20081021IPUC Intervention and Comments.pdf

UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
A VISTA CORPORATION )
)
)
)
Docket No. ER08-1602-000
RESIDENTIAL PURCHASE AND SALES
AGREEMENT
NOTICE OF INTERVENTION AND COMMENTS OF THE
IDAHO PUBLIC UTILITIES COMMISSION
The Idaho Public Utilties Commission ("Idaho PUC") files this Notice of Intervention
and Comments in response to the Federal Energy Regulatory Commission's ("Commission")
October 2, 2008 Combined Notice of Filngs #1. The Notice indicates that Avista Corporation
has submitted its Residential Purchase and Sale Agreement (RPSA) between itself and the
Bonnevile Power Administration ("BP A"). In its transmittl letter dated September 30, 2008,
Avista fies the RPSA as an initial rate schedule pursuant to Section 205 of the Federal Power
Act ("FPA") and Par 35 of the Commission's regulations. 16 U.S.C. § 824d and 18 C.F.R. Par
35.12. In the alternative, Avista requests that the Commission "disclaim jurisdiction over the
Bridge RPSA." Transmittal Letter at 1.
The Idaho PUC does not take a position whether the Commission has jurisdiction over
the RPSA. However, if the Commission does exert jurisdiction, the IPUC objects to two contract
provisions contained in the RPSA. The IPUC's primar concern pertains to the "deemer"
mechanism contained in Section 12 ("Payment Balancing Account)" of the RPSA. The IPUC
strenuously opposes the use of the payment balancing account or any other effort to continue the
"deemer" mechanism first utilzed in the 1981 RPSAs. Requiring a utilty in essence "to pay" a
deemer balance to BPA when the utilty's Average System Cost (ASC) falls lower than the PF
IPUC NOTICE OF INTERVENTION
AND COMMENTS 1 Docket No. ER08-1602-000
Exchange rate is contrary to Section 5( c) of the Pacific Northwest Electric Power Planing and
Conservation Act ("Northwest Power Act" or "NPA"), 16 U.S.C. § 839c(c).
I. COMMUNICATIONS
All pleadings, correspondence or communications related to this proceeding should
be addressed to the following persons:
Donald L. Howell, II
Deputy Attorney General
Idaho Public Utilties Commission
472 West Washington
PO Box 83720
Boise, Idaho 83720-0074
Telephone: [phone]
Fax: [phone]
Idaho Bar No. 3366
E-mail: don.howell(fpuc.idaho.gov
Lou An Westerfeld, Policy Strategist
Idaho Public Utilities Commission
472 West Washington
PO Box 83720
Boise, Idaho 83720-0074
Telephone: [phone]
Fax: [phone]
E-mail: 10uan.westerfeld(fpuc.idaho.gov
II. NOTICE OF INTERVENTION
Pursuant to Rule 214 of the Commission's Rules of Practice and Procedure, 18 C.F.R.
§ 385.214(a)(2), the Idaho PUC hereby intervenes in the above-entitled matter. The Idaho PUC
actively participated in the underlying BPA docket to develop new RPSA contracts. IPUC
Attachment A, BPA Record of Decision (ROD) at 2 (Sept. 4, 2008). The Idaho PUC also
regulates the Idaho retail electric rates of A vista.
III. COMMENTS
A. Introduction
Section 5(c) of the Northwest Power Act authorizes BPA to enter into power exchanges
with the six regional IOUs for the purose of providing rate relief to residential and small far
customers of the IOUs. 16 U.S.C. § 839c(c); H.R. Report No. 96-976(Par 1) at 60, 1980
U.S.C.C.A.N. 5989 (May 15, 1980). The power exchanges were intended to provide the IOUs
with access to lower-costs federal hydropower marketed by BPA. The RPSA provides the
IPUC NOTICE OF INTERVENTION
AND COMMENTS 2 Docket No. ER08-1602-000
contractual terms under which Avista's residential and small far customers will receive REP
benefits. The RPSA which is the subject of this filing is commonly referred to as a "short-term
bridge" RPSA to be effective during the period FY 2009-2011.1 Atch. A, ROD at 2. This short-
term Agreement was intended to "bridge" the time between October 1, 2008 and the "long-term"
RPSA which is proposed to be effective during the period FY 2012-2028. Id
The Residential Exchange Program (REP) embodied in Section 5(c) of the Northwest
Power Act2 is the mechanism used to calculate the level of monetar benefits for the exchanging
utilties, e.g., the six regional IOUs in the Pacific Northwest: Avista, Idaho Power, Northwestern,
PacifiCorp, Portland General Electric, and Puget Sound Energy. There are three components to
the REP mechanism.
1. The calculation of each utilty's (e.g., Avista's) average system cost (ASC)
using the approved ASC methodology.3
2. The establishment of BPA's priority firm power exchange (PF Exchange)
rate.4
3. The RPSAs which provide the contractual terms under which Avista's
residential and small farm customers receive their REP benefits.
1 Thee other IOUs have also fied their bridge RPSAs with the Commission: Puget Sound Energy (Docket No.
ER08-l599-000); PacifiCorp (Docket No. ER08-l607 -000); and Portland General Electric Company (Docket No.
ER08-l608-000).
2 Section 5( c)(1) of the NPA states: "Whenever a Pacific Nortwest electric utilty offers to sell electric power to
the (BPA) at the average system cost ofthat utilty's resources in each year, (BPA) shall acquire by purchase such
power and shall offer, in exchange, to sell an equivalent amount of electric power to such utilty for resale to that
utilty's residential users within the region." 16 U.S.c. § 839c(c)(1).
Section 5(c)(7) provides in par: "The 'average system cost' for electric power sold to (BPA) under this subsection
shall be determined by the Administrator on the basis of a methodology developed for this purpose in consultation
with the Council, the Administrator's customers, and appropriate State regulatory bodies in the region. Such
methodology shall be subject to review and approval by the Federal Energy Regulatory Commission." 16 U.S.C. §
839c(c)(7).
3 BPA's proposed 2008 ASC methodology is the subject of other dockets: EF08-20ll-000 and RM08-20-000. The
Idaho PUC has submitted a Protest in Docket No. EF08-20l 1-000 concerning the deemer mechanism.
4 The PF Exchange rate is currently under examination in Docket No. EF06-20ll-002. The Idaho PUC has
submitted a Protest in this case. .
IPUC NOTICE OF INTERVENTION
AND COMMENTS 3 Docket No. ER08-1602-000
Transmittal Letter at 2. When Avista's ASC is higher than the PF Exchange rate, BPA purchases
power from Avista at Avista's higher ASC and, in retu, Bonnevile agrees to sell Avista power
at BPA's lower PF Exchange rate in an amount necessary to serve Avista's residential and small
far customer load. Id.; Atch. A, ROD at 2.
The Ninth Circuit has often explained how the REP operates. When a utilty's ASC is
greater than BPA's PF Exchange rate, BPA pays the net difference to the utilty. In Portland
General Electric Co. v. Bonnevile Power Admin. (PGE), the Cour explained that "Section 5(c)
permits IOUs to exchange power they have purchased or generated for lower-cost power
generated by BPA." 501 F.3d 1009, 1015 (9th Cir. 2007) (emphasis added) cert. denied, _
u.s. _' 128 S.Ct. 2902 (2008); Golden Northwest Aluminum, Inc. v. BPA, 501 F.3d 1037, 1047
(9th Cir. 2007), cert. denied sub nom., Portland General Electric Co. v. Public Power Council,
_ u.s. _' 128 S.Ct. 2902 (2008); Washington Utilities & Transp. Comm 'n v. FERC, 26 F.3d
935, 936-37 (9th Cir. 1994); PacifCorp v. FERC, 795 F.2d 816, 818-19 (9th Cir. 1986). Under
the REP, an IOU may elect to sell power to BPA at the IOU's ASC and then purchase and
exchange the equivalent amount of power at a lower price. 16 U.S.c. § 839c(c)(7). "The REP
essentially acts as a cash rebate to the IOUs where the IOUs' power costs exceed those of BPA."
PGE, 501 F.3d at 1015 (emphasis added). Section 5(c)(3) of the Northwest Power Act requires
that utilities pass-through any REP benefits to the utilties' residential and small far customers.
PGE, 501 F.3d at 1015; 16 U.S.C. § 839c(c)(3).
B. The ttDeemer" Mechanism (aka the Balancing Account)
In addition to the three factors mentioned above, there is a fourh factor which determines
whether an IOU is eligible to receive benefits under the REP. The fourth factor is whether the
exchange utilty has a negative "deemer" balance. The "deemer" mechanism is a remnant of the
IPUC NOTICE OF INTERVENTION
AND COMMENTS 4 Docket No. ER08-1602-000
1981 RPSAs between BPA and three of the IOUs (Avista, Idao Power and Northwestern).
Atch. A, ROD at 3. If a utility's ASC is below the PF Exchange rate, the parties "deemed" the
utilty's ASC equal to the PF rate.5 In a deemer situation, the difference between the ASC and
the PF Exchange rate accrues to the benefit of BP A. The accumulation of the deemer account
must be reduced to zero "through cash payments or setoff against future (REP) payments before
the utilty can receive (futue) REP cash payments" under the RPSA. Atch. A, ROD at 3.
According to BPA, Avista has a deemer balance and BPA offset Avista's REP benefit by
$16.531 milion for FY 2009. Atch. B (BPA Lookback Study) Table 15.6 at p. 274. Requiring a
utility to, in essence, "pay" BP A when the utilty's ASC is lower than the PF Exchane rate is
contrar to Section 5(c) of the Northwest Power Act. 16 U.S.C. § 839c(c).
The deemer mechanism is contained in Section 12 of Avista's RPSA entitled "Payment
Balancing Account." Section 12 provides in part a mathematical formula for the operation of the
payment balancing account. Section 12.1 states:
Where P is the amount by which that (Balancing Account) increases or decreases
as determined by multiplying the difference of PacifiCorp's current ASC minus
the applicable PF Exchange rate by the utilty's Residential Load Eligible for
Moneta Benefits. If the. ASC is less than the applicable PF Exchange rate, P
wil be negative and add to the (Balancing Account) balance; otherwise P will be
positive and reduce the (Balancing Account) balance.
PacifiCorp RPSA § 12.1 at p. 12 (emphasis added). In addition, Section 12.2 provides:
Whenever the ASC is less than BPA's then-current applicable PF Exchange rate
during the term that this Agreement is in effect but not in suspension, pursuant to
section 11.2, the payment that would otherwse be owed BP A wil be tracked by
BP A and added to the balancing account.
5 According to BPA's records, Avista purortedly has a deemer balance at present. Atch. B, BPA Lookback Study,
WP07-FS-BPA-08, §15.2.i. at p. 265, Table 15.2 at p. 267. Although Avista's present ASC is purorted to be
above the PF Exchange rate, a deemer situation could arise in the future under Section 12 if the PF Exchange rate
increased, or Avista's ASC fell, or both so that Avista's ASC was below the BPA PF Exchange rate.
IPUC NOTICE OF INTERVENTION
AND COMMENTS 5 Docket No. ER08-1602-000
Id (emphasis added). The IPUC strenuously opposes the use of the payment balancing account
and the continuation of the "deemer" mechanism.
C. The Deemer Mechanism is not Authorized by the Northwest Power Act
There is no statutory authority for BP A to utilze the deemer mechanism or engage in
deemer accounting. 5 U.S.C. § 706(2)(A). BPA in its WP-07 supplemental rate case (FERC
Docket No. EF06-2011-002) concedes that "While the Northwest Power Act does not expressly
call out a deemer mechanism, it does not prohibit one." WP-07-A-05 (Final ROD) at 217, BPA-
A_ 000582 (Docket No. EF06-2011-002) (emphasis added). However, as construed by the
Ninth Circuit above, the Northwest Power Act contemplates that BPA and the IOUs would
exchange power when an IOU's ASC was above BPA's PF Exchange rate. Section 5(c), 16
U.S.C. § 839c(c); PGE, 501 F.3d at 1015; Golden Northwest, 501 F.3d at 1047. In this fashion,
IOUs would receive the lower-cost benefits of the federal hydropower system.
Contrar to BPA's conclusions in its ROD, there is nothing the Northwest Power Act or
its legislative history to suggest that the exchange benefits should flow in the opposite direction -
from an IOU to BP A. BP A states in its ROD, that it "agrees with the view (of some paries) that
(.,
Congress intended and understood that REP benefits could flow both from BP A to the
exchanging utilty and from the exchanging utility to BP A. BP A implemented the REP through
the original RPSA in 1981 to reflect the 'two-way' nature ofthe exchange. . . ." Atch. A, ROD
at 10. In justifying the "two-way" deemer mechanism, BPA relied upon legislative history that
addresses when a utilty might terminate its RPSA. Although Section 5( c )( 1) of the Act permits
an IOU to enter into an exchange with BPA "whenever" it offers to exchange power with BPA,
Subsection 5( c)( 4) of the Act allows a utilty to terminate "upon reasonable terms and conditions
agreed to by the administrator and such utility prior to such termination. . .." 16 U.S.C. §
IPUC NOTICE OF INTERVENTION
AND COMMENTS 6 Docket No. ER08-1602-000
839c(c)(4). BPA cites approvingly from a Senate Report from the Committee on Energy and
Natual Resources that the termination provisions were intended to minimize "disruption of the
administrator's rate-making or power marketing programs or planing." Atch. A, ROD at 10
citing S.Rep. No. 96-272 at 27 (1997). However, the Senate Report is discussing the termination
provision - not how the REP is intended to fuction.
BPA fuher acknowledges in its RPSA ROD discussion of Section 12 that:
In fact, most, if not all, of the legislative history regarding the REP discusses it in
terms of providing a share of the benefits of the Federal hydroelectric system to
the residential and small far consumers of investor-owned utilties,. thereby
providing some rate relief to those consumers, . . . .
Atch. A, ROD at 23 (emphasis added). Despite this acknowledgement, BPA nevertheless asserts
that Section 5(c) is structured in a way that benefits could accrue to BPA - i.e., that the REP is a
"two-way" street. Id at 23,25-26.
The legislative history to the Northwest Power Act clearly demonstrates that Congress
intended the residential exchange program to benefit the region's residential and small far
customers - not function to their detriment. The House Committee on Interior and Insular
Affairs issued two reports on the bils that were to become the Northwest Power Act. House
Report No. 96-976 (Part 2) at 32, 1980 U.S.C.C.A.N. 6031 (Sept. 16, 1980). The first House
Report stated that the purose of the Northwest Power Act was to provide a mechansm "through
which the Pacific Northwest can resolve differing claims over how the federal resources are to be
shared. . .." House Report No. 96-976 (Par 1) at 27, 1980 U.S.C.C.A.N. at 5593. This First
Report lists a number of factors which the legislation was intended to address including
"provisions protecting the existing preference clause," and having IOUs "share in the economic
benefits of the lower-cost federal (hydro) system for the residential customers of the non-
preference customers." Id
IPUC NOTICE OF INTERVENTION
AND COMMENTS 7 Docket No. ER08-1602-000
The First Report notes that initially the source of funding for the REP would be obtained
from higher rates for the direct service industries (DSIs). Id at 29, u.S.C.C.A.N. at 5995. The
Report continues that the higher DSI rates would permit the BP A administrator to
enter into contracts with the region's investor-owned utilties for an exchange of
power equal to the utilty's residential load. This exchange will permit residential
customers of the investor-owned utilties to share in the benefits of the lower-cost
federal resources. The power sold to BPA wil be sold at the utilty's average
system cost and purchased back at the rate paid by the preference customers'
utilzation (rate). ... By providing these residential customers wholesale rate
parity with the residential customers of preference utilties, the (House)
amendment serves in a substantial way to cure a major part of the allocation (of
benefits) problem.
Id (emphasis added). It should be evident that there would be no benefit from an exchange if the
utilty's ASC became lower than the PF rate.
The First House Report observes that all power sales under the Act shall be subject at all
times to the preference and priority provisions of the Bonnevile Project Act of 1937 (16 U.S.C.
§ 832 and following). The Committee wanted to ensure that "all preference customer contract
requirements will continue to have a priority over sales to other customers and other sales would
be, in effect, subordinate to preference provisions of the Bonnevile Project Act." Id at 34,
u.S.C.C.A.N. at 6000.
In its section-by-section analysis, the First Report notes that Section 5( c)
permits power exchange and power sales whereby rate relief wil be provided
residential customers of investor-owned utilties. Although all utilties are
permitted into such sales, its benefits are likely to be limited to utilties that are
not entitled to service as a preference customer. The sale is permitted where a
utilty offers for sale to the administrator in an amount of electric power equal to
that utilty's residential load. When such an offer is made the administrator shall
acquire, by purchase, such power at that utility's average system cost and shall
offer to sale the same amount of power back to the utilty at the rate charged
preference customers for their general requirements for resale to that utilty's
residential users within the region only. ... The requirement is not likely to result
in parity in the retail rates being paid by consumers of preference customers and
consumers of investor-owned utilties, but it should equalize the wholesale costs
IPUC NOTICE OF INTERVENTION
AND COMMENTS 8 Docket No. ER08-1602-000
of the electric power with the resulting benefit (to) the investor-owned utilties'
customers.
Id at 60 (emphasis added). There would be no rate relief if a utilty's ASC was below the PF
Exchange rate.
The House Committee on Interior and Insular Affairs subsequently issued another Report
on September 16, 1980. House Report No. 96-976 (Par 2). In addressing Section 5(c), the
Committee Report states:
Although this exchange is technically available for use by any utilty in the
region, including preference utilties, it is anticipated that the region's investor-
owned utilties will make primary use of it. This exchange wil allow the
residential and small far consumers of the region's IOUs to share in the
economic benefits of the lower-cost federal (hydropower) resources marketed by
BP A and wil provide these consumers wholesale rate parity with residential
consumers or preference utilties in the region. Customers of preference utilties
wil not suffer any adverse economic consequences as a result of this exchange
since, as discussed below, the direct-service industrial customers of BPA are
required to pay the cost of the exchange during its initial years while a "rate
ceilng" protects the customers of preference utilties during later years.
The cost benefits of any exchange are required under Section 5(c)(3) to be
passed directly through to the appropriate residential and small far consumers.
House Report No. 96-976 (Par 2) at 35, 1980 U.S.C.C.A.N. at 6033 (emphasis added). As
indicated above, the residential exchange was to provide economic benefits to the residential and
small far consumers of the IOUs. The intended benefits to IOU residential and small far
customers do not materialize if the deemer benefits flow from the IOU to BP A. The deemr
provisions of Sections 12.1 and 12.2 of the RPSA .do not provide economic benefits or wholesale
rate parity to the IOU customers. Quite the opposite, under the deemer mechanism IOU
residential and small far customers would provide benefits to BP A and the preference utilties.
This was not what Congress intended. 5 U.S.C. § 706(2)(A).
IPUC NOTICE OF INTERVENTION
AND COMMENTS 9 Docket No. ER08-1602-000
The REP was intended to provide the IOUs with access to lower-cost federal power, and
thereby (to the extent allowable under the ASC methodology) promote wholesale rate parity
between BPA preference customers and eligible iou customers. The deemer provisions of
Section 12 of the RPSA stand Section 5(c) on its head. Instead of providing beneficial rate relief
to eligible customers of A vista, the deemer mechanism in Section 12 would provide benefits in
the opposite direction if Avista's ASC becomes less than the PF rate.
As the Cour stated in PGE, "whenever BPA engages in a purchase and exchange of
power - whether on a yearly basis, under an REP program, or pursuant to a settlement agreement
- BPA acts pursuant to its Section 5(c) authority, and is thus subject to the Congressionally
imposed limitations on that authority as expressed in Section 5(c) and Section 7(b). 501 F.3d at
1032. Section 12's deemer mechanism depars from the REP mechanism contained in the
Northwest Power Act. 16 U.S.C. § 839c(c). BPA's deemer accounting mechanism is well
outside the REP program that Congress created in the Northwest Power Act.
Although one can hope during the two-year term of the bridge RPSA that Avista's ASC
would not fall below BPA's PF Exchange rate, history has shown that utilty ASCs do not
always remain stationar above the PF Exchange rate. As demonstrated in the recent BP A WP-
07 Supplemental rate case,6 three utilties (Avista, Idaho Power and Northwestern) had ASCs
above the PF rate when they executed the 1981 RPSAs. After BP A adjusted the ASC mechanism
in 1984, their ASCs fell below the PF Exchange rate. When this occured, the deemer
mechanism stared flowing benefits from Avista to BPA. Avista's FY 2009 REP benefit was
reduced by more than $16 milion due to the deemer mechanism. Atch. B. This is not a benefit
or rate parity. In the most extreme case, Idaho Power's deemer account purportedly grew to
more than $245 milion from 1985 to October 2007, even though Idaho Power only received
6 BPA's WP-07 Supplemental rates are currently being reviewed by the Commission in Docket No. EF06-20ll-002.
IPUC NOTICE OF INTERVENTION
AND COMMENTS 10 Docket No. ER08-1602-000
approximately $42 milion in REP benefits between 1981 and 1984. IPUC Exhibit WP-07-E-ID-
2 at 9, BPA-E_ 007092(in Docket No. EF06-2011-002). Avista's ASC and BPA's PF
Exchange rate could change over time.
If the Commission exerts jurisdiction over this RPSA, it should strike Section 12 and
direct the paries to craft language that complies with the Congressional intent of the exchange
program. In paricular, if a utility's ASC is lower than the PF Exchange rate, then the IOU will
not be eligible to receive REP benefits. This is an easy concept to administer. Requiring an IOU
to ll BPA the difference (i.e., when the utilty's ASC is lower than the PF Exchange rate)
before receiving future REP benefits goes beyond the concept of "wholesale rate parity" between
preference customers and IOU customers that Congress intended when it enacted the Northwest
Power Act. In fact, this payment by an IOU may constitute a subsidy of either the other IOUs'
REP benefits, or the public utilties' rates, or both. Curently, Section 11 allows a party to
suspend its RPSA but the utilty is not allowed to resume participation in the REP until the
contract terminates September 30, 2011.
D. Section 11
Although Section 11 (Termination and Suspension of Agreement) of the RPSA provides
greater flexibility than embodied in the 1981 RPSA, it is stil overly restrictive. Section 5( c)( 4)
of the Northwest Power Act allows an IOU to terminate its RPSA where application of the
Section 7(b)(3) supplemental rate charge results in the PF Exchange rate exceeding theJOU's
ASC. 16 U.S.C. § 839c(c)(4). The RPSA captures this notion in Section 11.1.1. In fact, Section
11.1.2 allows an IOU, after termination of an RPSA, to enter into a!! RPSA during the next or
subsequent Exchange Period. Thus, the termination provision allows an IOU to escape the
IPUC NOTICE OF INTERVENTION
AND COMMENTS 11 Docket No. ER08-1602-000
draconian result of accruing a deemer balance in the Balancing Account when its ASC falls
below BPA's PF Exchange rate after application of the Section 7(b)(3) supplemental rate charge.
On the other hand, Section 11.2 allows a pary to suspend its RPSA but the utility is not
allowed to resume paricipation in the REP until the contract terminates September 30, 2011.
The Northwest Power Act is silent on the subject of what happens when changes in BPA's PF
Exchange rate or the IOU's ASC drops the ASC below the PF rate (absence a Section 7(b)(3)
supplemental rate charge). What the RPSA offers as an alternative to termination of the RPSA is
"suspension" of the RPSA in Section 11.2. However, the terms of suspending the RPSA are
extremely punitive: the forfeiture of all rights and obligations through the expiration of the
RPSA, in this instace, September 30, 2011, or a maximum of three years. 7
An IOU's decision to suspend its RPSA will eliminate REP benefits for its retail
customers for the entirety of the RPSA's term. This result fles in the face of the plain language
of Section 5( c)( 1) of the Act:
Whenever a Pacific Northwest electric utilty offers to sell electric power to the
Administrator at the average system cost of that utilty's resources in each year,
the Administrator shall acquire by purchase such power and shall offer, in
exchange, to sell an equivalent amount of electric power to such utilty for resale
to that utilty's residential users within the region.
(Emphasis added.)
These contractual gyrations are completely unecessary and overly complicated. The
RPSA should reflect the "whenever" nature of iOU paricipation in the REP by eliminating the
prohibition of re-entering the REP under the suspension provision. Precluding PacifiCorp from
7 Whereas the termination provisions wil only last for three years for this bridge RPSA, the long-term RPSAs being
negotiated now between BPA and the IOUs wil carr this provision forward for the time period 2012-2028. Thus,
if an LOU receives REP benefits under the long-term RPSA and then, in future ASC determinations and Section 7(i)
rate proceedings, finds its ASC below BPA's exchange rate (outside the application of the Section 7(b)(3)
supplemental rate), the LOU wil only have the option of suspending the RPSA. Thus, it wil be forfeiting all rights
to future REP benefits for the remaining term of the long-term RPSA in order to avoid the accrual of a deemer
balance in its balancing account (Section 12.2).
IPUC NOTICE OF INTERVENTION
AND COMMENTS 12 Docket No. ER08-1602-000
offering a new exchange under the existing RPSA is contrary to the expressed provision of
Section 5(c), 16 U.C. 9839c(c)(1).
CONCLUSION
If the Commission exerts jurisdiction over this RPSA, the IPUC urges it to strike the
deemer mechanism contained in Section 12. Requiring the parties to re-draft Section 12 will not
adversely affect the operation of the RPSA given that Avista s current ASC is above the PF
Exchange rate. The Idaho PUC also recommends that the Commission require the parties to
modify Section 11 (Termination and Suspension of Agreement) to allow the suspending IOU to
re-enter the current REP program under the RPSA.
Respectfully submitted this ~f day of October 2008.
FOR THE IDAHO PUBLIC UTILITIES COMMISSION
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington (83702)
PO Box 83720
Boise, ID 83720-0074
Idaho Bar No. 3366
blslN :FERC _ERO8-1602-000 - dh _Intervention
IPUC NOTICE OF INTERVENTION
AND COMMENTS Docket No. ER08-1602-000
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this day of October 2008, served the
foregoing Notice of Intervention in FERC Docket No. ER08-1602-000, bye-mailng a
copy thereof to the recipients below.
Michael G. Andrea
Staff Attorney
A vista Corporation
1411 E. Mission Avenue, MSC-23
Spokane, W A 99202
E-mail: michael.andrea(favistacorp.com
Lar LaBolle
Director, Federal and Regional Affairs
A vista Corporation
1411 E. Mission Avenue, MSC- 7
Spokane, W A 99202
E-mail: lar.labolle(favistacorp.com
Donald L. H ell, II
Deputy Attorney General
SHÒRT-TERM BRIDGE RESIDENTIA PURCHASE AND SALE
AGREElvfENT FOR TH PERIOD FISCAL YEARS
2009-2011
AN
REGIONAL DIALOGUE LONG-TERM RESIDENTIAL PURCHASE AND.
SALE AGREEMENT FOR THE PERIOD FISCAL YEARS.
2012-2028
ADMINSTRATOR'S RECORD OF DECISION
Bonnevile Power Admstration
U.S. Deparent of Energy
September- 4, 2008
. ,
1
Idaho PUC
ATTACHMENT A
Docket No. ER08-1602-000
"
This page intentionally left blank.
TABLE OF CONTENTS
i. INTRODUCTION ...................................... ........................ ...........,..... ................................2
II. BACKGROUND ........................................................... ...... ................................................3
A. Section 5(c) of the Nortwest Power Act ................................................................3
B. Need for New RPSAs ......................... .....................................................................4
III. EVALUATION OF COMMNTS......................................................................................4
A. Termination and Reentry Issues...............................................................................5
B. Balancing Account Issues ......................................................................................14
C. In-lieu Issues ............................................ ..............................................................26
D. Other Issues............................................................................................................36
IV. NATIONAL ENVIRONMENTAL POLICY ACT...........................................................8
V. CONCLUSION ..................................................................................................................48
A IT ACHMENT A............................... ............................................................ ......... ...................... I
AITACHMEN.T B ..........................................................................................................................1
ATTACHMENT C ..........................................................................................................................1
This page intentionally left blank.
2
I. INTRODUCTION
This Record of Decision ("ROD'') evaluates and makes final decisions on issues raised, and on
proposals offered, by parties regarding Bonnevile Power Administration's ("BPA") prototye
Short-Term Bridge Residential Purchase and Sale Agreement (the "Bridge RPSA"), which is
proposed to be effective during the period FY 2009-20 i I, and the Regional Dialogue Long-
Term Residential Purchase and Sale Agreement ("Long-Term RPSA"), which is proposed to be
effective durng. the period FY 2012-2028. The substantive provisions of the Bridge RPSA and
the Long-Term RPSA (hereinafter referred to together as the "RPSA" or "Agreement") are
nearly identical, and parties' comments generally addressed the two agrements as one and the
same. This ROD addresses both agreements. Capitalized terms used herein that are not
parenthetically defined, or defined in context, ar defined in the Agreement.
