Comment on document 2003-18

Description

Mark Walker Director of Public Affairs Northwest Power and Conservation Council th851 SW 6 Avenue, Suite 1100 Portland, OR 97204 Mr. Walker: Please accept these comments from Emerald People’s Utility District on your white paper entitled: “The Future Role of BPA in Power Supply” The Council is interested in public comment on the following 4 questions (our comments are in italics and blue): 1. Do you think the analysis of the problems and issues presented in the paper is accurate? Yes, but we disagree with the paper’s conclusion that resolving the uncertainty about who was responsible for serving the 3,300 MW of additional load on BPA, and that following the Comprehensive Review’s recommendations would have lessened the impact of the West Coast Energy Crisis. We doubt it would have made any difference. At the very least, this conclusion needs more explanation. 2. Do you agree that a more limited role for Bonneville in power supply as described in principles is appropriate? Yes, with the added considerations specified in question 4. 3. Do you think the question of Bonneville’s future role in power supply needs to be addressed in the near future? Yes, this issue needs to be resolved in the near future. We believe that Emerald, and the utilities industry as a whole, will need to make significant resource decisions for the post-2006 time frame and we need to do it soon. Uncertainty, and therefore indecision, about who is ...

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• Publié par: Shiev
• Nombre de lectures: 15
• Langue: English

Extrait

1

Mark Walker

Director of Public Affairs

Northwest Power and Conservation Council

851 SW 6

th

Avenue, Suite 1100

Portland, OR

97204

Mr. Walker:

Please accept these comments from Emerald People’s Utility District on your white

paper entitled: “The Future Role of BPA in Power Supply”

The Council is interested in public comment on the following 4 questions (our comments

are in italics and

blue

):

1

.

Do you think the analysis of the problems and issues presented in the paper is

accurate?

Yes, but we disagree w

ith the paper’s conclusion that resolving the

uncertainty about who was responsible for serving the 3,300 MW of additional

load on BPA, and that following the Comprehensive Review’s recommendations

would have lessened the impact of the West Coast Energy Crisis.

We doubt it

would have made any difference.

At the very least, this conclusion needs more

explanation.

2

.

Do you agree that a more limited role for Bonneville in power supply as described

in principles is appropriate?

Yes, with the added considerations specified in

question 4.

3

.

Do you think the question of Bonneville’s future role in power supply needs to be

addressed in the near future?

Yes, this issue needs to be resolved in the near

future.

We believe that Emerald, and the utilities industry as a whole, will need to

make significant resource decisions for the post-2006 time frame and we need to

do it soon.

Uncertainty, and therefore indecision, about who is responsible for

developing resources could lead to energy shortages and higher prices.

Emerald

is specifically interested in going Slice when our current 5 year contract expires in

September 2006.

To make this shift to Slice we believe that we will need a

generation base to effectively manage the Slice product.

Therefore, having

certainty about resource develop responsibilities, as well as having BPA offer new

contract in 2006, are necessary short-term decisions from our perspective.

This

process should start in the first quarter of 2004, and be completed by the end of

the year.

Moreover, it would be redundant and a waste of the region’s time if BPA

and the Council run separate parallel processes for the future role of BPA in the

post 2006 era.

The Council and BPA should coordinate and combine their efforts.

2

4.

Do you think the principles or characteristics proposed by the Council are

appropriate guidance for consideration of Bonneville’s future role?

NWPCC Proposed Principles for the Future Role of Bonneville

1.

The goal should be long-term contracts (20 years) both to protect the system

from interventions from outside the region and to reduce uncertainty for both the

customers and Bonneville.

We are not sure if we support 20 year contracts,

given our concerns about the ability and the mechanisms to adequately control

BPA’s costs.

We are concerned that if we all sign 20 year contracts there will be

inadequate incentives for BPA to control costs (see further comments under

Principle 5). We do support signing contracts with a minimum of 10 years.

2.

