Board Members present: Susie Smith, Jeff Osanka, Mike Dyer (after 6:15 p.m.), Sandra Bishop, and Dorothy Anderson.
Others present: Randy Berggren, Manda Bednarczyk, Ken Beeson, Tom Buckhouse, Chuck Dalton, Marty Douglass, Dick Helgeson, Libby Henry, Dale Kessinger, Jim Maloney, Kris Middlewood, John Mitchell, Mat Northway, Jim Origliosso, Scott Spettel, John Yanov, and Krista Hince of the EWEB staff; Jim Deason, EWEB Special Counsel; John Lebens and Tonie Nathan, members of the public; and Kim Kunkel, Minutes Recorder.
President Smith called the meeting to order.
ELECTRIC DEREGULATION UPDATE
Referring to a memorandum and attached materials included in the meeting agenda packet, EWEB Legislative Lobbyist Libby Henry stated that the purpose of the work session was to discuss in-depth the Portfolio Model currently being considered by the PUC (Public Utility Commission). She said the Board would also receive an update on pending restructuring legislation before Congress and the final PPC (Public Power Council) position on the Bonneville Power Administration (BPA) Cost Review.
Jim Deason, EWEB Special Counsel, said the theory behind the Portfolio Model is that utilities make available to residential and small commercial and industrial customers portfolios of power options. Large customers above a demand or usage threshold would be given open access to outside power providers. He said three types of portfolio options being discussed are
In addition, he said the Portfolio Model disaggregates the traditionally fully-bundled rate.
Senior/Financial Rate Analyst Dale Kessinger expressed his opinion that the Portfolio Model is a compromised manner of attempting to bring to the large customer the benefits of competition in the wholesale market, primarily power options, while having the utility serve as the portfolio manager of pre-packaged options made available to the smaller customer.
President Smith said that given the example of competitive telephone services, she does not believe that EWEB's average residential electric customers want to consider power options made available through a portfolio. Mr. Kessinger responded that Portland General Electric (PGE), at least, believes its customers want choice, and will continue to push for it at the OPUC (Oregon Public Utility Commission) and at the legislature.
Vice President Osanka said EWEB's current method of providing power seems to be working well. In addition, he said that as EWEB has demonstrated, a utility can offer special green power pricing without having to subscribe to the Portfolio Model approach.
Mr. Deason noted that power portfolios exist on a continuum ranging from simple alternative rate schedules, to offering three or four power options, including green power pricing for example, to offering direct market access to all customer classes.
Commissioner Anderson reminded the Board that the Portfolio Model was developed in response to pressure at the legislature to have open access. She said during the last legislative session, those who were concerned about public power and public purposes were attempting to find a solution they could live with, and the Portfolio Model is emerging as that solution.
Senior Rate/Financial Analyst Dale Kessinger said that EWEB, through its Initial Alternative Electric Industry Restructuring Proposal, is proposing a compromise to the full and unlimited direct access proposed by PGE.
President Smith inquired as to whether Governor Kitzhaber will stand behind his assertion made during the Regional Review that any restructuring legislation must adhere to specific principles outlined by him. Ms. Henry responded that it appears Governor Kitzhaber will not back down on his statement. Noting that the Portfolio Model does not meet the criteria set forth by the Governor, President Smith questioned why EWEB should participate in something that will not be supported.
Commissioner Bishop inquired as to whether the proposed renewable funding is included in the three percent Public Purposes funding requirement. Ms. Henry responded that EWEB is requesting that funding for renewables remain as part of the three percent Public Purposes funding requirement.
Vice President Osanka requested information regarding the moral or legal basis for arguing that one customer class, large industrials, ought to be treated differently by being allowed direct access to the market while other customers have either limited access or no access to the market. He said that if direct access is "good" by nature, it should be made available to all customer classes. Vice President Osanka said he fails to see the justification for claiming that direct access is good for only a class of customers that has considerable political influence due to its size.
Vice President Osanka suggested, rhetorically, that EWEB propose legislation that provides full access to average rate payers, but limits or blocks access for large industrials. He expressed doubt that large industrials would support such legislation as the first step toward establishing retail access. Ms. Henry said one argument might be that offering direct access to large industrials is a stepping stone on the way to providing full access.
Mr. Berggren stated his opinion that there may not be a guiding principle behind the justification for providing access to large industrials first. He said it is an issue of politics rather than principle. Mr. Berggren explained that the Portfolio Model insulates the politicians from the potential negative impacts on residential customers while providing a potential sure win to industrial customers by allowing direct access to the market.
Mr. Kessinger stated that large industrial customers would likely respond to the questions raised by Vice President Osanka by claiming that if they are able to obtain a discount through direct access, they are being overcharged today.
Mr. Deason presented an overview of portfolio management issues specific to various portfolio options. Mr. Kessinger explained that PGE's full open access model proposes an outsourcing of the utility's metering, billing, and customer service functions. He said those functions would be taken over by competing service providers. Mr. Kessinger said PGE's proposal calls for stripping the utility of all functions except for transmission and distribution.
Mr. Kessinger said potential impacts of deregulation on EWEB include:
He said EWEB can learn from the deregulation of other industries to be prepared while retaining its core values.
Mr. Kessinger said EWEB is in a strong position to face potential deregulation. He said EWEB has tremendous advantages, including:
Mr. Kessinger stated that EWEB staff wants to form a pricing review team charged with evaluating the utility's rate structure and determining how EWEB can best position itself in the face of industry restructuring. Noting that EWEB's prices are currently bundled and the utility offers a single melded power supply portfolio, Mr. Kessinger said EWEB might best position itself for potential pricing competition by
Mr. Kessinger said the pricing review team will assess
He said the pricing review team will present its findings and associated recommendations to the Board.
President Smith responded that the process described by Mr. Kessinger seems backwards. She said that rather than answering incremental questions, EWEB should first define the desired outcome and identify the necessary components of meeting that goal. Commissioner Bishop noted that a number of the aforementioned questions are addressed by the Operating Principles. President Smith said it would be helpful if those principles were reiterated in relation to how they will guide the pricing review process.
The Board expressed support for staff proceeding with a cost of service study using current costs in order to prepare EWEB for the future. President Smith requested that if staff brings back a recommendation for marginal costs, for example, that it include a range of options and the pros and cons of each.
Ms. Henry and Mr. Deason presented a brief update of pending legislation before Congress and the final PPC position on the BPA Cost Review. Mr. Deason said the four main components of the PPC position on the BPA Cost Review are
With regard to the implications of fish river governance issues on legislation, Mr. Berggren noted that BPA is attempting to determine long-range fish costs. He said BPA's study suggests that long-range capital expenditures will increase considerably after 2009.
The meeting adjourned at 7:30 p.m.