20080616Comments.pdf

UNITED STATES OF AMERICA
S. DEPARTMENT OF ENERGY
BEFORE THE
BONNEVILLE POWER ADMINISTRATION
PROPOSED RESIDENTIAL PURCHASE AND
SALE AGREEMENTS FOR THE
RESIDENTIAL EXCHANGE PROGRAM
ESTABLISHED BY SECTION S(e) OF THE
PACIFIC NORTHWEST ELECTRIC POWER
PLANNING AND CONSERVATION ACT
) BPA DOCKET NO. PS-
COMMENTS OF THE
IDAHO PUBLIC UTILITIES COMMISSION
ON BOTH THE "BRIDGE AND RD RPSA AGREEMENTS"
On May 16, 2008, the Bonneville Power Administration (BP A) released two draft
Residential Purchase and Sale Agreements (RPSA) for implementing the Residential Exchange
Program (REP) authorized by Section S(c) of the Pacific Northwest Electric Power Planning and
Conservation Act (Northwest Power Act). The first Agreement is called a "Bridge RPSA" and is
intended to be effective between October 1 2008 and October 1 2011. The second Agreement
is called the "Regional Dialogue Long-Term RPSA," BPA has invited comments on the
highlighted" portions of both Agreements,
The Idaho Public Utilities Commission (Idaho PUC) appreciates the opportunity to
provide comments on these proposed Agreements. This matter is of great importance to all
electric utility customers in Idaho , especially the customers of the investor-owned utilities
(IOUs) subject to the jurisdiction of the Idaho PUe.
BP A currently has a number of ongoing proceedings that all relate to implementing
the REP. The Idaho pue is participating or has previously submitted comments in a number of
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these proceedings (WP-07 Supplemental 2007 Rate Case and the Draft Record of Decision for
the Average System Cost Methodology). Each of these proceedings involves issues that overlap,
and our comments in this proceeding should be viewed as dependent upon and reinforcing of
positions already expressed in these other proceedings.
ELIMINATE THE "DEEMER" MECHANISM
(I.E., PAYMENT BALANCING ACCOUNT)
Our primary concern pertains to the "deemer" mechanism, in Section 12 of the draft
RPSA Agreements, entitled the "Payment Balancing Account." However , the change in name
has not turned this sow s ear into a silk purse. The Idaho pue strenuously opposes the use of the
Payment Balancing Account or any other effort to re-implement or continue the "deemer
mechanism of the 1981 RPSAs. Requiring a utility to in essence "pay" BPA when the utility
ASC is lower than the PF Exchange rate is contrary to the intent of Section 5(c) of the Northwest
Power Act, 16 u.S.e. 9839c(c).
As drafted, Section 12 in part provides a mathematical formula for the operation of
the Payment Balancing Account. Section 12(a) states:
Where P is the amount by which the (Balancing Account) increases or
decreases as determined by the difference between the utility s current ASC
minus the PF Exchange Rate multiplied (by) the utility s Residential Load.
the ASC is less than PF Exchange rate, P will be positive and add to the
(Balancing account 1 balance; otherwise P will be negative and reduce the
(Balancing Account) balance.
Section 12(a) at p. 12 (emphasis added). In addition, Section 12(b) also provides: "Whenever
the ASC is less than BP A's then-current PF Exchange rate during the term of this Agreement
the payment that would otherwise be owed BP A will be tracked by BP and added to the
Balancing Account.
These provisions are clearly contrary to Section 5(c) of the Northwest Power Act.
Congress enacted the Northwest Power Act for the purpose of providing rate relief to residential
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and small farm customers of the IOUs. H.R. Report No. 96-976(1) at 60, 1980 U.e.A.N.
59889. The power exchanges were intended to provide IOUs with access to lower-cost federal
power, and thereby (to the extent allowable under the ASCM) promote wholesale rate parity
between BP A preference customers and eligible IOU customers, Id. Under the draft provisions
of Section 12, BP A would stand Section 5( c) on its head. Instead of providing rate relief to
. customers of eligible IOUs when the IOU's ASe is greater than the PF Exchange Rate, the
Balancing Account would provide benefits in the opposite direction when the IOU's ASC is less
than the PF rate.
BP A recognizes that the existence of the deemer balances, if any, is a disputed issue
in the WP-07 supplemental rate case. Despite this unresolved , long-running dispute, Section
12(a) would require the parties to the RPSAs to specify the beginning balance of the balancing
account as of October 1 , 2008
, "
subject to the resolution of any disputes regarding such balance.
Although this quoted language seems to condition the starting balance "subject to" any
resolution, the 20-year history of this ongoing dispute does not give the Idaho PUC confidence
that the parties can timely reach "resolution" of the chronic deemer dispute. Indeed, Section
12(d) (Account Balance Carry Over) of the RPSAs allows any deemer account balance to be
carried "over to the balancing account of the next RPSA." This "carry-over" mechanism does
not promote the resolution of the chronic deemer problem but seemingly provides the parties
with a convenient alternative to resolving this issue.
Section 12 should be stricken in its entirety. In its place, BP A should craft language
that adopts a policy of suspending an IOU's participation in the REP when the utility s ASC is
lower than the PF Exchange rate, but allowing the utility to resume REP eligibility when the
utility s ASC is higher than the PF Exchange rate. This is a solution that is easy to understand
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and implement. This policy harms no other party and, more importantly, is consistent with the
Northwest Power Act.
