover letter, Gibson said. He spent a few minutes going through this document, noting the changes to which he referred.

Gibson noted that there were several other items that were not addressed in either the Administration’s bill or the House staff’s rewrite, which have been included in the Transition Board’s redline version of the proposed legislation. He went through this draft page by page, noting the Transition Board’s suggested changes.

Why was the recommendation that hearings be held in the Northwest not included in the bill? Karier asked. The language was probably taken from the Administration bill – it was probably just an oversight, not a point of controversy, Walker replied.

Gibson continued on through some of the additional changes to the legislation requested in the Transition Board cover letter and redline version, touching on oversight of future BPA investment in the transmission system, rate adjustment mechanisms, BPA challenges to licensee or public utility actions, repayment methodology, regional review of cost management associated with transmission surcharges and other items.

One participant asked whether the redline draft covers all of the issues raised in the cover letter and the Report on Recommendations to Effect FERC Oversight of Bonneville Transmission. It is intended to do so, Gibson replied. Also, with regard to the phase-in of cost mitigation requirements, you say that’s current practice for FERC -- is that set forth in law or rules, or is it just standard practice? the participant asked. We understand it as practice, Gibson replied, but it is not set out in law or rule. Also, said the participant, with regard to the cost review, in the redline draft, you say the review is too late; in the letter, you say it’s too short a time for review. Actually, we believe it’s both too late and too short, Gibson replied – that’s what the letter was intended to say. In response to another suggestion, Gibson agreed that it would probably be appropriate to suggest a time frame for accomplishing this review in the cover letter.

The T-Board always talks about a four-step process in a transmission surcharge, Etchart said. Is that reflected here? Yes, it’s in the redline draft, Gibson replied. Al Wright made the point that the staff’s redline version needs to discern between their comments and the changes made by other entities. Also, Wright said, after more than two years of work, you’re now handing this redline draft off to the Congressional delegation. If this is going to make it through the Congressional meat-grinder, he said, it needs a champion. If you are going to find one, said Wright, it would probably be appropriate to delete the last two sentences of the first paragraph of the cover letter.

After a brief discussion, it was agreed to delete these sentences, and that the letter will be revised to reflect the fact that staff will be at the meeting to promote these recommendations and answer questions -- not to negotiate or give ground. Walker added that it is important to be clear that, when the meeting is over, anything agreed to by staff at the meeting will need to be reviewed and approved by the full Transition Board.

BPA’s Randy Roach noted that the region has been working together on this issue for a long time, to develop regional consensus and a unified position for presentation on Capitol Hill. He raised the concern that the redline draft has not been circulated for public review, and that most participants only saw it this morning or last night. He said he has concerns about mistakes and possible unintended consequences in the language of the redline draft, and about Transition Board staff submitting a draft to Congress that has not been circulated for public review.

Roach thanked the Transition Board staff, on behalf of BPA, for all of the hard work they have expended on this effort. He then touched on a number of specific concerns BPA has with the language in the draft report and redline version of the legislation:

  1. The provision for FERC review of transmission system cost recovery
  2. The application of the just and reasonable standard to the mitigation of unreasonable adverse impacts on remote transmission customers from changes in General Transmission Agreement costs
  3. The application of civil and criminal penalties to BPA
  4. The conditions for application of the cost recovery surcharge
  5. The equitable application of the transmission surcharge
  6. The requirement that the appropriate level of financial reserves for triggering the surcharge be determined by the rate case
  7. The requirement that any sale or resale of transmission by the Power Business Line be subject to the Federal Power Act
  8. The fact that the draft report would make a number of unnecessary and potentially conflicting changes to existing law, including a generic "FPA trumps all" provision
  9. The fact that, in BPA’s opinion, the report is in error when it states that, with regard to the transmission surcharge, the Administration’s bill strongly qualifies FERC’s authority, and gives BPA itself significant authority over the features and application of such a transmission surcharge.
Reaction or response? Etchart asked. Gibson replied that Roach’s comment about the generic "FPA trumps all" proviso on page 12 is understandable. However, this language was the result of many hours of discussion; the outcome of that discussion was a general feeling that a generic proviso was a good approach, Gibson said. Some of BPA’s comments represent ongoing disagreements, while others are good comments about oversights on our part, he added. Etchart suggested that Gibson sort through BPA’s comments and discuss them directly with Roach; Gibson replied that he will do so, and will also make sure that the redline version of the legislation is consistent with the report.

Dick Watson noted that many of Roach’s comments were directed at the draft report, which has been available for review for several months; he expressed concern that these comments are being presented to us at this stage in the process. Many of those comments undoubtedly fall into the "ongoing disagreements" category, Etchart observed. Gibson added that there will be further opportunity to make changes to these documents, as the stakeholders identify points that need to be strengthened or clarified -- this document doesn’t stop here, he said.

