20040519BPA Payment Report.pdf

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ATTORNEYS AT LAW idaho Public Utilities Commission
Office of the Secr~taryRECEIVED
900 sow. Fifth Avenue, Suite 2600
Portland, Oregon 97204
main 503224.3380
fax [phone]
www.stoel.com
5 TO E L~ R
MAY 1 9 200~
May 18 2004
Boise, Idaho
MARCUS A. WOOD
Direct [phone]
mwoodCfYstoel. com
Idaho Public Utilities Commission
472 West Washington
Boise, ill 83702-5983
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Attention:Jean D. Jewell
Commission Secretary
Re:Agreement Regarding Payment of Residential Exchange Program Settlement
Benefits During BP A Fiscal Years 2007 Through 2011
If offered by the Bonneville Power Administration ("BP A"), PacifiCorp expects it may
execute as early as May 28 2004, and in any event prior to June 3, 2004, an Agreement
Regarding Payment of Residential Exchange Program Settlement Benefits During Fiscal Years
2007 Through 2011 , between the Bonneville Power Administration and PacifiCorp, BPA
proposed Contract No. 04PB-11468 , comparable to the form of agreement that is attached to this
letter (the "FY 2007-2011 Agreement"). This letter is intended to provide the Idaho Public
Utilities Commission ("Commission ) with information concerning the background and
provisions of the FY 2007-2011 Agreement.
Overview of the FY 2007-2011 Agreement
The FY 2007-2011 Agreement would amend two existing agreements between
PacifiCorp and BPA. Under these amendments, as more fully explained below, (1) PacifiCorp
and BP A would modify provisions relating to calculation of monetary benefits payable to
PacifiCorp by BPA during the October 1 2006 through September 30, 2011 period (i.BPA
fiscal years ("FY") 2007-2011), and (2) PacifiCorp would waive one-half of the Reduction of
Risk Discount payments it otherwise would be entitled to receive. The monetary benefits would
be provided in settlement of rights that PacifiCorp s residential and small farm customers
otherwise were entitled to receive under Section 5(c) of the Pacific Northwest Electric Power
Planning and Conservation Act, P.L. 96-501 ("Northwest Power Act"
).
PacifiCorp is required to
pass all such benefits through to its residential and small farm customers in Oregon, Washington
and Idaho.
The prior related agreements are:
Oregon
Washington
California
Utah
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May 18 2004
Page 2
The Settlement Agreement between BPA and PacifiCorp (BPA Contract No. 01-
PB-12229, dated 10/23/00) and the related Firm Power Block Power Sales
Agreement between BPA and PacifiCorp (BPA Contract No. 01-PB-12229, dated
October 24, 2000) (collectively, the "Settlement Agreement"
The Settlement Agreement, for FY 2002-2006, provides for the benefit ofPacifiCorp
Idaho customers 74 aMW of firm power (out of 251 aMW provided PacifiCorp for its customers
in all states) and 66 aMW of monetary benefits, in lieu of firm power (out of 225 aMW of such
monetary benefits provided PacifiCorp for its customers in all states) Each megawatt-hour of
monetary benefits currently is valued based on the difference between a forward flat-block
electricity price forecast for the FY 2002-2006 period, as established by BP A in a power rate
case, and the lower of (i) BPA's RL rate for sale of power during such period or (ii) the lowest
PF rate applicable to the sale of power to public body and cooperative customers ofBPA during
such period.
For the period FY 2007-2011 , the Settlement Agreement currently provides for the
benefit ofPacifiCorp s Idaho customers 140 aMW of combined firm power and monetary
benefits (out of 586.8481 aMW of such benefits provided PacifiCorp for its customers in all
states). BP A reserved the right to specify how much of the total benefit it would deliver as firm
power and how much of the total benefit it would provide in the form of monetary benefits.
and to the extent BP A elected to provide monetary benefits, each megawatt-hour of monetary
benefits would be valued based on the difference between a forward flat-block electricity price
forecast for the FY 2007-2011 period, as established by BP A in a future power rate case, and the
lower of (i) BP A's RL rate for sale power during such period or (ii) the lowest PF rate applicable
to the sale of power to public body and cooperative customers ofBPA during such period.
