There was considerable discussion on the overall subject of coordination but the above tabulation can well reflect the substance of the meeting. There was no material exchanged; the discussion was entirely from the data presented on the blackboard. CONFERENCE AND TELEPHONE CALL REPORT To: Office of the Administrator DECEMBER 20, 1957. Meeting on December 18, 1957, with Idaho Power Co. For Idaho Power Co.: Robert A. Hogg, R. E. Gale, John Kimball, (all of Boise, Idaho). For BPA: Dr. Pearl, J. Lane Morthland, R. L. Conkling, Miller Evans, E. D. Ostrander, E. C. Starr, H. M. McIntyre, B. Goldhammer, R. C. Coulter (ORS), Leon Jourolmon (ORS). Ellis L. Nut, United States Department of Agriculture, Portland. Harold Nelson, Bureau of Reclamation, Boise, Idaho. Mr. Kimball asked permission to review Idaho's position, particularly for the information of the advisory board, since this was the first general meeting with them. The main points of Idaho's position relative to coordination are as follows: (1) That the pool critical year be used to determine Idaho Power's firm capability. (2) That Idaho should be entitled to the generation on its own system. (3) That Idaho should participate in the downstream benefits, which result from the project they are building. (4) That winter energy be recognized as being more valuable than summer energy, particularly since capacity is necessary for the winter energy and additional capacity is not necessary for the summer energy. (5) That the summer energy required by Idaho should be on a firm guaranteed basis. Mr. Kimball felt that their position was justified by the analysis and interim reports of the FPC task force on the upstream-downstream situation. Mr. Kimball stated that they have had no indication to date that BPA would accept the above principles. Time is short for them to make a coordination agreement in that they expect to start filling the Brownlee Reservoir on May 1, 1958. He stated that Idaho has contracts with Utah Power & Light, Washington Water Power, and Pacific Power & Light to dispose of their surplus. He further stated that these agreements are now firm. Idaho plans to build a line to the Mountain Sheep site where they will tie to a line that Washington Water Power is building south from Lewiston. Target date for energization of this line is November 1, 1958. Mr. Kimball further stated that they proposed to operate in coordination as required under their license, but he stated that coordination could probably be achieved with other utilities than with BPA. He says they are studying this situation now and are not sure whether such arrangements could result in full coordination. However, regardless of these studies, they would still like a contract with BPA. Mr. Kimball further stated that he felt the summer energy that they require should be sold by BPA at a reasonable price and they would like BPA to submit a basis for the coordination. Mr. Kimball then asked Mr. Hogg to go on from there with the reasons for coordination. Mr. Hogg reviewed the reasons for coordination which basically are to keep cost of service to ultimate consumers as low as possible and to increase the firm capability of their system. He also reviewed the preliminary contract they had submitted to us in 1956. Dr. Pearl said he wished to emphasize that there was no agreement as yet but before discussing coordination with Idaho, there were two items he wished to bring up. These were: (1) Wheeling to Harney Electric Coop since Harney is in the BPA marketing area. (2) Wheeling to the Bureau of Reclamation in southern Idaho to help firm up their power and supply additional power to preference customers in that area. Mr. Kimball stated he did not have to make any studies to answer these questions: (1) Idaho Power Co. will not wheel BPA power to Harney, nor He stated the reason for his position was the result of the preference clauses in Federal Law. It would expose Idaho to loss of customers and of service territories. Mr. Nelson of the Bureau of Reclamation pointed out that the Bureau would also benefit by firming up its level from 1934-35 to 1936-37 and asked if Idaho Power Co. would help accomplish this. Mr. Kimball stated he would defer answering that question but that they would certainly take it into consideration and would discuss it further with the Bureau. Dr. Pearl then asked, supposing we cannot agree to a contract by May when the Brownlee reservoir starts filling, should we consider an interim agreement? Mr. Kimball stated that his company was not interested in an interim agreement unless it would conform to their long-term principles. On further questioning, he stated he would not oppose a 5-year review for taking into account changes in conditions. However, he would be opposed to a 5-year contract. Mr. Morthland asked Mr. Kimball if the January 1957 draft his company submitted should be considered as a firm offer of a contract. Mr. Kimball said no, it just embodied principles. Mr. Morthland replied if it was to be considered a firm offer of a contract, we would have to reject the proposal. Mr. Morthland then went on and stated he felt the license eliminated any consideration of isolated operation but he recognized that coordination might possibly be achieved with utilities other than BPA. Then Mr. Morthland stated he would agree with some of the principles that Mr. Kimball outlined: (1) That coordination would be based on the pool critical year. (2) That Idaho should be entitled to generation on its own system. (3) That BPA must reject any proposal for Idaho to participate in downstream benefits. (4) That we cannot agree to consider summertime energy less valuable than wintertime energy but in our analysis we prefer to stay away from any value conception. (5) We agree that summertime power necessary for the coordination