[Federal Register Volume 64, Number 87 (Thursday, May 6, 1999)]
[Notices]
[Pages 24382-24386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11408]


-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Bonneville Power Administration


Opportunity for Public Comment Regarding Bonneville Power 
Administration's Subscription Power Sales and Standards for Service

AGENCY: Bonneville Power Administration (BPA), DOE.


[[Page 24383]]


ACTION: Notice of draft policy proposal.

-----------------------------------------------------------------------

SUMMARY: This notices announces a draft policy proposal to modify BPA's 
standards for service to permit the purchase of Federal power.
    One of the BPA's current eligibility standards for potential public 
agency utility customers and privately owned companies selling to the 
general public requires the utility or company to own its own 
distribution facilities. BPA is proposing that it modify this standard 
to permit in the future that a customer either (1) own a distribution 
system, or (2) have an ownership-type lease arrangement for a 
distribution system. The reason for this proposal is driven by the 
Federal Power Subscription Strategy, ongoing changes to the electric 
power industry and increased interest by some regional parties in 
becoming eligible to buy Federal power at the PF rate.
    This Notice on Eligibility and Standards of Service for Purchasing 
Federal Power will afford a 30-day public review and comment period on 
the proposal to permit ownership-type lease arrangements to be used by 
potential customers to meet one of the qualifications to purchase 
Federal power from BPA. BPA's proposal and background information on 
BPA's current eligibility requirements and standards for service 
regarding potential public agency and other customers follows below. 
BPA is also putting forward other concepts for consideration and 
invites comments on these as well.

DATES: Public meeting dates: May 27, 1999, and June 2, 1999. Close of 
comment date: June 11, 1999

ADDRESSES: If you are interested in commenting on the Eligibility and 
Standards for Service Policy Proposal, you have several options.
    1. You can send written comments to Bonneville Power 
Administration, P.O. Box 12999, Portland, OR 97212, or you can fax 
comments to (503) 230-4019. If you wish to send your comments 
electronically, email comments to: [email protected]. Comments must be 
received by close of business Friday, June 11, 1999.
    2. You also can attend one or both of the two public comment 
meetings. One meeting will be held on Thursday, May 27, 1999, in 
Spokane, Washington, at Cavanaugh's Inn at the Park, 303 W. North River 
Drive. Another meeting will be held in Portland, Oregon, on Wednesday, 
June 2, 1999, at the Sheraton Portland Airport Hotel, at 8235 N.E. 
Airport Way. Both meetings will begin at 10:00 a.m. Comments also will 
be collected on the Determining Net Requirements 5(b) and 9(c) Policy 
Proposal. If any additional meetings are scheduled, the information 
will be posted on the web site listed below.

http://www.bpa.gov/Power/subscription

FOR FURTHER INFORMATION CONTACT: Mr. Michael Hansen, Public Involvement 
and Information Specialist, Bonneville Power Administration, P.O. Box 
3621, Portland, Oregon 97208-3621, telephone (503) 230-4328 or 1-800-
622-4519. Information can also be obtained from your BPA Account 
Executive or from:

Ms. Ruth Bennett, Acting Vice President, Power Marketing, 905 N.E. 
11th, P.O. Box 3621, Portland, OR 97208, telephone (503) 230-7640
Mr. Rick Itami, Manager, Eastern Power Business Area, 707 W. Main 
Street, Suite 500, Spokane, WA 99201, telephone (509) 358-7409
Mr. John Elizalde, Acting Manager, Western Power Business Area, 700 
N.E. Multnomah, Suite 400, Portland, OR 97232, telephone (503) 230-7597
Mr. Steve Oliver, Manager, Bulk Power Marketing, 905 N.E. 11th, P.O. 
Box 3621, Portland, OR 97208, telephone (503) 230-3295

SUPPLEMENTARY INFORMATION: In its Federal Power Subscription Strategy, 
dated December 21, 1998, the Bonneville Power Administration stated 
that new public agencies that form and qualify for service within the 
period of the subscription contract window would be offered power at 
the priority firm (PF) rate for the post 2001 rate period for their 
entire general requirements load obligation, except for any new large 
single loads. The strategy further states that new preference tribal 
utilities that form and qualify for service will be treated the same as 
other new public agency utilities with respect to the availability of 
power at the PF rate.

