western issues update 9 - 04 - 2001 for questions or comments on this report please contact g . britt whitman at ex : 54014 or kristin walsh at ex : 39510 .
executive summary
? northwest smelters jockey for favorable rates
? bc hydro ' s rate freeze lingers
? bpa rates expected to rise , california refunds doubtful
aluminum smelters ( dsi ' s )
on 1 october 2001 the long - term relationship between dsi ' s and bpa for preferred rates will end as bonneville power administration ' s new rate case takes effect . after 2001 , dsi ' s become discretionary customers of bonneville power administration . dsi ' s have been playing the game of slowly ' migrating ' their load to local utilities in 9 . 9 mw annual increments to avoid being subject to bonneville ' s new large single load ( nlsl ) designation and losing their preferred rate status . now they are beginning to slip quietly back onto bpa ' s federal system , and officials at bonneville have been willing partners in attempting to circumvent their own nlsl regulations , which were established in 1980 . in an effort to secure existing dsi relationships , bpa is now undertaking a review of its nlsl regulation to provide an exemption for these companies .
bpa is opposed by the public power council , the representative of the public utilities in the pacific northwest that focuses bpa rate - making , which has sent a letter to the assistant secretary of energy to express its objections to bpa ' s proposed actions . the ppc was instrumental in raising public awareness earlier this year about the favored status of the dsi ' s as large industrial customers - they are moving aggressively to block bpa from giving the aluminum smelters any additional favored treatment .
the ability of bpa to exempt dsi ' s from its nlsl regulation will shape the direction of negotiations between aluminum smelters and other power producers in the region . it remains to be seen whether or not the public power council will initiate a legal battle to stop the dsi ' s from obtaining this special treatment .
while moving to maintain positive relationships with the dsi ' s , bpa is not enthusiastic about giving power back to the smelters because they think they will need all the water they can spare for the fish . bpa has concerns that supplies will be tight again in the fall and early winter - they won ' t really benefit much , even from normal or better precipitation , until the melt starts next april . bpa wants to buy back power from the smelters for at least a year and probably would not entertain any overtures from smelters until then . about the only possibility for smelters to go back on line would be for them to use the money they ' re getting from bpa to subsidize power purchases on the spot market . however , there would be a lot of risk in that , and bpa people don ' t think market prices would enable them to be very profitable , even with the bpa money helping .
as of april 1 , three smelters should come back on line ; nw aluminum , goldendale aluminum , longville aluminum
? alcoa aluminum
there is not much news happening on the negotiating end between alcoa and bc hydro right now . information is still fairly tight - lipped , however , employees of alcoa ' s idled intalco smelter have been shifted to other capital projects in the facility to prepare the plant for an eventual restart . this may indicate the direction of negotiations .
? kaiser aluminum
as odd man out , kaiser has little to say in northwestern energy developments . the company will obviously benefit if bonneville is able to fight off the public utilities , but they are in such a weak bargaining position right now that they might have to restart operations just to get revenues moving again , though there is no direct evidence to support this view at this time .
british columbia politics
? bc government
the latest news from british columbia is that the bc liberal government is doing quite nicely in implementing its conservative strategy . public opinion remains quite high , and they have virtually completed all of their campaign promises for the first 90 - day period . even former ndp legislators are surprised at the efficiency with which the government is proceeding . political strategists are watching the anwr vote in the us very carefully , not only because it will have a major impact on the natural gas and oil pipeline going through northern bc , but also because it is illustrating the environment vs . labor fallout . in the recent election , the green party of british columbia performed surprisingly well , garnering around 12 % of the vote in any typical race , contributing directly to the downfall of the ndp .
premier gordon campbell ' s core review of bc government is due by october , and it appears that the process will be primarily a cost - cutting measure . they are moving to reduce expenditures , which for bc hydro ' s sake , will include community outreach , student scholarship and any other ' feel good ' programs currently being undertaken by hydro .
the real long - term policy planning , however , is expected to take place in january when campbell ' s team ( brenda eaton , the deputy premiere ; doug allen , the premiere ' s consultant ; and jack ebbels , deputy energy minister ) works in conjunction with neufeld to construct bc ' s long - term energy plan .
bc hydro
bc hydro has formally signed on as a participant in the rto west regional transmission organization as a filing utility . rto west is currently being overseen by the western governor ' s association and developed as allowed by ferc . rto west will be the oversight entity in the western states and canada that will manage electricity transmission issues . we are also expecting alberta to come on board rto west shortly .