The RPSAs were proposed by BPA as the basis for contracting with all eligible utilties applying
for benefits under the Residential Exchange Program (the "REP'') during the above-referenced
periods. BPA provided draft RPSAs to interested parties by letter dated May 16, 2008, and
stated it would accept comments on the "non-standad" provisions in the Agreements through
June 16,2008.1 See Attachment A. BPA anticipates that the Bridge RPSA wil be signed shortly
after this ROD is issued, and that the Long-Term RPSA wil be signed at the same time all other
Regional Dialogue cantracts are signed, curently expected to be in late 2008.
BPA received comments by the comment deadline from the Idaho Power Company ("lPC"),
A vista Corporation, PacifiCorp, Portland General Electrc Company ("PGE"), and Puget Sound
Energy, Inc. ("Puget") (together the "investor-owned utilties" or "IOUs''), the Oregon Public
Utilty Commission ("OPUC"), the Idaho Public Utilties Commission ("IPUC"), the Public
Power Council ("PPC"), the Western Public Agencies Group ("WPAG"), and Snohomish Public
Utilty District NO.1 ("Snohomish").
On July 2, 2008, BPA issued a letter stating that it would accept additional comment on a
number of prototye Regional Dialogue contracts. See Attachment A. The letter contained a
web link to these contracts, including a contract styled "07/03/08 Revision- RPSA template"
which indicated that BPA would accept comments on the stadard, or boilerplate, portions of the
Long-Term RPSAs, which had not been open for comment during the earlier comment period
that closed June 16.2 Comments on the standard provisions were due by July 15,2008.
i BPA highlighted the nonstandard provisions on which it would accept comments. Discussions regarding the
"standard" (i.e., boilerplate) provisions for all Regional Dialogue contracts, including the Long-Term RPSA, were
the subject of ongoing separate public procses and are not yet ready for formal comment.
2 The standard provisions of the two Agreements ar different. The Bridge RPSA contains stadard provisions
contained in BP A's existing "Subscription" contracts, which generally expire on September 30, 20 i i. The standard
provisions in the Bridge RPSA are set and not subject to change. The Long-Term RPSA contains proposed new
standard provisions that wil be in all ofBPA's so-called "Regional Dialogue" contrcts, which wil be effective
October 1,2012.
2
II. BACKGROUND
A. Section S(c) of the Northwest Power Act
Section 5(c) of the Nortwest Power Act established the REP. 16 U.S.C. §§ 839c(c), et seq. .
Under the REP, a Pacific Nortwest electrc utility may offer to sell power to BPA at the utilty's
average system cost ("ASC"). 16 U.S.C. § 839c(c)(1). BPA purchases such power and, in
exchange, sells an equivalent amount of power to the utilty at BPA's PF
Exchange rate. ld. . The amount of the power exchanged is based on up to 100 percent of the
utilty's qualifyng residential and small far load. ld. BPA's past practice has not required
actual power purchases and sales.3 Instead, BPA provided monetar benefits to the utilty based
on the difference between the utilty's ASC and the applicable PF Exchange rate multiplied by
the utility's residential and small farm load.4 These monetary benefits must be passed though
directly to the utility's residential and smaH farm consumers. 16 U.S.C. § 839c(c)(3).
The purpose of the REP is to exchange resource costs for the benefit of the residential and small
far ratepayers of participating utilties. When the BP A PF Exchange rate is less than a
paricipating utilty's ASC, BPA pays the net difference to the utility. However, when the PF
Exchange rate is greater than the ASC, i.e., when the net difference of the exchange is negative,
BP A has previously provided the utility a right to "deem" its ASC equal to the PF Exchange rate,
so that no cash payment flows from the utilty to BPA. BPA does, however, keep an account of
such unpaid "deemer" amounts, which must be reduced to zero though cash payments or setoff
against future payments before the utilty can receive additional REP cash payment~.
Furtermore, Northwest Power Act section 5(c)(4), 16 U.S.C. § 839c(c)(4), recognizes that
BPA's PF Exchange rate is subject to a supplemental rete charge due to implementation of
section 7(b)(3) of the Northwest Power Act. 16 U.S.C. § 83ge(b)(3). Were this to occur and
cause the PF Exchange rate to exceed a partcipating utility's ASC, that utilty has the statutory
right to terminate its participation in the REP upon reasonable term and conditions agreed to
with BPA prior to such termnation. See 16 U.S.C. § 839c(c)(4).
Pursuant to section 5(c)(5) of the Nortwest Power Act, in lieu of purchasing any amount
of electrc power offered by an exchanging utilty, the Administrator may acquire an
equivalent amount of electric power from other sources to replace power sold by BP A to the.
utility as part of an exchange sale. 16 U .S.C. § 839c( c )(5). However, the cost of the
acquisition must be less than the cost of purchasing the electric power offered by the
utility. ¡d.
J "The exchange actually trasfers no power to or from SPA because the 'exchangé' is simply an accounting
transaction: 'In practice, only dollars are exchanged, not electric power. '" CP Nat 'I Corp v. Bonnevile Power
Admin., 928 F.2d 90S, 907 (9th Cir. 1991) (quoting Public Utility Commissioner of Oregon v. BPA, 583 F. Supp.
752, 754 (D. Or. 1984)).
4As descnbed in greater detail below, in the event the economic value of the exchange transaction favored SPA,
then the exchanging utility accumulated a non-cash obligation owing to BP A to be offset against any future
exchange benefit payments by BPA to the utilty.
3
B. Need for New RPSAs
In early 1996, the governors of Idaho, Montana, Oregon, and Washington convened the
Comprehensive Review of the Nortwest Energy System. The goal of the review was to devèlop
recommendations for changes to the region's electrc utilty industr, focusing on BPA, though
an open public process involving a broad cross-section of regional interests. In December i 996,
after over a year of intense study, the Comprehensive Review Steering Committee released its
Final Report. The Final Report sumarized the Steering Committee's goals and proposals. The
Final Report proposed a subscription system for purchasing specified amounts of power from
BPA at cost with incentives for customers to tae longer-term subscriptions ("Subscription"). In
connection with its Subscription proposal, the Steering Commttee encouraged BPA and other
parties in the region to explore a settlement of REP disputes with the region's IOUs. BPA's
Subscription Strategy was a comprehensive BP A business plan that addressed many details
regarding service for all ofBPA's customer classes: public utilties, 10Us, and direct-service
industrial customers. With regard tò the 10Us, the Subscription Strategy proposed that BPA
would offer the ability to (1) continue paricipation in the REP though RPSAs or (2) enter into
negotiated settlement agreements ofthe REP for the FY 2002-2011 period.
BPA developed prototyes of two agreements: (i) a Residential Purchase and Sale Agreement
(the "2000 RPSA") and (ii) a 2000 REP Settlement Agreement (the "2000 REP Settlement
Agreement"). Developing both agreements was necessary because while BPA expected the
10Us to sign the Settlement Agreements, BPA elected to have an RPSA ready in the event a
qualified utilty, including an lOU, chose to implement the REP through an RPSA.
Although there was broad customer support for the 2000 REP Settlement Agreements, several
customers challenged BPA's decision to execute the 2000 REP Settlement Agreements in the
Ninth Circuit. A number of parties also challenged BPA's decision in its WP-02 wholesale
power rate proceeding to allocate the costs of the 2000 REP Settlement Agreements to the PF
Preference rate. See Golden NW Aluminum, Inc. v. Bonnevile Power Admin., 501 F.3d 1037
(9th Cir. 2007) ("Golden NW"). On May 3, 2007, the Court held that the 2000 REP Settlement
Agreements executed by BPA and the 10Us were inconsistent with the Nortwest Power Act.
See Portland General Elec. Co. v. Bonnevile Power Admin., 501 F.3d 1009 (9th Cir. 2007)
("PGE'). The REP has been' suspended pending resolution of the issues engendered by the
Court's decisions.s
As a result of the Court's decision, BPA has prepared to resume the REP by negotiating new
RPSAs with its utilty customers, including the Bridge RPSA, designed to bridge the gap to the
commencement on October 1, 2011 of the Long-Term RPSA.
III. EVALUATION OF COMMENTS
BPA's evaluation of issues raised in paries' comments is divided into four sections.
Section lILA. addresses comments regarding a utility's right to terminate the RPSA and
subsequently reenter the REP. Section II.B. addresses comments regarding the proposed
5 Estimated REP benefits forFY 2008 were distrbuted to some exchanging IOUs through Interim Relief and
Standstil Agreements signed in March 2008.
4
Balancing Account in th~ RPSA.6 Section UI.C. addresses comments regarding the "in-lieu"
provisions. Section II. D. addresses all other issues raised in comments regarding the prototye
RPSA.
BPA has amended the Agreements in response to the. comments fied. A copy of each
Agreement as amended is included as Attachments Band C.7 .
A. Termination and Reentry Issues
Section 5(c)(1) of the Northwest Power Act provides that BPA shall enter into an exchage
transaction whenever an exchanging utility offers to sell power to BPA at the utilty's average
system cost. 16 U .S.C. § 839c( c)(1). The Act fuher provides that an exchanging utilty may.
terminate an exchange transaction "upon reasonable terms and conditions agreed to by the
Administrator and such utilty pnor to such termination" in the event that the 7(b )(2) rate test
triggers and additional costs are allocated to the PF Exchange rate, causing that rate to exceed the
average system cost of power sold by an exchanging utility to BPA. 16 U.S.C. § 839c(c)(4). The
effect of this termination provision is to relieve the exchanging utility from buying higher-pnced
BPA power and selling to BPA its own lower cost power, but only in the case where the 7(b)(2)
rate test trigger is the cause ofPF Exchange rate exceeding the utilty's ASC. The statute does
not expressly provide for termnation of an exchange transaction in the event the PF Exchange
rate exceeds a utility's ASC due to an increase in the PF Exchange rate caused by something
other than the 7(b)(2) rate test trggering.
The termination provision in the prototye Agreement provides as follows:
"11. TERMINATION OF AGREEMENT
(a) ((Customer Name)) may elect to terminate this Agreement within 30 days
of confirmation and approval by the Federal Energy Regulatory Commission of
new BP A rates (on the earlier of an interim basis, or if intenm approval is not
grated, on a final basis) in which the supplemental rate charge provided for in
section 7(b)(3) of the Northwest Power Act is applied and the PF Exchange rate
charged ((Customer Name)) exceeds ((Customer Name))'s ASC.
In the event a cour of competent jursdiction remands to BPA the Pnonty Finn
Power (PF) Exchange Rate relied upon by ((Customer Name)) to provide a notice
. of termination of this Agreement, and BP A amends such rate upon remand such
that ((Customer Name)) would not have given a notice oftennination under such
rate, the tennination is rescinded and the parties shall be placed in the position of
6Issues regarding the termination and Balancing Account provisions of the Agrement (the latter also referred to
herein as the "deemer" provision) are closely related. In some instances, issues raised that could have been
addressed in the termination section of this ROD are addressed in the deemer section, and vice-versa.
7The amended Agreements incorporate a.different numbering system for sections. For example, section 2(a) in the
Agrements as originally propose.d has become section 2. I. In order to avoid confusion, in general, section
references in this ROD are to the Agreements as originally proposed, not to the amended Agreements.
5
the notice never having been given. Similarly, in the event a court of competent
jurisdiction remands to BPA the Priority Firm Power (PF) Exchange Rate relied
upon by ((Customer Name)) in failng to provide a notice of termination, and BPA
amends such rate upon remand such that ((Customer Name)) would have given a
notice of termnation under such rate, the termination shall be effective at the time
the earlier termation notice would have taken effect.
(b) ((Customer Name)) may elect to terminate this Agreement within 6 months
of confiation and approval by the Federal Energy Regulatory Commission of a
new or amended ASC methodology (on an interim basis, or if interim approval is
not grated, on a final basis) under which ((Customer Name's)) initial ASC
calculated under such ASC methodology falls below BPA's PF Exchange rate
applicable to the initial Exchange Period under the new or amended ASC
methodology. Such termination shall be effective retroactively to the beginning
of the initial Exchange Period under the new or amended ASC methodology.
(c) After termination, ((Customer Name)) shall not participate in the
Rèsidential Exchange Program established in section S(c) of the Nortwest Power
Act until ((Customer Name)) offers to sell electric power to the Administrator at
the average system cost of ((Customer Name's)) resources pursuant to section 5(c)
of the Act."
In sumar, pursuant to this provision, an exchanging utilty may termnate its RPSA in two
circumstances: (1) when Northwest Power Act section 7(b)(3) costs allocated to the PF
Exchange rate (following the 7(b)(2) rate test trggering) cause that rate to exceed the exchanging
utility's ASC; or (2) when a change in the ASC methodology causes an exchanging utility's ASC
to drop below the PF Exchange rate. Subsection (c) provides that an exchanging utilty that has.
termnated its RPSA may request a new RPSA at any time.
. Issue i
Whether the termination and reentry provisions should be amènded.
Parties' Positions
WPAG argues that if a utilty terminates the RPSA because its ASC has fallen below the PF
Exchange rate, it should either accrue a deemer balance account that must be worked ofT after
benefits tu positive, as has been the cae since the REP was instituted, or it shoulèl forgo
participation in the REP once its ASC exceeds the PF Exchange rate for a "period equal to the
duration of its termnation." (WGAG, BNR005, at 1-2.)
The PPC argues that although section 5(c)(4) of the Northwest Power Act does provide for
termination of a utility's participation in the REP, the proposed termination provision is
inappropriate and should be modified to provide that once it terminates the contrct, it should not
be allowed to participate in the exchange again "during the years contemplated in the term of the
contract." (PPC, BNR0004, at 1-2.)
6
Snohomish argues that the proposed termnation provision would allow an exchanging utility to
swing into and out of the REP when it is economically advantageous to do so, and is therefore a
"drastic change from past practice." Snohomish proposes that an exchanging utilty that has
terminated its paricipation in the REP should have a one~time opportnity to reenter beginning
on October 1, 20 19, similar to a cnnsumer-owned utilty under the Regional Dialogue contracts.
(Snohomish, BNR007, at 4.)
¡PC argues BPA should expand the right in the provision to permit an exchanging utility to
essentially suspend the Agreement and "cease exchanging power" at such times that its ASC is
below the PF Exchange rate and "resume exchanging power" when its ASC again exceeds the
PF Exchange rate. . (IPC, BNR0003, at 2.)
The IPUC argues that the termination provision should expressly provide for termnation (or
suspension) any tie an exchanging utilty's ASC is below the PF Exchange rate. (IPUC,
RPS0003, at 4). The OPUC essentially makes the same proposal. (OPUC, BNR0006, at 5.)
BPA Stafls Position
The first issue is if, and when, an exchanging utilty that has terminated its RPSA may receive a
new RPSA prior to the date the terminated RPSA would have expired by its own terms. The
termination and reentry provision proposed by BPA echoes section 5(c)(1) of the Nortwest
Power Act, which provides that the Administrtor shall enter into an exchange agreement with a
Pacific Northwest electric utilty whenever requested. 16 U.S.C. § 839c(c)(1). An exchanging
utility could implement proposed RPSA section 11 in a way that would allow it to paricipate in
the REP when its ASC was above the PF Exchange rate, and terminate its paricipation when the
rèverse condition prevailed, thereby avoiding the accumulation of any deemer balance, but only
in cases where the exchanging utility's ASC falls below the PF Exchange rate due to (1) a
7(b)(3) allocation, or (2) a change in BPA's ASC Methodology. Absent one of those triggers
arising, there is no termination, so the reentry issue is moot.
The parties' comments with respect to the termination and reentr provisions reflect
fundamentally different interpretations of section 5(c) of the Northwest Power Act. Some paries
believe, notwithstading the strcture of section 5( c) of the Act as an actual power exchange,
that the intent of Congress in creating the REP was to have benefits flow only one way, from
BP A to the residential and small far consumers of exchanging utilties. Others believe the
strcture of section 5(c), and the termnation language in sectiQn 5(c)(4), which limits and
qualifies an exchanging utilty's termination right, support the conclusion that Congress intended
and understood that REP benefits could flow two ways, both from and to BP A.
Evaluation of Positions
WPAG notes that by allowing an exchanging utilty to request and receive a new RPSA at any .
time after it has termnated its existing RPSA, without conditions, the proposed termnation
provision effectively eliminates the possibility that an exchanging utility would ever accrue a
deemer obligation to BP A, allowing the exchanging utilty to receive payments when its ASC
exceeds the PF Exchange rate and avoiding any deemer exposure (or "negative benefits") by
7
termnating the Agreement "when the reverse situation applies." (WPAG, BNR0005, at 1.)
WPAG correctly notes that under all prior RPSAs, any negative benefits were accrued in a
deemer account lid repaid prior to the exchanging utilty receiving positive benefits, and
concludes that the proposed section does away with this "balancing to (sic) interests." ¡d.
WPAG states that section 5(c)(4) of the Northwest Power Act provides for termnation ofa
utilty's paricipation in the REP ''upon reasonable term and conditions agreed to by the
Administrtor and such utility," but argues that the proposed terms and conditions are not
reasonable, because the proposal "leaves thé preference customers with the worst of both worlds,
paying REP benefits when ASCs are high but receiving no compensating payment from the
participating utilty when the ASCs are low." (WPAG, BNR005, at 1-2). WPAG characterizes
this result as aliowing paricipating utilties to "cream skim" the REP. ¡d. at 2. WPAG proposes
that if a utilty terrnates the RPSA because its ASC has fallen below the PF Exchange rate, it
should either (i) accrue a deemer account balance that must be worked off after benefits tum
positive, as has been the case since the REP was instituted, or (2) it should forgo participation in'
the REP once its ASC exceeds the PF Exchange rate for "a period equal to the duration of its
termination." (WPAG, BNR0005, at 1-2.) .
Both PPC and Snohomish largely echo WPAG's comments on this issue, noting that the
termination provision provides a clear path for utilties to take advantage of the REP in the years
when doing so benefits them, and to opt out of the progr in years that it would not, and that
this is inconsistent with section 5(c) of the Act and with the take-or-pay constrct that wil.
govern preference customers' contracts. (PPC, BNR0004, at 1-2; Snohomish, BNR007, at 4.)
PPC's proposal differs from WPAG, however, arguing that once an exchanging utilty terminates
its RPSA, it should not be allowed to participate in the exchange again "during the years
contemplated in the term of the contract." ¡d. For its part, Snohomish proposes that an
exchanging utility that has terminated its RPSA should have a one-time opportunity to "re-enter
the REP'" on October 1, 20 19, similar to a consumer-owned utility under the Regional Dialogue
contracts. ¡d.
IPC takes a contrar position, based on a fundaentally different view of the intended purose of
the REP. IPC argues BP A should expand the right in the provision to permit an exchanging
utility to essentially suspend the Agreement and "cease exchaging power" at such times that its
ASC is below the PF Exchange rate and "resume exchanging power" when its ASC again
exceeds the PF Exchange rate. (IPC, BNR0003, at 2.) IPC argues that such a right would not
deprive other BP A customers of any benefits "tG which they are legally entitled" and would
"better faciltate achievement of the wholesale rate parity contemplated by the Act." ¡d. IPC's
view is supported by the IPUC and the OPUC. TheIPUC argues that while the proposed RPSA
provides more favorable termination rights than contained in the 198 i RPSA, they remain
"overly restrictive," and the better route would be to expressly provide for suspension of the
Agreement when the utility's ASC is below the PF Exchange rate, which IPUC argues is already
encompassed in section 1 l(c) of the proposed termination provision. (IPUC, RPS0003, at 4.)
IPUC states that in the alterntive, section 11 could be divided into two sections - one for
termation and another for suspension. ¡d.. The OPUC proposed language that would "allow
customers to terminate for any reason" on 90 days' notice. (OPUC, BNR0006, at 5.)
8
BPA believes WP AG, PPC, and Snohomish are, to some extent, overstating the amount of
flexibilty the proposed termination and reentry provisions give exchanging utilties. It is not
tre that the proposed termnation provision effectively eliminates the possibilty that an
exchanging utilty would ever aCcrue a deemer obligation to BPA. It is possible during the term
of the Agreement that BPA's rates could provide for rate adjustments withn a rate period, akin
to the Cost Recovery Adjustment Clauses, or CRACs, that have applied to BP A's base rates
since 2002. Such a rate adjustment could lead to an increase in the PF Exchange rate above an
exchanging utility's ASC, resulting in an accumulation in the utilty's balancing account under
section 12(b) of the Agreement. Even absent CRAC-lìke increases, the PF Exchange rate could
move above an exchanging utilty's ASC due to rising BPA costs that are allocated to all of
BP A's base rates. The proposed termination events, including a change in BPA 's ASC
Methodology, would not be available to an exchanging utility in this situation. Consistent with
section 5(c)(4) of the Act, the proposed RPSA provides limited termination rights, but because it
would not provide an exchanging utilty with a means to avoid accumulating an amount in'its
balancing account in all circumstances, the proposed provision is consistent with these
commenters' view that the REP was intended by Congress as a "two-way street" with benefits
potentially flowing each way.
WPAG proposes that an exchanging utilty be bared from reentry into the REP for a term equal
to the period it was not participating due to an RPSA termination, but it is not clear the proposal
would adequately address the fairness and equity concerns it raises. Under WPAG's proposal, "
an exchanging utilty that was not parcipating in the REP for a five-year period following an
RPSA tenTnation would be bared from reentr for an additional five years, measured,
presumably, from the date its ASC again exceeded the PF Exchange rate.s However, WPAG's
proposal seems to assume that the exchanging utilty would otherwse be entitled to benefits
during this second five-year period, and that this is the "price" it must pay for its earlier
termination. In fact, it is possible that if it had been allowed to reenter the REP at the beginning
of the second five-year period, the utility might stil have accumulated obligations to BPA in its
balancing account, as in the situation described above.
WPAG's alternative proposal, that an exchanging utilty accrue deemer obligations following
termnation of the RPSA, appears. to be inconsistent with section 5(c)(4) of the Act, by which
Congress provided an exchanging utility with a limited right to tenTnate both its purchase from
BP A and its sale to BPA under an RPSA. Accumulating a deemer balance after an exchanging
utilty invokes this statutory termnation right appears inconsistent with the right provided by
Congress. In addition, WPAG's implication that its proposal is consistent with the manner in
which the REP has beèn implemented since its inception is incorrect, as no deemer balances
accrued under the 1981 RPSA following termination.
The PPC and Snohomish proposals (no right toreenter the program for the duration of the RPSA
term, and a one-time right in 2019, respectively) do not seem proportionate in light of the limited
circumstances under which an exchanging utilty may terminate the RPSA. As a practical
matter, if an exchanging utilty exercised its limited termination right, it would be out of the REP
8 How SPA would know when this cross-over occurred is not clear because SPA would not be calculating the
utilty's ASC during the termination period, nor would BPA be establishing that utilty's PF Ex.change rate during
this period.
9
for at least the remaining term of the rate period, which, under BPA's current rate period
construct, would likely be two years, but could be as long as five years. Following termination
of an RPSA, the exchanging utilty accrues no deemer amounts. However, under the PPC
proposal, in an extreme but possible example, if an exchanging utilty terminated its Long-Term
RPSA at the beginning of the third year of the proposed Agreement (which could be as early as
20 15), the residential and small far consumers of an exchanging utilty could forfeit any
possibilty of receiving REP benefits for the next 13 years, regardless of how high its A~C may
be in relation to the applicable PF Exchange rate.
As a general matter, BPA agrees with the view that Congress intended and understood that REP
benefits could flow both fromBPA to the exchanging utility and from the exchanging utilty to
BPA. BPA irnplemented the REP through the original RPSA in 1981 to reflect the "two~way"
natue of the exchange by providing an account to trck accrued liabilties of an exchanging
utility to ßPA during periods when the utilty's ASC was below the PF Exchange rate, but the
utility's termination right could not be invoked. However, through section 5(c)(4) of the Act,
Congress provided exchanging utilties with a mean to avoid this liabilty, albeit under limited
circumstances and only pursuant to "reasonable terms and conditions" agreed to prior to any
termination. 16 U.S.C. § 839c(c)(4). Section 5(c)(4) of the Act expressly addresses the
termination side of the equation, yet termination is only one-half of the equation. The other half
concerns the exchanging utility's reentr into the REP. Section 5(c)(4) does not expressly
address ths par of the equation. Rather, Congress stated in section 5(c)(I) that the exchange
could be initiated by an exchanging utility at any time.
On its face, then, Congress provided exchanging utilties with a limited termination right, but an
unfettered reentry right. However, there is support for the view that Congress did not intend
section 5(c)(I) to entitle an exchanging utility to participate in the REP on demand following a
termination, but that the "reasonable terms and conditions" provided for termination in
section 5(c)(4) would apply to section 5(c)(I) in the context of reentry into the REP following a
termination under section 5(c)(4). In Senate Report 96-272 (Committee on Energy and Natual
Resources), the committee described the provisions of the REP, which at the time were contained
in section 5(b)(2) of the proposed legislation. The provisions in section 5(b)(2) are substantially
similar to the language that was eventually enacted into law as section 5(c), but section 5(b)(2)
was drfted as a single section and the main clause providing that BP A would enter into an
exchange trsaction whenever requested was followed by four provisos, incli:ding the
termination proviso in section 5(b)(2)(C). The report describes section 5(b)(2) as follows:
Section 5(b)(2). - This section governs the exchange power sales between the
Administrator and the utilties, and the detenInation of the costs of such power sold by
the utilties. In the four par proviso, part (C) permts a utility to terminate such exchange .
sales under specified circumstances. It is intended that the Administrator include in
contracts implementing .this section provisions governing termination and resumption of
any previously-terminated exchange. for the purpose of minimizing disruption of the
Administrator's rate-making or power marketing programs or planning.
S. Rep. No. 96-272, 96th Cong., 1st Sess., at 27 (1979) (emphasis added). The report language
indicates Congress intended that both termination and reentry into the REP following
10
termnation would be conditioned by "reasonable tenn and conditions" for the "purose of
minimizing disruption of the Administrator's rate making or power marketing progras orplaning." ¡d. .
Nevertheless, absent a more robust termnation right - one that would allow an exchanging
utilty to terinate the RPSA at any time and for any reason - BPA finds that the PPC and
Snohomish proposals barrng reentry for potentially the majority of a 20-year period are not
"reasonable" and are inconsistent with the REP, the primary purpose of which is to allow the
residential and small far consumers of regional investor-owned utilities to share in the
economic benefits of lower-cost Federal power.9
On the other hand, proposals by ¡PC, ¡PUC, and the OPUC that an exchanging utilty should be
allowed to terminate and resume its paricipation inthe REP, essentially at wil, seems equally
untethered from section 5(c) of the Act and the above-referenced legislative statements regarding
termination and reentry. If Congress had intended that the REP be a one-way transaçtion, with
benefits only flowing to the exchanging utilty (which would be the effect of the proposal by
these parties), it could haye so provided. But the termination and reentry provisions of the Act,
which Congress specified must be invoked only upon "reasonable terms and conditions" that
accommodate BPA's ratemaking, power marketing, and other program interests, support the
conclusion that Congress intended otherWise.
BPA agrees, however, that the proposed termnation and reentr provisions, which provide one
additional termnation trigger for exchanging utilties but which are otherwise essentially
carrovers from the 1981 RPSA, should be amended to better accommodate the competing
interests expressed in section S(c). Ta that end, BPA has amended section 11 to provide a
termination right that mimics section 5(c)(4) of the Act, and a suspension right that allows an
exchanging utility to avoid ever incurrng any deemer balances in exchange for a commitment
not to paricipate in the REP upon suspension until expiration of the RPSA at the end of its stited
term. Because the termination right is tied to the 7(b)(3) allocation, as a practical matter that
right (and its corollar reentr' right) wil be available only at the beginning of each rate period,
when BP A reestablishes the PF Exchange rates. This is a "reasonable term and condition" tied
to BPA's ratemakng. The suspension right, which wil encompass the right to suspend the
Agreement in the event of changes to the ASC Methodology that would result in a utilty
accumulating a deemer balance, wil provide the exchanging utility with flexibility to manage the
RPSA in way to maximize REP benefits in the context of a program that, BP A finds, is
strctured and was intended by Congress to be a two-way bargain. In exchange for the utilty's
right to suspend the Agreement at any time, BP A wili receive certinty regarding its REP
obligations to such exchanging utilty for a knoW!! period. BP A believes this a "reásonable term
and condition" that. is both important to BPA's cost and resource planing, and reflects the
underlying two-way natue of the REP. The amended section 1 i is as follows: 10
"11. TERMINATION AND SUSPENSION OF AGREEMENT
11.1 Termination of Agreement
9 See H.R. Rep. No. 96-976, pt. 2, 96th Cong., 2d Sess., at 34-35 (1980)
10 Additionàl changes to section I I as originally proposed are addressed under Issue 2 immediately below.
11
11. 1. ((Customer Name)) may termnate this Agreement by providing
BPA with written notice within 30 days following the date of
approval by the Federal Energy Regulatory Commssion of new
BP A rates (on the earlier of such approval on an interim basis, or
if interim approval is not granted, on a final basis) in which the
supplemental rate charge provided for in section 7(b)(3) of the
Northwest Power Act is applied and causes the PF Exchange rate
charged ((Customer Name)) to exceed ((Customer Name))'s ASC.