Agreement Regarding Conditional Deferral of Reduction of Risk Discount
Amount, between BPA and PacifiCorp (BPA Contract No. 02PB-11157) dated as
of June 20, 2002 (the "Deferral Agreement"
The Deferral Agreement provides for a conditional waiver of Reduction of Risk Discount
payments that PacifiCorp is entitled to receive under a Financial Settlement Agreement between
BPA and PacifiCorp (BPA Contract No. 01PB-10854) (the "Financial Settlement Agreement"
The Deferral Agreement was executed at a time when discussions were in an advanced stage
between PacifiCorp and the other investor-owned utilities in the Pacific Northwest and numerous
publicly-owned utilities and cooperatives regarding a comprehensive settlement of various BP
matters, including litigation relating to subscription benefits. The deferral was intended to
provide a window for completion of negotiations for a settlement that, if entered, would include
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a permanent waiver by PacifiCorp of the Reduction of Risk Discount payments. The Deferral
Agreement, however, permitted unilateral termination of the deferral if either (1) PacifiCorp
determined that the current comprehensive subscription settlement efforts were unlikely to be
concluded successfully to PacifiCorp s satisfaction or (2) this Commission, the Oregon Public
Utilities Commission, or the Washington Utilities and Transportation Commission objected to or
disapproved continuation of the deferral period. To date the deferral has not been terminated and
no Reduction of Risk Discount amounts have been paid by BP A to PacifiCorp.
II.Events Leading to Negotiation of the FY 2007-2011 Agreement
PacifiCorp negotiated and was prepared to enter a proposed (a) Stipulation and
Agreement of Settlement, (b) Amendment No.1 to the Financial Settlement Agreement between
BPA and PacifiCorp (BPA Contract No. 01PB-10584) and (c) Amendment No.2 to the
Settlement Agreement between BPA and PacifiCorp (BPA Contract No. 01PB-12229)
(collectively, the "Comprehensive Settlement"
The Comprehensive Settlement (1) would have settled all challenges related to the
Settlement Agreement, the Financial Settlement Agreement or implementation thereof (and to
comparable agreements and implementation between BP A and the other investor-owned utility
parties) and (2) would have made changes to BP A's elections under the Settlement Agreement
and calculation of benefits under the Settlement Agreement, to better assure continued benefits
for PacifiCorp s retail customers in Oregon, Washington and Idaho for the period FY 2007-2011.
In exchange, PacifiCorp would have (1) permanently surrendered all Reduction of Risk amounts
provided under the Financial Settlement Agreement and (2) along with the other investor-owned
utility parties, deferred each year for the three-year period FY 2004-2006, an additional
$75 000 000 in benefits under its Settlement Agreement and under similar agreements between
BP A and the other public utility parties.
The Comprehensive Settlement could go into effect only if accepted by all of the
municipal utilities, public utility districts, peoples ' utility districts , and electric distribution
cooperatives then challenging the benefits provided to residential and small farm customers of
the investor-owned utilities through contracts with BP A (the "Public Litigants
).
While most
Public Litigants did in fact support the Comprehensive Settlement, a few holdouts prevented this
region-wide agreement from becoming effective.
Following the failure of the Comprehensive Settlement, BPA and the region s investor-
owned utilities have addressed whether certain portions of the Comprehensive Settlement that
were beneficial to BP A and its customers, including the residential and small farm customers of
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the investor-owned utilities, could be adopted in bilateral contracts without a requirement that the
Public Litigants also be parties. These discussions led to the negotiation of a series of bilateral
agreements between BP A and each of the region s investor-owned utilities, of which the
FY 2007-2011 Agreement is the version applicable to PacifiCorp and BP A. Each of these
agreements is subject to a BP A public process, in which BP A will consider comments from third
parties. If following the comment period, BP A confirms its willingness to execute the FY 2007-
2011 Agreement, PacifiCorp would expect that prior to June 3, 2004, such agreement would be
executed by both BPA and PacifiCorp and BPA would release related Records of Decision;
June 3 , 2004 is the nearest deadline for PacifiCorp to provide notice of a termination of the
deferral of the Reduction of Risk Discount.
