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June 14, 2010 Mission Valley Power Feedback on 2010 Integrated Program Review This is the first time I have participated since 2003 task force, so I have some familiarity with the process. I sat through the presentations May 17 thru 20 and participated on the phone May 13 and May 24. I appreciate all the presentations and willingness to share details and answer questions. The information was presented in a good format. One of the future challenges is to develop an outline for all presentations that is consistent. I think that would streamline our understanding and reduce some work by all the presenting groups. What I took away is the generation and transmission systems are aging and are in need of maintenance. I felt like the message from the presenters was the systems are falling down and we need to rebuild immediately. I will be the first to admit we need to invest in maintenance and refurbishing the systems. I would just ask that the approach have a long term plan of 10 to 15 years, not all be fixed by the end of 2013. I did see some long range planning forecast on dollars. For example, the Energy Northwest had pretty good details on their plan for Columbia Generating Station. The Federal Hydro Assessment sounds like a great start. I remember someone saying Steve Oliver (I believe) had recognized the Columbia Generating Station condenser work shouldn’t go on at the same time as Grand Coulee work. I understood it was because of costs and generation impacts. I would hope this type of thought process is used every time in all future Transmission and Power projects when looking at reliability and costs. I will be the first to say Mission Valley Power has been lucky to have a pre-subscription contract for the last 10 years. Starting in October 2011, we realize our wholesale power supply costs will be increasing significantly. I realize that this rate increase is likely to be a large one, but my expectation is this will not happen during every two year rate period. One area that I would like more understanding on is the Personnel Compensation and Benefits increases. Your FTE additions did not seem to be out of line. I encourage you to use contract employees where it makes sense. The costs for transmission and power increasing 18% and 16% each from actual 2009 to 2012 IPR seemed high. Here locally our Union wages have been increasing 4 to 5% to move to the Northwest average and other personnel wages have been less than 2%. FY 10 our non union employees received no cost of living increase. Starting next year I expect the Union wages to go back to less than 3% and other personnel to below 2% per year if any for the next few years. Fortunately our benefits costs have been holding. I heard your transmission system needs to be evaluated for its maintenance needs, for example how long insulators should be used. All I can tell you, my observation is your system gets lots of maintenance compared to the IOU that crosses Mission Valley Power service area. I would encourage you to do maintenance but do not recommend overly aggressive plan. Use an industry standard of a mix between IOU and Federal owned. The ability to capital or expense items is confusing to me. I assume you have some guideline to follow. I don’t know the trade offs. If it is something customers can assist you in changing, let us know. I appreciate you are holding a meeting to discuss this process. Reserve dollars target, Risk and Insurance, and Debt structures, needs some discussion. I will leave that to Geoff Carr, Bill Drummond and others. I look forward to continuing to rebuild BPA Transmission and Power back into one organization. I’m seeing some efficiency results here at the Utility. In closing, I know rates need to rise but I expect it to be gradual after Fiscal Year 2012. We need to invest in the system to ensure the Northwest benefits from the Federal generation and transmission. You can reach me at 406-883-7905 if you want to discuss further. Thank you for all your hard work. Ralph Goode General Manager |
