20081021IPUC Intervention and Comments.pdf

UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
PACIFICORP )
)
)
)
Docket No. ER08-1607-000
RESIDENTIAL PURCHASE AND SALES
AGREEMENT
NOTICE OF INTERVENTION AND COMMENTS OF THE
IDAHO PUBLIC UTILITIES COMMISSION
The Idaho Public Utilities 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 Filings #1. The Notice indicates that PacifiCorp has
submitted its Residential Purchase and Sale Agreement (RPSA) between itself and the
Bonnevile Power Administration ("BPA"). In its transmittl letter dated September 30, 2008,
PacifiCorp requests that the Commission "disclaim jurisdiction over the RP8A." Transmittal
Letter at 1. In the alternative, PacifiCorp 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.
The Idaho PUC does not tae a position whether the Commission has jursdiction 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 utilized in the 1981 RPSAs. Requiring a utilty in essence "to pay" a
deemer balance to BPA when the utilty's Average System Cost (ASC) is lower than the PF
IPUC NOTICE OF INTERVENTION
AND COMMENTS 1 Docket No. ER08-1607-000
Exchange rate is contrar 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 Utilities 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 Ann Westerfield, Policy Strategist
Idaho Public Utilties Commission
472 West Washington
PO Box 83720
Boise, Idaho 83720-0074
Telephone: [phone]
Fax: [phone]
E-mail: 10uan.westerfield(fpuc.idaho.gov
II. NOTICE OF INTERVENTION
Pursuat 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 paricipated 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 ofPacifiCorp.
III. COMMENTS
A. Introduction
Section 5( c) of the Northwest Power Act authorizes BP A 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 BP A. The RPSA provides the
IPUC NOTICE OF INTERVENTION
AND COMMENTS 2 Docket No. ER08-1607-000
contractual terms under which PacifiCorp'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. ¡d.
The Residential Exchange Program (REP) embodied in Section 5(c) of the Northwest
Power Act2 is the mechanism used to calculate the level of monetay 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., PacifiCorp'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 PacifiCorp's
residential and small farm customers receive their REP benefits.
1 Three other IOUs have also fied their bridge RPSAs with the Commission: Puget Sound Energy (Docket No.
ER08- 1599-000); A vista Corporation (Docket No. ER08- 1 602-000); and Portland General Electric Company
(Docket No. ER08- 1 608-000).
2 Section 5( c)(1) of the NPA states: "Whenever a Pacific Northwest electric utilty offers to sell electric power to
the (BPA) at the average system cost of that 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: EF08-201 1-000 and RM08-20-000. The
Idaho PUC has submitted a Protest in Docket No. EF08-201 1-000 concerning the deemer mechanism.
4 The PF Exchange rate is curently under examination in Docket No. EF06-2011-002. The Idaho PUC has
submitted a Protest in this case.
IPUC NOTICE OF INTERVENTION
AND COMMENTS 3 Docket No. ER08-1607-000
Transmittl Letter at 2. When PacifiCorp's ASC is higher than the PF Exchange rate, BPA
purchases power from PacifiCorp at PacifiCorp's higher ASC and, in retur, Bonnevile agrees
to sell PacifiCorp power at BPA's lower PF Exchange rate in an amount necessar to serve
PacifiCorp'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 utility. 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 Utilties & 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-though any REP benefits to the utilties' residential and small farm customers.
PGE, 501 F.3d at 1015; 16 U.S.C. § 839c(c)(3).
B. The nDeemer" Mechanism (aka the Balancing Account)
In addition to the three factors mentioned above, there is a fourth factor which determines
whether an IOU is eligible to receive benefits under the REP. The fourh factor is whether the
exchange utility has a negative "deemer" balance. The "deemer" mechanism is a remnant of the
IPUC NOTICE OF INTERVENTION
AND COMMENTS 4 Docket No. ER08-1607-000
1981 RPSAs between BPA and three of the IOUs (Avista, Idaho Power and Northwestern).
Atch. A, ROD at 3. If a utilty's ASC is below the PF Exchange rate, the paries "deemed" the
utilty's ASC equal to the PF rate.s 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 (future) REP cash payments" under the RPSA. Atch. A, ROD at 3.
Requiring a utilty to, in essence, "pay" BPA when the utility's ASC is lower than the PF
Exchange rate is contrary to Section 5(c) of the Northwest Power Act. 16 U.S.C. § 839c(c).
The deemer mechanism is contained in Section 12 of PacifiCorp's RPSA entitled
"Payment Balancing Account."Section 12 provides in par 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
Monetary Benefits. If the ASC is less than the applicable PF Exchange rate, P
will be negative and add to the (Balancing Account) balance; otherwse 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 otherwise be owed BP A wil be tracked by
BP A and added to the balancing account.
Id. (emphasis added). The IPUC strenuously opposes the use of the payment balancing account
and the continuation of the "deemer" mechansm.
5 According to BPA's records, PacifiCorp does not have a deemer balance at present. BPA Lookback Study, WP-
07-FS-BPA-08, §15.2.i. at p. 265, Table 15.6 at p. 274. However, a deemer situation could arise in the future
under Section 12 if the PF Exchange rate increased, or PacifiCorp's ASC fell, or both so that PacifiCorp's ASC was
below the BPA PF Exchange rate.
IPUC NOTICE OF INTERVENTION
AND COMMENTS 5 Docket No. ER08-1607-000
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 "Whle 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. BPA 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 utilty to BP A. BP A implemented the REP through
the original RPSA in 1981 to reflect the 'two-way' natue of the 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)(I) 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 utilty prior to such termination. . .." 16 U.S.C. §
839c(c)(4). BPA cites approvingly from a Senate Report from the Committee on Energy and
IPUC NOTICE OF INTERVENTION
AND COMMENTS 6 Docket No. ER08-1607-000
Natural Resources that the termination provisions were intended to minimize "disruption of the
administrator's rate-making or power marketing programs or planning." 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 farm consumers of investor-owned utilities, 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 BP A - i.e., that the REP is a
"two-way" street. Id. at 23, 25-26.
The legislative history to the Nortwest Power Act clearly demonstrates that Congress
intended the residential exchange program to benefit the region's residential and small far
customers - not fuction 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 (Par 2) at 32, 1980 U.S.C.C.A.N. 6031 (Sept. 16, 1980). The first House
Report stated that the purose of the Nortwest Power Act was to provide a mechanism "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. ER08-1607 -000
The First Report notes that initially the source of fuding for the REP would be obtaned
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 utilities for an exchange of
power equal to the utilty's residential load. This exchange wil 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'
utilization (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 par 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 were 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. ER08-1607-000
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 wil make primar 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 durng its initial years while a "rate
ceiling" 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 BPA. The deemer
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. ER08-1607-000
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 one-way beneficial
rate relief to customers of eligible IOUs, the deemer mechanism in Section 12 would provide
benefits in the opposite direction if the IOU'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 departs 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 there may be little likelihood during the two-year term of the bridge RPSA that
PacifiCorp's ASC would 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 BPA 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 BPA
adjusted the ASC mechanism in 1984, their ASCs fell below the PF Exchange rate. When this
occured, the deemer mechanism staed flowing benefits from the IOUs to BPA. In the most
extreme case, Idaho Power's deemer account purportedly grew to more than $245 millon from
1985 to October 2007, even though Idaho Power only received approximately $42 milion in
REP benefits between 1981 and 1984. IPUC Exhibit WP-07-E-ID-2 at 9, BPA-E_ 007092(in
6 BPA's WP-07 Supplemental rates are currently being reviewed by the Commission in Docket No. EF06-201 1-002.
IPUC NOTICE OF INTERVENTION
AND COMMENTS 10 Docket No. ER08-1607-000
Docket No. EF06-2011-002). While PacifiCorp does not curently have a deemer balance, the
Company's ASC and 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 utilty's ASC is lower than the PF Exchange rate, then the IOU wil
not be eligible to receive REP benefits. This is an easy concept to administer. Requiring an IOU
to 00 BPA the difference (i.e., when the utility'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.
D. Section 11
Although Section 11 (Termination and Suspension of Agreement) of the RPSA provides
greater flexibilty 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 the IOU's
ASC. 16 U.S.C. § 839c(c)(4). The RPSA captues 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 new RPSA during the next or
subsequent Exchange Period. Thus, the termination provision allows an IOU to escape the
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 utilty is not
allowed to resume participation in the REP until the contract terminates September 30, 2011.
IPUC NOTICE OF INTERVENTION
AND COMMENTS 11 Docket No. ER08-1607-000
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 forfeitue of all rights and obligations through the expiration of the
RPSA, in this instance, 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) ofthe Act:
Whenever a Pacific Northwest electric utilty offers to sell electric power to the
Administrator at the average system cost of that utility'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 utility's residential users within the region.
(Emphasis added.)
These contractual gyrations are completely unecessary and overly complicated. The
RPSA should reflect the "whenever" natue of iOU paricipation in the REP by eliminating the
prohibition of re-entering the REP under the suspension provision. Precluding PacifiCorp from
offering a new exchange under the existing RPSA is contrar to the expressed provision of
Section 5(c), 16 U.S.C. § 839c(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 paries to re-draft Section 12 wil not
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 car this provision forward for the time period 2012-2028. Thus,
if an iou 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 iou 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. ER08-1607-000
adversely affect the operation of the RPSA given that PacifiCorp's current ASC is above the PF
Exchange rate. The Idaho PUC also recommends that the Commission require the paries 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 Z t 'S'" day of October 2008.
FOR THE IDAHO PUBLIC UTILITIES COMMISSION
Ùi~~Donald L. H well, II
Deputy Attorney General
Idaho Public Utilties Commission
472 W. Washington (83702)
PO Box 83720
Boise, ID 83720-0074
Idaho Bar No. 3366
blslN :FERC _ EROS- i 607 -000_ dh _Intervention
IPUC NOTICE OF INTERVENTION
AND COMMENTS 13 Docket No. ER08-1607-000
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this J- ~ day of October 2008, served the
foregoing Notice of Intervention in FERC Docket No. ER08-1607-000, bye-mailng a
copy thereof to the recipients below.