Such tennnation shall become effective as of the' date specifiedin the notice. '
i 1.1.2. Upon termination of this Agreement pursuant to section 11.1.1
((Customer Name)) shall not participate in the Residential
Exchange Progr established in section 5(c) of the Northwest
Power Act until ((Customer Name)) offers to sell electrc power
to BP A pursuant to a new Residential Purhase and Sale
Agrement (RPSA) that has been executed by the Partes. Such
RPSA shall become effective no earlier than the star of the first
Exchange Period following such request.
11.2 Suspension.
,I i .2.1. ((Customer Name)) may suspend perormance under this
Agreement for any reason upon 30 days written notice to BP A.
Such suspension shall become effective as of the date specified
in the notice, and shall suspend the rights and obligations of both
. Paries as of such date, and such suspension shall continue
though (September 30,2011 or September 30, 2(28).
11.2.2. Upon suspension of this Agreement pursuant to section I 1.2. I,
((Customer Naie)) shall not seek and shall not be entitled to
receive a new RPSA until the expiration of this Agreement on
(September 30, 201 i or September 30, 2028)."
Decision
For theforegoing reasons, section 11 wil be amended as provided above.
Issue 2
Whether the RPSA should require an exchanging utilty to refimd REP benefits received over a
certain period: (1) in the event that a court remands to BPA the P F Exchange rate and BP A
amends such rate upon remand such that the exchanging utilty would not have been entitled to
receive any REP benefits during such period; or ( 2) in the event BPA amends or replaces its
12
ASC methodology applicable to such period such that the exchanging utilty would not have been
entitled to receive any REP benefits during such period.
Parties' Positions
Snohomish argues that BPA must include in sections 1 1 (a) and 1 1 (b) a requirement that any and
all REP payments received in the circumstances described therein must be refunded to BP A
within 90 days, plus an interest charge. (Snohomish, BNR0007, at 3-4.)
PPC fied a similar comment, but its comment only addresses an overpayment contemplated
under section Il(a). (pPC, BNR0004, at 2.)
BPA Staff's Position
This .issue is evaluated in the context of section 11 as originally proposed, i.e., prior to the
changes reflected above under Issue 1, because a different termination event (one tied to court
action) is addressed here. Section 1 1 (a) of the RPSA as originally proposed provided the
Agreement would be deemed retroactively terminated in the event a court of competent
jurisdiction r~manded to BPA the PF Exchange rate relied upon by an exchanging utility as the
basis for its election not to provide a notice of termination and BPA amended such rate upon
remand, thereby causing the exchanging utilty's ASC to drop below the PF Exchange rate for
such period. Similarly, original section 1 I (b) provided for a retroactive termination triggered by
a new or.amended ASe Methodology that caused an exchanging utilty's ASC to fall below the
PF Exchange rate.
The purpose of these clauses was to hold harless an exchangirg utilty from certain specified
judicial or administrative action, beyond their control, that furidamentally changed the basis (i.e.,
an ASC above the PF Exchange rate) uponwhich the exchanging utilty made its decision to
participate in the REP for an Exchange Period.
Evaluation of Positions
Snohomish and the PPC correctly note that section i l(a) provides for retroactive termination in
the event that the PF Exchange rate is remaded to BPA, and BP A re-establishes the rate at a
level that would have led the exchanging utility to terminate if the newly established rate had
been in effect originally. (Snohomish, BNR007, at 34; PPC BNR0004, at 2.) The comments
are correct that the effective date of the retroactively applied termination may be several years in
the past, and that in this case the exchanging utility wil have collected REP payments it was not
otherwise entitled to receive. Snohomish and PPC urge BPA to include a requirement that any
REP payments received following the effective date of the termination be repaid with interest.
¡d.
Snohomish makes a similar argument with respect to a retroactive termination trggered by
section ll(b) of the proposed teimination provision. ¡d. Snohomish recommends repayment 90
days from the notice of termination, with interest at "the Prime Rate plus four percent." ¡d.
13
As originally proposed, the second paragraph of section II(a) would allow an exchanging utilty
to (1) retroactively withdraw a termnation, and (2) retroactively implement a termination, each
in the circumstance where court action has resulted in a change to the PF Exchange rate relied
upon by the utility in making its original election to terminate or not terminate. No provision
was made for either refunds by the exchanging utilty (in the event of a retro~ctive tennination)
or payments to the utility (in the event of a retroactive withdrawal of a termination), though the
requirement for such payments can be inferred from the retroactive natue of the termnation
revocation.
In either case, however, the rights and obligations of the paries under the REP following Federal
Energy Regulatory Commssion or court action settng aside a BP A final decision or decisions
that formed the basis for an exchanging utilty's benefits or election with respect to paricipating
in the REP wil be determined by BP A though additional administrative action in response to
such regulatory or court decisions. BP A agrees with Snohomish and PPC that, as a general
matter, if an exchanging utilty receives REP benefits it was not entitled to receive, such benefits
should be retued to BP A by direct payment or setoff. Likewise, the logic for such a result
would seem to apply equally to a payment wrongly withheld, and would require that BPA make
an exchanging utilty whole for payments that should have been made but were not.
However, creating additional contract language to addrss these hypothetical occurrences raises
additional questions regarding the natue of the cour's remand and BPA's response, neither of
which can be known ahead of time. As a consequence, BPA has decided to eliminate the second
paragraph of section 11 ( a) in its entirety, and leave for administrtive action the resolution of
REP issues engendered by a cour setting aside a BP A final decision or decisions that formed the
basis for an exchanging utility's election with respect to paricipating in the REP, including
whether and how REP payments made or not made should be trued up.
Snohomish's comment with respect to section i i (b) is made moot due to the elimination of the
right to terminate following changes to the ASC Methodology, as described under Issue 1 above. .
Decision
If the Federal Energy Regulatory Commission (FERC) or a court of competent jurisdiction
remands, reverses, or otherwise finds unlawfl a EPA final decision or decisions that affect an
exchanging utilty's receipt, orfailure to receive, Residential Exchange Program benefits, BPA
wil review and determine the rights and obligations of the Parties through additonal
administrative aciion(s) as necessary to respond to such regulatory or court decisions.
B. BaJanc.ing Account Issues
Section 5( c) of the Northwest Power Act established the REP as a "purchase and exchange sale"
by and between BPA and an exchanging utility. See 16 U.S.C. §§ 839c(c)(I) and (2). While the
language and structure of section 5(c) is couched in terms of an actual power exchange (with
BP A sellng power to the exchanging utilty at the PF Exchange rate and purchasing an
equivalent amount of power from the exchanging utilty at the utilty's ASC), BPA has
implemented the REP as a monetar transaction since its inception in 198 I. As a moneta
14
trasaction, BP A pays the exchanging utility the difference between the PF Exchange rate and
the utilty's ASC.
Neverteless, because REP benefits are derived by comparg the rate levels charged by each
pary for its hypothetical sale of power to the 'other, the benefits (or economic value of the
exchange) could flow from an exchangig utilty to BPA in the event the utilty's ASC (the rate
"paid" by BPA) is lower than BPA's PF Exchange rate. However, Congress appears to have
contemplated such a circumstance, and provided exchanging utilties with a limited statutory
right to terminate their RPSAs in the event the utilty's ASC falls below the PF Exchange rate,
due to application of section 7(b)(3) of the Act. 16 U.S.C. §§ 839c(c)(4), 83ge(b)(3).
The 1981 RPSA, in addition to providing for termination or suspension of the Agreement
consistent with the above-referenced statutory right, included a provision that gave an
exchanging utility the option, in lieu of invokig its termination or suspension right, to have its
ASC "deemed equal" to the PF Exchange rate. Notwithstanding this deemed equalization of the
two rates, the provision also provided that during the period any such election was in effect, BPA .
would "debit to a separate account the net exchange payment to Bonnevile, if any, that would
have been required of the Utility if the Utilty had not made such election and shall credit to that
account any exchange payments that would have been made."
i i
This "deemer" account concept is cared forward by BPA in the proposed RPSAs. The
Agreement also includes provisions addressing disposition of existing deemer balances cared
over from the 1981, RPSA. The balancing account provison in the prototye Agreement provides
as follows:
"12. PAYMENT BALANCING ACCOUNT
(a) Balancing Account (BA)
The account balance, if any, is deemed to be $((_)) on October I, (2008 or
201lJ12, subject to the resolution of any disputes regarding such balance. This
.accourt balance includes an adjustment for changes in the Western Region.
Consumer Price Index (all items) (CPI) applied to such balance beginning in
October 1, (2008 or 2011), and continuing until such time as the BA balance is
reduced to zero, based on the methodology described below. BPA shall adjust
such balance monthly effective October 1, (2008 or 2011), to reflect actual '
monthly changes in the CPL. This account balànce (BA_B), if any, comprises the
beginning balance for a balancing'account described in this section.
As long as the BA_B is greater than zero, such balance shall be adjusted monthly
by the change in the Consumer Price Index value for that month relative to the
CPI value for the previous month as follows. For the current month (m)
ii 1981 RPSA, section 10, "Election to Equalize Rates." This provision is ha been referred to by partes
colloquially âs the "deemer account" or "deemer provision."
12The 2008 date is in the Bridge RPSA, and the 201 1 date is in the Long-Tenn RPSA.
15
BA adjustmentm+i = lCPImlCPIm.i-ll*BA_B m
where
CPIm= current month's CPI Index value as determined below
C,PIm_l= Previous month's CPI Index value
BA_Bm = Current month's ending BA balance
BA_Bm+i = Next month's beginning BA balance
The CPI index value shall be the end of month Consumer Price Index - All Urban
Consumers (West Region. All Items), as published on the aureau of Labor
Statistics web site: htt://data.bls.gov/cgi-bin/surveymost?cu (select "West
Region, all items" and then select the applicable range of months and years)..
The adjusted BA balance for the next month (m+ 1) shall then be:
BA_B m+1 = BA_B m + BA adjustment. P
Where P is the amount by which the BA increases or decreases as determined by
multiplying the difference of the oeoeCustomer Name~~'s current ASC minus the
applicablePF Exchangerate by the utilty's Residential Load. If the ASC is less
than the applicable PF Exchange rate, P wil be negative and add to the BA
balance; otherwise P wil be positive and reduce the BA balance. .
(b) Additions to the Beginning Balancing Account
Whenever the ASC is less than BP A's then-curent PF Exchange rate during the
term of this Agreement, the payment that would otherwise be owed BP A wil be
tracked by BP A and added to the balancing account.
(c) Resumption of Monetary Benefits
If there i~ a balance in the balancing account and the ASC is grater than the
applicable Priority Firm Power Exchange Rate, BPA wil make no cash payments
but wil apply the amount tht would have been paid in order to reduce the
account balance. ((Customer Name)) will resume the receipt of exchange
payments from BP A under this Agreement provided that there is no longer an
amount in the balancing account, or ((Customer Name)) makes payments to BPA
to bring the balance in the balancing account to zero. ((Customer Name)) may
elect to make cash payments to BP A in order to eliminate all or a portion of
((Customer Name))'s account balance at any time.
(d) Accou'nt Balance Carryover
Any balance in the balancing account, upon termination of this Agreement, shall
not be a cash obligation of ((Customer Name)) but wil carr over to the balancing
account of the oeoeCustomer Name~~'s next RPSA."
16
Issue i
Whether to modif or eliminate section 12(a). which: (1) requires that an exchanging utilty 's
"deemed" account balance as of October 1, 2008for the Bridge RPSA, and October 1.2011 for
the Long-Term RPSA. must be determined and stated at the time each agreement is executed;
and (2) provides that account balances wil be adjusted through time to reflect changes in the
Western Region Consumer Price Index.
Partes' Positions
With respect to the Long-Term RPSA, WPAG, PPC, and Snohomish argue that instead of
including a number that is "deemed" to be the account balance as of October 1, 2011, the clause
should provide that the actual balance wil be calculated and included in the Agreement on
October 1,2011. (WPAG, BNR0005, at 2-3; PPC, BNR0004, at 3-4; Snohomish, BNR0007, at
5.) PPC also suggests that a "forecasted" amount can be included as a placeholder in the Long-
Term RPSA prior to that time. Id. These paries do not specifically raise this issue with respect
to the Bridge RPSA, but Snohomish and PPC indicated that their comments applied to both
agreements, and BPA wil treat the comments of these paries on this issue as applicable to both
agreements. .
These paries also argue that the CPI is not the appropriate measure for adjustments to account
1;alances, but that an interest component should be used instead.
'fte investor-owned utilties (addrssing their comments to both the Brjd. and Lon~:T~ri.
RPSAs) state that because the deemer balances are disputed and.\,si1bject to resolution in othe
IOf!Ms)the "restatement or confirmation of the alleged balances" i~ nöt a reasonable 'OT
necessary term or condition of service under a new RPSA, and that BP A should not include
provisions that restate or confirm such balances. (IOU, BNR0002, at 2.) The IPUC echoes the
10Us' position, and questions whether it is realistic that paries can conclusively resolve the
issue of outstanding deemer balances even prior to October 1, 201 i. (lPUC, RPS0003, at 3.)
The IPUC argues that section 12 should be deleted in its entirety. ¡d. .
BPA Stafts Position
Proposed section 12(a) requires that the pares agre to a "deemed" account balance attributable
to the exchanging utility as of October 1, 2008, in the case of the Bridge RPSA, and October 1,
201 I, in the case of the Long-Term RPSA. The "deemed" amount is expressly.subject to the
resolution of any disputes regarding such balance. BP A's intent with respect to this clause of the
Agreement is to car forward from the 1981 RPSAs, and to state expressly in the new RPSAs,
any deemer a.ccount balances accrued by an exchanging utilty under the 1981 RPSAs. BPA
believes this is what was contemplated by the 1981 RPSAs, and that the contractual liabilty
incurred by exchanging utilties under the 1981 RPSAs for deemer amounts should be
contractually recognized in the new RPSAs, which is the vehicle though which those liabilities
are to be discharged.
17
Proposed section 12(a) also contains the method by which amounts in the balancing account wil
be adjusted to account for the time value of money. BPA proposed a measure based on inflation
rather than an interest rate, as this seemed,to be a better measure of the "cost" incurred by BPA's
other customers ~ssociated with accumuiating unpaid amounts in the balancing account.
Evaluation of Positions
WPAG argues that it is unclear why the RPSA should "deem" an account balance when BPA
stated the balance for each LOU in testimony in the WP-07 Supplementa Rate Case. (WPAG,
BNR005, at 2.) WPAG argues that the Agreement should include the "actual balance as
calculated by BPA" as of Octòber i, 2011, including any interest accrned on the actual balance.
¡d. WPAG does not specifically address this issue with respect to the Bridge RPSA. PPC
similarly.argues (also with respect specifcally to the Long-Term RPSA) that it is unclear why
the RPSA should deem an exchanging utilty's 2011 account balance to be a specific amount at
the time of contract execution. (PPC, BNR0004, at 3.) PPC proposes that the Agreement should
include a forecasted account balance, but include a provision for calculating and including the
"actual balance" on October 1, 20 i i. ¡d.
Snohomish argues that the word "deemed" is inappropriate here, as it implies that the paries
know today what the account balance wil be more than thee years into the 'future. (Snohomish,
BNR007, at 5.) Snohomish proposes the following substitute language:
The account balance, if any; is estimated, to be $ ,,_~ on October 1, 201 i. This balance
~ subject to the resolution of any disputes regarding such balance, and wil be adjusted to
reflect the actual balance, if any, of the most recent balancing account attbuted to
""Customer Name~~.
¡d.
For their par, the investor-owned utilities argue that any obligations that purortedly arose under
the 1981 RPSAs are "properly the subject of litigation, settlement or otherwise." (IOUs,
BNR0002, at 2.) They argue it would be "inappropriate, in violation of the Act, and arbitrary
and capricious" for BPA to reqúire contracting pares to restate or confirm such disputed
balances, and ''waive rights and defenses" they may have with respect to such balances as a
. condition of executing a riew RPSA, and that BP A should not include provisions that restate or
confirm such balances. ¡d.
The IPUC states that that the deemer balances are a disputed issue in the WP-07 Supplemental
Rate Case. (IPUC, RPS0003, at 2-4.) The IPUC notes that while section l2(a) "seems to"
condition the starting balance subject to any resolution, the long running dispute between the
parties regarding deemer balances does not give the Idaho PUC confidence that the paries can
resolve the issue prior to October 1,2008. ¡d. Finally, the IPUC argues that the carrover clause
of the proposed Agreements does not promote the resolution of the chronic deemer problem but
seemingly provides the paries with a convenient alternative to resolving this issue. ¡d.
18
In summary, none of the commenters believe that the first sentence of proposed section 12(a) is
satisfactory. The 198 I RPSAs expressly provided for BPA to "debit to a separate account the
net exchange payment to Bonnevile" when an exchanging utility was in deemer status, and
provided that any balance in that account was to accumulate interest as provided in the RPSA.
See i 98 i RPSA, section i O. Balances existing at the time the contract terminated were to be
carred forward and applied "to any subsequent exchange." ¡d. Setting aside whether these
"deemer" balances are consistent with section 5(c) of the Nortwest Power Act, some
exchanging utilities did accumulate such balances under the.198l RPSA. The JOUs' conclusion
that including a placeholder figue that is "deemed" to be the account balance on the execution
date is "inappropriate, in violation of the Act, and arbitrary and capricious" is overblown, as the
deemed amount is expressly subject to change though dispute resolution. But BP A agrees it is
not strctly necessar that a dollar amount - whether deemed, forecasted, or otherwise - be
included in the text of the Agreements, either at the time of execution or on the Effective Date.
However, BP A does believe that it is important, at a minimum, that the Agreements
acknowledge whether an exchanging utility did accumulate a deemer account balance under the
198 i RPSA, pursuant to the terms and conditions in that contract. BPA recognizes that these
utilties, and their public utilty commissions, contest either the amount of these balances, the
legality of these balances, or both. In an attempt to accommodate paries' comments, BP A wil
amend proposed section 12(a) to provide that it will determne the account balance of any utility
that accumulated a deemer balance under the 1981 RPSA for carrover, subject to resolution of
disputes regarding such determination; but where no such balance was accumulated for carover
by a utilty under the i 98 i RPSA, the Agreement wil recognize this fact. The new section reads
as foiiows:13
"12.1 Balancing Account (BA)
Drafter's Note: First sentence of this section wil have one of two possible
vers ions. Version 1 wil be used for utilties with a deemer carrover from the
1981 RP SA. Version 2 for utilites with no carryover.
Version 1: The account balance attributable to carover amounts under the 198 i
.RPSA shall be determned by BPA, subject to the resolution of any disputes
regarding such determnation; provided, however, that the effect of section 12.3
below shall not be stayed pending resolution óf any such dispute.
Version 2: The account balance is zero as of the Effective Date."
With respect to whether it is appropriate to adjust account balances based on inflation, WPAG
states that because the account balances reflect an alternative to the' exchanging utility paying
BPA cash, it is inappropriate to apply an inflationar adjustment to those balances, and interest
should be applied to those cash obligations for which payment has been deferred. (WPAG,
BNR0005, at 3.) PPC makes the identical argument. (PPC, BNR0004, at 3.)
13 These versions will be used in the Bridge RPSA. Similar versions, but that also account for the possible
accumulation ora deemer balance under the Bridge RPSA. wil be used in the Long.Term RPSA.
19
Snohomish argues that an adjustmént based on a measure of inflation is inconsistent with
section 5(c) of the Northwest Power Act, which "conternplates a commercial trnsaction between
the exchanging utility and BPA." (Snohomish, BNR007, at 5-6.) As such, any deferrl in the
obligation by the exchanging utilty to make a cash payment requires that interest be applied to
the deferred balance, and that BPA should add a statement that any outstanding account balance
wil accrue interest at the Prime Rate plus four percent. ¡d.
In addition to bringing section l2(a) of the RPSAs back into line with the transaction
contemplated by the Nortwest Power Act, Snohomish argues' that the accrual ofinterest on an
outstanding payment is consistent with prudent utilty practice. ¡d.
BP A continues to believe that adjusting the amounts in the balancing account based on the CPI
(1) more accurately measures the cost to other BP A customers of the deferred "repayment" of
such amounts, and is therefore fairer to both those customers and to the residential and small
fann consumers of exchanging utilties, and (2) is easier to apply. Firt, for reasons explained in.
Issue 2 below, amounts in the balancing account are not cash obligations of the exchanging
utility, but rather non-èash deferred obligations. . The Agrements contemplate - consistent with
the 1981 RPSA - that this non-cash obligation wil be discharged through an offset by BPA to
future REP benefits.14 Using offsets to futue REP benefit payments as the default mechanism
for amortzing deemer balances is consistent with the fact that these deferred obligations, like the
. REP benefits paid by BP A, are more accurately attbutable to the residential and small far
consumers of the exchanging utilties than to the utilties themselves, which receive no monetar
benefits whatsoever from the REP. Absent a contrctual obligation to make a cash repayment on
a fixed schedule, applying an interest rate of prime plus four percent to outstading account
balances, as proposed by Snohomish, is excessive in relation to the nature of the obligation, and
would arguably overcompensate BP A's other customers compared to applying an inflation rate,
which, using the CPI based on the last i 0 years, would be in the 2 to 5 percent range.
Second, the date by which amounts in the balancing account would be "repaid" by offset is
unkowable and largely, if not wholly, outside the control of an exchanging utilty. As such, it
would be diffcult to choose the appropriate interest rate to apply to such amounts, because the
rate of interest is detennined in large par by the duration of the "loan." Again, in this respect
adjusting the amount in the balancing account based on an inflation rate provides a fair surrogate
that should make BPA's customers "whole" in the context of the obligation owed to them, and
does not unfairly penalize the residential and small far consumers of the exchanging utilties by
using an interest rate that could be excessive in light of the nature and duration of the outstanding
obligation.
Finally, Snohomish's argument that section S(c) of the Northwest Power Act requires that
deemer account balances must be treated as if they were cash obligations, even if repayment is
effected though offset, is addressed in Issue 2 below.
14 Section 12(c) of the proposed Agreement does provide for cash payments at the election ofthe utiity.
20
Decision
The first sentence of proposed section 12 (a) wi( be amended as stated, but no changes wil be
made to the proposed application of the CPI as the measure for adjustments to amounts in the
balancing account.
Issue 2
Whether section 12(d) should be amended to require an exchanging utilty to pay in cash a
carried-over account balance in the circumstance where tke utilty does not sign a new RPSA.
Partes' Positions
Snohomish and PPC each note that section 12(d), which expressly states that carrover account
balances are not cash obligations, could result in a cared-over account .balance remaining
unsatisfied in the circumstance where the exchanging utilty does not enter into a new RPSA.
(Snohomish, BNR007, at 5-6; PPC, BNR0004, at 3-4.) Snohomish questions whether the
provision as proposed is consistent with the structure and intent of the REP as provided in
section 5(c) of the Northwest Power Act. Snohomish also argues that there is no guarantee that
future RPSAs wil contain a balancing account in which to put cared-over account balances
from the proposed RPSAs.. ,
IPUC argues that the carover constrct is flawed in that it does not promote resolution of the
underlying "chronic deemer problem." (ipue, RPS0003, at 2-4.)
BPA StaWs Position
The proposed RPSA provides that any balancing account amount existing upon termnation of
this Agreement shall not be a cash obligation of the exchanging utilty, but wil car over to the
balancing account of the next RPSA. This proposal is consistent with the treatment of these
account balances in the i 98 I RPSA.
Evaluation of Positions
Snohomish argues that the Nortwest Power Act strctued the REP as a "standard purchase and
sal.e transaction" with BPA purchasing a set amount of power from a utility at that utility's ASe,
and the utility purchasing the same amount of power from BP A at the PF Exchange rate.
(Snohomish, BNR007, at 4-5.) Snohomish asserts that the difference between the utilty's ASe
arid the PF Exchange rate was intended by the Act to be a cash obligation between the utility and
BP A that flows directly from the transaction established in the Act. Id Snohomish argues that
the deemer account concept is not found anywhere in the Act, and is only a mechanism to allow
a utilty to repay an obligation to BPA through a reduction of exchange benefits it expects to
receive in the future, but that the proposed balancing account does not change the natue of the
transaction or the statutory obligations stemming from that transaction. Id. Snohomish
21
concludes that without acknowledging that the balancing account is merely an alternative means
of repaying a cash obligation, it is in conflct with section 5(c) of the Act. Id.
To "better reflect the exchange transaction" natue of the REP and "to avoid conflct with
section 5(c)" of the Act, Snohomish proposes the following text be added to the RPSA before
section 12(a):
"Where ~~Customer Name:;:;'s ASC is less than the PF Exchange Rate, c:~Customer
Name:;:; may elect to either (i pay the balance to BPA by the Due Date set forth in
section S(c) or (ii) accrue a balance in a Balancing Account as set fort herein."
Id
With respect to including language providing for cash payments at the utilty's election, BPA
believes that a utilty could elect to make such a payment notwithstanding any language
specifically providing for such payments, and the language already provided in section l2(c)
could be applied to such a contingency.
15 Snohomish and PPC also each point out that there is
no provision for the circumstance where an exchanging utility with an account balance opts not
to sign a future RPSA, arid that therefore section i 2 does not ensure that BP A wil receive the
benefit of any account balance that accrues to it. '(Snohomish, BNR007 at 5-6; PPC, BNR0004,
at 3-4.) Id Snohomish also notes that there is no guarantee that future RPSAs wil contain the
option to accrue a balance in a Balancing Account, and that section 12(d) of the RPSAs refers to
"the next RPSA," but fails to define the term RPSA in the contract. To cure its concerns
Snohomish proposes 'the following changes to section 12(d) ofthe Agreement:
"Any balance in the balancing account, upon termination of this Agreernent, shaH flot be
remains a cash obligation of ~~Customer Name:;:; but wi may, at ~~Customer
Name:;:;'s written election, 'car over to the bàlancing account of the next---R
agreement implementing section 5 (c) of the Northwest Power Act, if such an account is
established. If ~~Customer Name:;:; fails to sign a subsequent Sec) agreement within
ninety (90) days following the expiration of this Agreement, any balance in the balancing
account, including interest. shall become due and payable within 120 days following the
expiration of this Agreement."
¡d.
IPUC argues that the carrover constrct is flawed in that it does not promote resolution of the
underlying "chronic deemer problem." (IPUC, RPS0003, at 24.)
BPA believes that Snohornish's characterization of the REP as "a.standard purchase and sale
transaction" is inaccurate and misleading. Snohomish reasons that because section 5(c) of the
Nortwest Power Act is structured as an actual exchange implemented through a purchase and
sale agreement, Congress must have understood the value of that exchange could move in BPA's
favor, and tht REP benefits could be owed by an exchanging utilty to BPA. Certinly,
Snohomish is correct that section S( c) contemplates a purchase and sale agreement, with REP
IS Section 12(c) has been renumbered as section 12.3.
22
benefits measured as the difference between BPA's PF Exchange rate and the utilty's ASC. But
the fact that Congress provided an exchanging utility with a limited statutory right to terminate
the exchange if its ASC fell below the PF Exchange rate is strong evidence against the
conclusion that Congress intended or believed that the REP would be akin to an ans-length
transaction. It is not "standard" for one par to a contract to have the right to terminate the
transaction if its performance is no longer economically advantageous; yet that is exactly the
right (albeit with some important limitations) that Congress provided to the exchanging utilties
in section 5(c)(4) of the Act. .
A Congressional presumption that REP benefits, in the main, would flow from BP A though the
utilties and to the intended beneficiaries (residential and small farm consumers) is supported by
Congressional committee report language stating tht the termination provision was intended to
permit an exchanging utility "to termnate the exchange ifthe rate ceiling of section 7(b )(3) is
applied and the resulting surcharge makes the exchange uneconomic to the utilty." H.R. Rep.
