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PNUCC

PACIFIC NORTHWEST UTILITIES CONFERENCE COMMITTEE

July 5, 1983

ATTACHMENT A

The Honorable Richard L. Ottinger, Chairman
Subcommittee on Energy Conservation and Power
Committee on Energy and Commerce

U. S. House of Representatives

Room 316, House Annex 2

Second and D Streets, S. W.
Washington, D. C. 20515

Attention: Mr. Bruce Driver

Dear Chairman Ottinger:

Attached are responses to two questions raised during your subcommittee's June 13 hearing in Portland. The first question was asked by Congressman Wyden and dealt with anti-trust concerns raised by a long-term sale of the Northwest's firm surplus to Southwest utilities. The second question came from Congressman Swift and focused on how the 60 day pullback requirement of PL 88-552 might affect such a surplus sale. While both questions were addressed to the Pacific Northwest Utilities Conference Committee (PNUCC), I have consulted with several of our utility and industry members so that the attached response should generally reflect their collective views.

Please let us know if you require any additional information. As Congressman Swift indicated at your June 13 hearing, I assume the attached materials will become part of the official hearing record.

PNUCC 520 SW SIXTH AVENUE, SUITE 505 PORTLAND, OR 97204 (503) 223-9343

25-181 0-83--21

PNUCC RESPONSE TO QUESTIONS RAISED AT THE JUNE 13 HEARING OF THE HOUSE SUBCOMMITTEE ON ENERGY CONSERVATION AND POWER.

Question 1 (asked by Congressman Wyden):

Are anti-trust issues really of serious concern to utilities involved with a long-term sale of the Northwest's firm surplus to Southwest utilities? Could PNUCC provide the subcommittee with some more details on their anti-trust concerns?

Answer:

Presently, virtually all interregional sales of firm power are made pursuant to bilateral contracts of relatively short duration. This situation may result in significant diseconomies for both regions because:

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Southwest utilities, lacking a long-term commitment from the Northwest, are unable to avoid capital costs associated with construction of new generation;

Northwest utilities are unable to recover a price for their firm power which reflects capital-cost avoidance by Southwest purchasers; and

There is little comprehensive interregional planning and an associated risk that excess generating capacity could be installed in the two regions.

To the extent a long-term contract between a number of entities in both regions can be consummated, there is reason to believe that such diseconomies could be reduced to the benefit of electric consumers in both regions.

Presently, there is substantial competition among selling utilities, and major differences in interregional power sales contract terms and prices. While a long-term interregional sale involving multiple parties may be beneficial, care must be taken that the existing competitive market not be disrupted in an unlawful fashion.

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In effect, a long-term interregional sale would create a unique and inherently more valuable product power sold on a long-term firm basis. This is because no Northwest utility, with the possible exception of Bonneville, appears to have the resources, regulatory support or financing capability by itself to assure delivery of a significant quantity of power to the Southwest for a sufficiently long period to allow Southwest utilities to defer or avoid capital expenditures. Rather, the 1,500 average megawatt 15year sale which California utilities desire would result from an amalgamation of varying quantities of firm surplus made available by a number of Northwest entities, each of whom face differing circumstances in regard to their future loads and resources. Particularly in light of regional preference complexities, in order to "package" a longterm interregional sale, joint efforts by utilities in both regions would be necessary with an attendant risk that such joint efforts would be claimed to somehow violate the antitrust laws.

Because it appears that some form of collective action is necessary if an interregional long-term sale is to be made at all, a "rule of reason" test may well be applied, whereby a court would weigh the benefits of a long-term sale against any arguable anti

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