Bonneville’s primary role, in addition to transmission, should be managing the

operation and marketing the output of the Federal Columbia River Power

System.

The FCRPS is a multipurpose public resource and Bonneville has a

record of real expertise in its operation and marketing.

Agree.

3.

Bonneville’s role in providing power beyond the capability of the federal base

system should be limited to bilateral contracts or rate mechanisms that align the

benefits and costs.

This would limit Bonneville’s exposure to market risks and

reduce the uncertainty regarding who will be acquiring additional resources

thereby reducing an impediment to resource development.

Agree.

BPA has a

poor track record of generation resource acquisition ( ie - WPPSS, Tenaska and

Augmentation), with the exception of their conservation acquisition which

acquired over 800 MW at less than 2.0 cents/KWH.

Decentralizing resource

acquisition down to the utility level will require that we send the appropriate

economic signals to the utilities.

These mechanisms need to be carefully thought

through and developed, and should be a primary focus of the up-coming

Regional Dialog process.

At the very least, the existing FBS should be sold at

cost, and should include the cost of General Transfer Agreements (GTA) and the

Low-Density Discount (LDD).

Full Requirements utility load growth should be

charged at a Tiered Rate, where the second tier is the marginal cost or resources

or the market.

Slice customers in essence already have tiered rates.

Any tiered

rates mechanism also needs to take into consideration the previous extraordinary

conservation efforts taken by certain utilities.

It is blatantly unfair to treat those

utilities that have done a great deal of conservation over the years the same as

those that have done very little.

A mechanism need to be developed to take prior

conservation efforts into consideration.

In addition, a “Block” product, without a

load growth option, should be provided for those not wanting to go fully Slice.

4.

Bonneville’s role should be limited contractually.

Although most customers’

contracts run through 2011, these changes need to be enacted as soon as

possible so as to protect the regional resource from outside interference and

clarify the outlook for resource development.

Agree

.

A major obstacle to

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implementing tiered rates, and signing new contracts in 2006, is the language in

most contracts that guarantees the “lowest PF rate” available through 2011. The

Regional Dialog process should focus a great deal of attention on creating

incentives to get utilities to give up current contracts and accept new contracts

with tiered rates in 2006. Again, clarity about who is responsible for meeting load

growth is essential.

To handle the issue of leaving and coming back to BPA, the

new contracts should require a utility to make a one-time decision at the

beginning of the contract period about how they want to meet their load growth.

5.

Customer agreement to long-term contracts will require at minimum that

Bonneville: 1) provide customers and others greater openness regarding their

costs, the factors driving those costs and the decisions affecting them BEFORE

decisions are made; 2) implement cost-reducing process improvements; and 3)

rebuild trust with the customers and others that Bonneville is a good business

partner.

Agree, this is a critical component to getting new long-term contracts in

2006.

The Regional Dialog process needs to focus this issue to get to a point

where utilities are comfortable with signing long-term contracts.

One of the few,

if not the only, mechanism that seemed to keep BPA’s feet to the fire when it

came to cost control was loss of load.

The Regional Dialog should consider a

mechanism that would allow utilities to drop a certain percentage (10-20%) of

BPA load for market power or alternative non-federal resources.

As well, should

utility end-use customers choose to go to market for their power , rather then

continue to take BPA power, the should not be a penalty for these customers

opting for the cheaper market place.

It is our experience, that only if these

mechanism are in place will BPA keep their costs under control.

6.

Revising Bonneville’s role in acquiring and pricing the output of additional

resources will require an allocation of the federal base system resources and

benefits.

Any allocation method for the FBS should be equitable and consistent

with federal law while creating a broad constituency for Bonneville.

Agree.

While

there is not likely to be any surplus federal power by 2007; we believe that any

available

“headroom” should be allocated equally among all preference utilities,

and not just Full Requirements utilities.

Any remaining FBS after allocation

belongs to all preference utilities.

As well, the allocation methodology should not

be based on solely

estimated 2007 load.

