990430_dh.doc

MEMORANDUM

TO:

FROM:

DATE:

RE: LAWRENCE WASDEN, CHIEF OF STAFF
TERRY COFFIN, DIVISION CHIEF

DON HOWELL

April 30, 1999

THE PUC’S INTERVENTION IN BPA POWER SUBSCRIPTION CASE,
NINTH CIRCUIT DOCKET NO. CA-99-70323 et al.
On April 16, 1999, the Idaho PUC was granted intervention in a Ninth Circuit case generally referred to as the BPA’s Electric Power Subscription decision. Goldendale Aluminum Company v. Bonneville Power Administration, Docket No. 99-70323.

BACKGROUND
In December 1998, BPA issued its Record of Decision (ROD) concerning its power subscription strategy that would govern new power sales contracts with Pacific Northwest customers beginning in October 2001. The power subscription ROD is the first of three cases, which will determine the allocation of power, establish rates and design electric products offered to BPA customers in the Northwest.

A. The Power Subscription Decision
The power subscription ROD addressed the allocation of power generated at the federal Columbia River power system dams among the various customer classes. The ROD also discusses the availability of federal power, describes certain power products, establishes strategies for pricing power products, and discusses elements of BPA power contracts.
In its Record of Decision, BPA recognized the interrelationship between its power subscription decision and the power rate case to follow. BPA acknowledged in the subscription ROD that
some issues that will not be finely decided in the Power Subscription Strategy. Most of these issues will be finally decided in the 1999 Power Rate Case. . ., although some will be decided in other forums, such as the Transmission Rate Case, which will be concluded before October 2001. For example, where the strategy documents BPA’s intention to implement a discount for conservation and renewable resources, the final design of that discount will be decided in the 1999 Power Rate Case.

. . .rate design approaches identified in the Subscription Strategy will be part of BPA’s initial power rate proposal. The comments received during this subscription public process regarding the various rate-related issues will be addressed in the Power Rate Case, which includes extensive opportunities for public involvement.

64 Fed. Reg. 150, 153 (January 4, 1999).

In other words, the Power Subscription Strategy is the allocation and rate design framework that will be utilized in the power rate case.

B. Key Elements
The Subscription Strategy contained in the Record of Decision is very detailed and complex. For purposes of this memorandum, the following key elements are provided for your information.
1. Subscription to Federal Power. From February 1, 1999 until 120 days after the power rate case decision is released, BPA customers can enter into subscription contracts with the agency. This period is known as the “subscription window.” As previously mentioned, the rates for such contracts will be determined in the power rate case. In essence, it will not be until four months after the BPA power rate case is concluded (December 1999) before the agency and customers will know the total amount of power contracted by the agency.
2. Allocation. During the subscription case various parties expressed concerns about the amount of BPA power to be allocated and whether there is sufficient power to fill the demands of all eligible customers. In response, the ROD stated:
Public customer’s (e.g., PUDs)—BPA anticipates meeting “[a]ll net requirements load, including load of new publics and load annex by publics during the subscription window

Residential load of IOUs—for the years 2001 through 2006, BPA intends to offer at least 1000 aMW of power and 800 aMW of power or financial benefits. This is an increase from the BPA’s initial proposal. For customers that purchase 10-year contracts, BPA will provide the 1800 aMW package for the first 5-year period, and 2000 aMW for the second 5 years.

DSIs—BPA expects to serve all DSI loads placed on the agency.

3. Pricing. The BPA power rate case will establish the rates for BPA power for contracts made during the subscription window. These rates are typically referred to as the preferred (PF) rate. The IOUs (on behalf of the residential and small-firm customers) and the DSIs are concerned that the prices for them would be at rates “expected to be approximately, equivalent to the PF rate.” Until the power rate case is concluded, petitioners and intervenors seem to be genuinely concerned that the actual “approximately equivalent” rate is not now determined.

PETITIONS FOR REVIEW AND INTERVENTION
Following the issuance of the Power Subscription decision in December 1998, five separate petitions for review have been filed with the Ninth Circuit Court of Appeals. Two petitions for review were filed by seven aluminum companies DSIs. Two IOUs also filed individual petitions for review. Finally, the Benton Rural Electric Association (representing PUDs and municipalities) filed a petition. Pursuant to Ninth Circuit Court Rules, the five petitions were consolidated on appeal.
A wide variety of entities have also intervened in the consolidated appeals. Again under Ninth Circuit Court Rules, intervenors in one petition are considered to be intervenors in all of the consolidated petitions on appeal. At this time, the intervenors include the Idaho, Washington and Montana regulatory commissions; the IOUs of PacifiCorp and Avista (formerly Washington Water Power Company); a large customer association known as the Industrial Customers of the Northwest Utilities; PUDs such as Public Power Generating Pool and Public Power Council; and the Oregon Utility Resource Coordinating Association (on behalf of its PUD members). The deadline for intervention should expire this week.
The DSI petitioners have filed motions that the consolidated appeals be transferred to the Circuit Court’s prehearing conference program. Deferral to the conference program will allow the petitioners and intervenors to discuss the timing of the appeal. The DSI petitioners have said from the beginning that their appeals are “placeholders” until BPA has finished the power rate case. In particular, the DSI petitioners were concerned that failure to file an appeal on the power subscription ROD might not preserve their rights to an appeal.

POSITION OF THE PARTIES
The DSI petitioners are fearful that the Subscription Strategy decision does not allocate sufficient amounts of power to meet their needs. More specifically, the DSIs are concerned that BPA will not have any firm power available for them after serving the preference customers and IOUs. Although the ROD states that the BPA expects to be able to serve all DSI load placed on the agency, the DSIs are not so sure. DSI attorney Murphy is quoted as saying that the companies are especially concerned about BPA’s proposed allocation of federal power for the 2001-2006 timeframe.
The two IOU petitioners believe that the ROD violates the 1980 Regional Power Act by failing to give all Northwest residential and small-firm customers priority and access to low-cost BPA power. Under the BPA’s subscription plan, 60% of the Northwest population served by IOUs would receive only about 20% of the BPAs federal power benefits. The two IOUs also indicated in a press release that the power sales terms may difference significantly from customers of IOUs and customers of public agencies and cooperatives.
A spokesperson for Benton REA indicated that his municipal and PUD members decided to petition to make sure that “both sides of the story got preserved on appeal.”
As an intervenor, the Idaho Commission’s position will be shaped in large part by the positions advocated by the various petitioners. Transfer to the Circuit’s prehearing conference program may facilitate the identification of issues and the alignment of parties. I will keep you posted as to further developments.
You may want to consider whether this information should be made available to members of the Interim Committee.

Don Howell

vld/M:CA9970323_dh
The other two BPA cases are the power rate case followed by the transmission rate case. The power rate case is anticipated to begin next month with a projected ROD being issued in December 1999. The power rate case will establish the rates BPA will charge its customers—direct service industries (DSIs), public utility districts (PUDs), investor-owned utilities (IOUs), etc. The transmission rate case will establish new transmission rates for the delivery or wheeling of BPA power throughout the northwest.
DSI attorney Paul Murphy is quoted in Clearing Up as saying that if they did not file the appeal of the subscription ROD “we’d end up arguing with Bonneville whether we’d missed some statute of limitation deadline.” 868 Clearing Up at 8 (March 8, 1999).

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