The legislative language describing component A calls for two distinct parts: 1) A description of variations in retail electricity rates within the state and in comparison to national averages; and 2) A description of trends affecting electric service costs for all customers in the state, and strategies available to minimize those costs.

Part 1) calls for a straightforward comparison of rates. We expect to present a series of graphic representations and narration that depict rate variation within the state and relative to national averages. We will use simple formats that allow for meaningful comparison.

Part 2) calls for an examination of trends affecting electric service costs and strategies to minimize costs. In this section, we propose to consider trends and strategies that affect total electric service costs, not the distribution of who bears those costs. Distributional issues will be examined in Study component C, which concentrates on cost-shifting. We hope this separation between overall cost and efficiency concerns (component A) and distributional concerns (component C) will lend clarity to the study.

There are also a great many potential strategies to minimize costs. At this point we plan to focus on the following categories of strategies:

For each strategy, we would try to describe pros and cons in terms of the extent to which the strategy is likely to minimize future costs. We plan also describe the legal status of the strategy and identify any need for legislative action to implement the strategy.

This is an area where our survey results indicated a high degree of interest in participation in separate meetings on the issues pertinent to Component "A". Through such meetings we hope to further refine the identification and analysis of trends and strategies building on the bullets above.

• Retail service characteristics of WA retail utilities (i.e., number of utilities, number of customers by rate class and utility type, etc.)

1. Data source is EIA and various published sources.

The legislative language for this component of the study calls for an assessment of the potential for cost-shifting among and within customer classes and an examination of strategies available to minimize "inappropriate" cost-shifts. For the most part, we propose to avoid judgements about which cost-shifts are inappropriate. Rather, we will describe the potential for changes in cost distribution from the status quo, and allow others to render their own judgements about the appropriateness of such shifts.

We propose to examine potential shifts in three areas:

a. power costs;
b. delivery costs, and;
c. state and local taxes.

We plan to focus the examination on a range of scenarios. To establish the limit for the range of cost-shifting ("the potential") for power costs, we will estimate a range of load that is likely to exercise competitive power options, and assume that load is served at short run marginal generation cost (SRMC). The scenario analysis will then assume that the difference between SRMC and embedded generation cost would be shifted to remaining customers. The results of this analysis will provide an estimate of the potential for shifting of power costs assuming no efforts to mitigate these shifts. We plan to describe a number of factors that might mitigate actual cost-shifting below this level, but this scenario technique will permit an estimate of the technical or theoretical potential magnitude for power costs to be shifted.

Similarly, for delivery costs (transmission, distribution, etc.) we would estimate a range of load that may exercise competitive delivery options and assume that the unavoidable costs associated with delivery to those loads is shifted to remaining customers.

For taxes, we would simply describe the amount of taxes that would be shifted or avoided over a range of assumptions about the proportion of load that could be served by out-of-state providers.

Strategies to minimize cost-shifts would correspond to the three categories above. As in Component "A" our intent is to describe an inventory of strategies along with their pros and cons, not to propose a preferred strategy. Strategies may include, but are not limited to:

Power costs:

stranded cost recovery;
rate or revenue caps;
terms and conditions for discontinuing or resuming rate-regulated service.

Delivery costs:

exit fees;
establishment of distribution service territories.

Taxes:

changing the public utility excise tax to a sales and use tax (with or without exemptions);
other tax reform options?

Data Sources:

• Unbundled generation and delivery charges reported under E2SHB 2831.
• Utility data request regarding economically sensitive loads and potential for bypass facilities.
• Utility data request regarding amount of load already being served at market-based rates.

This is an area where our survey results indicated a high degree of interest in participation in separate meetings on the issues pertinent to the potential for cost-shifting and the strategies to minimize cost-shifting. Through such meetings we hope to further refine the identification and analysis of trends and strategies building on the bullets above.

• Range of policies and procedures summarized by major category (e.g., credit policies, disconnection policies, complaint resolution, service calls, etc.)
• Major areas of consistency and inconsistency identified.

- Number of agreements, status, major characteristics.

Data requested from utilities (also collected under E2SHB 2831).

Data requested from utilities.

Data from WSCC and Northwest Power Pool

Data from WSCC and Northwest Power Pool

Data requested from utilities (also collected under E2SHB 2831).

Information regarding trends, data and factors affecting service quality requested of utilities.

This is an area where our survey results indicated a high degree of interest in participation in separate meetings on the issues pertinent to customer service quality and reliable service delivery. Through such meetings we hope to further refine the identification and analysis of data, trends and strategies building on the bullets above.

The report will include the following data and discussions for each of these three public purposes: conservation, renewable resources and programs for low-income customers.

• An overview of investments made by utilities from 1990-1998. The investment figures for low-income programs will include non-BPA federal funds and state funds.

• A narrative discussion of history, rationale and current context for these programs and recent trends in these utility system expenditures and, for low income, the recent trends in federal and state expenditures.

• A description of a range of alternative strategies to provide funding, management, and accountability to accomplish these public objectives. The report will outline pros and cons for each strategy.

Data collection sources include the utilities, the Department of Community, Trade, and Economic Development, and the Northwest Energy Efficiency Alliance. The study will not be relying on BPA as a data source given the regional nature of its tracking mechanisms. There may also be some information gathering from self-generators using non-hydro renewable energy sources.

The discussion on trends will include those that effect public purpose investments. These may include: trends in Bonneville funding for public purposes; lower avoided costs; new approaches to leveraging investments; and virtual competition.

There are a number of strategies to provide funding, management, and accountability to accomplish these public objectives. The report will include a summary of the range of strategies being adopted throughout the United States and relevant models adopted in other countries as well as describe new models to serve the unique needs of Washington State.

The survey results in this study area indicated a high degree of interest in participation in separate meetings on the issues pertinent to public purpose programs and the strategies available to ensure that state policy in these areas is achieved. Through such meetings and working with stakeholders we hope to further refine the identification and analysis of data, trends and strategies.

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