III.Provisions of the FY 2007-2011 Agreement
Because of the inability to obtain unanimous consent of the Public Litigants, BP A and
PacifiCorp are unable to enter an agreement settling litigation related to the Settlement
Agreement. BP A and PacifiCorp, however, bilaterally would agree to provisions that were in the
Comprehensive Settlement related to calculation of benefits for the period FY 2007-2011.
Because of the value of these provisions to PacifiCorp s Oregon, Washington and Idaho
residential and small farm customers, PacifiCorp would provide in return for such benefits a
portion of the consideration it would have paid under the Comprehensive Settlement.
The specific provisions of the FY 2007-2011 Agreement are as follows:
Calculation of Benefits under the Settlement Agreement for the period FY 2007-
2011.
These provisions are identical to provisions the Commission earlier approved in the
Comprehensive Settlement related to the calculation of benefits under the PacifiCorp
Settlement Agreement. These provisions are:
(1) BPA will surrender its right to elect whether to deliver subscription power
or in the alternative monetary benefits, to the investor-owned utilities in the FY 2007-
2011 period. Instead, all benefits will be delivered as monetary benefits.
(2) BP A will accept a calculation of monetary benefits in the FY 2007-2011
period based on a forward flat-block electricity price forecast derived from an
independent survey of the forward price curves of buyers and sellers of bulk power for
resale in the Pacific Northwest, rather than based on BP A's findings as to such forward
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prices in a future rate case. The reason for the shift to an independent methodology for
the calculation of such monetary benefits is summarized well in BP A's Record of
Decision on the Comprehensive Settlement:
IOUs expressed concern that BPA views the IOUs' REP
(residential exchange program J settlement benefits as agency costs
and that BPA is frequently under pressure to reduce costs and
therefore rates. The IOUs were concerned that such an
environment could create the appearance that the Administrator
would view the FBPF (forward flat-block price forecast
calculation as a means to reduce IOU benefits. It was suggested
that an alternative method of calculating the FBPF should be
determined. To achieve this goal, the parties developed the
methodology described above. Through this methodology, an
independent QFP (qualified third partyJ surveys numerous EDPs
(eligible data providers J in order to obtain forward price data
which is averaged to determine the FBPF. This removes any
appearance or opportunity for BP A to establish low or high FBPF
rate case forecasts.(ROD at page 55)
(3) The total annual monetary payments to all investor-owned utilities in the
FY 2007-2011 period will be subject to an annual floor amount of$100 million and
annual ceiling amount of $300 million. For PacifiCorp, the Idaho annual benefit floor
would be $6 377 280 ($26 732 104 system-wide) and the Idaho annual benefit cap would
be $19 119 576 ($80 144 906 system-wide).1 These floor and cap amounts would be
exclusive of amounts received by PacifiCorp as deferred Reduction of Risk payments, as
described at m.B below. Thus, for example, for PacifiCorp the maximum annual Idaho
benefits would equal the Idaho-allocated rate cap of$19 119 576 plus the amount of all
deferred benefits returned by BP A to PacifiCorp with interest in that year.
1 To put these floor and ceiling amounts in perspective, over the history of the residential
exchange program, annual benefits to PacifiCorp s Idaho customers have varied from $0 in some
years to a maximum annual benefit of approximately $35 275 138 in FY 2004.
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Deferral and Partial Waiver of the Reduction of Risk Discount Payments.