Natalie L. Hocken
Vice President and General Counsel
Pacific Power
825 NE Multnomah, Suite 2000
Portland, OR 97232
E-mail: Natalie.hocken(ipacificorp.com
Phil A. Obenchain
Director, Bonnevile Regional Affairs
825 NE Multnomah
Portland, OR 97232
E-mail: phiLobenchain(facificorp.com
Sarah E. Edmonds
Legal Counsel
Pacific Power
825 NE Multnomah, Suite 1800
Portland, OR 97232
E-mail: sarah.edmonds(ipacificorp.com
Lara L. Skidmore
Troutman Sanders LLP
401 9th Street NW, Suite 1000
Washington, DC 20004
E-mail: lara.skidmore(itrountmansanders.com
Donald L. H ell, II
Deputy Attorney General
SHÒRT-TERM BRIGE RESIDENTIAL PURCHASE AN SALE
AGREEMENT FOR THE PERIOD FISCAL YEARS
2009-201 i
AN
REGIONAL DIALOGUE LONG-TERM RESIDENTIAL PURCHASE AND
SA.E AGREElvNT FOR THE PERIOD FISCAL YEARS.
2012-2028
ADMlSTR TOR'S RECORD OF DECISION. .
'. :" ',:: .
.:' . '.
Bonnevile Power AdßUnistration
U.S. Dep~ent of Energy
September 4, 2008
. ¡
1,.,
!
Idaho PUC
ATTACHMENT A
Docket No. ER08-1607-000
"
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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 Reentr Issues............... ..... ......... ........................ ..........................5
B. Balancing Account Issues......................................................................................14
C. In~lieu Issues ... ......................................... ..... ................................. ........................26
D. Other Issues............... .................................... .........................................................36
IV. NATIONAL ENVIRONMENTAL POLICY ACT...........................................................48
V. CONCLUSION..................................................................................................................48
A IT ACHMENT A............ .......... ................................................ ..................... ............................... i
ATTACHMENT B ........... .................................. .................. ................... ........................................1
ATTACHMENT C ..........................................................................................................................1
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2
I. INTRODUCTION
This Record of Decision ("ROD") evaluates and makes final decisions on issues raised, and on
proposals offered, by parties regarding Bonneville Power Administrtion's ("BPA") prototye
Short-Term Bridge Residential Purchase and Sale Agreement (the "Bridge RPSA"), which is
proposed to be effective during the period FY 2009-201 1, 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 paries' comments generally addressed the two agreements as one and the
same. This ROD addresses both agreements. Capitalized terms used herein that are not
parenthetically defined, or defined in context, are 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-standard" 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 cqntracts are signed, curently expected to be in late 2008.
BPA received comments by the comment deadline from the Idaho Power Company ("IPC"),
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
Utility 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. i ("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 standard, 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- Tenn RPSA, were
the subject of ongoing separate public processes and are not yet ready for fonnl comment.
2 The standard provisions of the two Agreements are 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 standar
provisions in the Bridge RPSA are set and not subject to change. The Long- Tenn RPSA contains proposed new
standard provisions that wil be in all ofBPA's so-called "Regional Dialogue" contracts, which wil be effective
October i, 2012.
2
II. BACKGROUND
A. Section S(c) of the Northwest Power Act
Section S(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 ("ASe"). 16 u.s.e. § 839c(c)(1). BPA purchases such power and, in
exchage, sells an equivalent amount of power to the utility at BPA's PF
Exchange rate. ¡d. . The amount of the power exchanged is based on up to 100 percent of the
utilty's qualifyng residential and small far load. ¡d. BPA's past practice has not required
actual power purchases and sales.3 Instead, BPA provided monetary benefits to the utility based
on the difference between the utility's ASe and the applicable PF Exchange rate multiplied by
the utility's residential and srnall farm load.4 These monetary benefits must be passed through
directly to the utilty's residential and smatI far 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 utilities. When the BP A PF Exchange rate is less than a
paricipating utilty's ASC, BPA pays the net difference to the utilty. However, when the PF
Exchange rate is greater than the ASe, i.e., when the net difference of the exchange is negative,
BP A has previously provided the utilty a right to "deem" its ASe equal to the PF Exchange rate,
so that no cash payment flows from the utilty to BPA. BPA does, hòwever, 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 payments.
Furtermore, Nortwest 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 råte charge due to implementation of
section 7(b)(3) of the Nortwest Power Act. 16 U.S.C. § 83ge(b)(3). Were this to occur and
cause the PF Exchange rate to exceed a participating utility's ASC, that utility has the statutory
right to terminate its paricipation in the REP upon reasonable term and conditions agreed to
with BPA prior to such termnation. See 16 u.s.e. § 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 l,tilty, the Administrtor may acquire an
equivalent amount of electric power from other sources to replace power sold by BPA to the.
utilty 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 pùrchasing the electric power offered by the
utility. ¡d.
3 "The exchange actually trnsfers no power to or from BPA beause the 'exchange' is simply an accounting
transaction: tIn practice, only dollars are exchanged, not electric power. '" CP Nai'/ Corp v. Bonnevile Power
Admin., 92S F.2d 905, 907 (9th Cir. 1991) (quoling Public Utilty Commissioner ofOregonv. BPA, 583 F. Supp.
752,754 (D. Or. 1984)).
4As described in greater detail below, in the event the economic value of the exchange transaction favored BPA,
then the exchanging utility accumulated a non-cash obligation owing to BPA 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 ofldaho, Montaa, Oregon, and Washington convened the
Comprehensive Review of the Nortwest Energy System. The goal of the review was to develop
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 summarized 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 lOUs. BPA's
Subscription Strategy was a comprehensive BPA business plan that addressed many details
regarding service for all ofBPA's customer classes: public utilties, 10Us, and direct-service
industrial customers. With regard tö the 10Us, the Subscription Strategy proposed that BPA
would offer the ability to (1) continue participation in the REP through RPSAs or (2) enter into
negotiated settlement agreements of the 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 agreernents was necessar because while BPA expected the
IOUs to sign the Settlement Agreements, BPA elected to have an RPSA ready in the event a
qualified utilty, including an IOU, 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 utility customers, including the Bridge RPSA, designed to bridge the gap to the
commencement on October 1,2011 of the Long-Term RPSA.
III. EVALUA nON OF COMMENTS
BPA's evaluation of issues raised in paries' comments is divided into four sections.
Section liLA. addresses coinents regarding a utilty's right to terminate the RPSA and
subsequently reenter the REP. Section II.B. addresses comments regarding the proposed
S Estimated REP benefits forFY 200S were distnbuted to some exchanging laUs through Interim Relief and
Standstil Agreements signed in March 200S.
4
Balancing Account in the RPSA.6 Section II.C. addresses comments regarding the "in-lieu"
provisions. Section IlL. 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)(I) of the Nortwest 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 V.S.C. § 839c( c)(1). The Act fuher provides that an exchanging utility may.
terminate an- exchange transaction "upon reasonable terms and conditions agreed to by the
Administrator and such utilty prior 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 utilty to BPA. 16 V.S.C. § 839c(c)(4). The
effect of this termination provision is to relieve the exchanging utility from buying higher-priced
BPA power and sellng 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 tennnation 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 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 the PF Exchange rate
charged ((Customer Name)) exceeds ((Customer Name))'s ASC.
In the event a cour of competent jursdiction remands to BPA the Priority Firm
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 of termination under such
rate, the termination is rescinded and the parties shall be placed in the position of
íssues regarding the termination and Balancing Account provisions ofthe Agreement (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 proposed 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 failing to provide a notice of termnation, and BPA
amends such rate upon remand such that ((Customer Name)) would have given a
notice of termination under such rate, the termination shall be effective at the time
the earlier termnation notice would have taken effect.
(b) ((Customer Name)) may elect to terminate this Agrement within 6 months
of confirmation and approval by the Federal Energy Regulatory Commssion of a
new or amended ASC methodology (on an interim basis, or if interim approval is
not grted, on a final basis) under which ((Customer Name's)) initial ASC
calculated under such ASC methodology falls below BP A'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, ((Custorner Name)) shall not participate in the
Residential Exchange Program established in section S(c) of the Northwest 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 S(c)
of the Act."
In sunar, pursuant to this provision, an exchanging utilty may termate 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 1
Whether the termination and reentry provisions should be amènded.
Parties' Positions
WPAG argues that if a utility 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 tum positive, as has been the case since the REP was instituted, or it shoulcl 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 utilty'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 participation in the REP should have a one-time opportnity to reenter beginning
on October 1, 20 i 9, similar to a cnnsumer-owned utilty under the Regional Dialogue contrcts.
(Snohomish, BNR007, at 4.)
IPC 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 LPUC argues that the termination provision should expressly provide for termnation (or
suspension) any time 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 Staff's 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 reentr provision proposed by BPA echoes section 5(c)(I) of the Nortwest
Power Act, which provides that the Administrtor shall enter into an exchange agreement with a
Pacific Northwest electric utility whenever requested. 16 U.S.C. § 839c(c)(I). An exchanging
utilty 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
reverse condition prevailed, thereby avoiding the accumulation of any deemer balance, but only
in cases where the exchanging utility's Ase falls below the PF Exchange rate due to (1) a
7(b)(3) allocation, or (2) a change in BPA's ASe 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, notwithstanding 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 fan consumers of exchanging utilties. Others believe the
strcture of section 5(c), and the termnation language in section 5(c)(4), which limits and
qualifies an exchanging utilty's termination right, support the èonclusion 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 terminated its existing RPSA, without conditions, the proposed termnation
provision effectively eliminates the possibility that an exchanging utilty would ever accrue a
deemer obligation to BPA, allowing the exchanging utilty to receive payments when its ASe
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 and repaid prior to the exchanging utilty receiving positive benefits, and
concludes that the proposed section does away with this "balancing to (sic) interests." ld
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
Administrator and such utilty," but argues that the proposed terms and conditions are not
reasonable, bec!'use 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 allowing paricipating utilties to "cream skim" the REP. ¡d. at 2. WPAG proposes
that if a utilty termnates 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 program 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." Id 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" onOctober 1,2019, similar to a consumer-owned utilty under the Regional Dialogue
contracts. Id.