96-976, part 1, 96th Cong., 2d Sess., at 61 (1980) (emphasis added). In fact, most, if not all, of
the legislative history regarding the REP discusses it in terms of providing a share of the benefits
of the Federalhydroélectrc system to the residential and small fan consumers of investor-
owned utilties, thereby providing some rate relief to those consUlers, not as a "standard
purchase and sale transaction" in which REP benefits would be flowing two ways. See, e.g., S.
Rep. 96-272, 96th Cong., 1st Sess., at 27 (1979) (pass-though provisions included in bill to
"assure that the full cost benefit of the exchange power sales" are passed on to the residential
ratepayers); H.R. 96,.976, par 2, 96th Cong., 2d Sess., at 34-35 (exchange provides share of
economic benefits of low-cost Federal resources and wholesale rate parity with public preference
customers); Congo Rec. S14,694 (daily ed. November 19, 1980) (the proposed exchange
provisions provide "power to private utilties for their residentia110ads at exactly the same rate as
power sold to preference bodies" (statement of Sen. Hatfield)). .
Neverteless, Snohomish is correct that the exchange is strctured in à way that the economic
benefit of the exchange trnsaction could accrue to BPA, at least in cases where a utilty's
termination right is unavailable or otherwise conditioned in a way that limits its application.
This situation occured in some periods under some of the 1981 RPSAs. BPA believes it has
provided for this eventuality in the proposed Agreements, consistent with the manner it 'was
provided for in the original 1981 RPSA, by offsetting "deemer" account balances against future
REP benefit payments. BPA beIíeves repayment of such amounts to BPA by an offset against
future REP benefit payments, as opposed to requiring cash payments by.the exchanging utilty, is
consistent with assigning the repayment obligation directly to the real beneficiaries of the REP:
the residential and small farm consumers of the exchanging utilties.
As a practical matter, and as expressly required by section 5(c)(3) ofthe Act, the exchanging
utilities are conduits between BPA and the utilities' residential and small fan consumers. The
exchanging utilities do not directly profit from the exchange transaction, but rather the "cost
benefits, as specified in the contrcts with the Admistrator, of any purchase and sale
transaction ... shall be passed thrugh directly to such utilty's residential loads." 16 U.S.C.
§ 839c(c)(3). Cash repayment of dee mer account balances has not been required because, while
it may be likely, it is not a certainty that an exchanging utility, in paricular an investor-owned
utilty, would be permitted by its regulatory body to recover the cost of such payments from its
23
residential and small far consumers. Because the exchanging utilities are not entitled to the
financial benefits of the REP, they should not be saddled directly with the financial burdens
either.
Finally, the disposition of any funds received by BPA as a cash payment in settlement ofa
deemer balance is unclear. BPA notes that during such periods of time that the section 7(b)(2)
rate test is providing preference customers with rate protection, any additional costs of the REP
that might be incuÌed due to the deeming of an ASC to the PF Exchange rate may not fall on
preference customers. Therefore, in cases where the economic benefit of the exchange .
transaction accrued to BPA, it is not certain where that economic benefit would be allocated. For
example, if section 7(b )(2) rate protection was trggered, returns of deemer balances miiht serve
to increase the REP benefits of other exchanging utilties whose benefits had been reduced by the
section 7(b)(2) rate protection puruant to section 7(b)(3). Other non-preference BPA ratepayers
might be similarly affected. Thus, the decisions regarding the proper allocation of either cash
repayments or REP benefit reductions due to deemer balance reductions are best left to
section 7(i) rate proceedings.
In sumar, BPA believes treating accumulated deemer amounts in the balanci.ng accounts as
non-cash obligations to be satisfied through offset against future REP benefit payments by BPA
better comports with (1) the tension inherent in the REP between its structure as an actual
exchange, and Congress' evident intent that, at least in the main, benefits flow from and not to
BP A, and (2) the fact that the resiqential and small farm consumers of the exchanging utilities
are the real beneficiaries of the REP. However, language has been added to section 12 to
clarfy that such offset would be applicable as against any instrment, including a new RPSA,
used to implement the REP.
Decision
Amounts accumulated in the balancing accounts wil not be made cash obligations of the
exchanging utilties. .
Issue 3
Whether the deemer construct should be deleted in its entirety.
Parties' Positions
The IPUC and Idaho Power each argue that the deemer account constrct is cont: to
section S(c) of the Northwest Power Act, and that it should be eliminated in its entirety. They
argue that the Agreements should permit a utilty to simply cease exchanging power at such
times that the PF Exchange rate exceeds the utilty's ASC and resume exchanging power when
the circumstances reverse. (IPUC, RPS0003, at 2-4; Idaho Power, BRN0003, at i -2.)
24
BPA Staffs Position
Sections l2(a) and (b) together provide that whenever an exchanging utilty's ASC is less than
BPA's PF Exchange rate "during the term of this Agreement," the payment that would otherwise
be owed bl the exchanging utility to BPA wil ~e tracked by BPA and added to the Balancing
Account. i This provision is consistent with the deemer account provision contained in the 1981
RPSA, except that the requirement in the 1981 RPSA that an exchanging utility send a notice of
an election to deem its ASC as equal to the PF Exchange rate has been eliminated.
Evaluation óf Positions
The IPUC states that its primary co.ncern with the proposed Agreements pertains to the "deemer"
mechanism. (IPUC, RPS0003, at 2-4.) IPUC argues that requiring a utilty to in essence "pay" .
BPA when the utilty's ASC is lower than the PF Exchange rate is contrar to the intent of
section S(c) of the Nortwest Power Act. ¡d. Citing legislative history, the IPUC concludes that
Congress enacted the REP for the purpose of providing rate reliefto residential and small farm
consumers of the IOUs by providing IOUs access to lower-cost Federal power, thereby
promoting wholesale rate parity between BPA's preference customers and eligible lOU
. customers. ¡d. IPUC argues that proposed sections 12(a) and (b) would stand this Congressional
intent "on its head" by providing benefits in the opposite direction. ¡d.
The IPUC proposes that section 12 be stricken in its entirety, and replaced with provisions that
permit an exchanging utilty to suspend parcipation in the REP when the utilty's ASC is lower
than the PF Exchange rate, and to resume partcipation when the circumstances reverse. ¡d.
IPUC concludes that this solution is easy to understand and implement, hars no other par,
and is consistent with the Northwest Power Act~ ¡d.
Idaho Power echoes IPUC's argUments that the Nortwest Power Act does not contemplate the
acc:uulation of large deemer baiances or a significant transfer of value from an exchanging
utility and its customers to BPA when the PF Exchange rate exceeds a utilty's average system
cost. (Idaho Power, BRN0003, at 1-2.) IPGalso supports IPUC's proposal that the RPSA
should permit an exchanging utilty to cease exchanging power when the PF Exchange rate
exceeds the utilty's average system cost and resume exchanging power when the utilty's
average system cost again exceeds the PF Exchange rate. ¡d. Like the IPUC, Idaho Power
argues that a contrctual provision of this natu would not deprive other regional customers of
BPA of any benefits to which they are legally entitled, but would better facilitate achievement of
the wholesale rate parity contemplated by the Act. ¡d.
For the reasons outlined in Issue 2 immediately above, BPA disagrees with the conclusion that
the REP is a "one-way street" exclusively. Section 5( c), together with its .legislative history,
creates a tension between a program that, fundamentally and primarily, is intended to provide
benefits to residential consumers of exchanging utilities, but that is strctued and limited in a
way that anticipates the possibilty tht the value of an exchange transaction could favor BP A,
16 The phrase "during the term of this Agreement" in section I 2(b) (renumbered as section 12.2) will be amended to
reflect changes to the termination and suspension provisions and to make clear that it was not the intent that deemer
balances would accrue during any period after the Agreement was terminated by an exchanging utility.
25
and providing exchanging utilities with only a limited and conditional means of temùnating the
exchange transaction. BPA must attempt to accommodate these competing expressions of
legislative intent. As amended, the proposed RPSA provides exchanging utilties with the
flexibility, through a combination oftemùnation and suspension rights, to optimize REP benefits
and minimize, or avoid completely, deemer obligations. To the extent any deemer balance is
accumulated, it wil not be treated as a cash obligation under the Agreement.
Decision
BPA wil not eliminate the balancing account.
C. In-lieu Issues'
Section 5(c)(5) of the Northwest Power Act provides that "in lieu" of purchasing power from the
exchanging utilty, BPA may acquire an equivalent amount of power from other sources if the
cost of such acquisition is less than the cost of purchasing the power offered by the utìlty priced
at its ASC. 16 U.S.C. § 839c(c)(5). Under the 1981 RPSA, following notice by BPA of its
intent to make an acquisition in lieu of purchasing all or a portion of the exchanging utilty's
power, the utilty could either reduce the amount of power it sold to BPA to the amount
remaining after BPA's in-lieu acquisition (with BPA purchasing the remainder from the in-lieu
resource), or reduce its ASC to the cost of the intended in-lieu acquisition. The proposed in-lieu
provisions in the Bridge and Long- Term RPSA are based substantiaiiy (but with important
modifications) on the in-lieu provisions in the 2000 RPSA prototye, which added provisions not
in the 1981 RPSA regarding the physical delivery ofin-lieu power at the PF Exchange rate from
BPA to the exchaging utilty.
Although the proposeq in-lieu provisions address most of the essential terms and conditions
regarding in-lieu transactions, many important details regarding their implementation are left for
the development of an In-Lieu Power Policy ("In-Lieu Policy" or "Policy") to be developed and
adopted by BP A though a notice and comment process. By defintion, BP A may not exercise. its
in-lieu rights under the Agreement until such time as the Policy is adopted.
The proposed in-lieu provision is as follows:
"7. IN-LIEU TitSACTIONS
(a) BPA's Right to In-lieu
Rather than purchase aÍl or a portion of the electrc power offered to BP A
pursuant to section 5 by ((Customer Name)) at a rate equal to its ASC,
BPA may acquire In-Lieu Power if the cost of such power is less than
((C:ustomer Name))'s- ASC. The ASC that wiH be used for issuing an
in-lieu notice shall be the ASC in effect on the date such notice is given.
(b) In-He'u Notice(s)
BPA shall provide ((Customer NamM a minimum period advance wrtten
notice of its election to acquire In-Lieu Power, and shall include in the
26
notice the following information: the source(s) of In-Lieu Power, the
amount ofIn-Lieu PF Power, the shape ofln-Lieu Power, the cost of such
In-Lieu Power, the term of the In-Lieu PF Power sale, and the point or
points of delivery. Such minimum period shall be established by the
In-Lieu Power Policy (but in no event shall be less than 90 days).
(I) Source(s) ofln-Lieu Power .
The sources of In-Lieu Power shall be derined in the In-Lieu
Power Policy.
(2) Amount of In-Lieu PF Power
The monthly amounts of In-Lieu PF Power shall be based on
BPA's most recent forecast of ((Customer Name))'s Residential
Load. ((Customer Name)) shall identify the portion of its Contract
System Load, as described in Exhibit D, 2008 Average System
Cost Methodology, that is Residential Load at the tirne it fies an
Appendix i under this Agreement in the manner described in
section 7(f) below;. BPA may issue an in-lieu notice for all or a
percentage portion of ((Customer Name))'s Residential Load.
(3) Expected Costs of In-Lieu Power
BPA shall identify its expected costs of In-Lieu Power in the
in-lieu notice. Such expected costs shall consist of BPA's forecast
of the wholesale costs of supplying In-Lieu Power to the delivery
point in the amount and in the shape identified in the in-lieu notice.
Such expected costs of the In-Lieu Power shall be developed in
accordance with procedures described in the In-Lieu Power Policy
and shall include: the cost of trsmission and losses to integrate
the power into the BP A system, to the extent they are incurred; the
costs of the power shaped to meet a uniform percentage of .
Diurnally differentiated monthly amounts of Residential Load
. identified in the in:lieu notice; the costs of additional operating
reserves if such reserves are necessar under Western Electricity
Coordinating Council procedures; the product of the Transmission
Component of ASC multiplied by the amount of In-Lieu PF
Power; and the costs that BPA incurs to deliver the In-Lieu PF
Power to the point of delivery as described below.
. The expected cost of In-Lieu Power shall include the costs of
delivering the power to ((Customer Name)). Any transmission cost
or losses incured to deliver the In-Lieu Power directly to
((Customer Name)) shall be treated as a cost to integrate the power
into the BP A system.
27
(4) Term and Quálity ofthe In-Lieu PF Power Sale
The In-Lieu PF Power wil be firm power offered by BP A for a
period of one or more Fiscal Years. BPA may issue multiple
in-lieu notices.
(c) ((Customer Name)) Election to Either Receive In-Lieu PF Power or
ReduceASC
Within a minimum penod (as described below) foJlowing the receipt of
BPA's notice to acquire In-Lieu Power puruant to section 7(b) above,
((Customer Name)) shall provide BPA written notice of its election to
either receive and pay for all or a porton of the In-Lieu PF Power or to not
receive In-Lieu PF Power and instead reduce its ASC for all or a porton
of the In-Lieu Power to the expected cost of the In-Lieu Power. If
((Customer Name)) elects to reduce its ASC to the expected cost of the
In-Lieu Power, and the expected cost of such In-Lieu Power i~ less 'than
the PF Exchange Rate, then ((Customer Name)) may suspend its sale and
purchase under sections 5 and 6 of this agreement for all or a porton of
the amount of Residentia! Load that BPA proposes to serve with In-Lieu
PF Powèr, for the duration of time specified in the In-lieu notice.
((Customer Name))'s election under this section shall be based on all or a
percentage portion ,of ((Customer Name))'s Residential Load that BPA has
specified in its in-lieu notice. Amounts'suspended under this section 7(c)
shall not be added to ((Customer Name)) 's payment balancing account.
under section 12. Such minimum period shall be established by the
In-Lieu Power Policy (but shall in no event be a period less than 15 days).
If ((Customer Name)) fails to notify BPA of its election under this section,
then ((Customer Name)) shall be deemed to have agreed to receive and pay
for all of the In-Lieu PF Power specified in such notice.
(d) Delivery of and Payment for In-LieuPF Power
In-Lieu PF Power shall be delivered to the transmission system connected
to ((Customer Name))'s distnbution system. All In-Lieu PF Power
deliveries shall be scheduled. ((Customer Name)) shRll pay BPA for
In-Lieu PF Power made available for delivery at the PF Exchange Rate.
For any month that ((Customer Name)) pays BP A for such In-Lieu PF
Power, BPA shall pay to ((Customer Name)) an amount equal to the
product of the Transmission Component of ASC multiplied by the amount
of such In-Lieu PF Power.
(e) Scheduling of In-Lieu PF Power
((Customer Name)) shall preschedule In-Lieu PF Power in accordance with
Exhibit E, Power Scheduling.
(f) Shaping of In-Lieu PF .Power
In-Lieu PF Power wil be delivered in monthly amounts shaped to
((Customer Name))'s monthly Residential Load (e.g., if ((Customer
28
Name))'s January Residential Load is 12 percent of its anual Residential
Load, In-Lieu PF Power deliveries for Januar wil be 12 percent of
annual In-Lieu PF Power deliveries). Such monthly amounts shall be
based on data used by ((Customer Name)) to establish its then~curent
rates, and shall be supplied to BPA with its forecast of Residential Load.
((Customer Name)) shall supply :i monthly forecast of Residential Load,
and the diurnal amounts of Residential Load, when it fies its Appendix 1.
Deliveries within each month wil be in equal hourly amounts during ~ach
HLH and in equal hourly amounts during each LLH, for each monthly
period based on the load' shape data in ((Customer Name))'s forecast of
Residential Load. If BP A does not have, or is not provided adequate load
shape.data, BPA wil determne the load shape of the In-Lieu PF Power
based on the average lo~ shape of its preference customer class.
Adequately documented load shape data shall include, but not be limited
to, data that are verifiable though published sources. The load shape
established for each notice wil continue for the duration of the In-Lieu PF
Power transaction."
Issue 1
Whether BPA should adopt an In-Lieu Policy prior to offering the RPSAs.
Parties' Positions
- WPAG argues that the cost protection mechanism of an In-Lieu Policy caot be "left as an
aftertought," but must be addressed fully before the implementation of the RPSAs taes place.
(WPAG, BNR005, at 3.)
The IOUs argue that leaving significant terms and conditions regarding.an in-lieu tranaction
undefined wil cause "undue and unacceptable uncertainty" regarding the pares' responsibilties
and obligation if BPA attempts to engage in such transactions before adoption of an In-Lieu
Policy. (IOUs, BNR0002, at 1-2.) They propose that the Agreement expressly state that BPA
wil not engage in any in-lieu transactions until it adopts an In-Lieu Policy. Id.
BPA Staffs Position
The In-lieu section requires that the In-Lieu Policy provide the following guidelines, terms, and
conditions regarding any in-lieu trnsaction: (1) the miimum period written notice of liin-lieu
transaction that BPA must provide to the exchanging utility (section 7(b)); (2) the permissible
sources ofIn-Lieu Power (section 7(b)(1)); (3) the costs that must (or must not) be attbuted to
the In-Lieu Power purchase (section 7(b)(3)); and (4) the period (but not less than 15 days) by
which the exchanging utilty must provide BPA notice of its election regarding physical receipt
ofln-Lieu Power (section 7(c)).
29
BPA believes it would not be able to exercise its option to implement an in-lieu transaction until
such time as it has adopted an In-Lieu Policy after a notice and comment period.
Evaluation of Positions
WPAG states that section 5(c)(5) of the Northwest Power Act was inclûded to ensure that BPA
did not pay more'than market for the power offered to it under the REP, and as such that it was
i'ntended to protect B P A's vi tal interest of ensuring cost recovery, in accordance with
section 7(a) of the Nortwest Power Act. (WPAG, BNR005, at 3.) WPAG argues that the
problem with this approach is that the in-lieu mechanism wil not be ready for implementation
when needed, leaving BP A in the position of incurng unnecessary and unwaranted costs from
which Congress intended to protect BPA and, by inference, its preference customers. ¡d.
BPA disagrees with WPAG.that leaving for a later date development and adoption of an In-Lieu
Policy will result in unnecessary and unwaranted costs to its preference customers. First, even
if there were sufficient time to undertake a process to develop and adopt an In-Lieu Policy before
the Bridge RPSAs are implemented, all of the mest likely exchanging utilties' ASCs are
substantially below the cost of potential in-lieu resources, as measured by current and forward
market prices; BPA believes it is most likely that this situation wil persist for at least the first
two to three years of the Bridge RPSA term. But in the event that market conditions change
dramatically from curent expectations, making in-lieu transactions desirable, BPA can promptly
begin an administrtive proceeding to establish an In-Lieu Policy. Second, the In-Lieu Policy
wil require BPA to provide an exchanging utilty with a reasonable period of notice prior to
initiation of an in-lieu trsaction. Because an in-lieu transaction may include the deli.very of
physical power to the exchanging utility by BPA, it can be anticipated (although BPA is not
prejudging the issue here) that such notice period wil be measured in months, not days. The
IOUs have already proposed a five-year minimum notice in their RPSA comments. Whatever
notice period is ultimately adopted, it wil overlap some par of the term of the Bridge RPSA, so
adopting the Policy prior to the effective date of the Bridge RPSA is unecessar. Neverteless,
BPA is mindful that both the exchanging utilities' ASCs and the cost of possible in-lieu
resources could change substantially prior to implementation of the Long-Term RPSA on
September 30, 20 Ii. BP A wil revisit the desirability of initiating the process for adopting an
In-Lieu Policy no later than early in FY 201 i.
For their part, the IOUs argue that absent the In-Lieu Policy, significant terms of an in-lieu
transaction are undefined, causing undue and unacceptable uncertainty regarding the paries'
responsibilties and obligations in the event BPA attempts to engage in such transaction~ before
adoption of an In-Lieu Power Policy. (IOUs, BNR0002, at 1-2.) Although BPA believes that, as
written, the proposed RPSA precludes BPA from implementing any in-lieu traction until the
In-Lieu Policy is adopted, to remove any uncertainty BPA wil revise the RPSA templates,
along the lines suggested by the 10Us, to expressly state that BPA wil not engage in such
transactions until it adopts an In-Lieu Policy following notice and comment an9 the issuance of a
record of decision. BPA wil address any IOU proposals regarding the pròposed Policy,
. including proposals regarding notice periods, as part of that process.
30
Decision
The adoption of an In-Lieu Policy prior to implementation of the Bridge RPSA is impractical and
unnecessary. BPA can promptly begin the development of an In-Lieu Policy in the event market
conditons change dramatically from current expectations. BPA wil revisit the desirability of
initiating the process for adopting an In-Lieu Policy no later than early 2011. The in-lieu
provision wil be amended to expressly prohibit any in-lieu transaction until BPA has adopted an
In-Lieu Policy through a record of decision following a notice and comment period.
Issue 2
Whether BPA should monetize in-lieu transactions.
Parties' Positions
The PPC proposes that BP A implement any in-lieu transaction though a moneta transaction,
rather than through a physically delivered power sale, as contemplated in the proposed RPSA.
(PPC, BNR0004, at 2.)
BPA Staff's Position
The proposed RPSA incorporates, with some modifications, provisions developed for the 2000
RPSA p,0totye regarding BPA's physical delivery ofIn-Lieu PF Power to an exchanging.
utilty. 7 The rationale for makng the in-lieu trsaction a physical, as opposed to moneta,
transaction is twofold. First, as noted previously, the Nortwest Power Act structued the REP
as a physical exchange of power, with BPA essentially using the power it purchases from the
exchanging utilty to make its retu delivery to the utilty. In an in-lieu transaction, BPA ceases
to "purchase" all or a portion of the power from the exchanging utilty under the RPSA, but its
delivery obligation to the exchanging utilty rernains. Therefore; BP A's in-lieu purchase,
according to the logic of the Act, is used to satisfy this delivery obligation. Second, because the
purpose, and consequence, of an in-lieu transaction is to reduce the amount of REP benefits to
the exchanging utilty, it is important that the in-lieu transaction be bona fide. The best way to
ensure and test the genuineness of the in-lieu transaction, including most importantly the cost of
the in-lieu resource, is to deal in physically delivered power.
Notwithstanding the physical delivery provisions, section 7(c) of the Agreement gives the
exchanging utilty the option of declining physical receipt of some or all of the In-Lieu PF
Power, and instead reducing its ASC to the expected cost of the In-Lieu Power.
IS In the event
17 Section 20) of the proposed RPSA defines In. Lieu PF Power as "finn power that is sold by BP A to ((Customer
Name)) in an in-lieu transaction at the Priority Finn Power Exchange Rate, or its successor."
13 In-Lieu Power (as opposed to In-Lieu PF Power) is defined in the RPSA as the finn power acquired by BPA as
part of the in-lieu trnsaction, whereas In-Lieu PF Power is the power sold by BPA to the exchanging utilty as part
of the transaction. See section 2(k) of the Agreement (renumbered as section 2.17).
3 i
that this cost is still above the PF Exchage rate, then that portion of the exchanging utility's
REP benefits would continue to be provided in cash, albeit at a lower leveL.
Evaluation of Positions
PPC states that section 5(c)(5) (the in-lieu provision) of the Northwest Power Act is designed to
ensure that if market power is available at a cost less than the exchanging utilty's ASC, BPA
wil be required to pay benefits to the exchanging utilty that reflect only the cost differential
between the PF Exchange Rate and the market price. (PPC, BNR0004, at 2.) PPC argues that
for ease of implementation, and in order to avoid an umiecessar exchange of actual power, BPA
should implement the in-lieu protections of the REP though a financial transaction, rather than
though an actual power sale to the IOUs. Id.
BPA agrees that monetizing in-lieu trsactions, that is, paying the exchanging utilty REP
benefits based on the difference between the In-Lieu Power cost and the PF Exchange rate (for
the amount of the in-lieu transaction), would be easier to administer than an actual power sale.
Eliminating a physical purchase and sale could have additional benefits as well; for example,
eliminating BPA's counterpar risk associated with a market purchase ofIn-Lieu Power. As
noted above, monetization is already contemplated by the RPSA in the case where the utilty
elects to decline physical delivery ofIn-Lieu PF Power and deem its ASC equal to the cost of the
In-Lieu Power, in which case that porton of the exchanging utilty's REP benefits would
continue to be provided in cash. There does not appear to be anyting in the Northwest Power
Act that would preclude structuring the RPSA so that an in-lieu trnsactions would be.
monetized, or that would preclude making monetizatio.n the default mechanism.
However, BPA would like to heàr from the IOUs, and other interested paries, regarding ths
issue. Monetizing all in-lieu transaction presents a number of issues, including how to measure
the costs of what would essentially be a hypothetical trsaction. Therefore, BP A wil seek
comments on this issue as par of the In-Lieu Policy notice and comment process. BPA wil
remove these provisions from the RPSA, and add language indicating that the in-lieu transaction
delivery mechanism wil be addressed in the In-Lieu Policy, and subsequently incorporated into
the Agreement as appropriate.
19
Decision
The (ielivery terms in section 7 of the RPSA wil be removed pending further review of this issue
as part of the In-Lieu Policy notice and comment process.
Issue 3
Whether BPA should allow an exchanging utility to remarket In-Lieu PF Power in the event it
chooses to take physical delivery of such power from BPA as part of an in-lieu transaction.
19 Sections 7(c)-(f) wil be deleted from the RPSA and relac with a new section 7(c) (renumbered as section 7.3).
32
Partes' Positions
The OPUC argues that to ensure that a utility can prudently manage its resource supply, BPA
should include contract language that allows .the utility to "market any PF Exchange Power."
(OPUC, RPS0005, at 4-5.)
BPA Staffs Position
As noted above, BP A will addrss the issue of whether to monetize all in-lieu transactions as par
of the In-Lieu Policy notice and comment process, and the delivery provisions in section 7 of the
proposed RPSA wil be removed pending completion of that process. However, under the
proposed RPSA language; in the event an exchanging utility elects to receive In-Lieu PF Power,
such power would be scheduled and delivered to the transmission system coruected to the
utility's distribution system. See sections 7(d) and (e). As a practical matter, this means the
power could be delivered by BP A to the varous points on its transmission system that are
coruected to the utilty's own distrbution system.
Evaluation of Positions
The OPUC argues that the physical delivery by BPA to an exchanging utility of In-Lieu PF
Power would raise issues regarding the utilty's "power plaruing (integrated resource planing)
and could limit a utility's flexibility to plan resource supply at the lowest cost." (OPUC,
RPS0005, at 5.) OPUC proposes, as a means of ensuring that.an exchanging utilty can
prudently manage its resource supply, that BPA should include contract language that allows the
utiity to "market any PF Exchange Power." Id. OPUC proposes that a new section 7(g) should
be added as follows:
"(g) Resale ofPF Exchange Power
Notwithstanding and Federal law prohibition on resale of Federal power. ~~Customer
Name)i)i may remarket PF Exchange Power (sicl. In the event the power is remarket.
(sicl ~~Customer Name)i)i shall provide EPA thirty days notice of such resale and
provide EPA any documentation necessary to identify the net proceeds from the sale.
~~Customer Name)i)i shall record any net proceeds in a clearly identified account and
distribute any such proceeds exclusively to its qualifying residential consumers. "
Id BPA believes that, in general, the provisions for delivery of In-Lieu PF Power would provide
most exchanging utilties with a good deal of flexibilty with respect to where they received
In-Lieu PF Power on their systems, and how they disposed of such power once it was received.
It is not the intent of the delivery provisions, nor is it physically possible, to require that an
exchanging utility resell each electron ofIn-Lieu PF Power only to its residential and small fan
consumers. There are times when the delivery of In-LieU PF Power could cause the exchanging
utilty to have more power than needed to serve its native load. In such cases, it would be BPA's
expectation that the utility would sell its system surplus into the market. Nothing in the proposed
in-lieu provisions would preclude such a result. Therefore, it is not clear how the provisions
could be read as limiting a utility's resource supply flexibilty.
33
BPA's primar interest is that the value of the in-lieu transaction be passed though to the
exchanging utilty's residential and sman far consumers, and that such value be measured as
the difference between the cost of the In-Lieu Power and the PF Exchange rate. It is not clear
that OPUC's proposal would guarantee this result. The OPUC proposal seems to contemplate
that the resale price garnered by the exchanging utility would substitute for the cost of the
In-Lieu Power for purposes of calculating the REP benefits owing to its eligible load, with the
"net proceeds" distrbuted to "qualifying residential customers:' By "net proceeds," BPA
assumes the OPUC means the proceeds net of the rate paid by the utility to BPA; that is, the PF
Exchange rate. However, it is possible that some or all of the remarketed power, as
contemplated by the OPUC language, could be sold at a price below the cost of the In-Lieu
Power. This would result in lower REP benefits to pass through than ifbenefits were measured
as the difference between the PF Exchange rate and the cost of the In-Lieu Power. BPA believes
any marketing of an exchanging utilty's system surplus, which mayor may not be created
through the purchase by the utilty ofIn-Lieu PF Power, should stay at the utilty's system level,
and not be pegged specifically as associated with In-Lieu PF Power.
