Here are some refinements to our protocol for selling BPA Surplus Energy.  I have consulted with Marcus Wood on this, and he agrees with my analysis on these points:

1.  We can sell BPA Surplus energy to public bodies and cooperatives ("munis") outside of the Pacific Northwest.  Therefore, the rule that "Surplus needs to touch a NW muni" should be expanded/relaxed to be "Surplus needs to touch a muni."  Stated in another way, the only customers we cannot sell Surplus power to are IOUs and marketers.

2.  Purchases of BPA Surplus that we sell only within NW are not subject to 60-day recall.  Likewise for Surplus energy we use to replace non-hydro resources that we then export.  Therefore, the 60-day recall provision only applies to energy that is exported out of the region, or that replaces hydro resources that are exported outside of the region.

Steve


-----Original Message-----
From: Wood, Marcus [mailto:MWOOD@stoel.com]
Sent: Friday, August 31, 2001 3:50 PM
To: Hall, Steve C. (Legal)
Subject: RE: BPA Questions


Let me give you the basic answers, but I should follow up next week with
a discussion of details that are crucial in implementation:

1.  Sacramento PUD and other out of region public bodies and
cooperatives indeed are entitled to be treated as public preference
customers.

2.  However, in a sale to an out-of-state utility, regional preference
trumps.  In other words, even if the customer is a public preference
customer, the sale of power to the customer is subject to 60-day recall.

3.  Sales of power within the region are not subject to the 60-day
recall.

4.  As a general matter, I think you can use federal power to displace a
non-hydro resource in the Northwest and then sell the output of that
displaced resource out of region.  However, (1) if the resource owner is
a "private person or agency," there will be a defect in the initial
resale of Surplus Energy to such resource owner.  In addition, under
Section 9(c) of the Northwest Power Act, a preference customer seeking
long-term requirements service from BPA cannot must treat such displaced
resource as serving its loads, so that BPA is required only to provide
service to the reduced load after such imputed service.

These matters might best be addressed in the context of specific desired
transactions. 

-----Original Message-----
From: Hall, Steve C. [mailto:Steve.C.Hall@ENRON.com]
Sent: Friday, August 31, 2001 3:15 PM
To: Wood, Marcus
Cc: Walters, Stephen; Yoder, Christian
Subject: BPA Questions


Marcus,

After taking a fresh look at the Bonneville-related statutes, I have
some new insights that I would like to test.  Please read over these
conclusions and let me know if you agree, disagree, etc.  This can
definitely wait until next week.

1.  Under section 5(a) of the Bonneville Project Act, no "private person
or agency" may resell BPA power to any "private utility or agency
engaged in the sale of electric energy to the general public."  We have
always interpreted this to mean that we must sell BPA Surplus Energy to
NW munis.  After reviewing this provision today for the first time in
months, I now believe that we are not limited in selling to NW munis,
but instead can sell to "public bodies and cooperatives" both inside and
outside the Northwest.  My thinking is that the Project Act does not
tell us who we can sell to, but only who we cannot sell to, e.g., a
"private utility or agency engaged in the sale of electric energy to the
general public."  Accordingly, there being no restrictions on selling to
non-NW public bodies and cooperatives, we can sell to them.

I believe that we can sell BPA surplus power, consistent with federal
law, to any public body or coorperative.  Do you agree?

2.  Who is eligible to be a preference customer?  Why can't Sacramento
MUD become a preference customer?  Under Section 4(d) of the Project
Act, the only requirements seem to be that the customer be (1) a public
body or cooperative that is (2) "within economic transmission distance
of the Bonneville project."  Although the Northwest Power Act
incorporates the Project Act, I do not see that it limits this
eligibility to publics in the the Columbia river drainage basin.  

Can any public body or cooperative that is "within economic transmission
distance of the Bonneville project," i.e., California, New Mexico,
Arizona, become a BPA preference customer?

3.  Sales of BPA Surplus energy that are (1) sold within the region, or
that are (2) used to replace non-hydro resources, which are exported out
of the region, are not subject to the 60-day recall provision under the
Preference Act.  Do you agree?  

Steve


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