IPC takes a contrar position, based on a fundamentally different view of the intended purose of
the REP. IPC argues BPA should expand the right in the provision to permit an exchanging
utilty 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 BPA customers of any benefits "to which they are legally entitled" and would
"better faciltate achievement of the wholesale rate parity contemplated by the Act." ld. IPC's
view is supported by the IPUC and the OPUC. TheIPUC argues that while the proposed RPSA
provides more f~vorable termination rights than contained in the 1981 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
encornpassed in section 1 l(c) of the proposed termination provision. (IPUC, RPS0003, at 4.)
¡PUC states that in the alterntive, section 11 could be divided into two sections - one for
termnation and another for suspension. ld' -The OPUC proposed language that would "allow
customers to terminate for any reason" on 90 days' notice. (OPUC, BNR0006, at 5.)
8
BPA believes WPAG, PPC, and Snohomish are, to some extent, overstating the amount of
flexibilty the proposed termination and reentry provisions give exchanging utilities. 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 BPA'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 I 2(b) of the Agreement. Even absent CRAC~lìke increases, the PF Exchange rate could
move above an exchanging utility's ASC due to rising BPA costs that are allocated to all of
BPA's base rates. The proposed termination events, including a change in BPA's ASC
Methodology, would not be available to an exchanging utilty 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 utility 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 paricipating in the REP for a five-year period following an
RPSA termnation would be barred 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 utilty 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
termination 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 termnate both its purchase from
BPA 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 maner in
which the REP has been implemented since its inception is incorrect, as no deemer balances
accrued under the 1981 RPSA following termnation.
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 u'nder 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 BP A would know when this cross-over occurred is not clear because BP A would not be calculating the
utilty's ASC during the termination period, nor would BPA be establishing that utilty's PF Exchange rate during
this period.
9
for at least the remaining tenn 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 tennination
of an RPSA, the exchanging utility accrues no deemer amounts. However, under the PPC
proposal, in an extreme but possible example, if an exchanging utilty termnated its Long-Term
RPSA at the beginning of the third year of the proposed Agreement (which could be as early as
2015), the residential and small farm consumers of an exchanging utilty could forfeit any
possibilty of receiving REP benefits for the next 13 years, regadless of how high its ASC 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. BP A 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
utilty to )3PA during periods when the utilty's ASC was below the PF Exchange rate, but the
utilty's tennination right could not be invoked. However, though section 5(c)(4) of the Act,
Congress provided exchanging utilties with a means 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 tennination 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 exchaging utility at any time.
On its face, then, Congress provided exchanging utilities with a limited termination right, but an
unfettered reentr right. However, there is support for the view that Congress did not intend
section 5(c)(I) to entitle an exchanging utilty 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
termnation 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 drafted as a single section and the man clause providing that BP A would enter into an
exchange transaction whenever requested was followed by four provisos, incll.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 determnation of the costs of such power sold by
the utilties. In the four part proviso, part (C) permts a utilty 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 terms and conditions" for the "purose of
minimizing disruption of the Administrator's rate making or power marketing progras orplanning." ¡d. .
Nevertheless, absent a more robust termnation right - one that would allow an exchanging
utilty to terminate 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 fan consumers of regional investor-owned utilities to share in the
economic benefits of lower-cost Federal power.9
On the other hand, proposals by IPC, IPUC, and the OPUC that an exchanging utility 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 transa~tion, with
benefits only flowing to the exchanging utilty (which would be the effect of the proposal by
these parties), it could hav.e 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 utiliies but which are otherwise essentially
carrovers from the 1981 RPSA, should be amended to better accommodate the competing
interests expressed in section 5(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 utilty to avoid ever incurrng any deemer balances in exchange for a commitrnent
not to paricipate in the REP upon suspension until expiration of the RPSA at the end of its stated
term. Because the termination right is tied to the 7(b)(3) allocation, as a practical matter that
right (and its corollar reentr'right) will 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 will encompass the right to suspend the
Agreement in the event of changes to the ASC Methodology that would result in a utilty
accumùlating a deemer balance, wil provide the exchanging utility with flexibilty 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 fot the utilty's
right to suspend the Agreement at any time, BP A wili receive certinty regarding its REP
obligations to such exchanging utility for a knowa period. BPA 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 (19S0)
10 Additionài changes to section i I as originally proposed are addresed under Issue 2 immediately below.
11
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 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
Nortwest Power Act is applied and causes the PF Exchange rate
charged ((Customer Name)~ to exceed ((Customer Name)~'s ASC.
Such terInation shall become effective as of the' date specifiedin the notice. '
i i .1.2. Upon termination of this Agreement pursuant to section i 1.1. i
((Customer Name~) shall not participate in the Residential
Exchange Progr established in section S(c) of the Northwest
Power Act until ((Customer Name)) offers to sell electric power
to BP A pursuant to a new Residential Purhase and Sale
Agrement (RPSA) that has been executed by the Pares. Such
RPSA shall becorne effective no earlier than the star of the first
Exchange Period following such request.
11.2 Suspension.
.i 1.2.1. ((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, 2028).
11.2.2. Upon suspension of this Agreement pursuant to section 11.2. I,
((Customer Name)) shall not seek and shall not be entitled to
receive a new RPSA until the expiration of this Agreement on
(September 30, 2011 or September 30, 2028)."
Decision
For the foregoing reasons, section 11 wil be amended as provided above.
Issue 2
Whether the RPSA should require an exchanging utilty to rejùnd REP benefits received over a
certain period: (1) in the event that a court remands to BPA the P F Exchange rate and BPA
amends such rate upon remand such that the exchanging utilty would not have been entited 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 utility would not have been
entiled to receive any REP benefits during such period.
Parties' Positions
Snohomish argues that BPA must include in sections 1 1 (a) and 1 l(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 1 1 (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 rt:manded to BPA the PF Exchange rate relied upon by an exchanging utilty 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 1 (b) provided for a retroactive termination triggered by
a new or.amended ASC Methodology that caused an exchanging utility's ASC to fall below the
PF Exchange rate.
The purpose of these clauses was to hold haless 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 utility made its decision to
participate in the REP for an Exchange Period.
Evaluation of Positions
Snohomish and the PPC correctly note that section i I(a) provides for retroactive termination in
the event that the PF Exchange rate is remaded to BPA, and BPA re-establishes the rate at a
level that would have led the exchanging utilty to terminate if the newly established rate had
been in effect originally. (Snohomish, BNR007, at 3-4; 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.
Id.
Snohomish makes a sirnilar argument with respect to a retroactive termination trggered by
section i I(b) of the proposed teimination provision. Id. Snohomish recommends repayment 90 .
days from the notice of termination, with interest at ''the Prime Rate plus four percent." Id.
13
As originally proposed, the second paragraph of section I I (a) would allow an exchanging utility
to (1) retroactively-withdraw a termination, 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 utility (in the event of a retroa.ctive termination)
or payments to the utilty (in the event of a retroactive withdrwal 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 pares 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 participating
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 bénefits
should be returned to BP A by direct payment or setoff. Likewise, the logic for such a result
would seem to apply equally to a payment wrongly witheld, 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 nature of the court's remand and BPA's response, neither of
which can be known ahead of time. As. a consequence, BP A has decided to eliminate the second
paragraph of section 1 l(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 partcipating in the REP, including
whether and how REP payments made or not made should be tred up.
Snohomish's comment with rèspect 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 i above.
Decision
If the Federal Energy Regulatory Commission (FERC) or a court of competent jurisdiction
remands, reverses, or otherwise finds unlawl a BPA final decision or decisions that affect an
exchanging utilty's receipt, or failure to receive, Residential Exchange Program benefits, BPA
wil review and determine the rights and obligations of the Parties through additional
administrative aciion(s) as necessary to respond to such regulatory or court decisions.
B. Balandng 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 utilty. 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
BPA 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 monetary transaction since its inception in i 98 i. As a moneta
14
transaction, BP A pays the exchanging utilty the difference between the PF Exchange rate and
the utilty's ASC.
Nevertheless, because REP benefits are derived by comparg the rate levels charged by each
party for its hypothetical sale of power to the 'other, the benefits (or economic value of the
exchange) could flow from an exchanging utilty to BPA in the event the utility'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 invoking its terination or suspension right, to have its
ASC "deemed equal" to the PF Exchange rate. Notwithstading this deemed equalization of the
two rates, the provision also provided that during the period any such election was in effect, BP A
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."l 1
This "deemer" account concept is carred forward by BP A 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
2011)12, subject to the resolution of any disputes regarding such balance. This
.accouit 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 201 1), 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 i, (2008 or 2011), to reflect actual
monthly changes in tie CPI. 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 li the "deemer account" or "deemer provision."
IZThe 200S date is in the Bridge RPSA, and the 201 I date is in the Long-Term RPSA.
is
BA adjustmentm+1 = (CPImlCPIm.i-ll*BA_B m
where
CPIm= current month's CPI Index value as detemiìned below
C,Plm.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 :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+l = 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
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 will be positive and reduce the BA balance. .
(b) Additions to the Beginning Balancing Account
Whenever the ASC is less than BPA's then-current PF Exchage rate durng the
temi of this Agreement, the payment that would otherwise be owed BPA wìl be
tracked by BPA and added to the balancing account.
(c) Resumption of Monetary Benefits
If there i~ a balance in the balancing account and the ASC is greater than the
applicable Priority Fimi 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)) wil 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 BPA in order to elirninate all or a portion of
((Customer Name))'s account balance at any time.
(d) Account Balance Carryover
Any balance in the balancing account, upon temiination of this Agreement, shall
not be a cash obligation of ((Customer Name)) but wil carr over to the balancing
account ofthe ~~Customer Name:;~'s next RPSA."
16
Issue 1
Whether to modif or eliminate section 12(a), which: (I) requires that an exchanging utilty's
"deemed" account balance as o/October 1, 2008/or 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 are that instead of
including a number that is "deemed" to be the account balance as of October 1, 20 i 1, 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. ¡d. These paries do not specifically raise this issue with respect
to the Bridge RPSA, but Snohornish and PPC indicated tht 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
palances, but that an interest component should be used instead.