One meeting participant suggested that the Transition Board simply register itself as a PAC and be done with it. He noted that he will be curious to see why BPA is initiating its subscription process, then distributed copies of the May 1999 issue of the IEEE Beep, a newsletter laying out an alternative restructuring for BPA’s consideration. While you’re thinking up reasons for why you want to change the transmission and distribution system, he said, you may want to consider this.

Ken Canon, representing Northwest Industrial Customers, commended the Transition Board staff for putting the draft report, cover letter and redline markup of the proposed legislation together. We encourage you to keep them moving forward, he said; obviously, we have some disagreements with some of the specific language they contain, but the dialogue needs to keep moving forward. Canon noted a few specific areas of concern for his constituents, applauding the inclusion of the cost recovery adjustment clause and the 4 (h) (10)(c). One issue we will be raising, he said, has to do with the language on Page 6, line 10: "The transmission surcharge mechanism set forth in paragraph (1) shall be implemented by the Bonneville Administrator only when the Bonneville Administrator projects that available financial reserves attributable to the power function will be less than $150 million." It is important to realize that BPA still has a single fund, Canon said; we wouldn’t want to get into a situation where that single fund contains $400 million or $500 million, BPA decides that $150 million of that is attributable to power, and that could still trigger a transmission surcharge, said Canon.

Rob Walton of the Public Power Council said his organization supports much of what is in the draft; we quibble with a lot of the details, and we will be in Washington D.C. two weeks from now to continue that process. We agree that this is a good product, Walton said, and should keep moving forward.

Next, Jim Litchfield, a consultant for the investor-owned utilities, suggested that it would be appropriate for the Transition Board to continue to search for comments in the region, even as they attempt to respond to the Congressional request. He echoed Wright’s comment that it would be appropriate for the Transition Board to take a very active role in promoting its recommendations, noting that the first subject likely to receive Congressional discussion is the transmission system surcharge section. Litchfield encouraged the Transition Board to continue to stay involved in this effort, and to represent the governors and the region. We will continue to work with you and your staff as you move this effort forward, he said.

Good comments, said Etchart -- we’re going to continue to respond to comments and refine these work products as the process continues. He encouraged all of the stakeholders to continue to provide input to these documents, and said staff will do their best to incorporate them.

III. Transition Board Decision on its Report on Recommendations to Effect FERC Oversight of Bonneville Transmission.

This topic was discussed during the previous agenda item.

IV. Staff Proposal for a Dialog on a Northwest Regional Transmission Organization (RTO).

Dick Watson provided an overview of this issue, distributing a paper, Staff Proposal for a Dialog on a Northwest Regional Transmission Organization (RTO). Watson spent a few minutes going through its contents, explaining that Transition Board staff put together these ideas to inform a meeting they hoped would take place later this month. We then circulated this paper to various entities in the region, including BPA, Montana Power, PNGC, Oregon PUC, Seattle City Light and others, Watson said.

Watson said the centerpiece of this planned meeting is a three-part panel discussion, including wire owners, wire users and regulators. Basically, the idea is that we would put a series of general questions to these panels -- where does the Northwest need to go with respect to a regional transmission organization, what would be its appropriate size, what should such an RTO look like, what major issues would it need to address etc.

The response we received from those we contacted was that, while this is a good idea, it may be a bit premature, said Watson. In particular, the transmission owners are wrestling with how to respond to the NOPR, and with their long-term thinking about where they’re going with their transmission in the future. At the same time, said Watson, we can’t afford to wait very long before broadening this discussion to include more than just the transmission system owners. Their suggestion was that we get past the submission date for the comments on the NOPR, but start this process soon there after – we’re now proposing late August or early September for this meeting, he said.

Maddock said that, in his opinion, this is an excellent idea, and should be at the top of the Transition’s Board’s "to do" list. Karier, Etchart and Wright agreed, saying that, from their perspective, such a symposium would be very useful, and should take place as soon as possible. Brian Silverstein said BPA also supported this idea, suggesting that, given vacation schedules in the summer, early September may be a more appropriate date for the symposium.
 

V. Other.

Etchart noted that BPA has put forward what it is calling its administrative efficiency proposal; it seems to me, he said, that the Transmission Board, on behalf of the governors and the other entities involved in this organization, needs to take an interest. We need to consider whether A) these administrative efficiencies are worth pursuing, and B) how we can help Bonneville accomplish these efficiencies, Etchart said. He suggested that it would be appropriate to invite BPA to make a presentation on these efficiencies at a future Transition Board meeting, to give the Transition Board an opportunity to discuss them and make suggestions. It was so agreed, although one BPA representative suggested that it may be appropriate to discuss this issue with the BPA administrator prior to inviting other entities, such as BPA employee organizations, to speak at the meeting.

With that, the meeting was adjourned.

(Minutes prepared by Jeff Kuechle, NWPPC contractor.)