Under the Comprehensive Settlement, all ofPacifiCorp s right to Reduction of Risk
Discount payments would have terminated. Under the FY 2007-2011 Agreement PacifiCorp
(1) would continue to defer the Reduction of Risk Discount payments, for receipt in equal
monthly installments for the period FY 2007-2011 , (2) would modify the Deferral Agreement to
provide interest on the deferrals at the rate of 4.46 percent per annum until October 1 , 2004 and
at the rate of 3.09 percent per annum thereafter until payment, and (3) would waive one-half of
the Reduction of Discount payments then due. As a result of these adjustments, PacifiCorp
would receive from BP A (for the benefit of residential and small farm customers in Oregon
Washington and Idaho), and in addition to any other amounts due Pa~i.fiCorp, $778 289 per
month for each of the designated 60 months as Reduction of Risk Discount payments.
Pass-through of Benefits.
In order to make PacifiCorp s distribution of federal benefits as uniform as possible over
the FY 2007-2011 period, PacifiCorp will be allowed to accumulate up to 36 months ofBPA
monetary payments in a balancing account, provided that all payments must be distributed to
residential and small farm customers by no later than April 1 , 2012. This increase from the
maximum 180-day accumulation allowed under the current Settlement Agreement is intended to
give PacifiCorp the flexibility to smooth out, at the retail level, the effect of projected increases
in BP A rates or reductions in market power price forecasts that would reduce BP A payment
levels. Of course, the actual rate of disbursement of the rate credits in Idaho would remain under
the regulatory supervision and control of the Commission.
Comparison of the Effects on Retail Customers of the Comprehensive Settlement
with the Effects on Retail Customers of the FY 2007-2011 Agreement.
In recognition that the Public Litigants did not terminate their third party legal challenges
to the Settlement Agreement, PacifiCorp will retain for collection with interest for the FY 2007-
2011 , one-half of the Reduction of Risk Discount payments it othenvise would have surrendered
under the Comprehensive Settlement. PacifiCorp also will not be required to defer any of its
current benefits during the FY 2007-2011 period. Those deferrals would have caused, under the
Comprehensive Settlement, the loss of up to $5 553 844 in currently-received Idaho-allocated
benefits in each of those three BPA fiscal years and 9.2 percent to 21.9 percent bill increases to
the various schedules entitled to share in the BP A benefits. The FY 2007-2011 Agreement, by
contrast, will produce no upward pressure on PacifiCorp s retail rates during this three-year
period.
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Frustration of Purpose Provision.
The parties to the FY 2007-2011 Agreement recognize that if the provisions for the
payment of monetary benefits to PacifiCorp provided under Section 4( c) of the Settlement
Agreement were successfully challenged, and thereby found to be void, unenforceable or
unlawful, that the receipt by PacifiCorp of benefits as intended under the FY 2007-2011
Agreement would be frustrated. Therefore, in such event, the FY 2007-2011 Agreement
provides that it will become void ab initio. As a result, the Deferral Agreement would be
enforceable in accordance with its then unmodified terms, and PacifiCorp would be entitled to
claim the full amount of deferred Reduction of Risk Discount payments, as set forth in the
Deferral Agreement.
IV.Implementation of the FY 2007-11 Agreement.
PacifiCorp anticipates that ifBP A does not execute and offer the FY 2007-2011
Agreement prior to June 3 , 2004, it will exercise its right to terminate deferral of Reduction of
Risk Discount payments, so as to begin receiving such payments at the earliest possible date. If
however, BP A offers such agreement to PacifiCorp prior to June 3, 2004, PacifiCorp instead
would provide an alternate form of notice of termination of Reduction of Risk Discount
payments; such alternate notice would be timed so as to commence the deferred payments as of
October 2006.
Very truly yours
)rl~~.
Marcus A. Wood
MW:knp:jlf
Attachment
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DRAfT
April 15 , 2004 Contract No. 04PB-11468
AGREEMENT REGARDING PAYMENT OF
RESIDENTIAL EXCHANGE PROGRAM SETTLEMENT BENEFITS
DURING FISCAL YEARS 2007 THROUGH 2011
executed by the
BONNEVILLE POWER ADMINISTRATION
and
ACIFICORP
Table of Contents
Section
Effective Date................................................................................................