'ffe investor-owned utilties (addressing their comments to both the Brj~ end Lon~:T~ri
RPSAs) state that because the deemer balances are disputed and.l$iibject to resolution in othe
IOf!rils)the "restatement or confination of the alleged balances" ii, nöt a reasonabie 'or
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
IOUs' position, and questions whether it is realistic that parties can conclusively resolve the
issue of outstanding deemer balances even prior to October 1,201 i. (IPUC, RPS0003, at 3.)
The IPUC argues that section 12 should be deleted in its entirety. Id.
BPA Starrs Position
Proposed section I2(a) requires that the parties 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,
2011, iIi 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 198 i RPSAs, and to state expressly in the new RPSAs,
any deemer a,ccount balances accrued by an exchanging utilty under the i 981 RPSAs. BPA
believes this is what was contemplated by the 1981 RPSAs, and that the çontractua1 liabilty
incurred by exchanging utilties under the i 981 RPSAs for deemer amounts should be
contractually recognized in the new RPSAs, which is the vehicle though which those liabilties
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 associated with accumuIating unpaid amounts in the balancing account.
Evaluation of Positions
WP AG argues that it is unclear why the RPSA should "deem" an account balance when BPA
stated the balance for each iou in testimony in the WP-07 Supplemental Rate Case. (WPAG,
BNR005, at 2.) WPAG argues that the Agreement should include the "actual balance as
calculated by BPA" as ofOctòber 1,2011, including any interest accn,ed on the actual balance.
¡d. WPAG does not specifically address this issue with respect to the Bridge RPSA. PPC
similarly.argues (also with respect specifically 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 i, 20 i 1. ¡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, 2011. This balance
lS 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 part, the investor-owned utilities argue that any obligations that purortedly arose under
the 1981 RPSAs are "properly the subject of litigation, settlement or otherwise." (lOUs,
BNR0002, at 2.) They argue it would be "inappropriate, in violation of the Act, and arbitrar
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 new RPSA, and that BPA 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 12(a) "seems to"
condition the staring 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 1981 RPSAs expressly provided for BPA to "debit to a separate account the
net exchange payment to Bonnevile" when an exchanging utilty 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 10. Balances existing at the time the contract terminated were to be
cared forward and applied "to any subsequent exchange." Jd. Setting aside whether these
"deemer" balances are consistent with section 5(c) of the Northwest Power Act, some
exchanging utilities did accumulate such balances under the 1981 RPSA The iaUs' 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 othen;ise - be
included in the text of the Agreements, either at the time of execution or on the Effective Date.
However, BPA 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
1981 RPSA, pursuant to the terms and conditions in that contract. BP A 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, BPA wil
amend proposed section 12(a) to provide that it wil determne the account balance of any utility
that accumulated a deemer balance under the 198 i RPSA for carover, subject to resolution of
disputes regarding such determination; but where no sllch balance was accumulated for carover
by a utility under the 1981 RPSA, the Agreement wil recognize this fact. The new section reads
as follows:13
"12.1 Balancing Account (BA)
Drafter's Note: First sentence of this section wil have one of two possible
versions. Version I wil be usedfor utilties with a deemer'carrover from the
J981RPSA, Version 2forutiities with no carryover. '
Version J: The account balance attributable to carover amounts under the 1981
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 utilty 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 ofa deemer balance under the Bridge RPSA, wil be used in the Long-Tenn RPSA.
19
Snohomish argues that an adjustmént based on a measure of inflation is inconsistent with
section S(c) of the Northwest Power Act, which "contemplates a commercial transaction between
the exchanging utilty and BPA." (Snohomish, BNR007, at 5-6.) As such, any deferral 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
will accrue interest at the Prime Rate plus four percent. ¡d.
In addition to bringing section 12(a) ofUie RPSAs back into line with the transaction
contemplated by the Nortwest Power Act, Snohomish argues'hat 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 Uie cost to other BP A customers of the deferred "repayment" of
such amounts, and is therefore fairer to both Uiose customers and to the residential and small
farm 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
Uie 1981 RPSA - Uiat 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 wiUi the fact Uiat these deferred obligations, like Uie
, REP benefits paid by BP A, are more accurately attbutable to Uie residential and small far
consumers of the exchanging utilties than to Uie utilties themselves, which receive no monetar
benefits whatsoever from the REP. Absent a contrctual obligation to mae 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 BPA's oUier customers compared to applying an inflation rate,
which, using Uie CPI based on the last 10 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 determined in large par by Uie.duration ofUie "loan." Again, in this respect
adjusting Uie amount in the balancing account based on an inflation rate provides a fair surrogate
Uiat should make BPA's customers "whole" in the context ofUie obligation owed to them, and
does not unfairly penalize the residential and small far consumers of Uie 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 5(c) ofUie Nortwest Power Act requires that
deemer account balances must be treated as if Uiey were cash obligations, even if repayment is
effected through offset, is addressed in Issue 2 below.
14 Section 12(c) of the proposed Agreement does provide for cash payments at the election of the utility.
20
Decision
The first sentence of proposed section J 2 (a) will 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 J 2(d) should be amended to require an exchanging utility 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." (IPUC, RPS0003, at 2-4.)
BPA Staffs 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 1981 RPSA.
Evaluation of Positions
Snohomish argues that the Nortwest Power Act strctured the REP as a "standard purchase and
sale transaction" with BPA purchasing a set amount of power from a utilty at that utility's ASC,
and the utilty purchasing the same amount of power from BP A at the PF Exchage rate.
(Snohomish, BNR007, at 4-5.) Snohomish asserts that the difference between the utilty's ASC
ard the PF Exchange rate was intended by the Act to be a cash obligation between the utilty and
BPA 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. ¡d. 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 S(c) of the Act. ¡d.
To "better reflect the exchange transaction" nature of the REP and "to avoid conflct with
section S(c)" of the Act, Snohomish proposes the following text be added to the RP8A before
section 12(a):
"Where -e-eCustomer Namt?;;'s ASC is less than the PF Exchange Rate. -e-eCustomer
Name;;;; may elect to either (i pay the balance to BPA by the Due Date set forth in
section Sec) or em accrue a balance in a Balancing Account as set fort herein."
¡d.
With respect to including language providing for cash payments at the utilty's election, BPA
believes that a utility could elect to make such a payment notwithstanding any language
specifically providing for such payments, and the language already provided in section 12(c)
could be applied to such a contingency. IS Snohomish and PPC also each point out that there is
no provision for the circumstance where an exchanging utility with an account balancè opts not
to sign a future RPSA, arid that therefore section 12 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.) ¡d. Snohomish also notes tht there is no guarantee that futue RPSAs will 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 concern
Snohomish proposes 'the following changes to section 12(d) of the Agreement:
"Any balance in the balancing account, upon termination of this Agreement, shall flat be
remains a cash obligation of -e-eCustomer Name~;; but wi may, at -e-eCustomer
Name;;~'s wrtten election, 'car over to the balancing account of the next---R
agreement implementing section 5 (c) of the Northwest Power Act. if such an account is
established. If -e-eCustomer Name;;;; fails to sign a subsequent 5(c) 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." (LPUC, RPS0003, at 2-4.)
BPA believes that Snohomish's charcterization of the REP as "a standard purchase and sale
transaction" is inaccurate and misleading. Snohomish reasons that because section S(c) of the
Northwest 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 that REP benefits could be owed by an exchanging utility to BPA. Certinly,
Snohomish is correct that section 5(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 utilty 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 ars-length
transaction. It is not "standard" for one part 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 RE benefits, in the main, would flow from BP A though the
utilties and to the intended beneficiares (residential and small farm consumers) is supported by
Congressional committee report language stating that the termination provision was intended to
permit an exchanging utilty "to termnate the exchange if the 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 i, 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 Federal .hydroèlectrc system to the residential and small farm consumers of investor-
owned utilties, thereby providing some rate relief to those conSUJers, 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 bil 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 oflow-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 a way that the economic
benefit of the exchange transaction 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 ~981 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 believes 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) of the Act, the exchanging
utilities are conduits between BPA and the utilities' residential and small far consumers. The
exchanging utilities do not directly profit from the exchange trnsaction, but rather the "cost
benefits, as specified in the contracts with the Admnistrator, of any purchase and sale
transaction ... shall be passed through 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
utility, 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 utilties 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 of a
deemer balance is unclear. BPA notes that dunng such penods of time that the section 7(b)(2)
rate test is providing preference customers with rate protection, any additionalcosts.ofthe REP
that might be incuÌed due to the deeming of an ASC to the PF Exchange rate may not fallon
preference customers. Therefore, in cases where the economic benefit of the exchange
transaction accrued to BPA, it is not certin where that economic benefit would be allocated. For
example, if section 7(b )(2) rate protection was tnggered, returns of deemer balances might serve
to increase the REP benefits of other exchanging utilties whose benefits had been reduced by the
section 7(b)(2) rate protection pursuant 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 sumary, 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 (i) 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 residential and small far consumers of the exchanging utilities
are the real beneficianes of the REP. However, language has been added to section 12 to
clanfy that such offset would be applicable as against any instrument, 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 contr 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, RPSOOO3, at 2-4; Idaho Power, BRN0003, at 1-2.)
24
BPA Staffs Position
Sections 12(a) and (b) together provide that whenever an exchanging utility'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 utilty to BPA wil Qe tracked by BPA and added to the Balancing
Account. i This provision is consistent with the deemer account provision contained in the 198 I
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 of Positions
.. The !PUC states that its primar concern 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 utility's ASC is lower than the PF Exchange rate is contrar to the intent of
section 5(c) of the Nortwest Power Act. ¡d. Citing legislative history, the IPUC concludes that
Congress enacted the REP for the purpose of providing rate relief to 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 paricipation 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
accl1mulation of large deemer balances or a signifcant 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 contractual provision of this natu would not deprive other regional customers of
BP A of any benefits to which they are legally entitled, but would better faciltate 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 stret" exclusively. Section S(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 structued and limited in a
way that anticipates the possibilty that the value of an exchange transaction could favor BP A,
16 The phrase "during the term ofthis Agreement" in section 12(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 Agrement was terminated by an exchanging utility.