Decision
The proposal by the OPUC appears to have the possibilty of resulting in lower REP benefits
than would otherwise be available, and wil not be included.
Issue 4
Whether BPA should allow an exchanging utilty to purchase In-Lieu PF Power at the expected
In-Lieu Power cost instead of at the PF Exchange rate if the former is lower than the latter.
Partes' Positions
The 10Us propose that if an exchanging utilty elects to purchase In-Lieu PF Power, and the cost
of such power is less than the applicable PF Exchange rate, then the utilty should pay a rate
equivalent to the expected cost ofIn-Lieu Power. (lOUs, BNR0002, at 1-2.)
BPA Stafls Position
Section 7(d) of the proposed RPSA states that an exchanging utilty shan pay BPA for In-Lieu
PF Power made available for delivery at the PF Exchange rate, minus an amount equal to the
product of the Transmission Component of ASC multiplied by the amount of such In-Lieu PF
Power.
Evaluation of Positions
The 10Us argue they should pay the lesser of the PF Exchange Rate and the expected cost of
In-Lieu Power, and that this change is "necessary to prevent BPA from inappropriately profiting
from an In-Lieu Power transaction." (IOUs, BNR0002, at 1-2.)
34
BPA disagrees with the IDUs' analysis of this issue. First, the REP is structured as a sale by
BPA to the utilty at the PF Exchange rate, with a corresponding and simultaneous purchase by
BPA from the utility at the utility's ASC. The fundamental purpose öfthe in-lieu provision is to
substitute a lower price at which BPA makes its purchase, not to lower the rate at which BPA
makes its sale. The in-lieu concept was intended by Congress to lower the cost of the REP
where feasible, and the iou proposal would seem to frustrate that purose.20
Second, BP A disagrees that this change is necessary to prevent BPA from "inappropriately
profiting" from an in-lieu transaction. In the event the cost of the In-Lieu Power is below the PF
Exchange rate, the utility has the option under section 7(c) of deeming its ASC equal to the
expected cost of the In-Lieu Power and suspending that portion of the exchange for the duration
of the proposed in-lieu transaction. During such suspension no amounts are added to the utilty's
account balance. Therefore, BP A is neither realizing any net positive margin between a low-cost
purchase and a high-priced sale (there is no sale at all.due to the exchanging utility's election),
nor is BPA realizing any benefit though a growing account balance (due to the exchanging
utilty's election to suspend).
Finally, BPA does not have the discretion to make sales of exchange power at any rate other than
the PF Exchange rate, developed pursuant to section 7 of the Act and duly established by BPA in
a section 7(i) proceeding, and approved by the Federal Energy Regulatory Comnssion. See 16U.S.C. §§ 83ge(i)(l) - (e)(6). '
Decision
The IOUs . concern that BPA could inappropriately profit from certain in-lieu transactions is
misplaced, and in any case BPA cannot make an exchange sale at a rate other than the duly
established PF Exchange rate. The LOU proposal wil not be adopted.
Issue 5
The following additional issues regarding in-lieu transactions were raised by certain paries:
(a) whether BPA should include the cost of transmission associated with delivering
In-Lieu PF Power to an exchanging utilty in the calculation of the cost of the In-Lieu
Power;
(b) whether BPA should make the shape oftne In-Lieu PF Power match the Residential
Load shape;
(c) whether BPA should specif the term of the in-:lieu transaction in the RPSA; and
20 See, e.g., S. Rep. No. 96-272, 96th Cong., 1st Sess., at 29 (1979) (in.lieu provision allows BPA to car out the
exchange power sales by purchasing power other than that offered by the exchanging utiliy if it is available at a
lower cost.)
35
(d) whether BP A should revise the minimum amount of time that an exchanging utility
has to respond to BPA 's notice to acquire In-Lieu Power.
BPA wil defer addressing each of the foregoing issues until it undertakes the In-Lieu Policy
process. BPA is mindful that each of.these issues could be relevant whether a proposed in-lieu
transaction is monetized or physically delivered. However, the exact nature, scope, and impact
of each issue with respect to an in-lieu transaction may well be determined by whether BPA
decides to monetize all in-lieu transactions. Oter related issues may arise as well in the context
of monetary-only in-lieu transactions. -
BPA wil address in tle In-Lieu Policy proceeding the arguments and proposals made bipares
in comments filed to date with respect to the above-referenced issues, phis any additional
comments fied as par of such proceeding.
Decision
BPA wil defer addressing the foregoing issues until it undertakes the In-Lieu Policy process.
D. Other Issues
The following additional substative issues were raised by paries in their comments.21
Issue 1
Whether an exchanging utilty should be allowed to specif the term of any RPSA it .executes.
Parties' Positions
The OPUC recommends that BPA should allow each customer to specify the expiration date of
its Long-Term RPSAs. (OPUC, RPS0005, at 1.)
BPA Staff's Position
The proposed Long-Term RPSA has an expiration date of September 30, 2028, covering a
i 7-year period once performance begins under the Agreement.22
Evaluation of Positions
The QPUC states that a specific term for the agreement is needlessly restrctive, that BPA has no
specific mandate to require that the contract term be i 7 year, and that section 5( c )(1) of the
21 Several parties raised non-substantive issues and/or proposed non-substantive changes to contrct language. Most
(if not all) of these proposed changes were helpful in corrcting errors, clarifying the meaning of text, or resolving
possible ambiguities. They have largely been incoiporated into the final Agreements, but are not addressed
individually here.22 As proposed, these contracts wil be signed on October I. 2008, but service wil not commence until October i,
201 i, and wil expire on September 30, 2028. Thus, while these are styled as 20-year contracts (as me.asured from
the date they are signed), service under the contracts is for a term of 17 years.
36
Northwest Power Act requires BPA to offer an RPSA to an exchanging utility whenever
requested. (OPUC, RPS0005, at 1.) OPUC states that the termination provisions are not a
suffcient substitute for managing the term of the contract since termination is conditionaL. ¡d.
One ofBPA's goals is to assure that residential and small-farm consumers of investor-owned
utilities receive a fair and reasonable share of the benefits from the Federal system over the long
term, consistent with the law, that wil parallel the certainty obtained by public utilties. The
offering of20-year contrcts to public utilty, iou, and direct-service industrial customers at the
same time is a key component ofBPA's Long-Term Regional Dialogue Final Policy (July 2007).
Were BPA to allow each utilty to choose and set the duration of its RPSA contract, it would
undercut the certainty and stabilty that is one fudamental purpose of the 20-year period.
Because the REP has a cost impact to BPA's other base rates, offerig 20-year contracts with all
its customer groups offers stabilty by clarifying, on a longer-term basis, the rights and .
obligations of all thee customer: classes with respect to the Federal hydroelectrc system, and the
potential cost and rate impacts that BPA must manage as a consequence. The OPUC's
suggestion therefore runs directly counter to the major purpose of Regional Dialogue.
While OPUC is correct that section 5(c)(I) of the Act specifies that an exchanging utility may
request to enter into an exchange transaction at any time, as discussed above BP A believes such
contract offers are necessarily subject to the "reasonable terms and conditions" specified in
section 5(c)(4) of the Act. In this case, BPA believes it is both desirable and reasonable to offer
contrcts to its customers that are effective for the same period of time, so as to minimize
disruption that would otherwise occur with contracts expiring at different times. BPA's
historical contracting practice under both sections 5(b) and (c) of the Act has been to offer
contrcts with specified term lengths that are standard for all contracts, thereby promoting
certainty to BPA with respect to its obligations, and parity to customers with respect to access to
the Federal system.
Decision
The Long-Term RPSAs wil all specif expiration dates of September 30,2028.
Issue 2
Whether BPA should allow exchanging utilties to access BPA's conservation credit offering.
Parties' Positions
The OPUC proposes that all BPA customers should have access to BPA's conservation and
renewables discount program. (OPUC, RPSOOOS, at 2.)
BPA Staff's Position
The proposed RPSA does not contemplate access to any conservation or renewable credit
program offered by BP A.
37
Evaluation of Positions
The OPUC suggests that all BPA customers should have access to BPA's conservation and
renewables discount program, or "C&RDP". (OPUC, RPSOOOS, at 2.) The OPUC disagres
with BPA's position taken in other forums that IOUs paricipating in the REP should not have
access to the C&RDP because conservation paid for by BPA would not red~!ce the level of loads
placed on B~A. ¡d. The OPUC contends that, for example, pursuant to any in-lieu transaction
BPA would be purchasing power and sellng such power to serve the exchanging utility's
residential loads. ¡d. The amount of In-Lieu Power purchased by BPA would directly depend on
the level of residential loads. ¡d. With conservation, residential loads would decrease, and
correspondingly, BPA's supply obligations would decrease as well. ¡d.
BPA is not persuaded by the OPUC's arguent. BPA replaced the Conservation and
Renewables Discount - a line item credit provided to BPA's customers on their monthly power
bils from BPA - in the 2007 wholesale power rate case with the Conservation Rate Credit
("CRC"). The CRC, like its predecessor the C&RD, is included in customers' monthly power
bils. These credits have not been included under the PF Exchange rate. The reason for this is
that BPA is obligated to acquire conservation as a resource to meet its load obligations.
Exchanging utilties have access to the CRC under their section 5(b) requirements contracts with
BPA, if any, but BPA does not have an actual load serving obligation under the RPSAs or
section S(c) of the Act. In addition, it is unclear whether BPA wil be physically delivering any
power under the RPSAs as par of an in-lieu transaction. Whether a utilty wil have the option to
take physical receipt ofln-Lieu PF Power (if any is even offered by BPA), or whether in lieu-
transactions wil bè monetized, wil be determined in the In-Lieu Policy.
The OPUC argues that even under the traditional exchange, the level of residential loads directly
affects the costs of the exchange since costs equal the utility's ASC multiplied by qualifying
loads. (OPUC, RPSOOOS, at 2.) Therefore, OPUC reasons, all ofBPA's customers would
benefit from lower exchange costs iflOU loads were reduced though conservation. ¡d.
However, OPUC fails to acknowledge the purse ofBPA's conservation program is to pursue
conservation equivalent to all cost-effective conservation in the service terrtories of those public
utilties that BPA is obligatd to serve under section 5(b) of the Act. (See Long-Term Regional
Dialogue Final Policy, at 30.) Because BPA is not planing to serve LOU residential loads with
firm requirements power, BPA wil not include those loads in determining BPA's conservation
target, nor wil BP A provide separate fuding for conservation for these loads. However, if BP A
enters into a load obligation with an lOU under section S(b), it is reasonable to assume rates
applicable to sales under such a contract wil include some form of conservation credit, if one isthen in effect. .
Finally, even though BPA is not providing exchanging utilities access to the CRC through the
RPSA, it is important to note that these utilities, including the IOUs, are allowed to include the
costs of their own conservation measures in the calculation of their ASCs. By allowing
conservation costs in the ASC's, BPA picks up a share of those costs through the REP benefits it
pays. Therefore, the IOUs are getting a portion of their conservation costs covered by BPA
through means other then the CRC.
38
Decision
BPA wil not allow exchanging utilties participating in the RPSAs access to BPA 's applicable
conservation credit offering. .
Issue 3
Whether BPA should change the start of the commencement date in the RPSAfrom October 1 to
November I.
Parties' Positions
Snohomish proposes that the October I commencement date should be changed to a date after
November 1, to allow time to gather and utilize the October data and submit the invoice.
(Snohomish, BNR007, at 1.)
BPA Staffs Position
The draft RPSA states that upon filing an Appendix I, the utility shall commence invoicing for
eligible load on the later of the date of such filing or October i.
Evaluation of Positons
Snohomish notes that the final sentence of section 4 of the RPSAs states that the customer "shall
commence invoicing for Residential Load" on October I, but that this date should be changed to
a date after November i, to allow time to gather and utilze the October data and submit the
. invoice. (Snohomish, BNR007, at 1.)
Snohomish's point is well taken. Under the 2008 ASC Methodology, a utility makesan
Appendix I filing and receives a BPA ASC for the exchange period prior to the start of the rate
period. In addition, as Snohomish points out, the utility submits an invoice each month durig
the exchange period reflecting actual eligible exchange loads for the prior month. This
requirement results in the actual eligible exchange loads for a month to be invoiced to BPA the
following month. BPA agrees that the language needs to be changed to reflect this requirement.
BPA wil amend section 4 to provide ilat upon fiing an Appendix i for an Exchange Period, the
utility shall commence invoicing for Residential Load Eligible for Monetary Benefits, pursuant
to section 8. I of the Agree:ient, in the month following thè first full month of such ExchangePeriod.. .
Decision
The RPSA wil be amended as -stated above.
39
Issue 4
Whether BPA should provide more clarity in the Bridge RPSA payment section.
Parties' Positions
Snohomish proposes that BPA make certain clarifying amendments to section 8 of the proposed
Bridge RPSA. (Snohomish, BNR007, at 2.)
BP A StaWs Position
The standard provisions in the Bridge RPSA are identical to the standard provisions in all of
BPA's Subscription contracts, which all expire on September 30, 2011. BPA believes it is
important for puroses of implementing these varous agreements, and to avoid ambiguity, that
these standard terms not be altered.
Evaluation of Positions
Snohomish states that section 8 of the Bridge RPSA is unclear and should be redrafted to allow
for greater clarity. (Snohomish, BNR007, at 2.) Snohomish's proposal is as follows:
"(i) Payment must be received by the 20th day after the issue date of the final bil
puruant to section 8(b) where .:.:Customer Nam~;: is required to pay BPA (Due Date).
If the 20th day is a Saturday, Sunday, or Federal holiday. the Due Date is the next
business day.
(ii) Payment must be received withn 30 days following receipt of each monthly invoice
pursuant to section 8(a) above where BPA is required to pay .:"Customer Name;:;: (Due
Date). If the ;Wil-30th day is a Satuday, Sunday, or Federal holiday, the Due Date is the
next business day.
(iii) After the Due Date, a late payment chage shall be applied each day to any unpaid
balance. The late payment charge is calculated by dividing the Prime Rate for Large
Ban as reported in the Wall Street Joural, plus 4 percent, by 365. The applicable
Prime Rate for Large Bans shall be the rate reported on the first day of the month in
which payment is received. .:.:Customer Name;:;: shall pay by electronic funds transfer
using BPA's established procedures. BPA shall pay by electronic funds transfer using
".cCustomer Name;:;:s established procedures."
¡d.
BPA agrees that the Bridge RPSA language would be improved if Snohomish's proposal were
adopted. However, one principle BPA wants to adhere to in connection with the Bridge RPSA
is that the Agreement contain the same standard provisions as contained in Subscription
contracts other BPA customers currently hold, and that expire along with the Bridge RPSA on
September 30, 20 i i. This creates parity among' the other Subscription contrct holders who
40
canot change their contract language at the moment, avoids possible ambiguities regarding
interpretation as between the agreements, and makes admnistration of the agreements easier.
BPA understands the desire to change common contract language but does not think it wise to
disconnect common language for those signing a new Subscription contract and those currently
holding a Subscription contract.
Decision
BPA wil keep the common contract laniuage that is in all Subscription contracts in the Bridge
RPSA without any changes.
Issue 5
Whether BPA should change the interest rates on disputed bils to that of late payments.
Parties' Positions
Snohomish states that the interest rate applicable to disputed bils and for late payments should
be the same. (Snohomish, BNR007, at 3.)
BPA Staffs Position
The differential in interest rates is a function of tye ofpaymeni (or non-payment) that they are
. applied to, and should not be the same.
Evaluation of Positions
Snohomish states that the interest rate applicable to disputed bils is the Prime Rate for Large
Banks, while the interest rate for late payments is the Prime Rate for Large Ban plus four
percent, and that BP A should make these rates t~e same by adding four percent to the interest
rate applicable to disputed bils.23 (Snohomish, BNR007, at 3.) Snohomish argues this increased
interest rate wil ensure consistency and provide incentive for the paries to settle any
differences. ¡d.
BPA disagrees with Snohomish's rationale and believes there is a good reason for having two
different interest rates for these tyes of transactions. BPA does not apply the higher rate that is
applied to late payments to disputed bils because of the basic premise behind both tyes of
actions. If a customer decides not to pay its bil, BP A does not receive any money and the utilty
gets to keep the money to use it for other puroses. The higher interest rate provides a customer
the incentive to pay BPA on time and imposes a reasonable penalty if it does not. In the event of
a disputed bil, however, the utility pays the amount in dispute to BPA and then works with BPA
23 The Bridge RPSA refers to the Prme Rate for Lare Banks, but the Long-Term RPSA refers only to the P.nme
Rate, excluding the reference to Large Banks. However, Snohomish's comment is relevant to both Agreements, as
the interest rate differential for late and disputed bils is included in both Agrements.
41
to resolve the dispute. In this case, BP A receives the fuds, and the utility does not have the
ability to use it for something else.
BPA does not agree with Snohomish's premise that a higher interest rate on disputed bils wil
help resolve disputes in a faster mamer. Givig the two different actions the same penalty
would tend to encourage the utility not to pay the bil up front and dispute it rather than make a
good faith effort to pay the bil and then resolve the dispute. The utilty should not be penalized
because it is trying to resolve a dispute. The higher interest rate should be applied to the utilty
that is wilful or negligent in not paying its bil to BPA, but that tye of penalty should not be .
applied to utilities that pay the bill and then try to resolve the dispute.
Decision
EPA wil continue to keep the interest rate on late payments diferent than the interest rate on
disputed bils.
Issue 6
Whether BPA should apply an interest rate to any errors that result in an over or underpayment
of exchange program benefits.
Partes' Positions
Snohomish proposes that to reflect the value of the benefits over or underpaid discovered
pursuant to sectiòn 9, BPA should set the interest rate at the Prime Rate plus four percent.
(Snohomish, BNR007, at 3.) In addition, Snohomish suggests revising the language in
section 8( d) so that an exchanging utilty would not receive a true-up REP payment where the
original underpayment is due to that utility's own "failure to submit eligible Residential Load"
data to BPA. ¡d.
BPA Staffs Position
BP A does not agree that an interest component is waranted in the situation contemplated under
section 9. BPA agrees with Snohomish, however, that section 9 should be amended to clarify
that an exchanging utilty wil not be entitled. to a tre-up payment where it failed to submit
accurate exchange load data to BP A in the first instance.
Evaluation of Positions
Snohomish points out that the final paragraph of section 9 of the RPSAssets out the procedure to
be followed where errors are found that result in. an over or underpayment of exchange program
benefits, but that there is no interest component applied to these over- or underpayments.
(Snohomish, BNR007, at 3.) Snohomish proposes that to reflect the value of the benefits over or
underpaid, BP A should set the interest rate consistent with 8( c) of the Bridge RPSA or 8( d) of
the RD RPSA (the Prime Rate plus four percent). ¡d. .
42
BPA understands Snohomish's position but does not see the need for applying interest to such
over or underpayments because of the shortess of the repayment period. The drft RPSA states
that any such over or underpayment is due withn 30 days after its determination, or is taken
from future payments. In addition, ifit is taken from future payments instead of paid back
within 30 days, then it is added to the balancing account and is charged the appropriate interest
for that account. This short recovery time for an issue that was an honest error does not warrant
an interest rate.
In addition, Snohomish states that the language of this final paragraph pernits an exchanging
utility to receive an adjustment even where the underpayment is due to that utility's own "failure
to subrnt eligible Residential Load" data to BP A. Snohomish suggests the intent of this section
is to make paries whole when the over or underpayment is due to an honest error, not the failure
to adequately perforn the requirements of the RPSAs. Snohornsh proposes the language in
section 9 be amended as follows:
"If BPA determines that -(-(Customer Name;;;; has not received monetar benefits due to
-:-:C\;stomeF l'lare~~ fai!\;Fe to s\;bmit eligible Residential Load or other an errors in
implementing this Agreement that result§ in an underpayment. . . "
(Snohomish, BNR007, at 3.)
BPA agrees with Snohomish's suggestion and believes that a utilty should not receive benefits
for its failure to submit eligible exchange load data. The utilty has the responsibilty to submit
timely and accurate data that. only it has access to. The only variable in the invoicing of monthly
benefits is the actual residential and small farm load data. All other variables are determned in a
process prior to the exchange period. Allowing a utilty to receive tred-up monetary benefits to
correct for inaccurate data submitted in the first instance would put BP A in the position of
always having to tre-up any movement in such loads that should have been known to the utilty,
and submitted to BP A, in the first instance.
Decision
BPA wil not charge interest on over or underpayments, but wil amend the language in section 9
as proposed ~y Snohomish.
43
Issue 7
Whether BPA has the legal authority to pay money to the IOUs under an RPSA in light of an
ongoing remand. an ongoing section 7 (i) proceeding within BPA, and a proceeding to establish
a new ASC Methodology.
Parties' Positions
PPC questions BPA's authority to make REP benefit payments to IOUs in light of preference
customers' past overpayments to BPA for costs .associated with the 2000 REP Settlement
Agreements, which were set aside by the Ninth Circuit in May of2007. (PPC, BNR0004.)
BPA Staff's Position
This issue is being addressed by BPA in the WP-07 Supplemental Wholesale Power Rate tas~
("WP-07 Rate Case"). BPA wil mae REP benefit payments, if any, to exchanging utilties,
including the .IOUs, consistent with the decisions in that proceeding.
Evaluation of Positions
PPC did not elaborate on its position, but rather noted that it was preserving all of the issues it
has raised in other proceedings related to the implementation of the REP in light of the Ninth
Circuit decisions regarding the REP, and that BPA should not view.PPC's comments as setting
fort all of its objections regarding this issue. (PPC, BNR0004.)
BPA understands PPC's concern about paying REP benefits in light of the Ninth Circuit court
cases; however, BPA believes it has the legal authority to make such payments, and the rationale
for that position wil be provided in the WP-07 Rate Case final Record of Decision.
Concurrently, BP A is takng steps to reestablish the REP in a maner that is responsive to and
consistent with the Court's rulings. A part of the process is to offer a new RPSA to utilties that
request one. However, section 20 of the proposed RPSA does expressly provide that REP
payments under the Agreement shall be subject to adjustment by BP A to account for the.
overpayment of benefits under the 2000 REP Settlement Agreements, all as established in a BPA
rate proceeding, or other appropriate forums established to determine such amounts.
Decision
The REP overpayments referred to by PPC are being addressed by BPA in the WP.07 Rate
Case, and the RPSA provides for the adjustment of REP benefits to reflect the outcomes in that .
or other proceedings.
Issue 8
Whether section 20 of the proposed RPSA must be deleted because it conficts with section 3(b)
of the 2000 REP Settlement Agreements.
44
Parties' Positions
The ¡PUC argues that section 20 should be eliminated from the RPSA because it conflcts with
section 3(b) of the 2000 REP Settlement Agreements, which provided that in the event a court
determined that the 2000 REP Settlement Agreement was unlawful, void, or unenforceable, an
exchanging utilty would nevertheless retain any REP benefits it received prior to such
determination. (IPUC, RPS0003, at 2-3.)
BPA Staffs Position
Whether section 3(b) is valid and enforceable is being addressed by BPA in the WP-07
Supplemental Wholesale Power Rate Case ("WP-07 Rate Case"). BPA wil make REP benefit
payments to exchanging iaDs under the proposed RPSAs consistent with the decisions in that
proceeding. However, BPA has amended section 20 to include language proposed by the ¡a Us
that clarifies that paries reserve all arguments regarding, among other things, the 2000 REP
Settlement Agreements and the calculation or implementation of REP benefit payments, for any
period of time.
Evaluation of Positions
BPA understands that resolution of issues arsing from the PGE and Golden NW decisions,
including the validity of section 3(b) of the 2000 REP Settlement Agreement, impacts the
enforceabilty of section 20 of the RPSA. BPA has amended section 20 to acknowledge that
partes have competing views regardig BPA's proposed disposition of the issues engendered by
the above-referenced cour cases, including how those decisions flow though to the proposed
RPSAs. However, BPA believes the requirement in section 20 that REP benefits paid are subject
to adjustment by BPA to account for the overpayment of REP benefits under the 2000 REP
Settlement Agreements, is valid. The rationale for that position wil be provided in the WP-07
Rate Case Final Record of Decision; but to summarize, BPA believes that since the Court found
that the 2000 REP Settlement Agreements were invalid because BP A entered into the
agreements without requisite statutory authority, unless the Court indicates otherwise, no
obligation that may have existed under the agreements, including under section 3(b), can be
enforced against BPA. .
Decision
BPA wil not delete section 20 from the RPSA, out has amended that section to make clear ihat
parties have not waived their right to make arguments regarding the 2000 REP Settlement
Agreement by virtue of signing an RPSA.
Issue 9
Whether Regional Dialogue contracts should assign all so-called "Environmental Attributes"
associated with those power resources solely to PF Preference rate customers.
45
Parties' Positions
The IOUs argue that the Regional Dialogue contrcts should not assign all Environmental
Attributes associated with those power resources solely to PF Preference. rate customers. (lOUs,
BNR0002, at 3.) They argue that PF Exchange rate customers are entitled to an equitable share
of the value of the Environmental Attibutes to the extent that they bear the costs of electric
power resources associated with those Environmental Attributes, and Regional Dialogue
contracts and the RPSA contracts should reflect this equitable share. Jd.
BPA Staff's Position
The proposed RPSA did not address this issue because thère is insuffcient informtion currently
available upon which BPA can make a final decision regarding the REP treatment of Renewable
Energy Certificates, carbon credits or Environmental Attrbutes in general.
. Evaluation of Positions
The IOUs referenced here comments regarding the disposition of Environmental Attibutes
submitted in connection with the draft Master Regional Dialogue Contract Template. (lOUs,
BNR0002, at 3.) They argue that PF Exchange rate customers are entitled to an equitable share
of the value of the Environmental Attributes to the extent that they bear the costs of electric
power resources associated with those Environmental Attributes, and Regional Dialogue
contracts and the RPSA contracts should reflect this equitable share. Jd.
BPA recognizes that the IOUs have concerns over BPA's treatment of Environmental Attbutes
(including in the fonn of Renewable Energy Certificates and carbon credits) associated with the
Federal system. However, BPA cannot addrss those concerns in this ROD. First, the full value
of Environmental Attibutes associated with the Federal system, including Renewable Energy
Certificates and carbon credits in paricular, is unkown at this time. These markets are stil
evolving, and. there is insuffcient infonnation available upon which BPA can make a fiûal
decision regarding the REP treatment of Renewable Energy Certificates, carbon credits, or
Environmental Attbutes in general.
Second, even if BP A were prepared to make a definitive statement on the disposition of
Environmental Attrbutes, Renewable Energy Certificates or carbon credits, BP A would
not make that decision in this ROD. The purpose of the RPSA is to establish the
mechånism by which to pay REP benefits to exchanging utilities. Consequently, the
issues that must be addressed in this ROD are limited to matters that directly relate to the
distribution of REP benefits. The concern raised by the IOUs as to how BPA wil use
the Environmental Attrbutes, Renewable Energy Certificates, or carbon credits of the
Federal system go beyond the issues BPA must or can address thugh the RPSA.
Decision
BPA cannot make any decisions in this ROD on,the treatment of Environmental Attributes,
Renewable Energy Certifcates, or carbon credits because such decisions. are outside of the
46
scope of the RPSA. However, BPA has addressed the ¡OUs' concerns by adding language to
Exhibit H to the Regional Dialogue contracts that assures that all ratemaking options available
under statute concerning treatment of the value and cost of Renewable Energy Credits and/or
carbon credits are preserved to the Administrator.
Issue 10
Whether BPA should amend the language in section 21 to allow for possible additional forums
for determining adjustments referred to therein. .
Parties' Positions
The OPUC argues that the language in the current draft does not provide the customer any rights
in determining forums, or ensuring due process, for adjustments to entitlement to monetary
benefits. (OPUC, RPS0005, at 5-6.)
BPA Staffs Position
Section 21 of the proposed RPSA provides that any adjustments referred to therein would be
limited to those formally established by BPA in its wholesale power rate adjustment proceedings
or other forums established by BPA for the determination of the amount of overpayment to be
recovered and the recovery period.
Evaluation of Positions
OPUC proposed that the following text provides better assurances to customers regarding
adjustment of benefit payments:
"The lTonetary benefits provided -(-(Customer Name~~ under this Agreement shall be
subject to adjustment by BPA to account for the overpayment of benefits under the
Residential Ex.change Program Settlement Agreement, Contract No. ~~ ::::, as
amended, during FY 2002 though FY 2007. Any such adjustments shall be limited to
those .formally established by BPA in its wholesale power rate adjustment proceedings or
other forums esiablished by mutually agreeable to BPA and the~~Customer Name:::: for
the determination of the amount of overpayment to be recovered and the recovery period.
