140 



below. 



2 . Should BPA proceed with the proposed contract for the output of 

 the Tenaska natural gas combustion turbine? If so. why? If not, 

 why not? BPA has agreed to maintain the confidentiality of certain 

 escalator clauses in the proposed Tenaska contract. Was this 

 confidentiality agreement appropriate? 



The Tenaska Washington II project represents a purchase of 248 

 Megawatts of gas-fired generating capacity; the Northwest Power 

 Planning Council pegs its life-cycle costs at "approximately $1.2 

 billion if Bonneville purchased the full 240 average megawatt 

 output of the plant over the life of the contract."'^ In my 

 opinion, whether BPA should proceed with this acquisition depends 

 entirely on whether it is part of a balanced portfolio dominated — 

 as the Regional Act requires — by less costly energy efficiency 

 and renewable energy. Based on its current performance, I do not 

 believe that BPA can meet this test. The fate of Tenaska should 

 hinge on BPA's demonstrated willingness and capacity to do better 

 in the immediate future. 



I am not aware of the basis for confidentiality about 

 escalators in the Tenaska contract; my experience has been that 

 such data are routinely disclosed in other regulatory contexts. 

 Even without all of this information, however, it is clear that the 

 actual out-of-pocket costs associated with the Tenaska purchase 

 will be far above the 27 mills/kWh (1990 dollars) cited in some 

 early BPA reports. BPA recently adjusted the estimate by 

 incorporating escalators and inflation, yielding a robust 41% 

 increase to 38 mills/kWh in levelized 1993 dollars. That figure 

 exceeds the current BPA preference rate by more than 50 percent, 

 and should prove illuminating to those who think that a rate 

 increase on the order of 20-25 percent would destroy BPA's 

 competitiveness . 



'^Staff Issue Paper, Tenaska Washington II Generating Project; 

 Section 6(c) Review for Consistency with the 1991 Northwest 

 Conservation and Electric Power Plan , at p. 2 (June 1993). The 

 Council adds that "[b]ecause of provisions for displacement, 

 however, it is unlikely that Bonneville will take the full energy 

 output of the plant for the entire contract period." 



