Western Issues

Executive Summary:
? BC's NDP Leader Publicly Concedes Defeat to Liberals
? BPA seeks Federal Loan for Improvements, Future Fish Credits Limited
? Washington House Extends Aluminum Smelters' Power Re-Sale Rights by 1,500
MWs

BC Elections
According to our information, the BC government is preparing for the Liberal
take this week. The election is slated for 16 May 2001 and it appears likely
that we are looking at a near Liberal sweep -- they are currently leading 41%
to 25% at the polls. There is about a three-week lead time between the
general election on May 16th, the Final Count on May 29th, and the Return Day
on June 7th -- so there will be a period of jockeying around some issues.
The New Democratic Party (NDP) leader, Ujjal Dosanjh, has effectively
conceded the election in a public announcement. Dosanjh is making public
pleas to voters not to desert the NDP in favor of the Greens so that the NDP
can retain official party status (4 seats). Dosanjh has stated that he "will
be happy if the NDP gets 10 to 15 seats."

The following are likely to be the key energy policy officials once the
Liberal Party takes power in BC:

? Richard Neufeld, Minister of Energy, Mines and Northern Development
(replacing NDP Minister Glenn Robertson)
? Dan Jarvis, Deputy critic on Energy, Mines and Northern Development Murray
Coell, Minister of Environment, Lands and Parks (replacing Ian Waddell)
? John Van Dongen, Fisheries Neufeld, Jarvis, Coell and Van Dongen are
currently Members of the Legislative Assembly (MLAs).

While Gordon Campbell, the probable incoming premier, will have been
effectively muzzled in the interim when it comes to talk about energy
deregulation, the opposition will likely have plenty to say about it. The
people we'll need to be looking at this regard are: Glenn Robertson -
Minister of Energy and Mines, and Ian Waddell - Minister of Environment, Land
& Parks.

It appears certain that the Liberals will move to privatize at least some of
the power crown corporations almost immediately. They have promised a
balanced budget and a chunk of money to do it their way; they have made
campaign promises about privatization to stir the economy; and they have
tight back channels with the crown corporations' management who want "a
straight privatization plan instead of coop approach to deregulation."
Sources report that, if elected, the Liberals promise a referendum on land
claims treaties with the local native Indians (or "First Nations"). These
treaties result from overlapping claims to land and serve to block land
development, forestry, mining, etc. While the NDP has been supportive of the
First Nations land claims process while in office, the promised Liberal
referendum would seem to suggest that the Liberals intend to backtrack and
not recognize the First Nations' rights. In other words, there would be an
increased impetus for mining and forestry. This development is surprising
since the Liberals have traditionally enjoyed strong Indian support, and the
land claims process was originally started under a Liberal government. If
the Liberals press forward with a referendum on the process, there is the
potential for violent flare-ups between the First Nations and the
government. (These flare-ups have occurred in the past, though not recently.)

BPA
BPA is urging the White House to increase its authority to borrow from the
federal Treasury by $2 billion to build over 20 new projects for 500-kilovolt
transmission lines and substations online between 2003 and 2006. BPA
officials hope the new borrowing authority will be included in a
comprehensive energy strategy the Bush administration is expected to release
next week, although federal officials have yet to give the final word on the
BPA request. Energy Secretary Spencer Abraham, key members of Congress and
the staff of Vice President Dick Cheney, who has taken charge of developing
the administration's energy strategy, all have been briefed on BPA's
proposal. BPA has been building a case for a budget item that officials say
would be a significant boost to the region's power infrastructure in the near
term. If the administration doesn't include it in its energy strategy, BPA
officials say they will nevertheless press for the increased borrowing
authority in Congress. BPA plans for the first time to use more "fish
credits" than cash to meet its annual debt obligation, reducing its cash
outlay by some $400 million. BPA had expected its borrowing authority to be
sufficient until 2006, but given the energy situation, BPA could hit the
ceiling by 2003.

BPA will be spilling water over its dams as a part of the salmon protection
plan. To make up for the shortfall, the agency will have to repurchase
approximately $1.2 billion on the electricity spot market -- these costs will
be passed on to energy consumers as a part of the subscription rate hike in
October. Oregon Governor Kitzhaber is pushing for more spills. Steve Wright
& other BPA officials are considering the effects of keeping water in the
reservoirs as a safety net, should there be a cold spell next winter, which
has precipitated a federal lawsuit from 12 environmental organizations
against the National Marine Fisheries Service.

Earthjustice Legal Defense Fund is leading this charge, a coalition which
includes Trout Unlimited and the Sierra Club. The official line is they want
to disallow the Federal Caucus and BPA from declaring a 'fish emergency'
which would allow them to determine the amount of water spilled over the
dams, among other things. However, by exercising a 'fish emergency', BPA
becomes qualified for additional federal credits - which is probably the real
source of contention here.

Aluminum Smelters
The bill passed by the House Energy Committee yesterday does extend the
resale rights of the smelters to 1500 megawatts of power beyond the October
2001 termination date. BPA is negotiating, even though they have no legal
obligation to serve the smelters. New attack ads paid for by the aluminum
companies are running to build political pressure to continue to receive and
resell 1500 megawatts of power beyond October 2001, in addition to receiving
other payments for staying offline.