25
and providing exchanging utilities with only a limited and conditional means of termnating the
exchange transaction. BP A must attempt to accommodate these competing expressions of.
legislative intent. As amended, the proposed RPSA provides exchanging utilties with the
flexibilty, through a combination of termnation and suspension rights, to optimize REP benefits
and minimize, or avoid completely, deemer obligations. To the extent any dee mer balance is
accumulated, it wil not be treated as a cash obligation under the Agreement.
Decision
BPA wil not elimin,ate the balancing account.
C. In-lieu Issues .
Section 5(c)(5) of the Nortwest 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 utility's
power, the utìlty 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 substantially (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 exchanging utilty.
Although the propose~ in-lieu provisions address most of the essential terms and conditions
regarding in-lieu transactions, may 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 BPA through a notice and comment process. By definition, BPA 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 TRANSACTIONS
(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 wil be used for issuing an
in-Iieu notice shall be the ASC in effect on the date such notice is given.
(b) In-lie'u Notice(s)
BPA shall provide ((Customer Name)) a minimum period advance written
notice of its election to acquire In-Lieu Power, and shall include in the
26
notice the following information: the soure(s) of In-Lieu Power, the
amount ofIn-Lieu PF Power, the shape ofIn-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).
(1) Source(s) onn-Lieu Power .
The soures of In-Lieu Power shall be defined 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 time it fies an
Appendix 1 under this Agreement in the manner described in
section 7(f) beIO\~. 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 ofBPA'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 transmission and losses to integrate
the power into the BP A system, to the extent they are incured; 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 incur to deliver the In-Lieu PF
Power to the point of delivery as described below.
The expected cost ofIn-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 of the In-Lieu PF Power Sale
The In-Lieu PF Power will be firm power offered by BPA 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 period (as described below) following the receipt of
BPA's notice to acquireln-Lieu Power pursuant 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 portion of
the amount of Residential 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 BP A 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 i 5 days).
If ((Customer Name)) fails to notify BP A of its election under this section,
then ((Customer Name)) shall be deemed to have agreed to receive and pay
for all ofthe 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 distrbution system. All In-Lieu PF Power
deliveries shall bè 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 BPA for such In-Lieu PF
Power, BP A 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.
(t) 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 wìl 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~urent
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 files its Appendix I.
Deliveries within eah month will be in equal hourly amounts during each
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 determine the load shape of the In-Lieu PF Power
based on the average load 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 canot 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 ters and conditions regarding.an in-lieu transaction
undefined wil cause "undue and unacceptable uncertainty" regarding the pares' responsibilties
and obligation itBPA attempt.s 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
will not engage in any in-lieu transactions until it adopts an In-Lieu Policy. Jd.
BPA Staff's Position
The In-lieu section requires that the In-Lieu Policy provide the following guidelines, te~s, and
conditions regarding any in-lieu transaction: (1) the miimum period written notice of an in-lieu
transaction that BPA must provide to the exchanging utilty (section 7(b)); (2) the permissible
sources ofln-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 ùntil
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 included to ensùre that BPA
did not pay more'than market for the power offered to it under the REP, and as such that it was
ilitended to protect BPA's vital 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 unnecessar 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 unwarnted costs to its preference customers. First, even
if there were suffcient time to undertake a process to develop and adopt an In-Lieu Policy before
the Bridge RPSAs are implemented, all of the most 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 administrative 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 transaction. Because an in-lieu tranaction 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 utilties' ASCs and the cost of possible in-lieu
resources could change substantially prior to implementation of the Long-Term RPSA on
September 30, 20 i 1. BPA wil revisit the desirability of initiating the process for adopting an
In-Lieu Policy no later than early in FY 201 i.
For their par, 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. (10Us, BNR0002, at 1-2.) Although BPA believes that, as
written, the proposed RPSA precludes BPA from implementing any in-lieu trsaction until the
In-Lieu Policy is adopted, to remove any uncertainty BPA wil revise the RPSA templates,
along the lines suggested by the IOUs, to expressly state that BPA wil not engage in such
transactions until it adopts an In-Lieu Policy following notice and comment and the issuance of a
record of decision. BPA wil address any IOU proposals regarding the proposed 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
conditions change dramatically from current expectations. BPA wil revisit the desirabilty of
initiating the process for adopting an In-Lieu Policy no later than early 20 J J. 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 cortmentperiod
Issue 2
Whether BPA should monetize in-lieu transactions.
Parties' Positions
The fPC proposes that BPA implement any in-lieu transaction through a moneta transaction,
rather than through a physically delivered power sale, as contemplated in the proposed RPSA.
(PPC, BNR0004, at 2.)
BPA Stafls Position
The proposed RPSA incorporates, with some modifications, provisions developed for the 2000
RPSA grototye regarding BPA's physical delivery ofln-Lieu PF Power to an exchanging'
utility. 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; BPA'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 utility, 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 utility 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
11 Section 2(j) of the proposed RPSA defines In-Lieu PF Power as "firm power that is sold by BP A to ((Customer
Name~~ in an in-lieu transaction at the Priority Firm Power Exchange Rate, or its successor,"
IS In-Lieu Power (as opposed to In-Lieu PF Power) is defined in the RPSA as the firm power acquired by BPA as
part ofthe in-lieu transaction, where In-Lieu PF Power is the power so/dby BPA to the exchanging utilty as part
of the trasaction. See section 2(k) of the Agreement (renumbered as section 2. I 7).
31
that this cost is stil above the PF Exchange 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 unnecessar exchange of actual power, BPA
should implement the in-lieu protections of the REP though a financial trasaction, rather than
though an actul power sale to the IOUs. Id.
BP A agres that monetizing in-lieu transactions, 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 counterpart risk associated with a market purchase ofln-Lieu Power. As
noted above, monetization is already contemplated by the RPSA in the case where the utility
elects to decline physical delivery of In-Lieu PF Power and deem its ASC equal to the cost of the
In-Lieu Power, in which case that portion 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 all in-lieu trnsactions would be'
monetized, or that would preclude making monetizatio.n the default mechanism.
However, BPA would like to hear from the IOUs, and other interested pares, 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 delivery 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 utilty 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)-(t) wil be deleted from the RPSA and replaced with a new section 7(c) (renumbered as section 7.3).
32
Parties' 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 Stafls Position
As noted above, BPA will address 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 InNLieu 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 various points on its transmission system that are
coruected to the utility's own distrbution system.
Evaluation of Positions
The OPUC argues that the physical delivery by BPA to an exchanging utilty ofln-Lieu PF
Power would raise issues regarding the utilty's "power planing (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 utility can
prudently manage its resource supply, that BPA should include contract language that allows the
utilty to "market any PF Exchange Power." Id. OPUC proposes that a new section 7(g) should
be added as follows:
H(g) Resale ofPF Exchange Power
Notwithstanding and Federal law prohibition on resale of Federal power. ~~Customer
Name~~ may remarket PF Exchange Power (sicl. In the event the power is remarket.
(sicl ~~Customer Name~~ shall provide BPA thirty days notice of such resale and
provide BPA any documentation necessary to identify the net proceeds from the sale.
~~Customer Name~~ 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 ofln-Lieu PF Power only to its residential and small far
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 utilty would sell its system surlus 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 utilty'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 small 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 priçe 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 utilty to BPA; that is, the PF
Exchange rate. However, it is possible that some or all of the rernarketed 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 if benefits were measued
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 afresulting 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 thån the latter.
Partes' Positions
The IOUs 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 Starrs Position
Section 7(d) of the proposed RPSA states that an exchanging utilty shall 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 or 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 strctured 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 utilty'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, BPA 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 utility'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 BP A realizing any benefit though a growing account balance (due to the exchanging
utility's election to suspend).
Finally, BP A 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 Comnission. See 16
U.S.C. §§ 83ge(i)(I) - (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 iou proposal wil not be adopted.
Issue 5
The following additional issues regarding in-lieu transactions were raised by certain parties:
(a) whether BPA should include the cost of transmission associated with delivering
In-Lieu PF Power to an exchanging utility 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 Coiig., i st Sess., at 29 (i 979) (in-lieu provision allows BPA to car out the
exchange power sales by purchasing power other than that offered by the exchanging utility 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 mindfl 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. Other related issues may arise as well in the context
of monetary-only in-lieu transactions. -
BPA wil address in the In-Lieu Policy proceeding the arguments and proposals made by'parties
in comments filed to date with respect to the above-referenced issues, plus 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 substantive issues were raised by parties 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 pedormance begins under the Agreement,i2
Evaluation of Positions
The OPUC states that a specific term for the: agreement is needlessly restrctive, that BPA has no
specific mandate to require that the contract term be 17 year, and that section 5(c)(l) of the
21 Several parties raised non-substantive issues and/or proposed non-substantive changes to contrct language. Most
(ifnot all) of these proposed changes were helpful in corrcting errors, clarifying the meaning of text, or resolving
possible ambiguities. They have larely been incoiporated into the final Agreements, but are not addressed
individually here.
22 As proposed, these contrcts 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 measured from
the date they are signed), service under the contracts is for a term of i 7 years.
36
Northwest Power Act requires BPA to offer an RPSA to an exchanging utilty whenever
requested. (OPUC, RPS0005, at 1.) OPUC states that the temiination provisions are not a
suffcient substitute for managing the temi of the contract since temiination is conditionaL. ¡d.
One ofBPA's goals is to assure that residential and small-fami consumers ofinvestor-owned
utilities receive a fair and reasonable share of the benefits from the Federal system over the long
temi, consistent with the law, that wil parallel the certainty obtained by public utilties. The
offering of20-year contracts to public utilty, LOU, and direct-service industrial customers at the
same time is a key component ofBPA's Long-Temi 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-temi 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 temis and conditions" specified in
section 5(c)(4) of the Act. In this case, BPA believes it is both desirable and reasonable to offer
contracts 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) ofthe Act has been to offer
contrcts with specified temi lengths that ar 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 aU specif expiration dates of September 30,2028.