Agreement by the Customer regarding choice orother Wrum shall not be unreasonably
withheld. "
¡d.
The adjustment of monetary benefits contemplated by section 21 is one that has an impact on
other BPA customers, not just the exchanging utilities. The amount of the adjustment is directly
reflected in preference customers' rates as well. The whole premise for the adjustment is to
account for overpayments made by the preference customers durng FY 2002.08 for REP
benefits. Therefore, the adjustment amount needs to be decided in a formally established foru
where all BPA customers and other interested paries can have due process, including the IOUs
47
and the OPUC. BPA cannot and wil not condition its responsibility to determine the appropriate
forums and proceedings necessar to carr out its statutory or other legal.oblìgations. Any part
that believes its legal rights have been infrnged through BPA's forum selection or the manner in
which proceedings are noticed or conducted may take whatever actions it sees fit. In any case,
BP A trditionally has worked informally with customers to ensure that the public processes it
undertakes ar fair to all interested pares.
Decision
BPA wil not amend section 21 as proposed by the OPUc.
iv. NATIONAL ENVIRONMENTAL POLICY ACT
BPA has evaluated the potential for environmental effects related to the Bridge and Long-Term
RPSAs, consistent with the National Environmental Policy Act (NEPA) 42 U.S.C. § 4321 et seq.
These new RPSAs wil provide the basis for contrcting with all eligible utilties applying for
REP benefits through 2028. The residential exohange has trditionally been implemented as a
finacial transaction - i.e., BPA has provided moneta REP benefits to an exchanging utilty,
instead of exchanging electric power. Under the new RPSAs, this practice would be expected to
continue, although some physical power deliveries are possible in the event that BPA both elects
to underte an in-lieu transaction, and adopts an In-Lieu Power Polìcy that provides for physical
delìveries. Nevertheless, the new RPSAs are expected to be primarily administrative in nature
(i.e., monetary) and accordingly would not be expected t9 result in environineIital effects. In
addition, the new RPSAs wil carr over many of the same provisions as the prototye 2000
RPSA., Because of this general continuation of providing REP benefits, the new RPSAs are not
expected to result in a substantial change in consumer or utilty behavior with the potential for
environmental effects. Furter, the potential resource development and acquisition consequences
of different scenarios under the REP were anticipated in BP A's Business Plan Environmental .
Impact Statement (DOEÆIS-0183, June 1995), and are consistent with BPA's Market-Driven
approach adopted in its Business Plan ROD (August 15, 1995). (See Business Plan EIS, Table
2.4. I, on Determination of Firm Loads and the Market-Driven Alternative, page 2-36; see also
Delivery of Power Under Residential Exchange Agreements, Business Plan EIS, page 4-10.)
V. CONCLUSION
I have reviewed and evaluated the comments received by BPA on the foregoing issues regarding
BPA's proposed Short-Term Bridge and Long-Term RPSAs. Based upon the record compiled in
this proceeding, the decisions expressed herein, and all requirements of law. I hereby adopt the
foregoing RPSAs in the form attched hereto as Attachments B and C, respectively. The
48
evaluations and decisions used in the development Qf the proposed RPSAs are consistent with
the above referenced environmental analysis.
Issued at Portland, Oregon, the 4th day of September, 2008.
/s/ Stephen J. Wright
Stephen J. Wright .
Administrator and Chief Executive Offcer
49
ATTACHMENT A
Department of Energy
Bonnevile Power Administration
P.O. Box 3621
Portland, Oregon 97208-3621
Power Services
May 16,2008
In reply refer to.: PS-6
To Paries Interested in Residential Purchase and Sale Agreements:
In order to re-establish the Residential Exchange Progrm (REP), Bonnevile Power
Administration (BPA) is proposing to offer Residential Purchase and Sale Agreements (RPSA)
to utilities wishing to paricipate in the REP staring in FY 2009. BPA is seeking public
comment on two draf RPSAs planed to be offered in August 2008.
The first Agreement, called a "Bridge RPSA," wil implement the REP between October 1, 2008,
and the tirne the Regional Dialogue Long-Tenn RPSA takes effect (currently scheduled to be
October 1, 2011). The Bridge RPSA is based on the original Subscription RPSA template, and
contains many of the same standard provisions that are present in the Full, Parial and Block
contracts many BPA customers currently hold. However, BPA has updated some of the
provisions unique to the RPSA, and reflects those same unique provisions in the Regional
Dialogue Long-Term RPSA.
The second Agreement, caned the Regional Dialogue Long- Term RPSA, wil be offered in
conjunction with the rest of the Regional Dialogue Long-Term Contracts this August. It contains
the standard contract provisions that reside in the other Regional Dialogue Long- Tenn contracts,
as well as language unique to the RPSA. Through this letter, BPA is seeking comments related
to only the non-stadard provisions in the RPSA (highlighted in yellow). Comments on the
standard contract provisions have recently undergone infonnal public review and wil continue to
evolve through the public process on the Supplement to the Long- Tenn Regional Dialogue
Policy in June and early July.
BPA is seeking comment on these proposed RPSAs in an effort to re-establish REP benefits
beginning in FY 2009, and to meet the time line of offering all Regional Dialogue Long-Term
contracts in August 2008. Following the close of comments on June 16, 2008, BPA wil
consider all comments received and issue a recQrd of decision on these contracts this sumer.
How to Comment
BP A is requesting your comments on the contracts described in this letter and enclosed as
Enclosures 1 and 2. These contracts can also be found at BPA's website at
http://www.bpa.gov/corporate/finance/ascm/letters.cOO.
2
Comments on the two contracts must be received by 5:00 p.m., Pacific Standad Time, on
June 16,2008. Comments can be submitted on-line at: www.bpa.gov/comments; via e-mail to
commentßùbpa.gov; via rnail to: Bonnevile Power Administration, Public Affairs Office-
DKC-7, P.O. Box 14428, Portland, OR 97293-4428; or faxed to 503-230-3285. You can also
call us with your comments, toll free at 1-800-622-4519. Please reference "Bridge and RD
RPSA Agreements" with your comments.
Sincerely,
/s/ Mark Gendron
Mark O. Gendron
Vice President
Northwest Requirements Marketing
Enclosures:
(I) Bridge RPSA
(2) RD Long-Term RPSA
Section
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
ATTACHMENTB
Contract No. 08PB-((#####))
Bridge RPSA Template
RESIDENTIAL PURCHASE AND SALE AGREEMENT
executed by the
BONNEVILLE POWER ADMINISTRATION
and
((FULl" NAME OF CUSTOMER))
1.1.1.1 Table of Contents
Page
Term ....................................................................................................................
Definitio.DS ...........................................................................................................
Applicable PF Exchange Rate .................~.......................................;................
Establishment of ASC to Activate Agreement ..............................................
Offer By ((Customer Name)) and Purchase By BPA .....................................
Offer By BPA and Purchase By ((Customer Name)) ......................................
In-Lieu Transactions ........................................................................................
Invoicing, Billing, and' Payment .......................................................................
Accounting, Review, and Budgeting ................................................................
Pass-Through of Benefits .................................................................................
Termination and Suspension of Agreement ...................................................
Balancing Account ...........................................................................................~.
Notices .......~.......~...................................................~.............................................
Cost Recovery ......~..................................................................................:............
Uncontrollable Forces ........................................................................................
Governing Law and Dispute Resolution .........................................................
Statutory Provisions ........................................................................................... .
Standard Provisions ..........................................................................................
20.
21.
Notice Provided to Residential and Small Farm Consumers .......................
(Drcifier's Note: For Publics, delete section 20 and change section 21 (Signatures) fa
section 20.)
Adjustments to Monetary Benefits...................................................................
Signatures ...........................................................................................................
Exhibit A Residentiai Load Definition
Exhibit B CF/CT and New Large Single Loads
Exhibit C 2008 Average System Cost Methodology
Exhibit D Scheduling
This RESIDENTIAL PURCHASE AND SALE AGREEMENT (Agreement) is executed
by the UNITED STATES OF AMERICA, Departent of Energy, acting by and through the
BONNEVILLE POWER ADMINISTRATION (BPA), and ((FULL NAME OF CUSTOMEIQ)
(((Customer Name))), hereinafter individually referred to as "Party" and collectively referred to
as the "Parties". ((Customer Name)) is a (( )) organized under the laws of the State
of ((___)) to purchase and distrbute electric power to serve retail consumers from its
distribution system within its service area.
RECITALS
Section S(c) of the Nortwest Power Act provides that a Pacific Nortwest Regional
electrc utility may offer to sell electric power to BPA and BPA shall purchase such electric
power at the Average System Cost of that utilty's resources, and in exchange BPA shall offer to
sell in retu an equivalent amount of electric power to such utilty and such utility shall
purchase such electrc power at the PF Exchange rate. The cost benefits of such purchase and
exchange sale attributable to a utility's residential load within a State shall be passed directly
through to that utilty's residential load within such State.
The Pares agree:
i. TERM
This Agreement shall take effect on the latter of (1) the date signed by the Parties,
or (2) if required, upon acceptance for fiing of this Agreement by the Federal Energy
Regulatory Commission without change or condition unacceptable to either Party,
and it shall terminate on September 30, 201 i, unless terminated earlier pursuant to
section 11 below. Performance by the Parties of their obligations under this
Agreement shall commence on October i, 2008. Upon termination of this
Agreement, all obligations incurred hereunder shall be preserved until satisfied.
2. DEFINITIONS
Capitalized terms below shall have the ineaning stated. Capitalized terms that are not
listed below are either defined withn the section or exhibit in which the term is used or,
if not so defined, shall have the meaning stated in BPA's applicable Wholesale Power
Rate Schedules, including the General Rate Schedule Provisions (GRSPs),'or the ASC
Methodology.
2. i "Appendix 1" means the electronic form on which ((Customer Naine)) reports its
Contrct System Costs and other necessar data to BP A for the calculation of
((Customer Name)) 's Base Period ASC pursuant to the ASC Methodology.
2.2 "Average System Cost," or "ASC" means the rate charged by ((Cilstomer Name))
to BPA for BPA's purchase of power from ((Customer Name)) under section S(c)
of the Northwest Power Act for each Exchange Period and is the quotient
08PB-((#####)), ((Customer Name))2
obtained by dividing Contract System Costs by Contract System Load, all in
accordance with the ASC Methodology.
2.3 "ASC Methodology" means a methodology, as may be amended or superseded,
used to determine ASC, as developed by BP A pursuant to section 5( c )(7) of the
Northwest Power Act and attached to this Agreement for ease of reference
purposes only as Exhibit C, 2008 Average System Cost Methodology. This
Agreement is subject to the ASC Methodology but such ASC Methodology is not
incorporated as part of ths Agreement.
2.4 "Balancing Account," or "BA," means an account maintained by BPA comprised
of amounts, if any, cared over from Contract No. . , by and between
((Customer Name)) and BPA ("1981 RPSA"), plus any additional amounts
accrued pursuant to section 12 of this Agreement.
2.5 "Base Period" means the calendar year of the most recent FERC Form 1 data at
the conuencem:ent of the ASC review period.
2.6 "Base Period ASC" means the ASC determined in the Review Period using
((Customer Name))'s Base Period data, all in accordance with the ASC
Methodology.
2.7 "Business Day(s)"means every Monday though Friday excèpt Federal holidays.
2.8 "Contract System Costs" means ((Customer Name))'s costs for production and
transmission resources, including power purchases and conservation measures,
which costs are includable in and subject to the provisions of Appendix 1, all in
accordance with the ASC Methodology. Under no circumstances shaIl Contract
System Costs include costs excluded from ASG by section 5( c )(7) of the
Nortwest Power Act. . .
2.9 "Contract System Load" means (1) the total Regional retail load included in the
Form 1, or (2) for a consumer-owned utility (preference customer), the total
Regional retail load from the most recent anual independently audited financial
statement, as either may be adjusted pursuant to the ASC Methodology, all in
accordance with the ASC Methodology.
2.10 "Diurnal" or "Diurnally" means the distrbution of hours of months between
Heavy Load Hours (HLH) and Light Load Hours (LLH).
2.11 "Due Date" shall have the meaning as described in section 8.2.2.
2.12 "Effective Date" means the effective date of this Agreement, as determined
pursuant to section 1 above.
08PB-((###)), ((Customer Name))3
2. I 3 "Exchange Period" means the period during which ((Customer Name))'s ASC is
effective for the calculation of ((Customer Name)) 's benefits under this
Agreem~nt. Each Exchange Period shall be the period of time concurrent with the
duration of each BPA wholesale power rate period.
2.14 "Fiscal Year" or "FY" mean the period beginning each October 1 and ending the
following September 30.
2.15 "Form 1" means the anual fiing submitted to the Federal Energy Regulatory
Commission required by 18 CFR § 141.1, as specified in the ASC Methodology.
2.16 "In-Lieu PF Power" means firm power that is sold by BPA to ((Customer Name))
in an in-lieu transaction at the applicable Priority Firm Power Exchange Rate, or
its successor.
2.17 "In-Lieu Power" means firm power acquired by BPA from a source(s) other than
((Customer Ntiine)) at a cost less than ((Customer Name))'s ASC, as provided in
section 5(c)(5) of the Northwest Power Act. Th~ provisions for acquisition and
delivery ofIn-Lieu Power shall be provided in a policy developed by BPA after
this Agreement is executed.
2.18 "In-Lieu Power Policy" mans a policy to be developed by BPA that wil contain
provisions for (1) the acquisition and purchase ofIn-Lieu Power by BPA, and
(2) the delivery and sale ofIn-Lieu PF Power to ((Customer Name)).
2.19 "Jursdiction" means the service terrtory of ((Customer Name)) within which a
particular Regulatory Body has authority to approve ((Customer Name)) 's retail
rates. Jursdictions must be within the Region.
2.20 "New Large Single Load" or "NLSL" has the meaning specified in section 3(13)
of the Nortwest Power Act and in BPA's NLSL Policy.
2.21 "Nortwest Power Act" meas the Pacific Nortwest Electrc Power Planing and
Conservation Act, 16 U.S.C. §839, Public Law No. 96-501.
2.22 "Region" means the Pacific Nortwest as defined in section 3(14) of the
Northwest Power Act.
2.23 "Regulatory Body" means a state commission or consumer-owned utilty
governing body, or other entity authorized to establish retail electric rates in a
Jurisdiction.
2.24 "Residential Exchange Progra" means the program implemented under this
Agreement and established by section 5( c) of the Northwest Power Act.
08PB-((#####)), ((Customer Name))4
2.25 "Residential Load" means the Regional residential load to which ((Customer
Name)) sells power, as that residential load is defined in the Northwest Power Act
and as further defined in Exhibit A, Residential Load Definition.
2.26 "Residential Load Eligible for Moneta Benefits" means the monthly amounts of
Residential Load detennined puruant to Exhibit A, Residential Load Definition,
less:
(a) any amounts of Residential Load with respect to which BPA has
issued a notice of the election, pursuant to section 7.3 below, to
acquire In-Lieu Power and ((Customer Nam~) has elected to either
take physical delivery of In-Lieu PF Power or forego exchange benefits
corresponding to the amount of In Lieu Power; or
(b) any amounts of Residential Load with respect to which BPA has
issued a notice of the election, pursuant to section 7.3 below, to
acquire In-Lieu Power and ((Customer Nam~) has elected to suspend
its sale and purchase under sections 5 and 6 of this Agreement, for the
duration of the time specified in the in-lieu notice. .
2.27 "Review Period" means the period of time durng which ((Customer Name))' s
Appendix 1 is under review by BP A. The Review Period begins on June I and
ends on or about November 150f the Fiscal Year prior to the Fiscal Year BP A
implements a change in wholesale power rates.
2.28 "Uncontrollable Force" shall have the meaning specified in section 15.
3. APPLICABLE PF EXCHANGE RATE
Purchases by ((Customer Namf)).under this Agreement are pursuant to the
applicable Priority Firm Power Exchange (PF Exchange) rate and applicable GRSPs,
or their successors, established by BPA in a proceeding pursuant to section 7(i) of
the Northwest Power Act, or its successor. Sections 5 and 6 below establish
purchases subject to the applicable PF Exchange rate schedule.
4. EST ABLISHMENT OF ASC TO ACTIVATE PARTICIPATION
The first Exchange Period during which.((Customer Name)) may activate its paricipation
under this Agreement shall commence on October 1,2008. ((Customer Nami:m may
activate its paricipation under this Agreement by fiing an initial Appendix i for the
initial Exchange Period that it has selected. Once ((Customer Name)) fies an initial
Appendix i, ((Customer Name)) shall continue to fie a new Appendix i for each
subsequent Exchange Period, unless and until ((Customer Name)) elects to tenninate or
suspend this Agreement pursuant to section II below. Upon filing an Appendix i for an
Exchange Period, ((Customer Name)) shall commence invoicing for Residential Load
Eligible for Monetar Benefits, pursuat to section 8.1 below, in the month following the
first full month of such Exchange Period.
08PB-((#####)), ((Customer Name))5
5. OFFER BY ((CUSTOMER NAME)) AND PURCHASE BY BPA
Beginning with the first month of the initial Exchange Period established under section 4
above, ((Customer Name)) shall offer and BPA shall purchase each month an amòunt of
electric power up to or equal to the Residential Load Eligible for Monetary Benefits.
The rate for such power sale to BPA shall be equal to ((Customer Name))'s ASC, as
determined by BPA using the ASC Methodology. ((Customer Name)) may only sell an
amount of electrc power under this section 5 tht is up to or equivalent to the Residential
Load Eligible For Monetary Benefits that ((Customer Name)) is authorized under State
law or by order of the applicable State regulatory authority to serve.
6. OFFER BY BPA AND PURCHASE BY ((CUSTOMER NAME))
Simultaneous with the offer by ((Customer Name)) and purchase by BPA pursuant to
section 5 above, BPA shall offer and ((Customer Name)) shall purchase each month an
amount of electric power equal to the Residential Load Eligible for Monetary Benefits
that ((Customer Name)) offers and BPA purchases each month pursuant to section 5.
The rate for such power sale to ((Customer Name)) shall be equal to BPA's applicable PF
Exchange rate, as established pursuant to section 3 above.
7. IN-LIEU TRASACTIONS
7.1 BPA's Right to In-Lieu
In lieu of purchasing all or a portion of the electrc power offered to BP A
pursuant to section 5 by ((Customer Name)) at a rate equal to its ASC, BPA may
upon prior written notice acquire or make arrangements to acquire In-Lieu Power
if the expected cost of such power is less than ((Customer Name))' s ASC( s).
If the expected cost of In-Lieu Power is less than the applicable PF Exchange
Rate, then ((Customer Name)) may upon prior written notice suspend its sale and
purchase under sections 5 and 6 of this agreement for all or a portion of the
amount of Residential Load Eligible for Monetary Benefits that BP A proposes to
serve with In-Lieu PF Power, for the duration of time specified in the in-lieu
notice. ((Customer Nare))'s election under this section shall be based on all or a
percentage portion of ((Customer Name))'s Residential Load Eligible for
Monetar Benefits that BPA has specified in its in-lieu notice. Amounts
suspended under this section 7.1 shall not be added to ((Customer Name))'s
balancing account under section 12. .
7.2 In-Lieu Power Policy
The terms and conditions of an in-lieu transaction, including the above referenced
notice provisions, the source(s) of In-Lieu Power, the amount of In-Lieu Power,
the shape of In-Lieu Power, the expected cost of such In-Lieu Power, and the term
of the In-Lieu PF Power sale, shall be subject to BPA's then effective In-Lieu
Power Policy; provided. however, that each In-Lieu Power Policy shall conform
to this section 7. BPA may not initiate an in-lieu transaction until it has adopted
08PB-((####1), ((Customer Nanie))6
an In-Lieu Power Policy following notice and comment and the issuance of a final
record of decision.
The Parties agree to work in good faith to amend this Agreement if, when, and as
necessar to implement the then effective In-Lieu Power Policy. ((Customer
Name)) acknowledges that in-lieu transactions are intended to lower the cost of
the Residential Exchange Prograi to BPA, and agrees that it wil not
unreasonably withhold its consent to any amendment to this Agreement proposed
by BPA.
7.3 In-Lieu Notice(s)
BPA shall, in each written notice of an in-lieu transaction, provide the following
information, wluch shall include, but is not limited to (i) the source(s) ofln-Lieu
Power, (ii) the amount ofIn-Lieu Power, (iii) the shape ofln-Lieu Power, (iv) the
expected cost of such In-Lieu Power, and (v) the term of the In-Lieu PF Power
sale. BPA shall keep ((Customer Name)) advised insofar as is practicable of
BPA's plans to provide notice to ((Customer Name)) ofBPA's election to acquire
In-Lieu Power.
7.4 In-Lieu Transaction Implementation Mechanisms
The mechanisms by which in-lieu transactions are implemented, whether by the
physical delivery ofln-Lieu PF Power,'the monetization of the value of such
deliveries, some combination thereof, or some other mechanism, and all issues
related thereto, shall be developed by and subject to the then effective In-Lieu
Power Policy.
8. INVOICING, BILLING, AND PAYM;ENT
8.1 Invoicing for Residential Load Eligible for Monetary Benefits
(Drafier's Note: For Publics. delete (iv) in section 8.1.1 below and change (v) to
(iv).)
8.1.1 ((Customer Name)) shall submit to BPA each month an accounting invoice
that documents (i) the amount of Residential Load Eligible for Moneta
Benefits that ((Customer Name)) has elected to exchange pursuant to
sections 5 and 6 above, (ii) ((Customer Name))'s ASC, (iii) ((Customer
Naine))'s applicable PF Exchange rate, (iv) any adjustment pursuant to
section 20, and (v) any adjustment pursuant to section 12. Such
documentation shall include, but is not limited to, the kilowatt-hours of
energy which ((Customer Name)) biled to the Residential Load Eligible
for Monetary Benefits during the previous month. Each such invoice shall
be su~ect to adjustment pursuant to section 9 below.
8.1.2 Within 30 days following the receipt of each monthly invoice from
((Customer Name)), and subject to section 9 below, BPA shall verify the
08PB-((#####)), ((Customer Name))7
invoice and pay such invoice electronically in accordance with
instrctions on each such invoice.
8.2 Biling and Payment for In-Lieu PF Power
In the event monthly amounts of In-Lieu PF Power are physically delivered to
((Customer Nanie)) , amcunts biled under this Agreement shall be the monthly
amounts specified in the in-lieu notice that are delivered by BPA to ((Customer
Name)) pursuant to section 7 above.
8.2.1 Biling
PBL shall bil ((Customer Name)) monthly, consistent with applicable BPA
rates, including the GRSPs and the provisions of this Agreement. PBL
may send ((Customer NallM an estimated bil followed by a fmal bilL.
. PBL shall send all bils on the bil's issue date either electronically or by
mail, at ((Customer Name))'s option. If electronic transmittal of the entire
bil is not practical, PBL shall transmit a summ electronically, and send
the entire bil by maiL.
8.2.2 Payment
Payment of all bils, whether estimated or final, must be received by the
20th day after the issue date of the bil (Due Date). If the 20th day is a
Saturday, Sunday, or Federal holiday, the Due Date is the next business
day. If payment has been made on an estimated bil before receipt ofa
final bil for the same month, ((Customer Name)) shall pay only the
amount by which the final bil exceeds the payment made for the
estimated bilL. PBL shall provide ((Customer Name)) the amounts by
which an estimated bil exceeds a final bil through either a check or as a
credit on the subsequent month's bil. After the Due Date, a late payment
charge shall be applied each day to any unpaid balance. The late payment
charge is calculated by dividing the Prime Rate for Large Banks as
reported in the Wall Street Journal, plus 4 percent; by 365. The applicable
Prime Rate for Large Banks shall be the rate reported on the first day of
the month in which payment is received. ((Customer Name)) shall pay by
electronic funds transfer using BPA's established procedures.
8.2.3 Disputed Bils
In case of a biling dispute, ((Customer Name)) shall note the disputed
amount and pay its bil in full by the Due Date. Unpaid bils (including
both disputed and undisputed amounts) are subject to late payment charges
provided above. If ((Customer Name)) is entitled to a refund of any
portion of the disputed amount, then BPA shall make such refund with
simple interest computed from the date of receipt of the disputed payment
to the date the refund is made. The daily interest rate used to detemnne
the interest is calculated by dividing the Prime Rate for Large Banks as
reported in the Wall Street Journal; by 365. The applicable Prime Rate for
08PB-((####)), ((Customer Name))8
Large Bans shall be the rate reported on the first day of the month in
which payment is received by BP A.
9. ACCOUNTING, REVIEW, AND RUDGETING
((Customer Name)) shall keep up-to-date records, accounts, and related documents that
pertain to this Agreement. These records, accounts, and documents shall contan
information that supports:
(1) ((Cus:tomer Name))'s ASC as determined pursuant to the ASC Methodology;
(2) identification of the consumers that comprise ((Customer Name))'s Residential
Load;
(3) the amount of Residential Load Eligible for Mönetary Benefits invoiced to BPA;
and
(4) evidence that the benefits received by ((Customer Name)) have been passed
though to consumers that comprise ((Customer Name))'s Residential Load
Eligible for Monetary Benefits, as provided for in section 10 below.
At BPA's expense, BPA or its agent may, from time-to-time, review or inspect,
consistent with the provisions of section 18.3 of ths Agreement, ((Customer Name))'s
records, accounts, and related docuents pertaining to this Agreement. BPA's agent
shall be subject to approval by ((Customer Name)); such approval shall not be
unreasonably witheld. ((Customer Name)) shall fully cooperate in good faith with any
such reviews or inspections. BPA retains the right to take action consistent with the
results of such reviews or inspections to require the pass-though of such benefits to
Residential Load Eligible for Monetar Benefits.
BPA's right to review or inspect ((Customer Name))'s records, accounts, and related
documents pertaining to this Agreement for any Fiscal Year shall expire 60 months after
the end of such Fiscal Year. As long as BPA has such right to review or inspect,
((Customer Name)) agrees to maintain such records, accounts, and related documents.
If BPA determines that ((Customer Name)) has received monetar benefits for ineligible
load, including an NLSL, or that other errors have occurred in implementing this
Agreement that result in an overpayment, then any such overpayment shall be returned to
BPA within 30 days of BPA's determination, or BPA may adjust future monetary benefit
payments to ((Customer Name)). IfBPA determines that ((Customer Name)) has not
received monetary benefits due to errors in implementing this Agreement that result in an
underpayment, then BPA shall pay ((Customer Name)) such monetar benefits within
30 days ofBPA's determnation that such benefits were not received. In the event
((Customer Name)) disputes BPA's determination regarding any overpayment or
underpayment, such dispute shall be subject to resolution in the same manner as a
disputed bil under section 8.2.4 above.
08PB-((#####)), ((Customer Name))9
10. PASS-THROUGH OF BENEFITS
10. I Except as otherwise provided in this Agreement, all benefit amounts received by
((Customer Name)) from BPA under this Agreement shall be passed thrQugh to
residential and small farm customers as either: (I) a ~eparately stated credit to
applicable retail rates; (2) monetarj payments; or (3) as otherwise directed by the
applicable Regulatory Body(ies):
10.2 Benefits shall be passed through by ((Customer Name)) in a timely manner, as set
fort in this section 10.2 provided, that, it is specifically acknowledged and
agreed that distributions of benefits for the Residential Load may be made by
((Customer Name)) in advance of its receipt of any such benefits from BPA and
that such benefits may be used to set off distributions to the Residential Load
made by ((Customer Name)) before or after October 1, 20 i 1. The amount of
benefits held as described in section 10.3 below at any time shall not exceed the
greater of (i) the expected receipt of moneta payments from BPA under this
Agreement over the next 180 days, and (ii) monetar payments received from
BPA under this Agreement over the preceding 180 days; provided, however, that
if the amount of benefits held in the account is less than $1,000,000, then
((Customer Name)) may distribute benefits on a less frequent basis, provided that
distributions are made at least once each Fiscal Year; provided, furter, that any
remaining benefits held shall be distributed to Residential Load no later than one
year following the earlier of (x) the end of the term of this Agreement; or (y)
termination or suspension of this Agreement.
10.3 Benefits shall be passed though consistent with any procedurs developed by
((Custonier Name))'s Regulatory .Body(ies) that are not otherwise inconsistent
with this Agreement, the Nortwest Power Act, or other applicable federal law.
Until ((Customer Name)) has passed though such benefits pursuant to section 10.1
above, benefits received by ((Customer Name)) shall be identified on ((Customer
Name))' s books of account and shall accrue interest at the rate( s) established by
((Customer Name))'s Regulatory Body(ies).
