McHUGH & ASSOCIATES
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THE MARKET WEEKLY
WHAT'S
SIERRA'S LINK WITH BPA
In materials announcing its PGE
purchase, Sierra Pacific has
mentioned improved access to Northwest power markets for its customers.
Sierra Pacific has not, hitherto, been a regular BPA power sales customer, but
it is a transmission customer. BPA also wheels power to some of its preference
customers in northwest Nevada through Sierra Pacific. BPAs grid is connected
to Sierra Pacific through the 345-kV Reno-Alturas Transmission System, which was
energized
in November 1998. The line runs from Sierra Pacifics system at Reno to
BPAs grid at Malin Substation in southern Oregon. Malin is a major link
in the alternating-current intertie connecting the Northwest
power grid with Californias. Some industry observers note that the combined transmission resources of Sierra Pacific, Nevada Power and PGE make up most of a transmission path between Northwest and Southwest power markets. PGE owns a segment of the alternating-current intertie from Grizzly to Malin substations, plus lines from the Trojan nuclear plant on the Columbia River, through and around Portland, over the Santiam Pass and connecting to Grizzly north of Redmond, Ore. Sierra Pacific owns transmission throughout northern and central Nevada, connecting to PacifiCorp and other utilities lines in Utah. The former Nevada Power portion of Sierra Pacific includes transmission around Las Vegas in southern Nevada that connects to lines in Arizona and southern California. WILCOX
STILL PUSHING PURCHASE
Northwest aluminum owner Brett Wilcox and consultant Jim Litchfield held a meeting last week on their proposal to have customers buy BPA. Those attending were mainly direct-service industries and investor-owned utilities. Public power and other constituents largely stayed away, which is probably a sign that this particular proposal is not getting off the ground. The group, which meets again Dec. 16, is aligned on only three points. 1. BPA benefits need to be distributed more widely (read more to IOUs, DSIs). This could have implications for public preference. 2. Fish and power issues should be more closely linked. For example, in good water years, there'd be more dollars for fish, while there'd be fewer in poor water years. That's an idea that's been around for some time but has never taken off, largely because of pressure against it from environmentalists. 3. BPA should legally separate and move toward an RTO. RURal Areas Are Offered Fiber Cable
The Bonneville Power
Administration is offering to provide rural communities in Washington
with ultra-cheap
fiber-optic cable-a move that is being embraced by the communities but
criticized by telephone companies. The Portland-based federal agency, which is laying thousands of miles of lines in the state as it upgrades its communications system, is offering to lease extra capacity to public utility districts in sparsely populated areas for $5 a mile. While the price is a bargain, business and civic leaders say what's more important is that the fiber will be available at all, as the private sector is years away from even starting to wire rural Washington with high-speed lines. With those lines, they say,
small towns will be better able to compete for businesses that demand
up-to-date communications systems. "Having high-speed
communications capability is right up there at the top of what companies
want," says Sharon Hart, executive director of the Lower Columbia
Economic Development Council in Skamokawa in southeast Washington. Treading on Turf
But GTE Corp., which
supplies local telephone service to 30% of Washingtonians, doesn't like
the idea of government stepping on its turf. "It appears that Bonneville and the local public utilities are getting ready to build a second phone system in rural Washington," says Richard Potter, manager of state affairs for Everett-based GTE Northwest Inc., a unit of the Dallas company. "We welcome competition, but if the PUDs are going to build this system using electric-ratepayer money, we have an issue with whether this is a level playing field."
Terry Vann, executive vice president of the Washington Independent Telephone Association in Olympia, which represents 16 small carriers operating phone systems in 21 rural areas of the state, says Bonneville's price "is probably six times less expensive than we can get to rent fiber. We are going down the road of socialized rural telecommunications here, and it could be very difficult for small private companies to survive." Mr. Potter says GTE doesn't
intend right now to ask the courts or the Washing ton Legislature to
stop the BPA program, but is keeping its options open. Don Godard, manager of the Grant County Public Utility District and chairman of Northwest Open Access Network, a nonprofit group working with the BPA on the fiber-optic program, says GTE can't complain unless it's willing to offer high- speed service to rural areas. "These are not
communities where fiber already exists," Mr. Godard says. "If
the private companies want to do it, we'd gladly stand aside. But if
they can't-or won't- then they should get out of the way." Mr. Potter says GTE hasn't
received any requests for fiber from rural areas in Washington. The
company has provided fiber for several of its smaller communities, but
only when the area's population and demand make it practical, he
says. Denver-based U S West Inc.
which provides about 60% of the phone lines in the state, has similar
concerns about "taxpayers funding a service that competes with
private industry," says Bill Prows, a company spokesman in
Portland. The BPA made its offer to the Washing ton Public Utility District Association on Sept. 28, and so far 16 PUDs out of 28 have signed up to lease the fiber. 'Outside That Box'Steve Johnson, executive director of the Seattle-based utility district association, says PUDs will offer to sell access to the BPA lines to anyone, even local telephone providers, "as long as they are willing to pass it on [to customers] at cost. "The companies that object are trying to kill off something that is targeted at areas they don't want to serve for business reasons," he says. "But I say we should think outside that box." The BPA distributes 40% of the Northwest's power with electricity generated from 29 federal dams and owns 80% of high-voltage transmission lines in the region. It can make the fiber cable available at low cost because it's laying new lines anyway for its own use, according to Ed Mosey, an agency spokesman. The old system of microwave
towers that regulates the dams and switch energy loads to meet peak
demands is wearing out, so Bonneville began stringing fiber in 1994. It
now has 2,000 miles in place, primarily in Washington, but also in
Oregon and Idaho, and plans to add an additional 1,800 miles in the next
two to three years. The agency hopes at some point to offer the same
deal to PUDs in other states. "This is expensive wire to hang, but you can add additional capacity for very little cost," Mr. Mosey says. The fiber that the BPA will
lease won't be active; a PUD will have to make an investment of $70,000
or more to buy and install the switching equipment that will make the
lines useful. Mr. Godard says that Northwest Open Access Network is
investigating financing options, including loans from banks, bonds or
grants from state or federal rural-development funds. Mr. Mosey says that the BPA is following its original mandate in offering the low-cost fiber to rural areas. The agency was formed by Congress with the 1937 Bonneville Project Act, which directed the agency to use the power to supply rural homes with electricity. So just as the agency brought lights to homes and farms in the Northwest, Mr. Mosey says, it's now offering access to new technology. The BPA is offering the fiber-optic deal "only to counties with fewer than 100 people per square mile," Mr. Mosey says. "We hope that what we are doing is creating or accelerating the market in these areas." Need for Redundant Line In Port Angeles, on the
Olympic Peninsula, Bart Phillips, executive director of the Clallam
County Economic Development Council, says that the lack of a fast, modem
communications system has hurt the community's chances of attracting new
businesses. Although he says that U S West is planning to bring a fiber
line to the town, "these communications businesses want a redundant
line so that if something happens, they don't lose business." Mr. Potter at GTE
questions utility districts' authority to move into the telephone
business, citing a 1998 opinion from Washington Attorney General
Christine Gregoire that said PUDs don't have the right under Washington
law to offer Internet access and telephone service. In that opinion, however, Ms.
Gregoire said that a PUD may sell or lease any excess capacity from a
fiber-optic cable, as long as it is primarily used for the PUDs' needs,
for instance, to manage electric demand and monitor system performance. Mr. Johnson of the state PUD association asserts the PUDs and BPA are entirely within their authority, adding, "Without this help, these rural communities will be left on the dark side of the digital divide."
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