Issue 2
Whether BPA should allow exchanging utilities 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, RPS0005, 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 tht all BPA customers should have access to BPA's conservation and
renewables discount program, or "C&RDP". (OPUC, RPS0005, at 2.) The OPUC disagrees
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. Id. The OPUC contends that, for example, puruant to any in-lieu transaction
BPA would be purchasing power and sellng such power to serve the exchanging utility's
residential loads. Id. The amount of In-Lieu Power purchased by BPA would directly depend on
the level of residential loads. Id. With conservation, residential loads would decrease, and
correspondingly, BPA's supply obligations would decrease as welL. Id.
BPA is not persuaded by the OPUC's argument. BPA replaced the Conservation and
Renewables Discount - a line item credit provided to BP A's customers on their monthly power
bils from BPA - in tle 2007 wholesale power rate case with the Conservation Rate Credit
f'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 utilities have access to the CRC under their section 5(b) requirements contracts with
BP A, if any, but BP A does not have an actual load serving obligation under the RPSAs or
section 5(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 ofIn-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, RPS0005, at 2.) Therefore, OPUC reasons, all ofBPA's customers would
benefit from lower exchange costs ifIOU loads were reduced though conservation. Id.
However, OPUC fails to acknowledge the purse ofBPA's conservation program is to pursue
conservation equivalent to all cost-effectivè 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 determning BPA's conservation
target, nor wil BPA provide separate funding for conservation for these loads. However, if BPA
enters into a load obligation with an lOU under section 5(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 exchaging 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 eRC.
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 / to
November J.
Parties' Positions
Snohomish proposes that the October I commencement 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 I.)
BPA Staff's Position
The draft RPSA states that upon fiing an Appendix I, the utility shall commence invoicing for
eligible load on the later of the date of such filing or October 1.
Evaluation of Positions
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 afer November I, to allow time to gather and utilze the October data and submit the
. invoice. (Snohomish, BNR007, at I.)
Snohomish's point is well taken. Under the 2008 ASe Methodology, a utilty makes an
Appendix I fiing and receives a BPA ASe for the exchange period prior to the start of the rate
period. In addition, as Snohomish points out, the utilty submits an invoice each month during
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.
BP A wil amend section 4 to provide that upon fiing an Appendix 1 for an Exchange Period, the
utilty shall commence invoicing for Residentìal Load Eligible for Monetary Benefits, pursuant
to section 8. I of the Agreement, 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 payent section.
Parties' Positions
Snohomish proposes that BPA make certain clarifYing amendments to section 8 of the proposed
Bndge RPSA. (Snohomish, BNR007, at 2.)
BP A Stafls Position
The stardard provisions in the Bndge RPSA are identical to the standard provisions in all of
BPA's Subscnption contrts, which all expire on September 30, 20 11. BPA believes it is
importart for puroses of implementing these vanous agreements, and to avoid ambiguity, that
these standard terms not be altered.
Evaluation of Positions
Snohomish states that section 8 of the Bndge RPSA is unclear ard should be redrafted to allow
for greater clanty. (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
pursuat to section 8(b) where ....Customer Name;~ 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 Nam~~ (Due
Date). If the ~1I-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 charge shall be applied each day to ary unpaid
balance. The late payment charge is calculated by dividing the Prime Rate for Large .
Bans as reported in the Wall Street Journal, plus 4 percent, by 365. The applicable
Pnme 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
....Customer Name~~'s established procedures."
¡d. .
BPA agrees that the Bndge RPSA larguage would be improved if Snohomish's proposal were
adopted. However, one pnnciple BPA wants to adhere to in connection with the Bridge RPSA
is that the Agreement contain the same stardard provisions as contained in Subscnption
contracts other BPA customers currently hold, ard that expire along with the Bndge RPSA on
September 30, 20 i i. This creates parity among' the other Subscnption contract holders who
40
canot change their contract language at the moment, avoids possible ambiguities regarding
interpretation as between the agreements, and makes administration 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 EPA should change the interest rates on disputed bils to that of late payments.
Partes' 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 Bank plus four
percent, and that BP A should make these rates tpe 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 purposes. The higher interest rate provides a customer
the incentiv'e to pay BP A on time and imposes a reasonable penalty if it does not. In the event of
a disputed bil, however, the utilty pays the amount in dispute to BPA and then works with BPA
23 The Bridge RPSA refers to the Prime Rate for Large Banks, but the Long-Temi RPSA refers only to the P.rime
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 Agreements.
41
to resolve the dispute. In this case, BPA receives the fuds, and the utility does not have the
abilty 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. Giving the two different actions the same penalty
would tend to encourage the utilty 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 utility 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 bil and then tr to resolve the dispute.
Decision
BPA 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
puruant to section 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 Staff's 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 paragrph of section 9 of the RPSAs sets 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, BPA 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 draft RPSA states
that any such over or underpayment is due within 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 permits an exchanging
utility to receive an adjustment even where the underpayment is due to that utilty's own "failure
to submit eligible Residential Load" data to BPA. Snohomish suggests the intent of this section
is to make partes whole when the over or underpayment is due to an honest error, not the failure
to adequately perform the requirements of the RPSAs. Snohomish proposes the language in
section 9 be amended as follows:
"If BPA determines that ....Customer Name~~ has not received monetar benefits due to
~~Cl;stomer Name;;;; failure to submit eligible Resideatial Load or otler an errors in
implementing this Agreement that resu1t~ 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 nas the responsibility 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 srnall farm load data. All other variables are determned in a
process prior to the exchange period. Allowing a utility to receive tred-up monetary benefits to
correct for inaccurate data submitted in the first instance would put BPA in the position of
always having to true-up any movement in such loads that should have been known to the utilty,
and submitted to BPA, in the first instance.
Decision
BPA wil not charge interest on over or underpayments, but wil amend the language in section 9
as proposed by Snohomish.
43
Issue 7
Whether BPA has the legal authority to pay money to the ¡OUs 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 Stafrs Position
This issue is being addressed by BPA in the WP-07 Supplemental Wholesale Power Rate Case
("WP-07 Rate Case"). BPA wil mae REP benefit payments, if any, to exchangig utilities,
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 viewPPC'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, BPA 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 thè 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 detennine 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 IPUC argues that section 20 should be elinñnated from the RPSA because it conflicts with
section 3(b) of the 2000 REP Settlement Agreements, which provided that in the event a court
determined that the 2000 REP Settlement Agrement 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 IOUs under the proposed RPSAs consistent with the decisions in that
proceeding. However, BPA has amended section 20 to include language proposed by the IOUs
that clarifies that parties 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 ha 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 beenforced against BPA. '
Decision
BPA wil not delete section 20fromthe RPSA, out has amended that section to make clear that
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 IODs argue that the Regional Dialogue contrcts should not assign all Environmental
Attributes associated with those power resources solely to PF Preference rate customers. (lODs,
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. ¡d.
BPA Staff's Position
The proposed RPSA did not address this issue because there is insuffcient infonntion 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 IODs referenced here comments regarding the disposition of Environmental Attibutes
submitted in connection with the draft Master Regional Dialogue Contract Template. (IOUs,
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. ¡d.
BPA recognizes that the IOUs have concerns over BPA's treatment of Environmental Attbutes
(including in the form of Renewable Energy Certificates and carbon credits) associated with the
Federal system. However, BPA canot address those concerns in this ROD. First, the full value
of Environmental Attibutes associated with the Federal system, including Renewable Energy
Certficates and carbon credits in paricular, is unkown at this time. These markets are stil
evolving, and. there is insuffcient information available upon which BPA can make a fiiial
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, BPA 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 utilties. Consequently, the
issues that must be addressed in this ROD are limited to matters that directly relate to the
distribution of REP benefits. The concerns raised by the IOUs as to how BPA wil use
the Environmental Attributes, Renewable Energy Certificates, or carbon credits of the
Federal system go beyond the issues BPA must or can address though the RPSA.
Decision
BPA cannot make any decisions in this ROD on,ihe 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 2 J to allow for possible additonal forums
for determining adjustments referred to therein. .
Parties' Positions
The OPUC argues that the language in the currnt draft does not provide the customer any nghts
in determining forums, or ensunng due process, for adjustments to entitlement to monetar
benefits. (OPUC, RPS0005, at 5-6.)
BPA Staffs Position
Section 2 i of the proposed RPSA provides that any adjustments referred to therein would be
limited to those formlly established by BPA in its wholesale power rate adjustment proceedings
or other forums established by BPA for the determination of the amount of overpayrnent 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 rronetar benefits provided .:.:Customer Name;:;: under this Agreement shall be
subject to adjustment by BPA to account for the overpayment of benefits under the
Residential E)5change 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 forus eslablished by mutually agreeable to BPA and the .:.:Customer Name;:;: for
the determnation of the amount of overpayment to be recovered and the recovery period.
Agreement by the Customer regarding choice orother forum shall not be unreasonably
withheld"
Id
The adjustment of monetar 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 oan 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. obligations. Any par
that believes its legal rights have been infrnged though 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 traditionally 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 contracting with all eligible utilties applying for
REP benefits though 2028. The residential exohange has trditionally been implemented as a
finacial transaction - Le., BPA has provided monetar 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 undertake an in-lieu transaction, and adopts an In-Lieu Power Policy that provides for physical
deliveries. Nevertheless, the new RPSAs are expected to be primarily administrative in nature
(i.e., monetary) and accordingly would not be expected tc? result in enviromneIital effects. In
addition, the new RPSAs wil car 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 substatial change in consumer or utilty behavior with the potential for
environmental effects. Furter, the potential resource development and acquisition consequences
of different scenaros under the REP were anticipated in BP A's Business Plan Environmental
Impact Statement (DOE/EIS-01 83, 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 conuents received by BP A on the foregoing issues regarding
BPA's proposed Short-Term Bridge and Long-Term RPSAs. Based upon the record compiled in
this pròceeding, the decisions expressed herein, and all requirements oflaw, I hereby adopt the
foregoing RPSAs in the form attched hereto as Attachments Band C, respectively. The
48
evaluations and decisions used in the development Qfthe proposed RPSAs are consistent with
the above referenced environmental analysis.