should be on a firm basis. Mr. McIntyre then presented some tables on the board, copies of which are attached. Mr. Hogg disagreed with Mr. McIntyre's analysis. He stated that the way Idaho would operate isolated would result only in an increase in load-carrying capability of 70,000 kilowatts rather than the 246,000 kilowatts shown by Mr. McIntyre. The reason for this is that Brownlee could be operated in the summertime rather than storing water at that time. Mr. McIntyre agreed that if the comparisons were made from an isolated operation to a coordinated basis, this would be the result. However, assuming coordination is essential to fulfillment of the license stipulations, the comparisons would be as indicated. Mr. Hogg further stated that the example given by Mr. McIntyre does not accomplish maximum load-carrying capability. To accomplish this, Idaho would have to be given much more summertime power in that they have a summer load of 1.16 times the winter load, while the average of BPA summer load is only about 95 percent of the winter load. The statement that maximum loadcarrying capability is not accomplished because of the seasonal load variations on the Idaho system is not subscribed to by Mr. McIntyre. Mr. Gale suggested that they study the figures and confer with Mr. McIntyre in regard to them and then contact the Administrator. COORDINATION WITH IDAHO POWER Co., EQUAL ENERGY EXCHANGE BASIS Idaho Power Co. under coordinated operation, 1936-37 streamflows; 1964-65 installation; millions of kilowatt-hours 2 Sept. 15 through Apr. 15. 3 Own system load, does not include any recent sales or exchange contracts with other utilities. Idaho Power Co. under coordinated operation 1934-35 streamflows-1964-65 installation-millions of kilowatt-hours 2 September through Apri!. 3 Own system load, does not include any recent sales or exchange contracts with other utilities. Carryover interchange due BPA, Annual kilowatt-hour comparisons: 1. Idaho gains, net after coordination and interchange—700 million firm kilowatt-hours 2. BPA gain, net after coordination and interchange-zero kilowatt-hour gross before interseasonal interchange for coordination-652 million firm kilowatt-hour winter energy Increase in salable firm capability: The following data given over the telephone by Mr. Hogg of the Idaho Power Co. were presented for staff discussion in Dr. Pearl's office Thursday, January 16. These data show the benefits of coordination as computed by the Idaho Power Co. under 1936-37 streamflow conditions and for various levels of resource development, as follows: Idaho gain is 1936-37 annual average increase above 1934-35 capabilities. Mr. Hogg pointed out the successive gains of both Idaho and BPA as being significant particularly the last two stages of development. Mr. Hogg also stated that the Idaho Power Co. believes there should be a differentiation between summer and winter power and that the company is not getting any capacity benefits, only energy. He asked if the Federal Government was getting some capacity benefit from the return of energy from Idaho. He was told that the same conditions apply on the Federal system as on Idaho's system where excess capacity is available on both systems. When informed that BPA's position remains the same as presented at the previous meeting, Mr. Hogg commented that it didn't appear BPA and Idaho could get together. Dr. Pearl presented a new proposal given to him over the telephone by Mr. Kimball of Idaho Power Co. Mr. Kimball first stated that full coordinatoin of their plants could be accomplished with other utilities but coordination_with BPA would be preferable. Mr. Kimball's proposal is as follows: (1) Idaho would purchase their power requirements during May, June, and July on BPA's proposed S-1 rate; (2) power requirements during April and August would be purchased from BPA at 2.5 mills when and if BPA had it available. If BPA did not have power available at this time, arrangements could be made with the Utah Power & Light Co.; (3) Idaho would let them have all the generation on their system for use or for sale to other utilities. The staff then discussed the preference position Idaho should assume for availability of BPA secondary ahead of or behind the industrial customers. No conclusion was reached. The staff was asked to prepare the requirements of the Idaho Power Co. and available surplus on the BPA system during the summer months for determination of the application of Idaho's proposal. CONFERENCE AND TELEPHONE CALL REPORT From: Miller Evans. JANUARY 24, 1958. Copies to: Dr. Pearl. Meeting on January 24, 1958, with Idaho Power Co. For Idaho Power Co.: John Kimball, R. E. Gale, Robert A. Hogg. For BPA: Dr. Wm. A. Pearl, J. Lane Morthland, E. C. Starr, E. D. Ostrander, Leon Jourolmon (GRS), Miller Evans, H. H. McIntyre, C. E. Mohler. The following discussions took place during the meeting with representatives of the Idaho Power Co. regarding the coordination of their system with that of the Administration: Mr. Kimball reviewed the situation, pointing out that perhaps a statement of principles such as those involving downstream benefits, priority of filling reservoirs, and relative values of summertime and wintertime energy might be appropriate. He is primarily interested in buying summertime energy to hold and fill the new Idaho reservoirs. Dr. Pearl went over briefly his telephone conversation with Mr. Kimball, as outlined on BPA form 15 dated January 20, 1958. This discussion primarily concerned some questions Mr. Kimball had raised, which will be brought out later in these minutes. Mr. Kimball wished to add one point at this time, namely, that his company was not in a position to sign any agreement today but wanted information on points mentioned by Dr. Pearl as outlined in his form 15. Dr. Pearl