Legal Separation of
Bonneville’s Transmission Function

Proposed Work Plan for the Transition Board

Revised March 18, 1997

 

Background

The Comprehensive Review Steering Committee’s primary goal in its recommendations for transmission "is a transmission system whose structure and operation help ensure a fully competitive generation market" by providing equal access to the transmission system for all competitors. The Steering Committee’s "recommendations are also designed to improve the efficiency of use of the transmission system and to maintain the system’s reliability as the pressures of competition on utilities increase." Finally, the Steering Committee intended that changes in Bonneville’s transmission function "not jeopardize or diminish the legal obligation and ability of Bonneville to meet fish and wildlife and other obligations." Key recommendations included the following:

Other considerations are:

The Steering Committee expected that legislation would be required to legally separate the power marketing and transmission functions of Bonneville. To succeed in the separation effort, the Transition Board will need to develop the greatest possible degree of regional consensus, and will require involvement by IndeGO parties, Bonneville and other key interests.

This draft work plan is divided into phases to assure that the progress being made under the IndeGO effort is not delayed, and to get some new initiatives underway as soon as possible.

Phase I: Establish Independent Grid Operator (IGO) that includes Bonneville

This effort is already underway. The IndeGO participants are moving forward with establishment of an IGO which will be regulated by the Federal Energy Regulatory Commission to ensure independence of transmission operation and improve efficiency. IndeGO has broad participation and Bonneville is moving as quickly as possible to be a participant. This activity will continue through 1997, and Bonneville is encouraged to work closely with the other IndeGO parties under the assumption that work leading to legal separation is underway.

Phase II: Identify Issues relating to Bonneville’s Legal Separation

A work group should be established immediately to identify the principles and issues necessary for a legal separation of Bonneville’s generation and transmission functions. The group would include the necessary legal, policy, political, technical and economic skills to carry out the necessary work. This group would identify which laws or regulations would need to be changed, identify any stumbling blocks and unresolved issues and bring those issues to the attention of the Transition Board. Transition Board staff will consult with PNUCC and other interested parties to identify the membership of the Work Group. The Work Group should also be charged to investigate the need for and nature of limited actions that could be implemented prior to 1998 that would make possible Bonneville’s participation in the IGO. The Work Group’s tasks:

Task 1 - Establish Work Plan and Project Schedule

  1. Design schedule around a goal of having a consensus proposal by fall 1997. A draft schedule is attached.

Task 2 - Review of BPA’s Current Statutory Directives

  1. Evaluate the current status of BPA’s statutory directives and identify areas where BPA organic statutes or their implementing regulations are likely to be inconsistent with achieving the Review’s goals. The main statutes that will need to be reviewed include:
  2. Determine areas where the BPA Administrator is directed to use all authorities to recover costs, including transmission rates.
  3. Examine the maintenance of current transmission reliability with financing through the appropriations process.

Task 3 - Alternatives for Splitting the BPA Fund

  1. Formulate alternatives for separating BPA’s financial funds while meeting BPA’s obligations for net billing and repayment of WPPSS, salmon recovery and Treasury borrowings.
  2. Assess the risks associated with alternatives.
  3. Develop a preferred alternative for separating the single BPA fund between generation and transmission.

Task 4 - Identify and evaluate alternatives for achieving separation

Task 5 - Governance & Organizational Structure

  1. Define and evaluate alternative organizational structures for a separated BPA.
  2. Analyze organizational alternatives balancing the conflicting objectives of independence, regional control, FERC regulation, efficiency incentives and cost control.
  3. Clearly identify the strengths and weaknesses of each organizational alternative.

Task 6 - FERC Regulation

  1. Define specific features of FERC regulation of Bonneville necessary to achieve equivalence with FERC regulation of jurisdictional utilities.
  2. Identify inconsistencies with existing statues.
  3. Identify alternatives for achieving equivalent FERC regulation of Bonneville, strengths and weaknesses.
  4. Develop a preferred alternative.

Task 7 - Risk Assessment

  1. Develop a political feasibility and risk assessment of alternatives. The goal is to ensure that the necessary changes are secured with the lowest risk of unexpected outcomes.

Task 8 - Outline of Draft Legislation

  1. Develop an outline of alternative approaches that would separate BPA transmission and provide FERC accountability.

Task 9 - Examination of Options for Fatal Flaws

  1. Once the options are fully defined and understood, do they face obstacles or risks that outweigh the potential benefits?

If, after the completion of the work in Phase II, legislation is judged to be in the interest of the region, Phase III and Phase IV will undertake the drafting and passage of the needed legislation.

Phase III Drafting of Separation Legislation

If moving ahead along the legislative path seems justified, a work group should be assigned to draft legislation. Concurrently, the Transition Board should begin to line up support from the delegation and identify a political strategy to get legislation in place for the 1998 session of Congress. This effort should include Bonneville and all other affected parties, and work should begin no later than early fall of 1997. If it is determined that the legislative path is not justified, work should proceed on achieving separation and FERC accountability by non-legislative means.

Phase IV Achieve Legal Separation by 1998

Once the legislation is drafted and political support is in place, the region should move to pass the necessary legislation by the end of 1998. Since the IndeGO efforts will be continuing during this time period, it is hoped that the legislation will merely cement into place what is already being accomplished in practice. If it is determined that legislation should not be pursued, non-legislative means of achieving separation and FERC accountability would be pursued.

Workplan Chart