Issued at Portland, Oregon, the 4th day of September, 2008.
lsi Stephen 1. 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 Progra (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 "Bndge RPSA," wil implement the REP between October I, 2008,
and the time the Regional Dialogue Long-Term RPSA takes effect (currently scheduled to be
October 1, 2011). The Bndge RPSA is based on the onginal 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, called 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-Term contracts,
as well as language unique to the RPSA. Through this letter, BPA is seeking comments related
to only the non-standard provisions in the RPSA (highlighted in yellow). Comments on the
standard contract provisions have recently undergone informal public review and wil continue to
evolve though the public process on the Supplement to the Long-Term Regional Dialogue
Policy in June and early July.
BP A 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
BPA is requesting your comments on the contracts descnbed in this letter and enclosed as
Enclosures i and 2. These contracts can also be found at BPA's website at
http://www . bpa. gov/corporate/finance/ascm/l etters.cfm.
2
Corrents on the two contracts must be received by 5:00 p.m., Pacific Standard Time, on
June 16,2008. Corrents can be submitted on-line at: www.bpa.gov/comments; via e-mail to
correnttâbpa.gov; via mail 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 corrents, toU free at 1-800-622-4519. Please reference "Bridge and RD
RPSA Agreements" with your corrents.
Sincerely,
lsi Mark Gendron
Mark O. Gendron
Vice President
Northwest Requirements Marketing
Enclosures:
(1) Bridge RPSA
(2) RD Long-Term RPSA
Section
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
is.
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.ns ........:..................................................................................................
Applicable PF Exchange Rate .................~.......................................;................
Establishment of ASC to Activate Agreement ...............................................
Offer By ((Customer Name)) and Purchase By BP A......................................
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 .............................................................................................
N otices ...............~...................................................~................................................
Cost Recovery ...'..~...................................................................................:............
Uncontrollable Forces .......................................................................................
Governing Law and Dispute Resolution ..................."..........".."...........".."...
Statutory. Provisions .............................................................................................. .
Standard Provisions .............................................................~............................
20.
21.
Notice Provided to Residential and Small Farm Consumers .......................
(Dra./er's Note: For Publics, delete section 20 and change section 2 ¡ (Signatures) to
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 (Agreernent) is executed
by the UNITED STATES OF AMERICA, Departent of Energy, acting by and though the
BONNEVILLE POWER ADMINISTRATION (BPA), and ((FULL NAME OF CUSTOMEIQ)
(((Customer Name))), hereinafter individually referred to as "Party" and collectively referred to
as the "Paries". ((Customer Name)) is a (( )) organized under the laws of the State
of ((____)) to purchase and distrbute electrc power to serve retail consumers from its
distrbution system within its service area.
RECITALS
Section 5(c) of the Nortwest Power Act provides that a Pacific Nortwest Regional
electric utilty 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 utility and such utilty shall
purchase such electrc power at the PF Exchange rate. The cost benefits of such purchase and
exchange sale attrbutable to a utility's residential load within a State shall be passed directly
through to that utility's residential load within such State.
The Paries agree:
1. 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, 2011, unless terminated earlier pursuant to
section 11 below. Performance by the Parties of their obligations under this
Agreement shall commence on October 1, 2008. Upon termination of this
Agreement, all obligations incurred hereunder shall be preserved until satisfied.
2. DEFINITIONS
Capitalized terms below shall have the rneaning stated. Capitalized terts 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.
2.1 "Appendix i" means the electronic form on which ((Customer Name)) reports its
Contract 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 5(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 BPA 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 i data at
the commencement 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 accordace 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 i, all in
accordance with the ASC Methodology. Under no circumstances shall Contract
System Costs include costs excluded from ASGby section 5(c)(7) of the
Northwest Power Act. . .
2.9 "Contract System Load" means (1) the total Regional retail load included in the
Form i, or (2) for a consumer-owned utilty (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. i 2 "Effective Date" means the effective date of this Agreement, as determined
pursuant to section i above.
08PB-((####)), ((Customer Name))3
2.13 "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" means the period beginning each October 1 and ending the
following September 30.
2.1 5 "Form 1" means the anual filing submitted to the Federal Energy Regulatory
Commission required by 18 CFR §141., as specifed in the ASC Methodology.
2.16 "In-Lieu PF Power" means finn power that is sold by BPA to ((Customer Name))
in an in-m:u transaction at the applicable Priority Finn Power Exchange Rate, or
its successor.
2.17 "In-Lieu Power" means finn power acquired by BPA from a source(s) other than
((Customer Name)) at a cost less than ((Customer Naine))'s ASC, as provided in
section 5(c)(5) of the Northwest Power Act. Th~ provisions for acquisition and
delivery ofln-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 ofln-Lieu Power by BPA, and
(2) the delivery and sale ofln-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 Northwest Power Act and in BPA's NLSL Policy.
2.21 "Nortwest Power Act" means 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 cOlmnission or consumer-owned utility
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 section5(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 furter defined in Exhibit A, Residential Load Definition.
2.26 "Residential Load Eligible for Monetar Benefits" means the monthly amounts of
Residential Load determined 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 oftime durg which ((Customer Name))'s
Appendix i is under review by BP A. The Review Period begins on June 1 and
ends on or about November 15 of the Fiscal Year prior to the Fiscal Year BPA
implements a change in wholesale power rates.
2.28 "Uncontrollable Force" shall have the rneaning specified in section 15.
3. APPLICABLE PF EXCHANGE RATE
Purchases by ((Customer Name)) ,under this Agreement are pursuant to the
applicable Priority Firm Power Exchange (PI" 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. ESTABLISHMENT OF ASCTO ACTIVATE PARTICIPATION
The first Exchange Period during which .((Customer Name)) may activate its paricipation
under this Agreement shall commence on October 1, 2008. ((Customer Name)) may
activate its paricipation under this Agreement by fiing an initial Appendix 1 for the
initial Exchange Period that it has selected. Once ((Customer Name)) fies an initial
Appendix 1, ((Customer Name)) shall continue to fie a new Appendix 1 for each
subsequent Exchange Period, unless and until ((Customer Name)) elects to terminate or
suspend this Agreement pursuant to section i 1 below. Upon filing an Appendix 1 for an
Exchange Period, ((Customer Name)) shall commence invoicing for Residential Load
Eligible for Moneta Benefits, pursuant 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 establìshed under section 4
above, ((Customer Name)) shall offer and BPA shall purchase each month an amount 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 that 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 BPA
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
ifthe 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 Moneta'r Benefits that BP A proposes to
serve with In-Lieu PF Power, 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 Elìgible 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 N aine))' 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) ofln-Lieu Power, the amount ofln-Lieu Power,
the shape ofln~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-((#####)), ((Customer Name))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 irnplement 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 BP A, 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, which shall include, but is not limited to (i) the source(s) of In-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 ofIn-Lieu PF Power, the monetization of the value of such
deHveries, 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
(Drqfter's Note: For Publics. delete (iv) in section 8.1.1 belo'w and change M 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 Monetar
Benefits that ((Customer Name)) has elected to exchange pursuant to
sections 5 and 6 above, (ii) ((Customer Name))'s ASC, (iii) ((Customer
Name))'s applicable PF Exchange rate, (iv) any adjustment pursuant to
section 20, and (v) any adjustment puruant 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 sub-ject 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
instructions on each such invoice.
8.2 Biling and Payment for In-Lieu PF Power
In the event monthly amounts ofln-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 NmPM an estimated bil followed by a final bil.
. PBL shall send all bils on the bill'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 summar 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 bue 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 Joural, 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 refud 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 ~UDGETING
((Customer Name)) shall keep up-to-date records, accounts, and related documents that
peïtain to this Agreement. These records, accounts, and documents shall contain
information that supports:
(1) ((Customer 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 Monetary 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-through of such benefits to
Residential Load Eligible for Monetar Benefits.
BP A's right to review or inspect ((Customer N arne))' 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 ofBPA's determination, or BPA may adjust future monetary benefit
payments to ((Customer Name)). IfBPA determines that ((Customer Name)) has not
received moneta benefits due to errors in implementing this Agreement that result in an
underpayment, then BP A shall pay ((Customer Name)) such monetar benefits within
30 days of BP A's determination 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
10.1 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: (1) a ~eparately stated credit to
applicable retail rates; (2) monetar¡ 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 11. 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 monetary 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, fuer, 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
(ICustoIlier 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. i
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. TERMINA nON AND SUSPENSION OF AGREEMENT
11. i Termination of Agreement
11.1. ((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 of this 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 such request.
11.2 Suspension of Agreement
1 i .2. i ((Customer Name)) may suspend performance under this Agreement for
any reason upon 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 Pares as. of such
date, and such suspension shall continue through September 30, 20 i i.
i 1.2.2 Upon suspension of this Agreement pursuat 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.
i 1.3 Remedies
If the Fedeml Energy Regulatory Commission (FERC) or a court of competent
jurisdiction remands, reverses, or otherwise finds unlawful a BPA final decision
or decisions that affect an exchanging utilty's receipt, or failure to receive,
Residential Exchange Program benefits, BP A wil review and determine the rights
and obligations of the Parties through additional administrative actions(s) as
necessar to respond to such regulatory or court decisions.
12. BALANCING ACCOUNT
12.1 Balancing Account
Drafter's Note: First sentence afthis seäion jòr the Bridge RPSA wil have one of
two possible versions. Version 1 wil be usedfor a utilty with a deemer carry
over from the 198/ RPSA. Version 2 for a utility with no carryover.
Version 1 Bridge.' The BA balance attbutable to carr over amounts under the
1981.RPSA 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 = ~CPlm/CP1m-i-il*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-binlsurveymost?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+!) shall then be:
BA_B m+l =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 utilty'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 BPA 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
BPA 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 liability of
((Customer Name)) to the BA of a successor RPSA or other agreement
implementing the Residential Exchange Program.
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 riotice of such change consistent with this section.