10.4 Nothing in this Agreement shall require that any In Lieu PF POVýer delivered to
((Customer Name)) pursuant to section 7 be delivered on an unbundled basis to
residential and small farm customers of ((Customer Name)) or that ((Customer
Name)) provide retail wheeling for such In Lieu PF Power.
11. TERMINATION AND SUSPENSION OF AGREEMENT
11. I Termination of Agreement
11.1.1 ((Customer Name)) may terminate this Agreement by providing BPA with
written notice within 30 days following the date of approval by the Federal
Energy Regulatory Commission of new BP A rates (on the earlier of such
approval on an interim basis, or if interim approval is not granted, on a
08PB-((#####)), ((Customer Name))10
final basis) in which the supplemental rate charge provided for in
section 7(b)(3) of the Northwest Power Act is applied and causes the PF
Exchange rate charged ((Customer Name)) to exceed ((Customer Name))'s
ASC. Such termination shall become effective as of the date of the notice.
11.1.2 Upon termination ofthis Agreement pursuant to section 11.1.1,
((Customer Name)) shall not participate in the Residential Exchange
Program established in section 5(c) of the Northwest Power Act until
((Customer Name)) offers to sell electric power to BPA pursuant to a
new Residential Purchase and Sale Agreement (RPSA) that has been
executed by the Parties. Such RPSA shall become effective no earlier
than the start of the first Exchange Period following suchrequest.
11.2 Suspension of Agreement
11.2.1 ((Customer Name)) may suspend performance under this Agreement for
any reason upòn 30 days advance written notice to BPA. Such
suspension shall become effective as of the date specified in the notice,
and shall suspend the rights and obligations of both Paries as. of such
date, and such suspension shall continue through September 30, 2011.
11.2.2 Upon suspension of this Agreement puruat to section 11.2.1,
((Customer Nanie)) shall not seek and shall not be entitled to receive a
new RPSA until the expiration of ths Agreement on September 30,
2011.
11.3 Remedies
If the Federal Energy Regulatory Commission (FERC) or a court of competent
jursdiction remands, reverses, or otherwise finds unlawful a BPA final decision
or decisions that affect an exchanging utility's receipt, or failure to receive,
Residential Exchange Program benefits, BPA wil review and determine the rights
and obligations of the Parties though additional administrative actions(s) as
necessary to respond to such regulatory or court decisions.
12. BALANCING ACCOUNT
12. i Balancing Account
Drafter's Note: First sentence of this section fiJr the Bridge R PSA wil have one of
two possible versions. Version J wil be l/sedfòr a utilty with a deemer carry
over from the 1981 RPSA. Version 2 for a utility with no carryover.
Version 1 Bridge: The BA balance attbutable to carr over amounts under the
1981RPSA shall be determined by BPA, subject to the resolution of any disputes
regarding such determnation; provided, however, that the effect of section 12.3
below shall not be stayed pending resolution of any such dispute.
Version 2 Bridge: The BA balance is zero as of the Effective Date, subject to
any adjustment provided for in section 20.
08PB-((#####)), ((Customer Name))11
The BA balance includes an adjustment for changes in the Western Region
Consumer Price Index (all items) (CPI) applied to such balance beginning on
October 1, 2008, and continuing until such time as the BA balance is reduced to
zero, based on the methodology described below. BPA shall adjust such balance
monthly effective October 1,2008, to reflect actcal monthly changes in the CPI.
This BA balance (BA_B), if any, comprises the beginning balance for a balancing
account described in this section.
As long as the BA_B is greater than zero, such balance shall be adjusted monthly
by the change in the Consumer Price Index value for that month relative to the
CPI value for the previous month as follows. For the current month (m).
BA adjustmentm+1 = lCPlm/CPlm-i-l)*BA_B m
Where
CPIm= current month's CPI Index value as determined below
CPIm.i= Previous month's CPI Index value
BA_Bm = Current month's ending BA balance
BA_Bm+i = Next month's beginning BA balance
The CPI index value shall be the end of month Consumer Price Index - All Urban
Consumers (West Region. All Items), as published on the Bureau of Labor
Statistics web site: address: http://data.bls.gov/cgi-bin/survevmost?cu, (select
"West Region, all items" and then select the applicable range of months and
years).
The adjusted BA balance for the next month (m+ 1) shall then be:
BA_B m+i = BA_B m + BA adjustment. P
Where P is the amount by which the BA increases or decreases as determined by
multiplying the difference of the ((Customer Name))'s current ASC minus the
applicable PF Exchange rate by the utility's Residential Load Eligible for
Monetary Benefits. If the ASC is less than the applicable PF Exchange rate, P
wil be negative and add to the BA balance; otherwise P wil be positive and
reduce the BA balance.
12,2 Additions to the Beginning Balancing Account
Whenever the ASC is less than BPA's then-curent applicable PF Exchange rate
during the period that this Agreement is in effect but not in suspension, pursuant
to section 11.2, the payment that would otherwise be owed BP A wil be tracked
by BP A and added to the balancing account.
08PB~((#####)), ((Customer Name))12
12.3 Resumption of Monetary Benefits
If there is a balance in the balancing account and the ASC is greater than the
applicable PF Exchange rate, BPA will make no cash payments but wil apply the
amount that would have been paid in order to reduce the balance in the BA
account. (~Customer Name)) wil resume the receipt of exchange payments from
BP A under this Agreement if and at such time that there is no longer a balance in
the BA, or ~(Customer Name)) makes payments to BPA to bring the balance in the
BA to zero. ((Customer Name)) may elect to make cash payments to BPA in order
to eliminate all or a portion of ((Customer Name)) 's balance in the BA at any time.
12.4 BA Balance Carry Over
Any balance in the BA, upon termination of this Agreement, shall not be a cash
obligation of (~Customer Name)) but wil car over as a non-cash liabilty of
((Customer Name)) to the BA of a successor RPSA or other agreement
implementing the Residential Exchange Progrm.
13. NOTICES
Any notice required under this Agreement shall be in writing and shall be. delivered
(a) in person; (b) by a hationally recognized delivery service; or (c) by United States
Certifed MaiL. Notices are effective when received. Either Party may change its
address for notices by giving notice of such change consistent with this section.
If to (~Customer N are)):If to BPA:
))
))
Bonnevile Power Administration
P.O. Box 3621
Portland, OR 97208-362 i
Attn: ((
Account Executive
Phone: 503-230-(~_))
FAX: ~(_ _ _))E-Mail: (( ))
))
((
((
((
Att: ((
((
Phone: ((_ _ _))
FAX: (( -'.))---E-Mail: ((
))
))
))
))
14. COST RECOVERY
14.1 Nothing included in or omitted from this Agreement creates or extinguishes any
right or obligation, if any, ofBPA to assess against (~Customer Name)) and
((Customer Name)) to pay to BPA at any time a cost under-recovery charge
pursuant to an applicable transmission rate schedule or otherwise applicable law.
14.2 BPA may adjust the PF Exchange rate set fort in the applicable power rate
schedule during the term of this Agreement pursuant to the Cost Recovery
Adjustment Clause in the 2009 GRSPs, or successor GRSPs.
15. UNCONTROLLABLE FORCES
PBL shall not be in breach of its obligation to provide In-Lieu PF Power and ((Customer
Name)) shall not be in breach of its obligation to purchase In-Lieu PF Power to the extent
08PB-((#####)), ((Customer Name))13
the failure to fulfill that obligation is due to an Uncontrollable Force. "Uncontrollable
Force" means an event beyond the reasonable control of, and without the fault or
negligence of, the Part claiming the Uncontrollable Force tht impairs that Par's
ability to perform its contractual obligations under this Agreement and which, by exercise
of that Part's reasonable dilgence and foresight, such Par could not be expected to
avoid and was unable to avoid. Uncontrollable Forces include, but :ire not limited to:
15.1 any unplanned curtailment or interrption for any reason of firm transmission
used to deliver In-Lieu PF Power to ((Customer Name))'s facilities or distribution
system, including but not limited to unplaned maintenance outages;
15.2 any unplanned curtailment or interrption, failure or imminent failure of
((Customer NamM's distribution facilties, including but not limited to unplaned
maintenance outages;
15.3 any planed transmission or distrbution outage that affects either ((Customer
Name)) or PBL which was provided by a third-par transmission or distribution
owner, or by a transmission provider, including TBL and ((Customer Name)), that
is functionally separted from the generation provider in conformance with FERC
Orders 888 and 889 or their successors;
15.4 strikes or work stoppage, including the theat of imminent strikes or work
stoppage;
15.5 floods, earhquakes, or other natual disasters; and
i 5.6 orders or injunctions issued by any court having competent subject matter
jurisdiction, .or any order of an administrative .offcer which the Part claiming the
Uncontrollable Force, after dilgent efforts, was unable to have stayed, suspended,
or set aside pending review by a court of competent subject matter jurisdiction.
Neither the unavailabilty of funds or financing nor conditions of national or local
economies or markets shall be considered an Uncontrollable Force. The economic
hardship of either Party shall not constitute an Uncontrollable Force. Nothing
contained in tils provision shall be construed to require either Party to settle any
strike or labor dispute in 'which it may be involved.
The Part claiming the Uncontrollable Force shall notify the other Part as soon as
practicable of that Par's inabilty to meet its obligations under this Agreement due to an
Uncontrollable Force. The Party claiming the Uncontrollable Force also agrees to notify
any control area involved in the scheduling of a transaction which may be curtailed due
to an Uncontrollable Force.
Both Parties shall be excused from their respective obligations, other than from payment
obligations incured prior to the Uncontrollable Force, without liabilty to the other, for
the duration of the Uncontrollable Force and the period reasonably required for the Party
08PB-((#####)), ((Customer Name))14
claiming the Uncontrollable Force, using due diligence, to restore its operations to
conditions existing prior to the occurrnce of the Uncontrollable Force.
16. GOVERNING LAW AND DISPUTE RESOLUTION
(Drafter's Note: The reference below to "CPR" means "Center/br Policy Resolution."
CPR is a proper name and should not he spelled out.
(OPTJONSjòr section 16.
Option I-Inelude thefollowing if customer prefers to lit(~ate (not arbitrate) disputes.
This Agreement shall be interpreted in accordance with and governed by Federal law.
The Parties shall make a good faith effort to negotiate a resolution of disputes before
initiating litigation. During a contract dispute or contract issue between the Paries
arising out of this Agreement, the Parties shall continue performance under ths
Agreement pending resolution of the dispute, unless to do so would be impossible or
impracticable. ((Customer Name)) reserves the right to seek judicial resolution of any
dispute arsing under this Agreement.
Option 2-Include the jbUowing if cLlslomer prejèrs to arbitrate (not litigate) disputes.
16.1 This Agreement shall be interpreted consistent with and governed by Federal law.
Final actions subject to section 9(e) of the Nortwest Power Act are not subject to
binding arbitration and shall remain within the exclusive jurisdiction of the United
States Ninth Circuit Cour of Appeals. Any dispute regarding any rights of the
Parties under any BPA policy, including the implernentation of such policy, shall
not be subject to arbitration under this Agreement. ((Customer Name)) reserves
the right to seek judicial resolution of any dispute arsing under this Agreement
that is not subject to arbitration under this section 16. For purposes of this
section 16 BPA policy means any written document adopted by BPA as a final
action in a decision record or record of decision that establishes a policy of
general application, or makes a determnation under an applicable statute. If
either Part asserts that a dispute is excluded from arbitration under this
section 16, either Par may apply to the Federal court having jurisdiction for an
order determining whether such dispute is subject to arbitration under this
section 16.
16.2 Any contract dispute or contract issue between the Parties arising out of this
Agreement, except for disputes that are excluded through section 16(a) above,
shall be subject to binding arbitration. The Parties shall make a good faith
effort to resolve such disputes before initiating arbitration proceedings.
During arbitration, the Parties shall continue performance under this
Agreement pending resolution of the dispute, unless to do so would be
impossible or impracticable.
16.3 Any arbitration shall take place in Portland, Oregon, unless the Parties agree
otherwise. The CPR Institute for Dispute Resolution's arbitration procedures for
corrercial arbitration, Non-Administered Arbitration Rules (CPR Rules), shall
be used for each dispute; provided, however, that: (1) the Parties shall have the
discovery rights provided in the Federal Rules of Civil Procedure unless the
Paries agree otherwise; and (2) for clais of $ 1 millon or more, each arbitration
08PB-((####)), ((Customer Name))15
shall be conducted by a panel of three neutral arbitrators. The Paries shall select
the arbitrators from a list containing the names of 15 qualified individuals
supplied by the CPR Institute for Dispute Resolution. If the Parties cannot agree
upon thee arbitrators on the list within 20 business days, they shall take tus
striking names from the list of proposed arbitrators. The Par initiating the
arbitrtion shall take the first strike. This process shall be repeated until three
arbitrtors remain on the list, and those individuals shall be designated as the
arbitrators. For disputes involving less than $1 milion, a single neutral arbitrator
shall be selected consistent with section 6 of the CPR Rules.
16.4 Except for arbitration awards which declare the rights and duties of the Parties
under the Agreement, the payment of monies shall be the exclusive remedy
available in any arbitration proceeding. Under no circumstances shall specific
pedormance be an available remedy against BPA. The arbitration award shall be
final and binding on both Parties, except that either Par may seek judicial
review based upon any of the grounds referred to in the Federal Arbitration Act,
9 U.S.C. §1-16 (1988). Judgment upon the award rendered by the arbitrators may
be entered by any court having jurisdiction thereof.
16.5 Each Part shall be responsible for its own costs of arbitration, including legal
fees. The arbitrator(s) may apportion al1 other costs of arbitration between the
Parties in such manner as they deem reasonable taking into account the
circumstances of the case, the conduct of the Paries during the proceeding, and
the result of the arbitration.
End of OPTiONS/ò/, section 16.)
17. STATUTORY PROVISIONS
17.1 Annual Financial Report and Retail Rate Schedules
((Customer Name)) shall provide PBL with a current copy of its anual financial
report and its retail rate schedules, as required by Section Sea) of the Bonnevile
Project Act, P.L. 75-329.
17.2 New Large Single Loads(09/05/00 Version/or Block)
i 7.2.1 General
All existing NLSLs are listed in section 1 of Exhibit B. ((Customer
Name)) shall provide reasonable notice to PBL of any expected increase in
load that is likely to qualify as a new NLSL. ((Customer Name)) may
either serve a NLSL with Contracted Power or with power from another
source. For purposes of this section 15( c), "Consumer" mean an end-user
of electrc power or energy.(Drafter's Note: List existing NLSLs in the
Rate Commitments Exhibit)
08PB-((#####)), ((Customer Name))16
17.2.2 Determination of a Facilty
PBL, in consultation with ((Customer Name)), shall make a reasonable
determnation of what constitutes a single facilty, for the purpose of
identifying a NLSL, based upon the following criteria:
(A) whether the load is operated by a single Consumer;
(B) whether the load is in a single location;
(C) whether the load serves a manufacturing process which produces a
single product or tye of product;
(D) whether separable portions of the load are interdependent;
(E) whether the load is contracted for, served or biled as a single load
under ((Customer Name))'s customar billng and service policy;
(F) consistent application of the foregoing criteria in similar fact
situations; and
(0) any other factors the Parties determne to be relevant.
PBL shall show an increae in load associated with a Consumer's facilty
which has been determined to be a NLSL in section 1 of Exhibit B. PBL
shall have the unilateral right to amend Exhibit B to reflect such
determinations when made.
17.2.3 Determination ofTen Average Megawatt Increase
An increase in load shall be considered a NLSL if the energy consmption
of the Consumer's load associated with a new facility, an existing facilty,
or expansion of an existing facilty durg the immediately past 12-month
period exceeds by 10 average.megawatts or more the Consumer's energy
consumption for such new facilty, existing facilty or expansion of an
existing facilty for the consecutive 12-month period one year earlier, or
the amount of the. contracted for, or committed to load of the Consumer as
of September 1, 1979, whichever is greater.
¡OPTIONS for section 17(b)(4).
. Option 1-.lnclude thefo/lowing ¡fcustomer has no CFlCT load\'.
17.2.4 CF/CT Loads
((Customer Name)) has no loads that were contracted for, or conutted to,
as of September 1,1979, as defined in section 3(13)(A) of the Northwest
. Power Act.
08PB-((#####)), ((Customer Name))17
Option 2-1nclude thelol/owing ifcustomer has CnCT loads.
17.2.4 CF/CT Loads
The following load were determined by the Admnistrator to be
contracted for, or committed to, as of September 1, 1979, as defined in
section 3(13)(A) of the Nortwest Power Act, and are subject to the
applicable rate for the rest (non-NLSL) of ((Customer Name)) 's load:
Retail electric power consumer's name:
Amount of firm energy contracted for, or committed to, as of September 1,
1979:
Facility description:
End of OPTIONS for section 17(b)(4).)
17.3 Priority of Pacifc Northwest Customers
The provisions of sections 9(c) and.(d) ofP.L. 96-501 and the provisions of
P.L. 88-552 as amended by section 8(e) ofP.L. 96-501 are incorporated into this
Agreement by reference. BPA agrees that ((Customer Name)), together with other
customers in the Region, shall have priority to BPA power, consistent with these
provisions.
17.4 BPA Appropriations Refinancing Act
Section 3201(i) ofP.L. 104-134 is incorporated by reference.(Drafier's Note:
BPA is lega/~y obligated to offer to make section 3201 (i) of P.L. 104-/34 a part of
this Agreement. Customer may exclude this provision at their option.)
18. STANDARD PROVISIONS
18.1 Amendments
No oral or written amendment, rescission, waiver, modifcation or other change of
this Agreement shall be of any force or effect unless set fort in a written
instruent signed by authorized representatives of each Par.
i 8.2 Assignment
This Agreement is binding on any successors and assigns of the Parties. BP A
may assign this Agreement to another Federal agency to which BPA's statutory
duties have been transferred. Neither Par may otherwise transfer or assign this
Agreement, in whole or in par, without the other Part's written consent. BPA
shall consider any request for assignment consistent with applicable BP A statutes.
Such consent shall not be unrasonably witheld. ((Customer Name)) may not
transfer or assign this Agreement to any of its retail customers.
18.3 Information Exchange and Confidentiality
The Paries shall provide each other with any information that is reasonably
required and requested in writing by either Part, to operate under and administer
this Agreement, including load forecasts for planning purposes, information
08PB-((#####)), ((Customer Name))18
needed to resolve billng disputes, scheduling and metering information
reasonably necessary to prepare power bils that is not otherwise available to the
requesting Par, including metering data for each load that qualifies as an NLSL.
Such information shall be provided in a timely maner. Information may be
exchanged by any means agreed to by the Partes. If such information is subject
to a privilege of confidentiality, a confidentiality agreement or statutory
restriction under state or Federal law on its disclosure by a Par to this
Agreement, then that Par shall endeavor to obtain whatever consents, releases or
agreements are necessary from the person holding the privilege to provide such
information while asserting the confidentiality over the information. Information
provided to BP A which is subject to a privilege of confidentiality or
nondisclosure shall be clearly marked as such and BP A shall not disclose such
information without obtaining the consent of the person or Part asserting the
privilege, consistent with BPA's obligation under the Freedom of Information
Act. BPA may use such information as necessary to provide servce or timely bil
for service under this Agreement. BPA shall only disclose information received
under this provision to BPA employees who need the information for purposes of
this Agreement.
i 8.4 Entire Agreement
This Agreement, including all provisions, exhibits that are incorporated as par of
this Agreernent, and documents incorporated by reference, constitutes the entire
agreement between the Paries. It supersedes all previous communications,
representations, or contracts, either written or oral, which purort to describe or
embody the subject matter of this Agreement.
18.5 Exhibits
The exhibits listed in the table of contents are incorporated into this Agreement by
reference. The exhibits may only be revised upon mutual agreement between the
Parties unless otherwise specified in the exhibits. The body of this Agreement
shall prevail over the exhibits to this Agreement in the event of a conflct.
18.6 Liabilty of Delivery
((Customer Name)) waives any claims against BP A under this Agreement for non-
delivery of pòwer to any points beyònd the applicable point(s) of delivery under
section 7. In no event wil either Par be liable under this Agreement to the other
Part for damge that results from an Electrcal Distubance caused by or
occurring on an electrc system owned or operated by such other Par or a third-
part. Electrcal Disturbance means any sudden, unexpected, changed, or
abnormal electrical condition occurrng in or on an electric system which causesdamage. .
18.7 No Third.Party Beneficiaries
This Agreement is made and entered into for the sole protection and legal benefit
of the Parties, and no other person shall be a direct or indirect legal beneficiary of,
08PB-((####)), ((Customer Nanie))19
or have any direct or indirect cause of action or clairn in connection with this
Agreement.
18.8 Waivers
Any waiver at any time by either Part to this Agreement of its rights with respect
to any default or any other matter arising in connection with this Agreement shall
not be considered a waiver with respect to any subsequent default or matter.
18.9 BPA Policies
Any reference in this Agreement to BPA policies, including without limitation
BPA's NLSL Policy, In-Lieu Power Policy, and the 5(b)/9(c) Policy, and any
revisions thereto, does not constitute agreement by ((Customer Naine~~ to such
policy, nor shall it be construed to be a waiver of the right of ((Customer Name))
to seek judicial review of any such policy.
LOPTION jòr section 18(j).
This provision is optional at customer's discretron.
18.10 Hold Harmless
Each Part assumes all liabilty for injury or damage to persons or propert
arising from the act or negligence of its own employees, agents, members of
governing bodies or contrctors. Each Part shall indemnify and hold the other
Part harless from any liabilty arising from such act or negligence.
End of OPTION for section 180).)
19. NOTICE PROVIDED TO RESIDENTIAL AND SMALL FARM CONSUMERS
((Customer Name)) wil ensure that any entity that issues customer bils to ((Customer
Name)~'s residential and small far consumers shall provide written notice on such
customer bils that the benefits of this Agreement are "Federal Columbia River Benefits
supplied by BPA."
Drafter's Note: Include the folio wing section 20 ONLY for ¡OUs
20. ADJUSTMENTS TO MONETARY BENEFITS
The monetary benefits provided to under this Agreement shall be subject to adjustment
by BPA to account för the overpayment of benefits, if any, for the period October i,
200 i, through September 30, 2008. Any such adjustments shall be limited to those .
formally established by BPA in its wholesale power rate adjustment proceedings or other
forus estab Iished by BP A for the determnation of the amount of overpayment to be
recovered and the associated recovery period; provided however, that any such
adjustment is subject to the resolution of all administrtive or judicial .review thereof.
Drafter's Note: For Puget and PAC, insert the Contract No.jor the.Lood Reduction Agreement
in this paragraph. For the other IOUs, delete (ii).
Notwithstading anything in this Agreement to the contrary, it is hereby agreed that
neither Part has waived or is waiving, either by virte of entering into this Agreement,
by making or accepting payments under this Agreement, or otherwise, any arguments or
claims it has made or may make, or any rights or obligations it has or may have,
08PB-((#####)), ((Customer Name))20
regarding (i) the above referenced payments, if any, to ((Customer Name)), (ii) the
calculation implementation or settement of Residential Exchange Program benefits for
any period of time, or (iii) implementation or settlement of rights under Contract No.
(Load Reduction Agreement), as amended, and each Part hereby
expressly reserves all such arguments and rights. This section 20 shall survive the
termination or the expiration of this Agreement and shall survive even if any other
provision(s) of this Agreement is held to be not consistent with law, or void or otherwse
unenforceable.
End sec lion 20for JOUs on~v
Drafter Note: For publics. change section number belowfrom 21 to 20.
21. SIGNATURES
Each signatory represents that he or she is authorized to enter into this Agreement on
behalf of the Part for whom he or she signs.
((FULL NAME OF UTILITY))UNITED STATES OF AMERICA
Departent of Energy
Bonneville Power Administration
By By
Name Name
(Prinillype)(Prinillype)
Title Title
Date Date
08PB-((#####)), ((Customer Name))21
Exhibit A
RESIDENTIAL LOAD DEFINITION
1. ((Customer Name))'s Residential Load means the sum of the loads within the Region
eligible for the Residential Exchange Program under the tariff schedules described below,
adjusted for distrbution losses as determined pursuant to Exhibit C, 2008 Average
System Cost Methodology, as revised, supplemented, or superseded. IfBPA determines
that any action changes ((Customer. Name))'s general tariffs or service schedules in a
maner which would allow loads other than Residential Loads, as defined in the
Northwest Power Act, to be included under these tarff schedules, or that the original
general tarffs or service schedules include loads other than Residential Loads,such
nonresidential loads shall be excluded from this Agreement.
Such tariff schedules as presently effective include:
(1) for all schedules listed below, include the amount, expressed in kilowatt-hours, of
Residential Load supplied by ((Customer Name)) under:
(A) ((schedule,'
(B) ttìchedule"
(C) ((schedule", and
(2) a portion of the Residential Load supplied by ((Customer NamB)) as
determined pursuant to section 2 of this exhibit.
2. Any far's monthly irrigation and pumping load qualifyg under this Agreement for
each biling period shall not exceed the amount of the energy determined by the
following formula:
lrgation/umping Load = 400 x 0.746 x days in biling period x 24
provided. however, that this amount shall not exceed that farm's measured energy for the
same biling period.
where:
400 is equal to the horsepower limit defined in the Northwest
Power Act,
0.746 is the factor for converting horsepower to kW,
days in biling period is determined in accordace with prudent and normal
utility business practices, and
24 is the number of hours in a day.
3. When more than one farm is supplied from a conuon pumping installation, the irrgation
and pumping load of the installation shall be allocated among the farms using the
installation, based on the method (e.g., water shares, acreage) that the fars use to
09PB-~(#####)). ~~Ciistomer Name))i of3
allocate the power costs among themselves. These allocated loads shall then be
combined with any other irrgation and pumping loads attbuted to the farms under
section 2 of this exhibit. In no instance shall any far's total qualifying irrgation loads
for any billng month exceed 222,000 kWh.
4. A farm is defined as a parcel or parcels of land owned or leased by one or more persons
(person includes partnerships, corporations, or any legal entity capable of owning farm
land) that is used primarily for agriculture. Agriculture is defined to include the raising
and incidental primary processing of crops, pasturage, or livestock. Incidental primar
processing means those activities necessarily undertaken to prepare agrcultural products
for safe and efficient storage or shipment. All electrical loads ordinarly associated with
agriculture as defined above shall be considered as usual farm use.
. Contiguous parcels of land under single-ownership or leasehold shall be considered
to be one farm. Noncontiguous parcels of land under single-ownership or leasehold
shall be considered as one farm unit unless demonstrated otherwise by the owner or
lessee of the parcels as determined by BP A.
Parcels of land may not be subdivided into a larger number of parcels in order to attempt
to increase the number of farms. Ownership or leasehold interests in fars may not be
changed in order to attempt to increase the number of farms, for example, by leases to
family members or establishment of parnerships, corporations or similar devices.
Acquisition of a parcel which was previously a separte far becomes part of the single
farm that acquired the parceL. In order for a noncontiguous parcel to constitute a separate
farm, the farm must not share any equipment or labor with any other parcel and must
maintain separate financial statements, accounting records, and tax returns as of May i,
2000. Any new farms created after May 1,2000, with irrgation loads, must submit an
application for exchange benefits for such irrgation loads to ((Customer Name)) which
shall then submit such application to BPA and such application must be reviewed and
approved by BPA before the new far is eligible to receive benefits for such irrgation
loads. A number of additional factors may be used by BP A to determine whether
noncontiguous parcels constitute one or more farms. These factors include but are not
limited to:
(1)use,
(2)ownership,
(3)control,
(4)operating practices, and
(5)distance between parcels.
5. Unused irrigation allocations may not be reallocated to other fars or to another biling
period.
09PB-((##)), ((Customer Name))
Exhibit A, Residential Load Definition
20f3
~/
6. The operator of a fan is required to certfy to ((Customer Name)) all irrigation accounts,
including horsepower rating for that far, including all irrgation accounts commonly
shared. The operator of a farm is required to provide ((Customer Name)) and BPA all
documentation requested to assist in the farm determination. .
7. This exhibit shall be revised to incorporate additional qualifying taff schedules, subject
to BPA's determnation that the loads served under these schedules are qualified under
the Northwest Power Act.
09PB-((#####)), ((Customer Name))
Ex:hibit A, Residential Load Definition
30f3
Exhibit B
NEW LARGE SINGLE LOADS
(Drafter's Note: For each NLSL in this section include the.following: the retail electric power
CO/liimel' name, the/acilty location, the date the load became a NLSL. a description atthe
NLSL, and how the NLSL shall be served.~lBPA serves the NLSL.. Contracted Power ¡,vil be
provided under the NR rate schedule unless the Parties agree to service under a surplus rate
schedule. and establishes rates aiid billing.factors in E:y;hibil D. Additional Products and Special
Provisions.)