with regard to a potential rate hearing , bc hydro has recently put a freeze on rates in the province that will last until 2003 . the word on this move is that it will allow chairman bell to generate some political cover as he begins to shave off parts of the business , such as transmission and information technology - focusing bc hydro ' s core operations on additional generation , exports / trading , and delivery . the public concern over privatization is that it will cause rates to skyrocket , similar to what happened in california - but bell has moved to head off these concerns with the rate freeze .
as a function of increasing bc hydro ' s generation capacity , they are looking very carefully at building on two sites : site c ( hydroelectric dam ) and burrard thermal .
bpa
? financial status
in what was expected to be a quiet period in rates matters , bpa dropped a bombshell by announcing it was considering triggering the fb crac on 1 october . this would increase rates over the 46 % lb crac rate increase announced earlier - - despite forecasts that such an increase would be unnecessary . what this essentially does is allow bpa to bypass its initial rate case increase of 46 % , utilizing a stop - gap measure under federal regulations .
bpa cited a number of reasons why it was considering imposing an fb crac , including losses trading power this summer , changes in the accounting treatment of some dsi buyouts , and uncertainty whether the california iso and px can pay monies owed bpa . bpa did note , however , that it also had more than one hundred million additional dollars in bond refinancing money not accounted in the fb crac calculation . if the fb crac triggers by any amount , bpa would have the option of " truing up " its calculation of the fb crac in march and could change the rates again if bpa ' s actual financial condition on 30 september differs from what is estimated now , or if bpa changes its accounting assumptions further .
bpa representatives suggest strongly that there is a good chance that a rate increase would be announced early and also indicated that the specific number would be much less than the earlier load - based crac increase ( of about 46 % ) - - " much less than 20 % , and probably much , much less than 20 % . "
the public power council staff has written to and met with steve wright , bpa acting administrator , in an effort to convince bpa that a fc crac is unnecessary . we should know bpa ' s decision by 31 august .
? ferc refunds
at this time , bpa will not seek refunds in the ongoing ferc proceedings - or submit to the process for purposes of others seeking refunds against bpa - for the following reasons :
1 ) bpa believes ferc lacks jurisdiction over bpa .
2 ) the proceedings are so convoluted ( and the transactions so complicated ) that bpa asserts that there is no realistic hope of unwinding all of the transactions necessary to equitably order refunds . insofar as other parties collecting against bpa , in some cases bpa was only the remarketing agent acting at the behest of , for example , aluminum smelters . ferc would have to proceed against these third parties , and often that money has already been spent .
3 ) with respect to claims by the calif . dwr ( $ 71 million ) , a similar claim in the separate california ferc proceeding was disallowed on 14 june . it would be incongruous to allow the claim here . in this claim , ferc denied dwr access to refunds in situations where there was a willing buyer and willing seller .
4 ) then there are the assorted politics involved . first , bpa believes that the political costs of pursuing refunds outweigh any eventual benefit that might be received . bpa calculates its potential exposure in these refund proceedings at circa $ 400 million , while it believes its own potential claims could amount to $ 500 million - thus a potential $ 100 million net gain . for reasons cited , however , we believe it highly unlikely they will seek refunds . second , with respect to others seeking refunds against bpa , five nw senators who sit on the senate energy committee would be very upset if ferc allowed california parties to collect against bpa ; and ferc to some extent is likely to be responsive to this sentiment .
bpa is confident of its legal position in this matter estimating less than a 10 % chance of their being forced to submit to ferc in this matter . of course , if they were forced to submit to ferc jurisdiction , they would cross claim against other parties and seek refunds .
even if bpa received refunds , we do not believe that it would affect the ability of aluminum smelters to come back on - line . we anticipate that on 1 april 2002 , three smelters ( amounting to between 300 - 500 mw ) will come back on line : northwest aluminum & goldendale aluminum ( 230 mw ) , and longville aluminum ( 100 mw ) .
