BULK POWER MARKETING EXPERIMENT

Mr. Bevill. What conclusions has the Commission drawn from its

bulk power marketing experiment?

Mr. Sousa. The Commission has not formally reached any conclusions about the Southwest Bulk Power Market Experiment.

However, the Commis

sion has received a report from the Rand Corporation that examines whether the experiment produced changes in competition and economic efficiency. Rand's evidence finds that the experiment market became more competitive in 1984, the first year of the experiment, when compared to the baseline year of 1983. With respect to efficiency gains that can be obtained from bulk power trading, Rand finds some evidence that "the experiment increase [d] the likelihood of potential gains being realized." Since several policies implemented in the experiment are now being examined in the notice of inquiry relating to wholesale electricity transactions the Commission will probably consider Rand's results as one of many inputs to the NOI policy review process.

BPA RATE REVIEW

Mr. Bevill. In November 1984, ALJ David Miller issued an initial decision finding that BPA had grossly undercharged for energy sold to California. What is the status of that case (EF81-2011-003 and

EF82-2011-003)?

Mr. Sousa. Concerning the status of the initial decision by Judge Miller on BPA's nonfirm energy rates in Docket Nos. EF81-2011-003 and F82-2011-003, the staff is currently working on a draft opinion for the Commission. The case involves a number of complex technical and legal issues concerning the proper basis for BPA's nonfirm rates.

Mr. Bevill. Does FERC have a general policy in such cases of ensuring benefits to both sides cheaper power to the receiving

utility coupled with adequate revenues for the generating region?

Mr. Sousa. Concerning the Commission's general policy about BPA's rates for nonfirm energy, the Commission has previously decided that in reviewing BPA's nonfirm rates the applicable statutes require that it must determine whether BPA's proposed rates have been designed: to recover the cost of generation and transmission of the nonfirm energy; to encourage the most widespread use of BPA power; to provide the lowest possible rates to consumers consistent with sound business principles; and that they were designed in a manner which protects the interests of the United States in amortizing its investments in the BPA projects within a reasonable period.

A number of important issues in Docket Nos. EF81-2011-003 and EF82-2011-003 concern the appropriate allocation of costs between the purchasers of nonfirm energy outside the Pacific Northwest and BPA's purchasers inside the Pacific Northwest. The Commission will be required to decide many of these issues for the first time. Thus, the decision in the dockets is of vital interest and importance to the parties involved.

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FY 1986 APPROPRIATION LANGUAGE

Mr. Bevill. Has the Commission experienced any difficulty with the appropriation language contained in the FY 1986 Act?

Mr. Sousa. No, the Commission has not experienced any operational difficulty with the FY 1986 appropriation language nor do we anticipate

any.

Mr. Bevill.

FY 1987 BUDGET REQUEST

Provide for the record an appropriations account

baseline table for fiscal year 1987, indicating the fiscal year 1987 requests (a) made for each program by the Commission to OMB, and (b) included in the President's proposed budget?

Mr. Sousa. The Commission's FY 1987 requests, to the Office of Management and Budget (OMB) and the Congress, by program, are outlined below. The change from the request to OMB to the President's budget is a reduction of $3.0 million. The FY 1986 appropriation is provided for

Mr. Bevill. Provide for the record a list by appropriations account of any anticipated fiscal year 1987 requests for supplemental appropriations.

Mr. Sousa. The Commission does not anticipate submitting any supplemental budget requests to the Congress during fiscal year 1987.

Mr. Bevill. Provide for the record a list of any assumptions in the President's proposed budget that require legislation? In each case: provide a detailed statement of purposes; provide the proposed language (if available) or indicate if, or when, the Administration intends to transmit such language; and indicate whether, in the Administration's judgement, such legislation would be sought from the Energy and Natural Resources Committee or as a rider on an appropriation act?

Mr. Sousa. The only assumption underlying the Commission's budget for FY 1987 that will require legislation is our proposal to extend explicit authority to assess fees and to collect additional annual charges. Annual charges, currently applicable only to the hydropower program, would be extended to our oil pipeline, natural gas pipeline, and electric power programs. Additionally, the FERC would be given explicit authority to set fees for particular services and/or filings instead of relying on the nonspecific authority to do so under the Independent Offices Appropriations Act of 1952. This proposal, which had been submitted to the 98th Congress but never introduced, was resubmitted to the Congress on May 8, 1985, and was subsequently modified slightly based on discussions between FERC's Office of the General Counsel and the staff of the Senate Energy and Natural Resources Committee in August 1985. I am supplying for the record a copy of the Commission's May 8, 1985, letter of transmittal citing a detailed statement of purpose, the original legislative proposal, and the August 1985 revision.

The purpose of the proposed legislation is to reduce the direct cost of energy regulation to the taxpayer through recovery of a greater share of the costs of regulatory services provided by the Commission to energy companies that operate under a Commission license, certificate, or other authorization. This proposal, if passed, would result in approximately $26.5 million in additional revenue in FY 1987 and about $50 million additional annually in FY 1988 and future years.