20070529_1942.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
CO MMISSI 0 NER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DONOVAN E. WALKER
DATE:MA Y 24, 2007
SUBJECT:BONNEVILLE POWER ADMINISTRATION'PETITION FOR A
DECLARATORY ORDER DISCLAIMING JURISDICTION, CASE NO.
BPA-07-
On April 6, 2007, Bonneville Power Administration (BPA) petitioned the
Commission for a declaratory order disclaiming Commission jurisdiction and regulation of the
Owner Lessor in a proposed lease financing arrangement for the construction of various electric
transmission facilities within the State of Idaho. On April 25, 2007, the Commission issued a
Notice of Petition and Modified Procedure seeking comments on this matter. Order No. 30308.
Commission Staff was the only party to file comments.
BP A's PETITION
On April 6, 2007, Bonneville Power Administration (BP A) petitioned the
Commission for a declaratory order disclaiming Commission jurisdiction and regulation of the
Owner Lessor in a proposed lease financing arrangement for the construction of various electric
transmission facilities within the State of Idaho. BP A states that it is a federal power marketing
administration within the U.S. Department of Energy that markets wholesale electrical power
and operates transmission facilities in the West and Pacific Northwest. Petition at 2. BP A
proposes to enter into a lease financing arrangement under which it would acquire, construct
and/or install various, and as of yet undetermined, transmission facilities (Facilities) for the
purposes of enhancing transmission grid reliability, ensuring compliance with mandatory
reliability standards, enabling the integration of new generation, and managing grid congestion.
Id. Some of the Facilities will be located in Idaho and all Facilities will be used exclusively by
DECISION MEMORANDUM
BP A to provide interstate transmission service and will not be available for use for bundled retail
service. Id.
Construction of the Facilities will be financed by a special purpose entity (SPE) that
is the Owner Lessor. Id. The Facilities will be owned by the SPE, Northwest Infrastructure
Financing Corporation II , which will be formed expressly for the purpose of arranging for the
financing of the Facilities. Id. at 4. All of the capital stock of the SPE will be owned by JH
Holdings, acting solely as trustee under a trust agreement between J.H. Management Corporation
(JHM) as grantor, and JH Holdings Corporation (JHH) as trustee. Id. All of the capital stock of
JHM and JHH will be owned by the 1960 Trust, an independent charitable support organization
operated for the benefit of Harvard University. Id. at 4-5. The SPE will not engage in any
business other than arranging for the acquisition and financing of the Facilities. Id. at 5.
The SPE will finance the construction of the Facilities through one or more loans.
The SPE's sole source of funds to repay the loan(s) will be payments made by BPA under the
lease of the Facilities to BP A. Id. The SPA will lease its undivided interest in each of the
Facilities to BP A at the time each such Facility is acquired, installed, and/or constructed. Id.
The term of the lease will be seven (7) years from the date that the master lease and the first lease
commitment are executed. Id. BP A will agree in the lease to operate and maintain the Facilities
in the same manner as it operates and maintains its other transmission facilities. Id. The SPE
will have no operating responsibilities or control rights with respect to the Facilities. Id. A draft
of the lease agreement was filed with the Petition.
BP A requests that the Commission issue a declaratory order disclaiming jurisdiction
over the Owner Lessor SPE in the proposed lease financing for the construction of the
transmission facilities. Id. at 8.
ST AFF COMMENTS
On May 16, 2007, the Commission Staff submitted comments in this matter. Based
upon the facts presented in BP A's Petition, the Staff concluded that the SPE's leasing of
transmission facilities to BP does not subject the SPE to the Commission s regulatory
jurisdiction. The Staff noted that an electrical corporation is a public utility subject to the
jurisdiction, control , and regulation of the Commission where the service is performed and the
commodity delivered to the public or some portion thereof for compensation within the State of
Idaho. Idaho Code 9 61-129.
DECISION MEMORANDUM
Relying on Idaho Supreme Court cases, Idaho Code, and a prior Commission Order
regarding the leasing of locomotive engines for the generation of electricity, the Staff concluded
that the SPE's leasing of transmission facilities to BPA does not constitute the provision of
utility service to the "public." The Staff observed that the SPE will be formed expressly for the
purpose of arranging for the financing of the transmission facilities, and will lease its undivided
interest in the transmission facilities to BP A. BP A will operate and maintain the Facilities in the
same manner as it operates and maintains its other transmission facilities, and the SPE will have
no operating responsibilities or control rights with respect to the Facilities. Additionally, the
Facilities will be used exclusively by BP A to provide interstate transmission service and will not
be available for use for bundled retail service. Petition at 2. Consequently, Staff believes, based
upon the representations made in the Petition, the SPE, Owner/Lessor, would not be subject to
the Commission s regulation.
COMMISSION DECISION
1. Does the Commission believe that BPA's proposed lease financing arrangement
for the construction of various electric transmission facilities within the State of Idaho subjects
the SPE to the Commission s regulatory jurisdiction under Title 61?
2. Does the Commission wish to address any other matter?
t2 0C(JDonovan E. Walker
DECISION MEMORANDUM