Northwest Conservation REPORT VOLUME 2, NUMBER 18 SEPTEMBER 2, 1983 THE NEWSLETTER ON THE IMPLEMENTATION OF THE PACIFIC NORTHWEST WAPA FIRM SURPLUS POWER SALE RAISES QUESTIONS, CONCERNS Many "interested parties" first became aware of the negotiations between the Bonneville Power Administration (BPA) and the Denver-based Western Area Power Administration (WAPA) for the sale of firm surplus power to WAPA when a letter dated August 12 crossed their desks, stating: "Enclosed for your information is a draft of the proposed contract with Western. It is subject to further change, but it reflects the current stage of negotiations. If you care to comment on this draft, we would appreciate receiving your comments no later than August 10, 1983. Under our current schedule, we intend to finalize this draft contract on or about August 15, 1983 and will shortly thereafter transmit a copy to Western for their execution." BPA has relented in its original requirement for those commenting on the draft proposals to be well versed in at least the fundamentals of time travel, and the comment process has been expanded and the time limit for comment extended. BPA spokespersons, including Administrator Peter Johnson, also assured participants in a Portland-based public involvement meeting and conference call last week that there have been no attempts to "bury" the contract negotiations, and a thorough scrutiny of readily available BPA documents would have revealed the existence of such discussions and contract negotiations although judging by the responses of the participants to these assertions, there was clearly a breakdown in BPA's public involvement process. Other entities, including the Montana Public Service Commission (MPSC), were aware of parts of the negotiations but were caught by surprise when the whole scope of the contracts was made public. WAPA signed a contract with the Basin Electric Power Cooperative to buy power from its Antelope Valley (ND) coal-fired plants in April of 1982, against the better judgement of the California Energy Commission, which had informed WAPA that firm surplus from the Northwest would be a much better buy. WAPA apparently felt, however, that there was little likelihood that the Northwest could provide enough firm surplus soon enough -- if conditions of the contract can be met, WAPA is scheduled to begin receiving the power when is available from the Antelope Valley plants and the portion of the transmission line connecting the plants to the BPA grid is finished, which could be as early as 1985. Until 1985, WAPA would buy some 250 megawatts of power it from BPA as part of the contract currently being negotiated. After 1985, WAPA would only be required to buy 100 megawatts from BPA, but would have use of the intertie for a total of 250 megawatts. Interestingly, WAPA's contract with Basin is for 185 megawatts, but it is anticipated that only 150 megawatts of capacity will be needed once the power reaches the intertie due to line losses. Many observors are marveling at the cost of the power WAPA has contracted to purchase from Basin for a whopping 65 mills per kilowatt hour (levelized in 1983 dollars). The nominal contractual cost ranges between 60 and 90 mills per kilowatt hour. Natural Resources Defense Council analyst Jim Wheaton informed the Report that WAPA anticipates selling the power to California's Central Valley Project at prices starting at 16.8 mills per kilowatt hour, rising to 39 mills by 1990, or at an apparent loss of up to 50 mills. Wheaton also states that some of the power will be sold to irrigators at 3 mills. Getting the power to California is what is holding up the WAPA contract process at this point. Another question is where BPA enters the picture. Due to public comment, BPA has decided to expand its public involvement process from a "brief memorandum process" to a more thorough "environmental assessment, according to Larry Kitchen of BPA's Contract Negotiation Branch under the Division of Customer Service. Kitchen (who emphasized to the Report that his comments were as a BPA employee familiar with the issue, not as an official BPA spokesperson, and that he is not trying to anticipate in any way formal positions BPA may take or the outcome of the environmental assessment process) stated that the environmental assessment process would determine whether an environmental impact statement would be appropriate or not. "BPA felt there were no air/land/water impacts sufficient to require an environmental assessment process. But I think the concerns and problems we're seeing raised have more to do with socioeconomic impacts than environmental impacts," commented Kitchen. The environmental assessment process will begin in early September, and will include a two week public comment period. The exact schedule has not yet been established, but interested parties should contact Lynn Baker in the BPA public involvement office for background documents, current schedules and procedural information. - According to Kitchen, BPA has offered to allow WAPA use of the intertie to get their power from Antelope Valley to California after 1985 for up to twenty years to facilitate WAPA's completion of a DC conversion line near Miles City (MT) which would allow a connection between the western and midwestern transmission systems long a goal of BPA's. In response to concerns that BPA not "give away" access to existing intertie capacity before developing its comprehensive intertie access policy (see also Volume 2, Number 16 the deadline for public comment on the intertie access policy has been extended to September 16), Kitchen commented that BPA considers WAPA to be in a "special category or separate class" from other entities involved in BPA intertie access policies for two reasons: 1) Historical arrangements relating to transmission lines for Colstrip power, and the reservation of government capacity in those lines; and 2) the fact that WAPA controls a portion