There are numerous utilities that have

experienced significant load loss due to the economic recession.

Our loads for

example at currently at 1996 levels.

The allocation should not penalizes those

that have already been hit hard by the poor economy.

The allocation

methodology should take this into consideration.

One possible method might be

to take the average loads for the period 2000 – 2006 along with the highest

monthly peaks during that period.

In addition, any allocation methodology must

take into consideration previous conservation efforts.

It seem wholly

inappropriate to penalize those utilities, like Emerald PUD, that have stepped up

to the plate and done much more than the average in acquiring conservation

over the years.

Finally, any allocation methodology should also allow for future

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new public utilities (ie – a reallocation), and new publics should not be limited to a

mere 75 MW.

7.

A significant amount of the system should be offered as a “Slice” product .

The

slice product effectively distributes hydro risk and, by virtue of more diverse

decision-making, should reduce the impact of hydro variability on the market.

Agree.

Slice has turned out to be a beneficial risk hedge for BPA.

8.

Benefits should be provided for the residential and small farm customers of the

region’s investor-owned utilities in a way which is judged to be equitable by the

parties and that is clear and transparent and not subject to manipulation by any

of the parties.

Agree.

The benefits should be financial rather than a power

allocation.

This

will allow BPA to focus on marketing the existing 8,000 MW of

the FBS rather than augmentation.

We also believe that benefits should track

either the Residential Exchange/ASC or the BPA-CT Joint Customer

methodology.

9.

The question of service to the DSI’s must be addressed.

If power is made

available to DSIs, the amount and term should be limited and contracts should be

structured to allow Bonneville to capture benefits of DSI load interruptibility and

provision of reserves.

The smelters should be encouraged to reduce

dependence on Bonneville power in the long-term.

We disagree. There should

not be a power allocation to the DSIs.

Given that preference utility load already

nearly matches the output of the FBS, and BPA is not legally required to provide

power to the DSIs, this power should be preserved for preference utility load.

10.

Any solution must contain a mechanism for ensuring continued regional

development of cost-effective conservation, as determined through the Council’s

plans.

While limiting Bonneville’s role to develop new power supplies to bilateral

arrangements with customers is a major step in the right direction, it is not

sufficient to ensure the development of cost-effective conservation given the

disincentives to utility investment in conservation.

Reliance on local

implementation is appropriate so long as there is a focus on cost-effectiveness

and accountability and a backup mechanism is included to ensure that

conservation is implemented.

A direct Bonneville role in implementation is

appropriate where there are economies of scale or other benefits from

Bonneville’s direct involvement.

Conservation budgets (dollar amounts and

MWa) should set using the Council’s regional conservation target.

This will

ensure that all cost-effective conservation is acquired within a reasonable time

frame.

We believe that an improved and enhanced Conservation & Renewables

Discount is an appropriate mechanism, that it should be designed to apply to all

of a utility’s load rather than just the amount of load placed on BPA, and that it

should establish a spending floor of a minimum of 3% of gross revenue for public

purposes plus low-income bill payment assistance.

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11.

Similarly, a mechanism is required for ensuring that cost-effective renewable and

high efficiency resources are developed and that the ability of the hydropower

system to support the development of intermittent renewable resources

,

through

the flexibility of the hydropower system

,

should not be unduly impaired.

Agree.

The region, and especially BPA, should continue and enhance existing levels of

spending and acquisition for renewables.

It is also critical that BPA develop and

provide products and services that utilize the hydro system to facilitate the

integration of renewables into the grid.

12.

Bonneville’s ability to implement its fish and wildlife obligations must not be

impaired.

Agree.

BPA must continue to meet its fish and wildlife obligations.

Thank you for the opportunity to comment on this important issue.

We look forward to

working with the Council during the Regional Dialog, and we hope that you will carefully

consider our comments.

Sincerely,

Alan Zelenka

Resources Manager

Emerald PUD