20070420Decision memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:DONOVAN E. WALKER
DATE:APRIL 19,2007
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. BP A requested that its Petition be processed by
Modified Procedure.
THE PETITION
BP A's Petition states that it is a federal power marketing administration within the
S. Department of Energy that markets wholesale electrical power and operates transmission
facilities in the west and Pacific Northwest. According to the Petition, 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. Some of
the Facilities will be located in Idaho and according to the Petition all Facilities will be used
exclusively by BP A to provide interstate transmission service.
As stated in the Petition, the Facilities will be financed by a special purpose entity
(SPE) who is the Owner Lessor. The Facilities will be owned by the Owner Lessor, SPE
DECISION MEMORANDUM
Northwest Infrastructure Financing Corporation II, which will be formed expressly for the
purpose of arranging for the financing of the Facilities. All of the capital stock of the Owner
Lessor, 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. 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. The
Owner Lessor SPE will not engage in any business other than arranging for the acquisition and
financing of the Facilities.
The SPE will finance the construction of the Facilities through one or more loans.
The SPE's sole source of funds to repay the loans will be payments made by BP A under the
lease of the Facilities to BP A. The SPE 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. The term of the
lease will be seven (7) years from the date that the master lease and the first lease commitment
are executed. 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. The SPE will have no
operating responsibilities or control rights with respect to the Facilities. 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. BP A also requests that its Petition be processed by Modified Procedure.
ST AFF RECOMMENDATION
Procedural Rules 101 and 102 provide for the issuance of declaratory rulings by the
Commission. IDAPA 31.01.01.101 31.01.01.102. Pursuant to Rule 101 , persons seeking such a
declaratory ruling must state the ruling that the Petitioner seeks, set out the factual allegations
and indicate the statute or other controlling law pertaining to the Petition. IDAP A
31.01.01.101.02. Rule 102 provides that the notice of the petition for a declaratory ruling will be
issued to all affected utilities. IDAP A 31.01.01.102.
Staff recommends that it is appropriate to process the Petition under Modified
Procedure, and recommends a comment deadline twenty-one (21) days from the service date of
the Commission s Order.
DECISION MEMORANDUM
COMMISSION DECISION
Does the Commission wish to process this Petition for a Declaratory Ruling under
Modified Procedure with a 21-day comment period?
g;L
Donovan E. Walker
DECISION MEMORANDUM