If to ((Customer Name)):If to BPA:
))
))
Bonnevile Power Administration
P.O. Box 3621
Portland, OR 97208-3621Attn: ~ ~
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 trsmission 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 Par claiming the Uncontrollable Force that impairs that Part's
ability to perform its contractual obligations under this Agreement and which, by exercise
of that Par's reasonable diligence and foresight, such Par could not be expected to
avoid and was unable to avoid. Uncontrollable Forces include, but are not limited to:
15.1 any unplanned curtailment or interruption 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 Name))'s distribution facilties, including but not limited to unplaned
maintenance outages;
15.3 any planed transmission or distribution outage that affects either ((Customer
Name)) or PBL which was provided by a third-par transmission or distrbution
owner, or by a transmission provider, including TBL and ((Customer Name)), that
is functionally separated 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 immnent strikes or work
stoppage;
15.5 floods, earquakes, or other natual disasters; and
15.6 orders or injunctions issued by any court having competent subject matter
jurisdiction, .or any order of an administrative .offcer which the Par 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 this 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 inability 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 liability to the other, for
the duration of the Uncontrollable Force and the period reasonably required for the Part
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 hep R" means "Center/or Policy Resolution."
CPR is a proper name and should not be spelled out.)
(OP110NSfor section 16.
Option I-Inelude the/allowing if customer prefers to Iii.~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 this
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 fbllowing if customerprejèrs 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 jursdiction of the United
States Ninth Circuit Cour of Appeals. Any dispute regarding any rights ofthe
Parties under any BPA policy, including the implementation 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 BP A policy means any written document adopted by BP A as a final
action in a decision record or record of decision that establishes a policy of
general application, or makes a determination 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 Paries agree
otherwise. The CPR Institute for Dispute Resolution's arbitration procedures for
commercial 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
Pares 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 Paries 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
arbitration shall take the first strike. This process shall be repeated until three
arbitrators 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 circumstaces shall specific
performance be an available remedy against BPA. The arbitration award shall be
final and binding on both Paries, 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.
i 6.5 Each Part shall be responsible for its own costs of arbitration, including legal
fees. The arbitrator(s) may apportion all other costs of arbitrtion 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 OP710NS/ór 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 5(a) of the Bonnevile
Project Act, P.L. 75-329.
17.2 New Large Single Loads(09/05/00 Version/or Block)
17.2.1 General
All existing NLSLs are listed in section i 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), "Consumef' 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
determination 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 customary billng and service policy;
(F) consistent application ofthe foregoing criteria in similar fact
situations; and
(0) any other factors the Parties determne to be relevant.
PBL shall show an increase 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 consumption
of the Consumer's load associated with a new facilty, an existing facilty,
or expansion of an existing facilty durg the immediately past i 2-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 Consurner as
of September 1, 1979, whichever is greater.
/OP110NS for section 17(b)(4).
Option I-Include thefollowing ifcusiomer has no CFICT loads.
17.2.4 CF/CT Loads
((Customer Name)) has no loads that were contracted for, or commtted to,
as of September 1, 1979, as defined in section 3(13)(A) of the Northwest
. Power Act.
08PB-((#####)), ((Customer Name))17
Option 2-Include the following ifcustomer has cncr loads.
17.2.4 CF/CT Loads
The following loads were determined by the Admnistrator to be
contracted for, or committed to, as of September 1,1979, as defined in
section 3(l3)(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 commtted to, as ofSeptember 1,
1979:
Facilty description:
End of OPTIONS for section 17(b)( 4)../
17.3 Priority of Pacific 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:
EPA is legal(y obligated to offer to make section 320 I (i) ofP.L. 104-134 a part of
this Agreement. Customer may exclude this provisíon at their option.)
18. STANDARD PROVISIONS
18.1 Amendments
No oral or written amendment, rescission, waiver, modification or other change of
this Agreement shall be of any force or effect unless set forth in a written
instrent signed by authorized representatives of each Part.
i 8.2 Assignment
This Agreement is binding on any successors and assigns of the Parties. BPA
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
Agrement, in whole or in par, without the other Part's written consent. BPA
shall consider any request for assignment consistent with applicable BPA statutes.
Such consent shall not be unreasonably witheld. ((Customer Name~) may not
transfer or assign ths Agreement to any of its retail custorners.
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 otherwse 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 Parties. 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 Freedorn oflnformation
Act. BPA may use such information as necessary to provide service 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 part of
this Agreement, and documents incorporated by reference, constitutes the entire
agreement between the Parties. It supersedes all previous communications,
representations, or contracts, either written or oral, which purort to describe or
embody the subject matter of this Agreement.
i 8.5 Exhibits
The exhibìts 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 power to any points beyond 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 daage 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. Electrical 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 Name))19
or have any direct or indirect cause of action or claim in connection with this
Agreement.
18.8 Waivers
Any waiver at any time by either Par to this Agreement of its nghts with respect
to any default or any other matter ansing 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 Name)) 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 186).
This provision is optional af customer's discretion.
18.10 Hold Harmless
Each Part assumes all liabilty for injury or damage to persons or propert
ansing from the act or negligence of its own employees, agents, members of
governing bodies or contractors. Each Part shall indemnify and hold the other
Part harless from any liabilty ansing from such act or negligence.
End of OPTION for section 18G).)
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/ollowing section 20 ONLY for ¡OUs
20. ADJUSTMENTS TO MONETARY BENEFITS
The monetar 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 established by BP A for the determnation of the amount of overpayment to be
recovered and the associated recovery period; provided however, tht 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.jòr the.Load Reduction Agreement
in this paragraph. For the other ¡OUs, delete (ii).
Notwithstanding 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 surive even if any other
provision(s) of this Agreement is held to be not consistent with law, or void or otherwse
unenforceable.
End seciion 20for JOUs on~v
Drafter Note: For publics. change section number below from 21 to 20.
21. SIGNATURES
Each signatory represents that he or she is authorized to enter into this Agreement on
behalf of the Par for whom he or she signs.
((FULL NAME OF UTILITY))UNITED STATES OF AMERICA
Department of Energy
Bonneville Power Administration
By By
Name Name
(Prinirrype)(Prinirrype)
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) (t.'whedule"
(B) ((schedule"
(C) ((schedule", and
(2) a portion of the Residential Load supplied by ((Customer Nam~) 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:
Irgation/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
utilty business practices, and
24 is the number of hours in a day.
3. When more than one far is supplied from a cornon pumping installation, the irrgation
and pumping load of the installation shall be allocated among the fars using the
installation, based on the method (e.g., water shares, acreage) that the farms use to
09PB-((#####)), "Customer Name))l of3
allocate the power costs among themselves. These allocated loads shall then be
combined with any other irrgation and pumping loads attrbuted to the far under
section 2 of this exhibit. In no instance shall any far's total qualifying irrgation loads
for any biling 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 far
land) that is used primarily for agriculture. Agrculture 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 ofland may not be subdivided into a larger number of parcels in order to attempt
to increase the number of fars. Ownership or leasehold interests in farms may not be
changed in order to attempt to increase the number of farms, for exarnple, by leases to
family members or establishment of parnerships, corporations or similar devices.
Acquisition of a parcel which was previously a separate fann becomes part of the single
farm that acquired the parceL. In order for a noncontiguous parcel to constitute a separate
far, the farm must not share any equipment or labor with any other parcel and must
maintain separte financial statements, accounting records, and tax returns as of May 1,
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 BP A and such application must be reviewed and
approved by BPA before the new far is eligible to receive benefits for such irgation
loads. A number of additional factors may be used by BPA 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 billng
period.
09PB-((#/)), ((Customer Name))
Exhibit A, Residential Load Definition
2 of3
6. The operator of a fan is required to certify to ((Customer Name)) all irrigation accounts,
including horsepower rating for that farm, including all irrigation accounts commonly
shared. The operator of a farm is required to provide ((Customer Name)) and BPA all
documentation requested to assist in the far determination.'
7. This exhibit shall be revised to incorporate additional qualifying tarff schedules, subject
to BPA's determnation that the loads served under these schedules are qualified under
the Northwest Power Act.
09PB-((##)), ((Customer Name))
Exhibit A, Residential Load Definition
3 of3
Exhibit B
NEW LARGE SINGLE LOADS
(Drafter's Note: For each NLSL in this section include the/allowing: the retail electric power
coi/slimeI' name, the facility location, the date the load became a NLS!., a description of
the
NLSL. and how the NLSL shall be seri:ed(lBPA serves theNLSL. Contracted Po-wer wil be
provided under the NR rate schedule unless the Parties agree to service under a surplus rate
schedule. and establishes rates aiid biling/actors in g"hibif D, Additional Prodiicts and Special
Provisions.)
¡OPTIONS for section (a).
Option J-Include the/allowing if customer has no existing NLSL.
1. ((CUSTOMER NAME)) HAS NO EXISTING NLSL.
Optron 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 NISI policy (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 LISTED
BELOW.
End ()fOPTIONS for ,sect;()i (a).l
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-((####)), ((Customer Name))1 of i
Exhibit C
2008 AVERAGE SYSTEM COST METHODOLOGY
09PB-((If##)), ((Customer Name))I ofl
EXHIBITD
SCHEDULING
1. PURPOSE OF THIS EXHIIT
The purpose of this exhibit is to identify power scheduling requirements and
coordination procedures necessaryfor the delivery of electric power and energy sold
under this Agreement. All provisions apply to Purchasing-Selling 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, REALTIME, AND AFfER-
THE-FACT REQUIREMENTS
2.1 General Requirements
2.1. i 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:
(1) to comply with rules or orders issued by FERC, NERC, or WSCC 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 shall 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 (ATF) per both
paries' ATF processes.
2.1.6 BPA is not obligated to accet 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 Name))1 of4
reserve the transmission necessary 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"
format.
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. i. i i 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
2.2.1 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 (Califomia~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 ofE-tag
information) 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-((##)), ((Customer Nainl:) 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 arrangements 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)(I) 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) will 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 paries 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 frquency 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 paries, advance hourly Transactions thrugh the
following Workday(s). Preschedules apply to the following day or days (if the
following day or days are not Workdày(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 Nome))
Exhibit D, Scheduling
30f4
3 .5 Real-Time: The hourly or mInute-to-mInute operation and scheduling of a power
systern as opposed to those operations which are prescheduled a day or more in
advance.
3.6 Schedule: The planed Trànsaction approved and accepted by all PSEs and
Control Areas involved in the Transaction.
3.7 Transaction: An agreement aranged 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-((#l)), ((Cuiitomer Name))
Exhibit D, Scheduling
40f4
ATTACHMNT C
RD RPSA Template
The Regional Dialogue RPSA agreement wil be published separately once the standard (non-
RPSA) provisions are finalized.