of the intertie south of Malin (CA). BPA's draft contract with WAPA expects that the transmission lines in Montana necessary to complete the intertie connection would be completed by 1986. "This is the culmination of three to four years of discussions to complete the power grid," says Kitchen. "I don't see any great need over the duration of the times specified in the contract for the Northwest to use those lines in question." However, Northern Plains Resources Council staffperson Tim Stearns doesn't buy that argument: "Why should BPA basically give away 150 megawatts of its intertie transmission capacity, while in the process encouraging WAPA to lose money on the deal, when BPA could sell them 250 megawatts of Northwest firm surplus for twenty years at a reasonable price?" Wheaton concurs, "There seem to be scant benefits to the Northwest as a whole if BPA signs away part of the intertie. Completing the west/midwest transmission systems connection may be worthwhile, but it doesn't seem this is the most rational way of attaining that goal." Page 2 SEPTEMBER 2, 1983 PNUCC SURPLUS SALES WORKGROUP "RISK SHARING" SUBCOMMITTEE MEETS A breakthrough may have been made in discussions between Northwest and Southwest participants in the PNUCC Surplus Sales Workgroup's (see also Volume 2, Numbers 10, 12 and 16) Risk Sharing Subcommittee meeting last month in San Francisco. The Subcommittee meeting followed a full Workgroup meeting where the main unresolved issue was how the Northwest can be assured it has the flexibility to keep power in the region as demand increases while the Southwest is assured it will have enough power to put off building additional generation long enough to make it worthwhile to enter into the Another impasse at the full Workgroup meeting was the allocation of the costs of new transmission, which the Workgroup has assumed will be necessary to finalize a long-term firm surplus sale. contracts. Regarding the new or expanded Northwest/Southwest transmission costs, the Subcommittee agreed that there should be some kind of cost-sharing between the regions for the part of the upgrade or new intertie that was outside the Northwest - by far the largest portion in all four of the expanded transmission scenarios the Workgroup is seriously considering. - A scheme was also outlined by the Risk Sharing Subcommittee, which was apparently acceptable to both Northwest and Southwest representatives, to deal with the tug-of-war surrounding the five-year "pullback" clauses currently proposed by Northwest utilities. These provisions are intended to ensure the Northwest use of its power if it is needed within the region. An "insurance policy" would guarantee a minimum of 1500 megawatts per year to California for the duration of the contract within the specified price range. The insurance policy would most likely consist of a small surcharge on the contract price; a portion of the revenues from the surcharge would then go to mothball (instead of the planned termination) oil and gas generating facilities in California, which could be restarted with the remainder of the surcharge revenues if for some reason the Northwest was unable to supply the electricity specified in the long-term contract. Other possible sources of "fill-in" power that the "insurance surcharge" could be used to acquire -- include Canada, the spot market, or increasing the interruptibility of power to Direct Service Industries. The final contracts would likely include a dual price, allowing Southwest utilities to opt for an insured (slightly higher) price, or to self-insure outside of the contracts with the Northwest at a lower contract price. Still under discussion are the amount of the sales which would need to be insured -- certainly less than the 1500 megawatts of the total sale under discussion; and whether the Northwest would option specific plants in the Southwest for insurance purposes or if some other scheme would be used. There was also some further discussion of whether an upgrade of the intertie alone would provide enough transmission capability to satisfy all the concerned parties, or if new lines would have to be built. The Northwest feels the risks of being unable to supply power up to 1500 megawatts over the fifteen year period are lower than many of the Southwest utilities participating in the Workgroup and Subcommittee discussions. SMUD SACRAMENTO MUNICIPAL UTILITY DISTRICT 6201 S Street, Box 15830, Sacramento, California 95813; (916) 452-3211 June 30, 1983 CONGRESSMAN JIM WEAVER CHAIRMAN SUBCOMMITTEE ON MINING, FOREST MANAGEMENT AND BONNEVILLE POWER ADMINISTRATION US HOUSE OF REPRESENTATIVES WASHINGTON DC 20515 Dear Congressman Weaver: This letter is in response to your June 13, 1983 letter to Mr. John Mattimoe, General Manager of SMUD, regarding expanded transmission capacity between the northwest and California. SMUD now has rights for the transmission of 200 megawatts of electric energy You will find attached to this letter the answers to the questions contained in your June 13th letter. Sincerely, George F. Fraser, Director AN ELECTRIC SYSTEM SERVING MORE THAN 600 000 N THE HEART OF CALIFORNA QUESTIONS FOR ALL WITNESSES 1. What are the economic and environmental benefits and costs of expanded transmission capacity between the Northwest and California? 2. Answer: An expanded Pacific Intertie could result in the postpone- Please compare the feasibility, possible schedule for completion. a. b. C. d. Upgrading the existing Pacific Intertie ac lines from 2800 MW to 3200 MW. Answer: We believe that 3200 megawatts of flow over the existing intertie is feasible and that the stability problems associated with this higher flow are solvable. Upgrading the existing Pacific Intertie ac lines to 4000 MW. Answer: Not enough information to comment. Upgrading the existing 230 kV ac lines from the Round Mountain/ Building an additional 500 kV ac line from Malin, Oregon to: (2) Midway, California. An |