Public Body and Cooperative Customer Eligibility Under Bonneville 
Project Act

    To be eligible to purchase power from BPA on a preference and 
priority basis, an applicant must meet two fundamental statutory 
requirements found in the Act of August 20, 1937, (the Bonneville 
Project Act) Pub. L. 75-329. First, the applicant must meet the 
statutory definition of one or the other of the terms ``public body'' 
or ``cooperative.'' Section 3 of the Bonneville Project Act defines the 
term ``public body'' or ``public bodies'' to mean ``States, public 
power districts, counties, and municipalities, including agencies or 
subdivisions of any thereof.'' Section 3 also defines the term 
``cooperative'' or ``cooperatives'' to mean ``any form of nonprofit-
making organization or organization of citizens supplying, or which may 
be created to supply, members with any kind of goods, commodities, or 
services, as nearly as possible at cost.''
    BPA has indicated that a Federally recognized tribe that forms a 
cooperative utility pursuant to its tribal constitution and laws would 
be eligible for preference status. Further, a tribe with the legal 
right could serve non-tribal members within its reservation boundaries, 
but would otherwise need to comply with state law for service outside 
the tribe's jurisdiction.
    For potential public customers who will resell Federal power to 
retail consumers, the second requirement is that a public body or 
cooperative applicant be in the public business of selling and 
distributing the Federal power to be purchased from BPA.1 If 
not presently in business, section 4(c) of the Bonneville Project Act 
directs BPA to afford the prospective customer a reasonable time, as 
determined by the Administrator, to allow it to get into the public 
business of selling and distributing power. BPA may not deny the 
request of a preference applicant that has not yet obtained necessary 
financing to get itself into the business of selling and distributing 
electric energy until after the reasonable time has passed.
---------------------------------------------------------------------------

    \1\  Section 5(a) of the Bonneville Project Act authorizes the 
Administrator to sell Federal power at wholesale to public bodies 
for direct consumption of the Federal power. In order to receive 
Federal power for its own use a potential public body end use 
customer needs to meet BPA's standards for service specific to 
direct consumption. BPA is not proposing any changes in its current 
standards for this class of potential customers.
---------------------------------------------------------------------------

    Finally, section 4(d) declares several policies regarding the 
preferential status of public bodies and cooperatives. They reinforce 
the directives found in section 4(c).2 First, preference to 
public bodies

[[Page 24384]]

and cooperatives is to be preserved. Second, people are to be given 
reasonable opportunity and time to hold any elections or to take any 
other necessary action to create a public body or cooperative. Third, 
once created the public body or cooperative is to be afforded a 
reasonable time and opportunity to authorize and issue bonds or to 
arrange other financing necessary to construct or acquire necessary and 
desirable electric distribution facilities, and to become in all other 
respects qualified purchasers and distributors of Federal power. To 
date, BPA has interpreted section 4(c) and 4(d), particularly the 
language ``to construct or acquire necessary and desirable distribution 
facilities,'' to require that the applicant own its distribution 
system.
---------------------------------------------------------------------------

    \2\ Section 4(c) provides in pertinent part: ``An application by 
any public body or cooperative for an allocation of electric energy 
shall not be denied, or another application competing or in conflict 
therewith be granted * * * on the ground that any proposed bond or 
other security issue of any such public body or cooperative, the 
sale of which is necessary to enable such prospective purchaser to 
enter into the public business of selling and distributing the 
electric energy proposed to be purchased, * * *''
    Section 4(d) provides in pertinent part: ``It is declared to be 
the policy of the Congress, as expressed in this chapter, to 
preserve the said preferential status of the public bodies and 
cooperatives herein referred to, and to give to the people of the 
States within economic transmission distance of the Bonneville 
project reasonable opportunity and time to hold any election or 
elections or take any action necessary to create such public bodies 
and cooperatives as the laws of such states authorize and permit, 
and to afford such public bodies or cooperatives reasonable time and 
opportunity to take any action necessary to authorize the issuance 
of bonds or to arrange other financing necessary to construct or 
acquire necessary and desirable electric distribution facilities, 
and in all other respects legally to become qualified purchasers and 
distributors of electric energy available under this chapter.''
---------------------------------------------------------------------------