? spill - related issues
fish returns for this year have been especially high . if the ocean stays productive for the next few years , as some think it might , the region could have an enormous opportunity to rebuild the salmon and steelhead runs and make huge strides towards success in this area .
behind - the - scenes work continues on the implementation plan ( on the biological opinion on the hydro system ) , with the region ' s states and tribes trying to play a stronger role in designing the columbia river strategy .
ppc and northwest irrigation utilities were admitted to the national wildlife federation et al v . nmfs lawsuit as defendant interveners , and the court is now making plans to try mediation between the parties .
western issues update 9 - 04 - 2001
for questions or comments on this report please contact g . britt whitman at ex : 54014 or kristin walsh at ex : 39510 .
executive summary
? northwest smelters jockey for favorable rates
? bc hydro ' s rate freeze lingers
? bpa rates expected to rise , california refunds doubtful
aluminum smelters ( dsi ' s )
on 1 october 2001 the long - term relationship between dsi ' s and bpa for preferred rates will end as bonneville power administration ' s new rate case takes effect . after 2001 , dsi ' s become discretionary customers of bonneville power administration . dsi ' s have been playing the game of slowly ' migrating ' their load to local utilities in 9 . 9 mw annual increments to avoid being subject to bonneville ' s new large single load ( nlsl ) designation and losing their preferred rate status . now they are beginning to slip quietly back onto bpa ' s federal system , and officials at bonneville have been willing partners in attempting to circumvent their own nlsl regulations , which were established in 1980 . in an effort to secure existing dsi relationships , bpa is now undertaking a review of its nlsl regulation to provide an exemption for these companies .
bpa is opposed by the public power council , the representative of the public utilities in the pacific northwest that focuses bpa rate - making , which has sent a letter to the assistant secretary of energy to express its objections to bpa ' s proposed actions . the ppc was instrumental in raising public awareness earlier this year about the favored status of the dsi ' s as large industrial customers - they are moving aggressively to block bpa from giving the aluminum smelters any additional favored treatment .
the ability of bpa to exempt dsi ' s from its nlsl regulation will shape the direction of negotiations between aluminum smelters and other power producers in the region . it remains to be seen whether or not the public power council will initiate a legal battle to stop the dsi ' s from obtaining this special treatment .
while moving to maintain positive relationships with the dsi ' s , bpa is not enthusiastic about giving power back to the smelters because they think they will need all the water they can spare for the fish . bpa has concerns that supplies will be tight again in the fall and early winter - they won ' t really benefit much , even from normal or better precipitation , until the melt starts next april . bpa wants to buy back power from the smelters for at least a year and probably would not entertain any overtures from smelters until then . about the only possibility for smelters to go back on line would be for them to use the money they ' re getting from bpa to subsidize power purchases on the spot market . however , there would be a lot of risk in that , and bpa people don ' t think market prices would enable them to be very profitable , even with the bpa money helping .
as of april 1 , three smelters should come back on line ; nw aluminum , goldendale aluminum , longville aluminum
? alcoa aluminum
there is not much news happening on the negotiating end between alcoa and bc hydro right now . information is still fairly tight - lipped , however , employees of alcoa ' s idled intalco smelter have been shifted to other capital projects in the facility to prepare the plant for an eventual restart . this may indicate the direction of negotiations .
? kaiser aluminum
as odd man out , kaiser has little to say in northwestern energy developments . the company will obviously benefit if bonneville is able to fight off the public utilities , but they are in such a weak bargaining position right now that they might have to restart operations just to get revenues moving again , though there is no direct evidence to support this view at this time .
british columbia politics
? bc government
the latest news from british columbia is that the bc liberal government is doing quite nicely in implementing its conservative strategy . public opinion remains quite high , and they have virtually completed all of their campaign promises for the first 90 - day period . even former ndp legislators are surprised at the efficiency with which the government is proceeding . political strategists are watching the anwr vote in the us very carefully , not only because it will have a major impact on the natural gas and oil pipeline going through northern bc , but also because it is illustrating the environment vs . labor fallout . in the recent election , the green party of british columbia performed surprisingly well , garnering around 12 % of the vote in any typical race , contributing directly to the downfall of the ndp .
premier gordon campbell ' s core review of bc government is due by october , and it appears that the process will be primarily a cost - cutting measure . they are moving to reduce expenditures , which for bc hydro ' s sake , will include community outreach , student scholarship and any other ' feel good ' programs currently being undertaken by hydro .
the real long - term policy planning , however , is expected to take place in january when campbell ' s team ( brenda eaton , the deputy premiere ; doug allen , the premiere ' s consultant ; and jack ebbels , deputy energy minister ) works in conjunction with neufeld to construct bc ' s long - term energy plan .
bc hydro
bc hydro has formally signed on as a participant in the rto west regional transmission organization as a filing utility . rto west is currently being overseen by the western governor ' s association and developed as allowed by ferc . rto west will be the oversight entity in the western states and canada that will manage electricity transmission issues . we are also expecting alberta to come on board rto west shortly .
