Addendum to the Fourth Power Plan

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When the Draft Fourth Northwest Conservation and Electric Power Plan (draft power plan) was released in March 1996, the region had just embarked on an effort to develop consensus on how the electricity industry of the Northwest should be restructured to accommodate increasing competition. That effort, the Comprehensive Review of the Northwest Energy System, was convened by the governors of Idaho, Montana, Oregon and Washington. The governors appointed a steering committee to conduct the review and charged them to "develop, through a public process, recommendations for changes in the institutional structure of the region’s electric utility industry. These changes should be designed to protect the region’s natural resources and distribute equitably the costs and benefits of a more competitive marketplace, while at the same time assuring the region of an adequate, efficient, economical and reliable power system."

To support this process, the draft power plan was intended as a reference tool on the changes in the industry. Public comment on the draft power plan was left open for a year with the goal of revising the plan when the conclusions of the Comprehensive Review, as well as other public comment, could be taken into account.

This addendum, in combination with the original draft power plan, accomplishes that goal. The two taken together constitute a revised Draft Fourth Northwest Power Plan. The Council will accept public comment on the revised draft until October 31, 1997. Public hearings will be held in each of the states during September and October. The final plan is scheduled for adoption in December 1997.

This addendum has two principal objectives. First, it reviews important developments since the release of the draft power plan. These developments include what has happened with respect to: generation and conservation resources, gas and electricity markets, electricity loads, institutions, and policies. While there have been significant developments in the electricity industry since March 1996, none of them invalidates the analysis contained in the draft power plan. The more important developments include the creation of new institutions in response to the increasingly competitive utility industry, and the continued evolution of policies at the state and federal levels designed to facilitate competitive electricity markets.

The second purpose of the addendum is to examine the relationships between the analysis contained in the draft power plan and the recommendations from the Comprehensive Review’s Steering Committee. In several instances, this addendum suggests approaches that would help move the Northwest from the usually general nature of the Steering Committee’s recommendations to the specifics that will have to be addressed by legislatures and state and local regulators.

The draft power plan focused primarily on issues raised by the transition to competitive electricity markets and highlighted, where possible, important considerations and principles in that transition. The Comprehensive Review dealt with many of the same issues. In general, the recommendations from the Review are supported by the analysis of the draft power plan or, where they are not, the recommendations reflect legitimate policy choices on the part of the Review’s Steering Committee. In many instances, however, the recommendations from the Review are specific in intent but, of necessity, lacking in detail. For example, one recommendation is that provisions for recovering stranded investments be made as part of opening retail electricity markets to competition. However, the recommendation provides little guidance regarding how stranded investment recovery might be structured and why. This addendum builds on the analysis in the draft power plan to suggest important considerations in recovering stranded investments. The same is true with respect to several of the recommendations for competition and consumer access, and provisions for conservation and renewable resources.

This addendum also describes potential new roles for the Northwest Power Planning Council that are based on recommendations from the Comprehensive Review. After the conclusion of the Comprehensive Review, the governors of Idaho, Montana, Oregon and Washington created the Northwest Energy Review Transition Board to oversee implementation of the Steering Committee’s recommendations. The Transition Board is made up of the four governors’ representatives that served on the Steering Committee: Northwest Power Planning Council Chair John Etchart of Montana, Council Member Todd Maddock of Idaho, Council Member Mike Kreidler of Washington and Roy Hemmingway of Oregon. Council staff are supporting the work of the Transition Board. During the transition to a more competitive electricity market, the Council has been asked to help the region ensure that the benefits of competition are shared by all electricity consumers, and that public purposes, such as energy-efficiency improvements, development of renewable resources and services to low-income customers, continue to be provided.