    Regarding nonpreference applicants for Federal power which will be 
resold to the general public, BPA has required that such entities be 
properly formed under state law, including compliance with any 
approvals, filing or regulatory orders to which such businesses are 
subject under the laws of the states. BPA has required that such 
private utilities also own their own distribution system for making 
retail resale of Federal power. This requirement is based on section 
5(a) of the Bonneville Project Act which distinguishes between a 
privately owned public utility buying Federal power for resale to the 
general public from other sales to private persons. 3 It is 
not based on sections 3 and 4 discussed above.
---------------------------------------------------------------------------

    \3\  Section 5a of the Bonneville Project Act provides in 
pertinent part: ``Subject to the provisions of this chapter and to 
such rate schedules as the Secretary of Energy may approve, as 
provided in this chapter, the administrator shall negotiate and 
enter into contracts for the sale at wholesale of electric energy, 
either for resale or direct consumption, to public bodies and 
cooperatives and to private agencies and persons and for the 
disposition of electric energy to Federal agencies. Contracts for 
the sale of electric energy to any private person or agency other 
than a privately owned public utility engaged in selling electric 
energy to the general public, shall contain a provision forbidding 
such private purchaser to resell any of such electric energy so 
purchased to any private utility or agency engaged in the sale of 
electric energy to the general public, and requiring the immediate 
canceling of such contract of sale in the event of violation of such 
provision.''
---------------------------------------------------------------------------

Standards for Service

    The Northwest Electric Power Planning and Conservation Act on 1980, 
Pub. L. 96-501, section 5(b)(4) directs the Administrator to require 
all potential customers requesting a contract for firm power under 
section 5(b) of the Act to comply with the Administrator's standards 
for service in effect on December 5, 1980, or as subsequently revised. 
4 BPA has traditionally made its determination regarding 
eligibility for preference and meeting BPA standards for service on a 
case-by-case basis and communicated its standards and assessment of a 
party's qualifications in correspondence to parties seeking to purchase 
Federal power under section 5(b). The following describes the standards 
for service, including the eligibility requirements under sections 4(c) 
and (d) of the Bonneville Project Act, applicable to potential public 
agency customers.
---------------------------------------------------------------------------

    \4\  Section 5(b)(4) of the Northwest Power Act provides, 
``Sales under this subsection shall be made only if the public body, 
cooperative, Federal agency or investor-owned utility complies with 
the Administrator's standards of service in effect on December 5, 
1980 or as subsequently revised.''
---------------------------------------------------------------------------

    As a practical and legal matter, BPA's determination of a 
customer's eligibility to purchase preference power is included in an 
overall review to determine if the customer is in compliance with the 
Administrator's standards for service. To comply with the existing 
standards for service an applicant must:
    1. Be legally formed in accordance with local, state and Federal 
laws;
    2. Own a distribution system and be ready, willing and able to take 
power from BPA within a reasonable period of time;
    3. Have a general utility responsibility within the service area;
    4. Have the financial ability to pay BPA for the Federal power it 
purchases;
    5. Have adequate utility operations and structure; and
    6. Be able to purchase power in wholesale, commercial amounts.
    Following is a more detailed explanation of the existing criteria.

Legal Formation

    BPA will request an applicant to demonstrate that all required 
steps under applicable law have been taken to authorize its formation 
as a public body or cooperative. It also ensures that the applicant is 
in the public business of buying and distributing, at retail, power to 
be purchased from BPA, or is in the process of going into such a 
business. The applicant must provide copies of filings of certificates 
and approvals from designated officials, such as by-laws and articles 
of incorporation, regulatory approvals as required, and information on 
whether public elections were required and held. This standard is 
applicable to potential new preference customers and to new private 
utilities selling to the general public.