began with a discussion of the S-1 rate under which it is possible to sell secondary energy during May, June, and July, and as secondary energy it may be shut off at any time. He also indicated the difference between the sale and exchange of power and their associated priorities. He raised the question as to whether coordination meant the sale or exchange of power; it was generally agreed that coordination could probably be accomplished by either means. Mr. Hogg pointed out that the S-1 type of energy was not in the class needed for filling reservoirs; he wanted this S-1 energy at the rate outlined in our schedule but not with the restrictions included therein. Mr. Gale indicated that exchange of energy during May, June, and July, between the two utilities would be desirable on a multiplier basis at some ratio other than 1 for 1, but that energy for the remaining 9 months-August through April could be exchanged on a 1 for 1 basis. Mr. Kimball asked if the Administration had any suggestions on how this could be accomplished. Mr. Morthland stated the staff feels that S-1 power would probably be available 19 out of 20 years, and that possibly Idaho could secure assurance from other utilities for power which could be coupled with S-1 power, thus insuring delivery even in this hypothetical 20th year. Mr. Kimball explained they had not made such an assumption but that it had definite possibilities. Mr. Morthland brought out that the Administration does not take the position that coordination, in whole or in part, must necessarily be with BPA. He assumed that Idaho must present a plan to the FPC for coordiation, whether with this Administration or other utilities, which indicated the terms of Idaho's license as being met. Mr. Evans read from the S-1 rate schedule, pointing out the terms and conditions of this rate with particular emphasis on its limitation of being secondary power and carrying a very low priority. Mr. Morthland mentioned that we had not definitely decided to go ahead with this S-1 rate, but if we did it might be possible to make a contract on the assumption that the rate would be approved. The Administration had not planned on filing this schedule until 1959. However, if agreement is reached involving the S-1 rate, we would be willing to file it at any time. Mr. Kimball informed the group that the first unit of Brownlee would be on the line soon after July 1, 1958. Mr. Hogg felt a contract should provide for an exchange of energy from August 1 to May 1 on a 1-for-1 basis. To accomplish complete coordination it might be necessary to have this contract plus a second one for the purchase of S-1 energy by his company. He suggested the inclusion of this May, June and July energy in an exchange agreement at less than a 1-for-1 ratio. Mr. Morthland had assumed that Idaho wanted to avoid an exchange in that they would like to retain all the benefits of their own generation. Mr. Hogg referred to the original terminology; namely, that operating energy was that energy exchanged during the winter season or, as integrated energy, was that resulting from the drawdown of Brownlee Reservoir. There was some general discussion at this point on the overall exchange, relative values of summer and wintertime energy, and other points of a similar relation. Mr. Kimball believes that all discussions up to now should, in effect, be forgotten and that we should look for a new means of coordination, even though Idaho would prefer to return to their original proposal. He wanted to talk at this time about an exchange of energy from August 1 to May 1 and the purchases of energy from May 1 to August 1 at the S-1 rate. Mr. Evans gave a copy of our S-1 schedule to the Idaho people with the admonition that we wanted them to fully understand the terms and conditions of this rate. At this point Mr. Kimball requested that he be allowed some time for a meeting with his staff. This occurred in another room and took only a short interval of time. Mr. Kimball, upon his return, said that he and his people felt there was great merit in the plan discussed for the exchange of energy from August 1 to May 1, and the purchase of energy from May 1 to August 1 at the S-1 rate. However, he wished to have his people closely examine the water cycle of the summertime months and would appreciate an opportunity to review Mr. McIntyre's study of this summertime energy. Idaho will need about one week to make this review and during this period would like the Administration to consider a 100 percent exchange agreement, including an exchange ratio higher than 1 to 1 for summertime energy, between the utilities in order to avoid the minimum bill exposure to Idaho in a wet year. Dr. Pearl stated that Mr. Starr had tentatively proposed a 14 to 10 exchange on the summertime energy. Mr. Hogg again suggested the 25 to 10 ratio for this type of energy, which is the same as previously mentioned by him. Mr. Kimball mentioned that perhaps it would be possible to have a combination exchange and purchase of the summertime energy. He and his people would like the opportunity to make an extensive study of the S-1 rate for the May, June, and July energy, with an even exchange of energy for the balance of the year. Mr. Evans told the group there appeared to be general agreement on the even exchange of energy during the 9-month interval from August 1 to May 1; therefore, both Idaho and BPA should be able to concentrate on a solution to the summertime energy problem. The meeting terminated at this point, with the Idaho men leaving with Mr. McIntyre to examine the Administration's water cycle studies previously mentioned. After the review has been completed by the Idaho Power Co., which Mr. Kimball indicated previously would take approximately one week, he will call Dr. Pearl and arrange the next meeting. |