with regard to a potential rate hearing , bc hydro has recently put a freeze on rates in the province that will last until 2003 . the word on this move is that it will allow chairman bell to generate some political cover as he begins to shave off parts of the business , such as transmission and information technology - focusing bc hydro ' s core operations on additional generation , exports / trading , and delivery . the public concern over privatization is that it will cause rates to skyrocket , similar to what happened in california - but bell has moved to head off these concerns with the rate freeze .
as a function of increasing bc hydro ' s generation capacity , they are looking very carefully at building on two sites : site c ( hydroelectric dam ) and burrard thermal .
bpa
? financial status
in what was expected to be a quiet period in rates matters , bpa dropped a bombshell by announcing it was considering triggering the fb crac on 1 october . this would increase rates over the 46 % lb crac rate increase announced earlier - - despite forecasts that such an increase would be unnecessary . what this essentially does is allow bpa to bypass its initial rate case increase of 46 % , utilizing a stop - gap measure under federal regulations .
bpa cited a number of reasons why it was considering imposing an fb crac , including losses trading power this summer , changes in the accounting treatment of some dsi buyouts , and uncertainty whether the california iso and px can pay monies owed bpa . bpa did note , however , that it also had more than one hundred million additional dollars in bond refinancing money not accounted in the fb crac calculation . if the fb crac triggers by any amount , bpa would have the option of " truing up " its calculation of the fb crac in march and could change the rates again if bpa ' s actual financial condition on 30 september differs from what is estimated now , or if bpa changes its accounting assumptions further .
bpa representatives suggest strongly that there is a good chance that a rate increase would be announced early and also indicated that the specific number would be much less than the earlier load - based crac increase ( of about 46 % ) - - " much less than 20 % , and probably much , much less than 20 % . "
the public power council staff has written to and met with steve wright , bpa acting administrator , in an effort to convince bpa that a fc crac is unnecessary . we should know bpa ' s decision by 31 august .
? ferc refunds
at this time , bpa will not seek refunds in the ongoing ferc proceedings - or submit to the process for purposes of others seeking refunds against bpa - for the following reasons :
1 ) bpa believes ferc lacks jurisdiction over bpa .
2 ) the proceedings are so convoluted ( and the transactions so complicated ) that bpa asserts that there is no realistic hope of unwinding all of the transactions necessary to equitably order refunds . insofar as other parties collecting against bpa , in some cases bpa was only the remarketing agent acting at the behest of , for example , aluminum smelters . ferc would have to proceed against these third parties , and often that money has already been spent .
3 ) with respect to claims by the calif . dwr ( $ 71 million ) , a similar claim in the separate california ferc proceeding was disallowed on 14 june . it would be incongruous to allow the claim here . in this claim , ferc denied dwr access to refunds in situations where there was a willing buyer and willing seller .
4 ) then there are the assorted politics involved . first , bpa believes that the political costs of pursuing refunds outweigh any eventual benefit that might be received . bpa calculates its potential exposure in these refund proceedings at circa $ 400 million , while it believes its own potential claims could amount to $ 500 million - thus a potential $ 100 million net gain . for reasons cited , however , we believe it highly unlikely they will seek refunds . second , with respect to others seeking refunds against bpa , five nw senators who sit on the senate energy committee would be very upset if ferc allowed california parties to collect against bpa ; and ferc to some extent is likely to be responsive to this sentiment .
bpa is confident of its legal position in this matter estimating less than a 10 % chance of their being forced to submit to ferc in this matter . of course , if they were forced to submit to ferc jurisdiction , they would cross claim against other parties and seek refunds .
even if bpa received refunds , we do not believe that it would affect the ability of aluminum smelters to come back on - line . we anticipate that on 1 april 2002 , three smelters ( amounting to between 300 - 500 mw ) will come back on line : northwest aluminum & goldendale aluminum ( 230 mw ) , and longville aluminum ( 100 mw ) .
? spill - related issues
fish returns for this year have been especially high . if the ocean stays productive for the next few years , as some think it might , the region could have an enormous opportunity to rebuild the salmon and steelhead runs and make huge strides towards success in this area .
behind - the - scenes work continues on the implementation plan ( on the biological opinion on the hydro system ) , with the region ' s states and tribes trying to play a stronger role in designing the columbia river strategy .
ppc and northwest irrigation utilities were admitted to the national wildlife federation et al v . nmfs lawsuit as defendant interveners , and the court is now making plans to try mediation between the parties .