Distribution Function

    This criterion assures that BPA sells power consistent with the 
legal requirement that it be sold to public bodies and cooperatives 
engaged in the public business of buying and distributing power through 
distribution facilities owned by the customer. The performance of the 
distribution function by the party applying for preference status has 
been viewed as an assurance that the purposes of selling Federal power 
on a preference basis are realized. The same considerations are 
applicable to BPA sales to privately owned utilities selling Federal 
power to the general public. That is, they have a distribution system 
and are able to provide the power to retail consumers. Parties that do 
not own, operate and maintain, or control the costs of the distribution 
may face the issue of how to demonstrate that they are able to provide 
the benefits of cost based Federal power to retail consumers. This 
standard is applicable to potential new preference customers and to new 
private utilities selling to the general public.
    BPA must give the applicant a reasonable opportunity to achieve 
ownership including time needed to finance the acquisition or 
construction of the necessary distribution. In general, State law 
grants public bodies the power of eminent domain allowing them to 
acquire the distribution facilities of another utility through 
condemnation. In general, cooperatives have been able to construct or 
purchase their own systems through low-cost financing obtained from 
loans made by the Federal Rural Electric Administration (predecessor to 
the Rural Utility Service).

General Utility Obligation To Serve

    This criterion assures that Federal power will be sold by the 
applicant in a non-discriminatory manner for the benefit of the general 
public and particularly of domestic and rural consumers. BPA has always 
required that a customer serving retail consumer load have a ``utility 
responsibility'' to serve. This means that any retail consumers may 
request and obtain service from the potential customer, limited only by 
service area or franchise allocation restrictions. An applicant must 
have obtained authorization to serve certain loads or areas prior to 
receiving power from BPA for service to such loads or areas. Any legal 
action that challenges such service must be resolved by final order 
before BPA begins service. This standard is

[[Page 24385]]

applicable to potential new preference customers and to new private 
utilities selling to the general public.

Financial Health and Ability To Pay

    This criterion assures BPA that the applicant is able to pay for 
the power it receives. BPA examines the applicant's authority to 
collect money for the services it renders to its retail consumers--the 
ability to bill--and the applicant's authority to sue and be sued. BPA 
reviews the applicant's organizational structure to see if there is a 
financial officer and staff that performs a billing and collection 
function. BPA will also examine, particularly in the case of a 
municipal or tribal applicant, whether the applicant has the authority 
to segregate utility funds from a general fund, if one exists. This 
standard is applicable to potential new preference customers and to new 
private utilities selling to the general public.

Operations and Structure

    This criterion is used to provide BPA reasonable assurance that the 
applicant has the ability to fulfill responsibilities and duties under 
a power sales contract. BPA examines the applicant's ability to perform 
utility functions such as metering, billing, or operation and 
maintenance on utility facilities, or contract for such functions and 
control the costs of such functions. This standard is applicable to 
potential new preference customers and to new private utilities selling 
to the general public.

Commercial Quantities

    Because BPA is directed to sell power at ``wholesale,'' BPA has 
generally required that customers purchase power in wholesale, 
commercial amounts of one megawatt or more. This standard is applicable 
to potential new preference customers and to new private utilities 
selling to the general public.

Connection to BPA Transmission System

    The BPA standards for service have also addressed matters related 
to the configurations and operations of electrical facilities. 
Requirements for interconnection to the BPA transmission system are 
governed by the Open Access Transmission Tariff. The Transmission 
Business Line is currently revising its Interconnection Standards. 
These aspects of standards for service are not addressed in this 
Notice.