OTHER COMMENTS
1. Section 11 . Although Section 11 (Termination of Agreement) of the draft RPSAs
provides greater flexibility than embodied in the 1981 RPSA, it is still overly restrictive. Rather
than terminating a utility s participation in the REP program, a better route would be to merely
suspend the utility s eligibility until such time as its ASC is greater than BPA's PF Exchange
rate. This "suspension concept" is already encompassed in Section 11 (c). In the alternative
Section 11 could be divided into two sections - one for termination and another section for
suspensIOn.
Section 20 . The PUC also has senous concerns regarding draft Section 20
(Adjustments to Monetary BenefIts) of the two RPSAs. In its entirety, this section provides:
The monetary benefits provided (the IOU1 under this agreement shall be
subiect to adiustment by BP A to account for the overpayment of benefits
under the residential exchange program settlement agreement Contract No.
, as amended, during FY 2002 through FY 2007. Any such
adjustment shall be limited to those formally established by BP A in its
wholesale power rate adjustment proceedings or other forums established by
BP A for the determination of the amount of overpayment to be recovered and
the recovery period.
Section 20 (emphasis added). The inclusion of this section raises three concerns.
First, the issue of overpayments is a disputed issue in the WP-07 supplemental rate
case. More specifically, parties have advanced several arguments why the refund of benefits
should be prohibited or limited to refunds back to October 1,2006,
Second, the Ninth Circuit in Portland General Electric Company ("PGE") v. BPA
501 F.3d 1009 (9th Cir. 2007), cert. denied S. (2008) and Golden Northwest Aluminum
v, BPA 501 F.3d 1037 (9th Cir. 2007), cert. denied sub nom. PGE v. BPA - U.S. (2008),
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did not order BP A to provide refunds to the consumer owned utilities. In commenting on the
two circuit opinions, BP A acknowledges that "the Ninth Circuit provided little guidance to BP
in its (two) decisions regarding the subsequent actions BP A should take in response to those
opinions." BPA Response to APAC's Motion to Strike, WP-07-BPA-, p. 5. In neither
opinion did the Ninth Circuit vacate the BP A rates. Indeed, given the Court's findings in Golden
Northwest that the PF rates were both too high and too low, the Court remanded the matter back
to BPA "to set rates in accordance with this opinion." 501 F.3d at 1053 (emphasis added). This
is consistent with the well-established rule that courts do not set rates - they are empowered to
affirm or set aside agency action. 5 u.S.C. 9 706 (2). It is BP A that is vested with the authority
to establish rates. 16 U.e. 983ge(a)(1).
Finally, although the Ninth Circuit found that the REP Settlement Agreements were
contrary to law, there remains a question whether Section 3(b) of the 2000 REP Settlement
Agreements survives. This section entitled "Invalidity" provides:
In the event the United States Court of Appeals for the Ninth Circuit finally
determines, after all appeals and requests for reconsideration that this
Agreement (or Section 4(a), Section 4(c), or Section 5 of this Agreement) ~
unlawful, void, or unenforceable, then the provisions of Section 3(a) above
shall be of no further force and effect, and the Parties intend and agree that:
(1) the Firm Power and Monetary Benefits provided prior to such final
determination shall be retained by Ithe IOUl;and (2) the satisfaction ofBPA'
obligations to (the IOU) under Section 5(c) of the Northwest Power Act prior
to such fInal determination shall be preserved, the maximum extent permitted
by law. This Section 3(b) shall survive notwithstanding any determination
that any other provision of this Agreement (or the exhibits) is unlawful, void,
or unenforceable.
, Idaho Power REP Settlement Agreement, WP-07 -JP6-, 9 3(b) at p. 16-17 (emphasis
added).The purported intent of draft Section 20 to recover the "overpayment of (REP
Settlement) benefits" conflicts with Section 3(b) of the 2000 REP Agreements.
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The 2000 REP Settlement Agreements also included a "Severability" clause that all
of the provisions of the Agreement are independent and shall remain in effect even if other
provisions of the Agreement are unlawful, void, or unenforceable. Id. at 9 13(g) at p. 31. By the
terms of the 2000 REP Settlement Agreement, BP A and the IOU Parties clearly contemplated
the possibility that the Settlement Agreement might be overturned on appeal. Consequently,
they made provisions in the 2000 Agreements that benefIts provided under such REP Settlement
Agreements would be retained by the IOUs. Thus, Section 20 of the proposed RPSAs would
seem to run counter to Section 3(b) of the 2000 REP Settlement Agreements.
In summary, the Idaho PUC urges BPA to eliminate the deemer mechanism in
Section 12 (Payment Balancing Account) from both RPSAs, We also recommend that the
Termination provisions of Section 11 be revised to allow for a suspension of benefits if the
utility s ASC is below the PF exchange rate. Finally, Section 20 (Adjustments to Monetary
Benefits) should be eliminated.
Respectfully submitted this 16th day of June 2008.
FOR THE IDAHO PUBLIC UTILITIES COMMISSION
Donald L. Ho II, II
Deputy Attorney General
PO Box 83720
472 W. Washington Street (83702-5918)
Boise, In 83720-0074
Idaho State Bar No. 3366
Telephone No. [phone]
E-mail: don.howell(Zj~puc,idaho.gov
N:BPA rpsa- dh Commenls
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