¡OPTIONS for section (a).
Option i-Include the/allowing if cus'tomer has no existing NLSL.
1. ((CUSTOMER NAME)) HAS NO EXISTING NLSL.
Opi;on 2-lnclude the following if customer has an existing NLSL. The load listed may no longer
be considered to be a NLSL ifBPA establishes a new NLSLpolicy (i.e.. Klickitat, Goldendale).
This should be noted and the right to change the determination should be established.
1. ((CUSToMER NAME)) HAS AN EXISTING NLSL. THE NLSL IS LJSTED
BELOW.
Bnd orOPTIONS for section (a).¡
2. When ((Customer Name)) has a NLSL this exhibit shall be revised to include estimated
monthly HLH and LLH MWs in a table below.
09PB-K#####)). ((Customer Name))1 of I
Exhibit C
2008 AVERAGE SYSTEM COST METHODOLOGY
09PB-((###)). ((Customer Name))1 of I
EXHIBITD
SCHEDULING
1. PURPOSE OF THIS EXHIBIT
The purpose of this exhibit is to identify power scheduling requirements and
coordination procedures necessary for the delivery of electric power and energy sold
under this Agreement. All provisions apply to Purchasing-Sellng Entities (PSEs),
including their authorized scheduling agent. Transmission scheduling
arrangements are handled under separate agreements/provisions with the
. designated transmission provider. Nothing in this exhibit is intended to relieve the
Parties of any obligation they may have under North American Electric Reliabilty
Council (NERC) or Western Systems Coordinating Council (WSCC) policy,
procedure, or guideline.
2. COORDINATION: GENERAL, PRESCHEDULE, REAL-TIME, AND AFTER-
THE-FACT REQUIREMENTS
2.1 General Requirements
2.1. 1 The Parties may revise and replace this exhibit by mutual agreement.
BPA shall also have the right to revise and replace this exhibit under
the following circumstances after providing an opportunity for all
affected Paries to discuss and comment on any proposed changes:
(l)to comply with rues or orders issued by FERCI NERO, or WSCO or
(2) to implement changes reasonably consistent with standard
industry practice, but necessary for BPA to administer it's power
scheduling function.
2.1.2 PSEs shall have staff available 24 hours a day for each day an active
transaction or preschedule is in effect. PSEs must be prepared to verify
trsactions on an hourly basis if necessary.
2.1.3 PSEs shan complete the prescheduling and check out processes, and to
verify Transactions and associated totals, per NERC tag, and BPA
contract.
2.1.4 Inabilty to verify Transactions may result in schedule rejection or
curtailment.
. 2.1.5 PSEs shall verify Transactions and totals after-the-fact (A TF) per both
paries' A TF processes.
2.1.6 BPA is not obligated to accept Transactions that do not comply with the
scheduling requirements in this exhibit or the contract.
2.1.7 Should a PSE attempt to preschedule a Transaction for power for which
that PSE has an obligation to provide transmission and fails to properly
OOPB-((#####)), ((Customer Naine))1 of4
reserve the transmission necessar to complete the Transaction, the PSE
wil not be excused from its payment obligation, if any, under this
Agreement. .
2. 1:8 All Transactions shall be stated in WSCC time zone and "hour ending"
fonnat.
2. 1.9 All Schedules, except Dynamic Schedules, wil be implemented on an
hourly basis using the standard ramp as specified by WSCC procedures.
2.1.10 (Intentionally Omitted)
2.1.11 Changes to telephone or fax numbers of key personnel (for Prescheduling,
Real-Time, Control Area, or Scheduling Agents, etc.) must be submitted
to BPA.
2.2. Prescheduling Requirements
2.2. i Information Required For Any Preschedule
2.2. i . i Unless otherwise mutually agreed, all Transactions wil be
submitted according to NERC instrctions for E-tagging, as
modified by WSCC.
2.2.1.2 When completing the NERC E-Tag insert the applicable BPA
Contract number(s) in the "reference" column of the
miscellaneous section of the tag.
2.2.1.3 Transactions going to or from COB (California-Oregon Border)
must be identified as using Malin or Captain Jack, or COB Hub.
2.2.2 Preschedule Coordination
2.2.2.1 Final hourly preschedules (verbal submission of E-tag
infonnation) must be submitted for the next day(s) by 1000 of
each Workday, unless otherwise agreed.
2.2.2.2 Typically, preschedules are for one to three days. By mutual
agreement of the parties, final preschedules may be requested for
longer time periods to accommodate special scheduling
requirements.
2.2.2.3 Under certain operating conditions, either par may require
submission of estimated daily preschedules for an ensuing period
up to ten days in length, prior to the final preschedule.
OOPB-(i#/)), ((Customer Name)) 2 of 4
Exhibit D, Scheduling
2.3 Real-Time Requirements
2.3.1 PSEs may not make Real-Time changes to the scheduled amounts,
including transmission arngements unless such changes are allowed
under individual contract provisions or by mutual agreement. .
2.3.2 If Real-Time changes to the Schedule become necessary, and are
allowable as described in section 2(c)(1) above, PSEs must submit such
request no later than 30 minutes prior to the hour for which the Schedule
change becomes effective.
2.3.3 Multi-hour changes to the Schedule shall specify each hour to be changed
and shall not be stated as "until furter notice."
2.3.4 Emergency scheduling and notification procedures (including mid-hour
changes) wil be handled in accordance with NERC and WSCC
procedures.
2.4 After-the-Fact Reconcilation Requirements
PSEs agree to reconcile all Transactions, Schedules and accounts at the end of
each month (as early as possible within the first ten calendar days of the next
month). The parties wil verify all Trasactions per BPA contract, as to product
or tye of service, hourly amounts, daily, and monthly totals, and related charges.
3. DEFINITIONS AND ACRONYMS
Capitalized terms in this Exhibit shall have the meanings defined below, in context,
or as used elsewhere in this Agreement.
3.1 Control Area: An electrical system bounded by interconnection (tie-line)
metering and telemetr. It controls generation directly to maintain its interchange
schedule with other control areas and contributes to frequency regulation of the
interconnection.
3.2 Hour Ending: Designation for one hour periods of time based upon the time
which the period ends. For example: the one hour period between 1300 and 1400
is referred to as Hour Ending 1400.
3.3 Prescheduling: The process (electronic, oral, and written) of establishing and
verifying with all scheduling pares, advance hourly Transactions through the
following Workday(s). Preschedules apply to the following day or days (if the
following day or days are not Workdåy(s).
3.4 Purchasing-Sellng Entity (PSE): (NERC defined term) An entity that is
eligible to purchase or sell energy or capacity and reserve transmission services.
OOPB-((#####), ((Customer Name))
Exhibit D, Scheduling
30f4
3.5 Real-Time: The hourly or mInute-to-mInute operation and scheduling ofa power
system as opposed to those operations which are prescheduled a day or more in
advance.
3.6 Schedule: The planed Tninsaction approved and accepted by all PSEs and
Control Areas involved in the Transaction.
3.7 Transaction: An agreement arnged by a PSE to trsfer energy from a seller to
a buyer.
3.8 Workday: Any day BPA, other regional utilities, and PSEs observe as a working
day.
OOPB-((t/)), ((Customer Nalntm
Exhibit D, Scheduling
40f4
ATTACHMENT C
RD RPSA Template
The Regional Dialogue RPSA agreement wil be published separately once the standard (non-
RPSA) provisions are finalized.
BONNEVILLE POWER ADMINISTRATION
2007 Supplemental Wholesale Power Rate Case
Final Proposal
FY 2002.2008 LOOKBACK
STUDY
September 2008
WP-OL -FS-BPA-08
Idaho PUC
ATTACHMENT B
Docket No. ER08-1602-000
IONNlVILLl"
(PAGES 1-264 OMITTED)
1 i. I-year through 20-year average annual T-Bil rates. This input is used to accrue
2 interest on unpaid Lookback balances staing in FY 2009.
3
4 Given the model inputs listed in Table 15.1, and the treatment of certain issues described below,
5 the LBLF model determines Lookback Amounts. In addition, it solves for the amount of
6 FY 2009 REP benefits that wil be applied against Lookback Amounts given policy decisions
7 and assumptions also described.
8
9 15.2.1 Treatment of Deemer Balances
10
11 15.2.1.1 Overvew
12 BPA's 1981 RPSAs established what was called a "deemer account." In the event that an
13 exchanging utilty's ASC fell below the applicable PF Exchange rate, rather than pay BPA, the
14 utilty would accumulate a balance in a deemer account based on the difference between its ASC
15 and the PF Exchange rate multiplied by the utilty's eligible exchange load. The 1981 RPSA
16 provided that any obligations incurred under that RPSA would continue until satisfied, even if
17 the RPSA expired. The RPSA also provided that the utilty must repay its deemer balance before
18 receiving any positive REP benefits. Avista, Idaho Power, and NorthWestern had positive
19 deemer balances as of October 1, 2001, according to BP A's records.
20
2 i BPA's determination ofthe amount of reconstructed REP benefits accounts for a utility's deemer
22 balance. Specifically, any reconstructed REP benefits for FY 2002-2008 that are due to an iou
23 with a deemer balance are first applied to its deemer balance, until exhausted, before being
24 compared to the REP settlement benefits to establish that IOU's annual Lookback Amount.
25 Using this approach, NortWestern extinguishes its deemer balance in FY 2006 and Avista in
26 FY 2009. Since it is assumed that Idaho Power would not have signed an RPSA in 2000, as
WP-07-FS-BPA-08
Page 265
1 explained in Section 15.2.1.3.3., Idaho Power's deemer balance is not a factor in the calculation
2 of its Lookback Amount.
3
4 15.2.1.2 Calculation of Deemer Balances
5 Deemer balances are calculated based on the terms and conditions of the 1981 RPSAs, the
6 Suspension Agreement signed by Avista in 1987, a settlement agreement signed by
7 NorthWestern in 1989, and the terms of the 2000 RPSA prototye contract.
8
9 Avist's Suspension Agreement stated that interest on its deemer balance would not compound;
10 therefore, interest is calculated only on the deemer balance and not on the interest that has
11 accrued, as provided for in the 2000 RPSA prototype contract. NortWestern's (formerly
12 Montana Power Company) settlement agreement specified that interest would compound, so the
13 determination of interest on NortWestern's deemer balance for Lookback purpses is calculated
14 accordingly through FY 2001. When the agreement specifies compounding of interest, no
15 distinction is needed between the deemer principal amount and the interest component.
16
17 The agreements for these utilties specified the same rate of interest on deemer accounts for both
18 companies. The interest rate is the Federal Reserve Board, H.15 Selected Interest Rates, bank
19 prime loan rate. Interest rates are fixed for each quarer beginning October, January, April, and
20 July. The rates are determined by averaging the prime rates (to hundredths of a percent) for the
21 second, third, and fourth months prior to each quarer. For example, the interest rate for the
22 quarter beginning October 2007 would be set equal to the average of the prime rates for August,
23 July, and June 2007.
24
25
WP-07-FS-BPA-08
Page 266
15.2.1.3 Individual Utility Deemer Results
2
3 15.2.1.3.1 Avista Deemer Treatment
4 Table 15.2 shows how Avista's deemer balance, with accrued interest, is reduced each year by
5 the reconstrcted REP benefits. The first line of Table 15.2 shows Avista's start-of-year deemer
6 balances. The second line shows pre-deemer reconstructed REP benefits. These reconstrcted
7 REP benefits are applied to the outstading deemer balance unti the deemer balance is reduced
8 to zero. Avista's deemer balance was not completely amortized within the FY 2002-2008 time
9 frame ofthis analysis. At the beginning ofFY 2009, a $16.53 millon deemer balance remains
i 0 that is extinguished with the REP benefits due to A vista in FY 2009.
12 Because this Study uses a simple interest computation, the pre-deemer REP benefits are applied
i 3 first to the deemer interest balance and then, if there ar any remaining benefits due, to the
14 principal balance. Interest is then computed on the new principal balance, excluding any
15 previously accrued interest. Interest accruals use a mid-year convention. The result of the
16 application of pre-deemer REP benefits and accrued interest is the end-of-year deemer balance.
17 Additional documentation is provided in Table 15.1, Avista Deemer Calculations, FY 2002-2008
18 Lookback Study Documentation, WP-07-FS-BPA-08A.
19
20
21
22
23
24
25
26
27
28
29
30
31
32
11
FY2002
SOY Deemer Balance $ 85.583
Reconstructed REP Benefits $ 3.290
Applied to Deemer $ 3.290
Interest Accrued $ 2. I 60
EOY Deemer Balance $ 84.453
Recst. REP Benefits Earned $
Interest Rate Applied 5.49%
Table 15.2
A vista Deemer Treatment
$ millons
FY 2004 FY 2005
$86.023 $69.541
$ 18.062 $ 4.6 I 7
$ 18.062 $ 4.617
$ 1.80 $ 1.971
$69.541 $66.895$ $
FY 2006 FY 2007 A FY 2oo7B FY 2008
$66.895 $63.181 $55.507 $47.833
$ 6.472 $ 9.288 $ 9.288 $33.516
$ 6.472 $ 9.288 $ 9.288 $33.516
$ 2.758 $ 1.614 $ 1.614 $ 2.213
$63.181 $55.507 $47.833 $16.531$ $ $ $
~01% 821% 821% 825%
FY2003
$84.453
$ 0.187
$ 0.187
$ 1.757
$86.023
$
4.47% 4.02% 5.01%
WP-07-FS-BPA-08
Page 267
15.2.1.3.2 NorthWestern Deemer Treatment
2
3
4
5
6
7
8
9
10
I I
12
13
14
15
16
17
18
19
20
21
Table 15.3 shows how Northwestern's deemer balance, with accrued interest, is reduced each
year by reconstructed REP benefits. The firs line of the table shows NorthWestern's start-of-
year deemer balance. The second line shows the pre-deemer reconstructed REP benefits. This
amount is applied to the outstanding deemer balance until the deemer balance is reduced to zero.
Additional documentation is provided in Table 15.2, NorthWestern Deemer Calculations, FY
2002-2008 Lookback Study Documentation, WP-07-FS-BPA-08A.
Table 15.3
Northwestern Deemer Treatment
$ milions
FY 2004
$15.271
$ 8.539
$ 8.539
$ 0.315
$ 7.047
$
FY 2003
$ 16.980
$ 2.110
$ 2.110
$ 0.01
$15.271
$
FY200
$ 7.047
$ 5.433
$ 5.433
$ 0.209
$ 1.823
$
FY 2006 FY 2007 A FY 2007B FY 2008
$ 1.823 $ $ $
$ 12.403 $ 6.140 $ 6.140 $ 14.099$ 1.823 $ $ $$ $ $ $$ $ $ $
$10.581 $6.140 $6.140 $14.099
7.01% 8.21% 8.21% 8.25%
FY 2002
SOY Deemer Balance $ 19.518
Reconstructe REP Benefits $ 3.031
Applied to Deemer $ 3.031
Interest Accrued $ 0.493
EOY Deemer Balance $ 16.980
Recst. REP Benefits Eared $
Interest Rate Applied 5.49%4.47%4.02%5.01%
22
23
24
25
26
27
28
29
30
31
32
33
15.2.1.3.3 Idaho Power Deemer Treatment
Results described in Chapter i 4 show Idaho Power would not have qualified for reconstructed
REP benefits during FY 2003-2008 due to its low ASC. IfBPA had assumed that Idaho Power
would have signed an RPSA 2000, it would have qualified for about $8.2 milion in
reconstructed REP benefits in FY 2002. Idaho Power did not qualify for reconstructed REP
benefits in FY 2003-2006, and if it had signed an RPSA in FY 2000, it would have accumulated
more than $200 milion of additional deemer balance (before interest accrual) for FY 2002-2006.
Therefore, as described in Chapter 14, BPA assumed that Idaho Power would not have signed an
RPSA in 2000 and would have no reconstructed REP benefits. As a result, Idaho Power's
Lookback Amount is equal to the REP settlement benefits it received in FY 2002-2007. In
addition, its Lookback Amount is the same regardless of whether it is assumed to have a deemer
balance as of October 1, 2001, or not.
WP-07-FS-BPA-08
Page 268
15.2.2 FY 2002-2007 Cumulative Lookback Amount Cannot Be Less tban Zero
2 For purposes of calculating the FY 2002-2007 cumulative Lookback Amount for each utilty, an
3 iou cannot have a negative cumulative Lookback Amount. This condition impacts only
4 North Western. For North Western, the amount ofFY 2007 reconstucted REP benefits that it
5 keeps is set equal to $5.69 milion because this amount results in a zero FY 2002-2007 Lookback
6 Amount for NorthWestern.
7
8 15.2.3 Treatment oftbe Load Reduction Agreements (LRA)
9 The LRAs with PacifiCorp and Puget were contracts wherein BPA bought back power from the
10 two IOUs during FY 2002-2006 to limit BPA's exposure to the high and volatile market prices
11 ofthe West Coast energy crisis. Marks, et al., WP-07-E-BPA-62, at 62. Challenges to these
12 agrements were dismissed by the Ninth Circuit as untimely and moot. BPA's calculation of
13 Lookback Amounts treats the LRAs as enforceable agreements. Bliven, et al.,
14 WP-07-E-BPA-52, at i 9-20. Therefore, the LRA payments are included as par ofthe total
15 calculation of REP settlement benefits paid to PacifiCorp and Puget. However, PacifiCorp and
16 Puget are allowed to retain the greater ofthe REP benefits the utilties would have received or
17 their LRA payments. By taking this approach, BP A's proposal effectively treats the LRA
18 payments to PacifiCorp and Puget as "protected" payments that are not subject to recovery
19 through the Lookback.
20
21 i 5.2.4 Treatment of tbe Reduction of Risk Discount
22 In Snohomish, the Court detennined that the Reduction of Risk Discount was actually a par of
23 the REP Settlement Agreements. See Bliven, et al., WP-07-E-BPA-52, at 20. In the Lookback
24 analysis, the Reduction of Risk Discount payments are treated in the same manner as any other
25 non-LRA payment made under the REP Settlement Agreements. Payments made to PacifiCorp
26 and Puget for the Reduction of Risk Discount are not "protected" and are therefore included in
27 the calculation of the REP settlement benefits.
WP-07.FS-BPA-08
Page 269
15.2.5 Results
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
The inputs and decisions stated above are applied on an annual basis to calculate the annual
Lookback Amounts for each iou for FY 2002-2007. In the Lookback analysis, the annual
Lookback Amounts for FY 2002-2007 ar escalated to 2009 dollars in order to adjust for the
effects of inilation. Table 15.4 shows the resulting annual and cumulative Lookback Amounts
for each iou, in 2009 dollars, for FY 2002-2007. Table 15.9 provides details of the calculations
of the Lookback Amounts in Table 15.4.
Table 15.4
Summary of Lookbaek Amounts
milions of200$
Total
FY 100 FY 100-1007
$ 11.36 $ 75.768
$ 16.725 S 101.742
S (5.687) S
S 48.707 $
$ 4.470 $
$ (55.020) $
S 10.331 S
Total
FY100 FY2003 !U FY2005 FY2006 FY 100100
Avista $14.271 S to.623 S 13.693 S 13.167 S 12.879 $64.632
Ida S 17.607 $14.250 $18.323 $17.608 S 17.230 $85.017
Northwetern 1/ $3.753 $2.812 S 3.637 S 3.494 $(8.08) S 5.687
Pacific $45.744 $31.081 $43.659 $42.177 $40.884 $203.546
POE $(48.553) $31.599 $47.434 S 48.263 S 46.369 $125.111
Puge! $67.822 S 33.630 $64.731 S 62.532 $33.513 $262.227
Total S 100.64 S 113.994 S 191.476 S 187.140 S 141.67 S 746.111
252.253
129.581
207.208
766.552
\I Northwestrn's negative FY 07 Lookback Amount is set equal to FY02-06 Lookback so FY02-07 Lookback not les than O.
21 15.3 Recovery of the FY 2002-2007 Lookback Amounts
22 BPA intends to recover the Lookback Amounts by reducing the amounts of REP benefits paid to
23 the IOUs in the future, with these reductions applying to outstanding Lookback balances. The
24 allocation of REP benefits between the amounts applied toward Lookback Amounts and the
25 amounts paid to the IOUs wil be determined in each rate period. Bliven, et al.,
26 WP-07-E-BPA-52, at 23. Sections 15.3.1 and 15.3.2 describe these allocations of benefits for
27 FY 2008 and FY 2009, respectively. Interest wil accrue on the outstanding Lookback balances.
28 Section 15.3.3 describes the accrual of interest on Lookback balances. Section 15.3.4 describes
29 the time frame over which Lookback Amounts would be recovered from the 10Us based on the
30 simple assumption that future REP benefits and other factors are the same as those for FY 2009.
31
WP-07-FS-BPA-08
Page 270
15.3.1 Treatment of FY 2008 Reconstructed REP Benefits and Definitive Benefit Amounts
2 In March 2008, BPA offered Interim Agreements to the IOUs, with the exception ofIdaho
3 Power, that resulted in interim payments to Avista, NorthWestern, PGE, and Puget. These
4 interim payments are subject to a tre-up to the Definitive Benefit Amounts, for FY 2008,
5 established in the 2007 Supplemental Wholesale Power Rate Case.
6
7 The Definitive Benefit Amount for each IOU is equal to the REP benefit payments for FY 2008
8 for each IOU as determined by the Administrator. Each utility's Definitive Benefit Amount is
9 calculated in three steps. First, BPA detennines the reconstrcted REP benefits that the IOU
10 would have received in FY 2008. Second, BPA subtracts from the reconstructed REP benefits
11 any outstanding deemer balances that the LOU may have had with BPA. Third, BPA subtracts an
12 additional amount from the remaining reconstructed REP benefits to apply toward the IOU's
13 outstanding Lookback Amount. After making this final adjustment, the resulting amount is the
i 4 reconstrcted REP benefits payment for FY 2008. This amount is the Definitive Benefit Amount
15 for each utilty.
16
17 The amount of reconstructed FY 2008 REP benefits applied toward each IOU's outstnding
18 Lookback Amount is based on a goal of providing a total amount of reconstructed REP benefits
19 to the IOUs in FY 2008 that is close to the total amount of REP benefits to be paid to all IOUs in
20 FY 2009. As described in Section 15.3.2, the total amount of REP benefits paid to all IOUs in
21 FY 2009 is estimated to be $178.39 millon. This amount is described as an estimated amount
22 because the amount finally provided to the IOUs wil be determined by the final ASCs that wil
23 be established in March 2009 and the actual eligible exchange loads during FY 2009. Given this
24 FY 2009 amount, BPA set the total reconstcted FY 2008 REP benefits applied toward the
25 IOUs' outstanding Lookback Amounts (total Definitive Benefit Amount) at $ 180 millon.
26
WP-07-FS-BPA-08
Page 271
Table 15.5 shows the derivation of the Definitive Benefit Amounts by utilty. The FY 2008
reconstructed REP benefits before adjustments come from Table 14.2 above. The reconstructed
benefits applied to deemer balances come from Tables 15.2 and 15.3. The amounts of FY 2008
reconstructed benefits, after deemer adjustment, that are applied to Lookback Amounts are
determined as follows. A vista and Idaho Power have no reconstrcted benefits, after deemer
adjustment, so the amounts applied to their Lookback Amounts are zero. NorthWestern has no
Lookback Amount, so none of its FY 2008 reconstructed REP benefits are applied. Because
PacifiCorp did not sign an Interim Agreement, BPA applies all ofits FY 2008 reconstrcted REP
benefits to its Lookback Amount. For PGE and Puget, the reconstrcted REP benefits applied to
their Lookback Amounts are the amounts that result in a total Definitive Benefit Amount of
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
$ 1 80 millon. PGE and Puget s reconstrcted FY 2008 REP benefits are reduced by the same
percentage to determine their respective amounts applied to Lookback Amounts.
Table 15.5
Summary ofFY 2008 Reconstructed REP Benefits
milions of 2008$
FY OS Benefits
Before
Adjustments
33.516
0.000
14.099
6.937
82.029
164.474
301.055
FY OS Benefits FY OS Benefis
Applied to After Deemer
Deemer Balance Adjustment
$ 33.516 $ 0.000
$ 0.00 $ 0.000
$ 0.000 $ 14.09
$ 0.000 $ 6.937
$ 0.000 $ 82.029
$ 0.00 $ 164.474
$ 33.516 $ 267.539
FY OS Benefits
Applied to
Lookback
$ 0.000 $
$ 0.000 $
$ 0.000 $
$ 6.937 $
$ 26.822 $
$ 53.780 $
$ S7.539 $
Avista $
Idaho $
Nortwestem $
Pacific $
POE $
Puget $
Total $
FYOS
Definitive
Benefit
Amounts
0.000
0.000
14.099
0.000
55.207
110.694
IS0.000
15.3.2 Treatment of REP Benefits for FY 2009 and Beyond
Since the IOUs have already passed payments. received under the REP settlements on to their
residential and small farm customers, BPA wil recover Lookback Amounts from the IOUs by
reducing future REP benefits they would otherwise receive. The amount of this reduction in
WP-07-FS-BPA-08
Page 272
REP benefits wil be determined by the Administrtor in eah rate proceeding, with a goal to
2 complete the recovery and return of the Lookback Amounts within seven years. For FY 2009,
3 BPA is setting an IOU's REP benefits paid at no less than 50 percent of its total FY 2009 REP
4 benefits after deemer adjustment.
5
6 The LBLF model solves for the amounts of REP benefits that need to be applied to Lookback
7 Amounts in order to amortize the Lookback Amounts over a given time period, given a set of
8 inputs and assumptions. These inputs and assumptions ar:
9 1. FY2002-2008 Lookback Amounts from Table 15.4,
10 2. FY 2008 benefits applied to Lookback Amounts from Table 15.5,
11 3. Assumed deemer balances as of September 30,2008 that must be extinguished before
12 REP benefits wil be available to reduce Lookback Amounts or pay to the utilty from
13 Tables 15.2 and 15.3,
14 4. FY 2009 REP benefits before deemer adjustment from the FY 2009 Wholesale Power
15 Rate Development Study Documentation, WP-07-FS-BPA-13A, Table 2.9, column K,
16 5. Interest charged on unamortized Lookback Amounts from Table 15.7,
17 6. The 7 year amortization goal,
18 7. The limitation that an IOU's REP benefits paid be no less than 50 percent of its total FY
19 2009 REP benefits after deemer adjustment, and
20 8. The assumptions for FY 2010 and beyond that 1) REP benefits remain the same as FY
21 2009 benefits (in nominal dollars); 2) the 50 percent floor on REP benefits paid continues
22 and 3) the FY 2009 interest rates on unamortzed Lookback amounts continue to be used.
23
24 The total amount ofFY 2009 REP benefits applied to Lookback Amounts given these inputs and
25 assumptions is $70.769 milion. Table 15.6 summarizes FY 2009 results for each iOU.
26
27
WP-07-FS-BPA-08
Page 273
1
2
3
4
5
6
7
8
9
10
ii
12
13
14
15
16
17
Table 15.6
Summary of FY 2009 REP Benefits
$ millons
Remaining
FY 09 Benefits REP Benefits Percent of REP Lookbac
Before Demer Aft Demer applied to After Lookback Benefits Amount at the
Adjustment Adjustmnts Lookback Adjustment Retained End ofFY 09 II
Avist $22.091 $5.560 $2.571 $2.989 54%$76.517
Idaho $$$$NA $106.861
Nortwestern $6.888 $6.888 $$6.888 100%$
Pacific $55.515 $55.515 $26.252 $29.264 53%$229.680
POE $66.527 $66.527 $16.811 $49.716 75%$89.917
Puget $114.671 $114.671 $25.135 $89.536 78%$134.220
Total $265.691 $249.161 $70.769 $178.392 72%$637.195
11 Includes aproximate FY 2009 Interest accruals totaling $28.95 milion
18
19
20
21
22
23
24
25
26
27
15.3.3 Accrual oflnterest on Lookback Balances
BPA wil accrue interest on unamortized Lookback balances. The rate of interest wil be
determined each rate period. The interest rate applied for FY 2009 is the T-Bil rate for terms
equal to the number of years that BPA expects it wil take for each iou to return its respective
Lookback Amounts. For example, a 7-year amortization period assumes a 7-year T.Bil rate.
The average daily T .Bil rates are computed for the period starting October 1, 2001. The terms
are those corrsponding to the projected years Lookback Amounts are amortized from Table 15.8
below. The rate corresponding to a 20-year term is used for Idao Power. Table 15.7 shows the
terms and interest rates.
WP-07-FS-BPA-08
Page 274