BPA Proposal To Change Its Standards for Service

    The advent of retail electricity deregulation in the wholesale 
market and in some western states at retail, as well as the interest of 
some tribes and other parties in forming and operating an electric 
utility, has prompted BPA to assess whether or not a change in its 
existing standards for service may be warranted. Some parties have 
questioned whether BPA should continue to require that preference 
customers who serve retail consumers own and operate a distribution 
system. A similar issue arises as to BPA's sales of Federal power to 
new private entities, as to the legal distinction between a utility 
selling to the general public and other sales.
    In response, BPA is inviting comments from interested parties on 
this proposal to allow ownership-type lease arrangements which, in 
addition to direct ownership of a distribution system, qualify a 
potential public agency customer to be able to purchase PF power. All 
other eligibility criteria would continue to apply. BPA proposes that a 
potential new customer who would sell power to retail consumers may use 
an ownership-type lease arrangement in order to provide for 
distribution to retail consumers. A customer could lease a distribution 
system for delivery of Federal power to retail consumers. In this 
concept, in order to qualify as an ownership-type lease, the agreement 
would (1) be a long term arrangement for the life of the facilities or 
for a duration equal to the term of the BPA power supply obligation, 
and (2) give to the preference customer the right to operate, maintain 
and have repairs performed on the system, as well as have complete 
decision authority over costs of the distribution system. In addition, 
the customer would perform, or be responsible for, all other utility 
functions such as meter reading, billing, retail rate setting, and 
other services and functions provided by a serving utility. The 
proposal is to have the potential customer and the distribution owner 
enter into an arms length commercial transaction. The potential 
customer should have the ability under such transactions to have a 
third party provide for the system maintenance functions in an open 
competitive process.
    This proposal to use an ownership-type lease arrangement is 
consistent with Department of Energy policy which allows the use of a 
lease by a potential public agency customer to obtain a distribution 
system. See DOE General Counsel, ``Request of City of Needles for 
Reinstatement of Sales of Federal Power for Benefit of Its Citizens'' 
(Nov. 21, 1978). This policy was affirmed in Salt Lake City et al. v. 
Western Area Power Administration, et al. 926 F.2d 974 (10th Cir. 
1991).

For Discussion: Concepts Regarding Standards for Service

    In addition to the ownership-type lease arrangement, some parties 
have suggested other concepts which may meet the standards for service 
requirement. The concepts presented below are for discussion purposes. 
BPA is not making a proposal regarding these concepts.

Contractual Capacity Rights

    A customer could obtain long-term contracts for use of capacity on 
distribution facilities or for access to distribution according to 
state law which assure delivery of Federal power to retail consumers. 
The distribution owner would operate and maintain the distribution 
system. The preference customer would contract for use of distribution 
and would perform, or be responsible for, meter reading, billing, 
retail rate setting and all other services normally provided by a 
serving utility.

The Utility's Obligation To Serve

    Retail access legislation may raise issues regarding the standard 
for service requirement that a customer have a general utility 
responsibility or obligation to serve. An obligation to serve standard 
is linked with the distribution function. Decisions made regarding 
distribution should guide the issues on a customer's obligation to 
serve standard. Following are variations on the obligation to serve 
depending on how the utility accomplishes the distribution function:
     If a utility contracts for long-term capacity rights on 
the distribution system or has access to a distribution system 
according to state law, the distribution owner would operate, maintain, 
and have complete decision authority over costs. In this case the 
leasing utility should have the obligation to serve, if it has the 
distribution capacity or can obtain the necessary capacity to serve the 
load. If the leasing utility does not have and can not obtain the 
necessary capacity, then the distribution owner would potentially have 
the obligation to serve.
     Another concept would be to rely on governing law, 
including retail access law, to determine who will have the obligation 
to serve in specific circumstances.
    Responsible Official: Mr. Fred Rettenmund, Customer Account 
Executive, Power Business Line, is the official responsible for the 
development of the draft policy proposal for modifying BPA's standards 
for service

[[Page 24386]]

to permit the purchase of Federal power.

    Issued in Portland, Oregon, on April 26, 1999.
Judith A. Johansen,
Administrator and Chief Executive Officer.
[FR Doc. 99-11408 Filed 5-5-99; 8:45 am]
BILLING CODE 6450-01-P