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HomeMy WebLinkAboutMinutes 07/29/1996UTILITY ADVISORY COMMITTEE Port Angeles, Washington July 29, 1996 L Call to Order: Chairman Michalczik called the meeting to order at 4:05 p.m. Roll Call: Members Present: Members Absent: Staff Present: Public Present: Gary Braun, Orville Campbell, Lar~ Doyle, Joe Michalczik, and Bill Myers. None. C. Knntson, B. Titus, and C. Hagar. N. Schaefer. II1. Discussion Items: A. Discuss Retail Rates and Wholesale Power Contracts Light Director Titus opened the meeting by passing out copies of the latest version of the new power sales agreement being negotiated with BPA. Copies of a draft power sales agreement with Louisville Gas & Electric (LG&E) were also distributed as well as a copy of proposed retail wheeling language drafted by WPAG. It was pointed out that the BPA agreement was in its 8 o 9th iteration and was still subject to change. Director Titus started the discussion by stating that the purpose of the meeting was to bring the UAC and representatives from the mills up to date on the negotiations and to insure that issues in the contracts and upcoming retail rate proposals were clearly understood. He stated that negotiations with BPA were nearing the final stages and that the materials passed out to the UAC were current with negotiations haven taken place the previous Friday in Olympia. Director Titus then proceeded to go through the BPA agreement reviewing those sections where disagreement or concerns still existed. Some of the difficulties are only ones of wording and relatively little time was spent in their review but in the two areas where the parties are still far apart, considerable discussion ensued. Those areas were dispute resolution and retail wheeling. With dispute resolution, the utilities are concerned that BPA has yet to indicate what kind of issues either can or can't be resolved by arbitration. Federal law prohibits BPA from arbitration in some cases but the utilities would like to compare their interpretation to BPA's. BPA has also failed to include any specifics as to process in their proposed language which could lead to litigation just to determine how to arbitrate. The WPAG goal is to speed up the dispute resolution process as much as possible since currently our only option to resolve a dispute is to sue BPA in Federal Court and on average this is an 18-24 month process. Director Titus then moved on to a discussion of retail wheeling issues which provoked the most discussion. Retail wheeling was explained as an instance where the end use customer goes directly to the market to obtain power rather than going to their local utility. The existing contract with BPA does not address retail wheeling and BPA has indicated that they would treat it as unauthorized load removal which under our existing contract would allow them to continue to bill us as if the load still existed. We would need to take BPA to court to argue against that interpretation but in the meantime we would be forced to pay since the existing contract also requires us to pay our bills and dispute their validity after the fact. In our specific case, for example, if Daishowa were to go to the open market and purchase power, BPA could bill us upwards of $500,000 a month for which we would have no offsetting revenue. In the new contract mandated retail wheeling would be dealt with in the same way as in the existing contract. If the utility voluntarily provided an industrial customer the ability to retail wheel BPA would charge the utility for lost revenues plus a penalty. The WPAG utilities countered BPA's proposal with one of their own that provided far different terms. In the case of mandated retail wheeling the ultimate decision would again defer back to the existing contract but the utilities would not have to pay in advance while the issue was decided. In the case of voluntary retail wheeling a formula was proposed whereby the utility would pay for lost margins incurred by BPA with no penalty. WPAG also suggested a third consideration whereby BPA would assume all liability if they provided transmission access to allow retail wheeling. The financial consequences of this issue provoked considerable discussion among the UAC members and mill representatives. The mills have for some time expressed a desire to access the marketplace as soon as possible and want assurances that the City will not enter into any agreement that will negatively impact their ability to do so. Council members were concerned about the liability faced by the City under the existing agreement or any future agreement should the mills or any of our other customers gain market access at the expense of the remainder of our customers. Various opinions were expressed as to the ability of the mills to access the market, when the State legislature might promulgate legislation allowing retail wheeling and what ability BPA had to prohibit access to its transmission system. Unfortunately it is unclear as to how existing law might apply to a circumstance that was never contemplated when the law was passed. About the only certainty that exists is that BPA will do everything in its power to delay retail wheeling for as long as possible because BPA could not survive the loss of all its industrial load. It was also pointed out that if BPA's continued existence was in jeopardy that Congress would very likely step in and ensure their viability. There is no way that the remaining WPPSS and treasury obligations will not be paid by the region although how that might occur is unknown. The meeting concluded with an acknowledgment that the issue of retail wheeling was critical and that staff should aggressively pursue contract language that would allow our industrial customers to access the market while protecting our remaining customers from financial penalty. IV.. Adjournment: The meeting adjourned at 6:45 p.m.