Other
..............................................................................................................
Page
Amendment of Settlement Agreement
.....................................................
Amendment of Conditional Deferral Agreement
...................................
This AGREEMENT REGARDING PAYMENT OF RESIDENTIAL EXCHANGE
PROGRAM SETTLEMENT BENEFITS DURING FISCAL YEARS 2007 THROUGH 2011
Agreement ) is executed by the UNITED STATES OF AMERICA , Department of Energy,
acting by and through the BONNEVILLE POWER ADMINISTRATION ("BP A"), and
PACIFICORP ("PacifiCorp
).
PacifiCorp is a corporation organized under the laws of the
State of Oregon. BP A and PacifiCorp are sometimes referred to in the singular as "Party
or in the plural as "Parties.
RECITALS
Pursuant to Section 4(b) of the Financial Settlement Agreement, Contract
No. 01PB-10854, between BPA and PacifiCorp ("Financial Settlement Agreement ), BPA
would reduce its payments to PacifiCorp by a "Reduction of Risk Discount" commencing
October 1 , 2002 , and continuing through September 30,2006 , if by December 1, 2001
PacifiCorp had entered into a certain settlement agreement with one or more of BP A'
publicly-owned utility and cooperative customers (hereinafter referred to as "BP A
Preference Utilities
No such certain settlement agreement was entered into by December 1, 2001.
As of June 17 2002 , BPA and PacifiCorp entered into the Agreement Regarding
Conditional Deferral of Reduction of Risk Discount Amount, Contract No. 02PB-11157
Conditional Deferral Agreement ), which amended the payment provisions of the
Financial Settlement Agreement to provide for conditional deferral, with interest, of
.. ..--............
payment by BP A to PacifiCorp of monthly amounts under the Financial Settlement
Agreement equal to the monthly amount of Reduction of Risk Discount.
Under the Conditional Deferral Agreement, PacifiCorp has the right to elect, by
giving a notice to BP A, to terminate such Reduction of Risk Discount deferrals under
certain conditions. Such conditions have occurred, and PacifiCorp has given such notice
pursuant to which notice such deferrals will terminate as of September 30 , 2006, and
payment to PacifiCorp of Reduction of Risk Discount deferral amounts under such
agreement will be made over a 48-month period commencing on October 1, 2006 , as
described below. As of September 30 2006, the amounts to be paid to PacifiCorp by BPA
under the Conditional Deferral Agreement will be equal to the sum of the deferral of
$80 757 816 plus interest (accrued monthly at an annual rate of 4.46 percent) of
474 133. Upon such termination as of September 30 2006 , such sum is , pursuant to the
Conditional Deferral Agreement, to be paid by BP A to PacifiCorp, with interest until paid
(accrued monthly at an annual rate of 4.46 percent), in equal monthly installments over
the 48-month period commencing October 1 , 2006.
As of January 13 2003 , BPA and PacifiCorp entered into the Agreement Regarding
Fiscal Year 2003 Deferral Amount, Contract No. 03PB-11262 ("FY 2003 Deferral
Agreement ), which amended, among other things, the payment provisions of the
Settlement Agreement to defer, with interest, payment by BP A to PacifiCorp of
$11,584 210.53 under the Settlement Agreement.
Subject and pursuant to the provisions of this Agreement, the Parties wish to
amend, among other things, provisions in the Settlement Agreement, Contract
No. 01PB-12229 (Settlement Agreement) regarding the methodology for determining the
Forward Flat-Block Price Forecast used in determining the amounts of Monetary Benefit
under the Settlement Agreement during the period that begins on October 1 , 2006, and
continues through September 30, 2011 and to specify that BP A will provide Monetary
Benefit rather than Firm Power during such period. Further, the Parties wish to amend
the Conditional Deferral Agreement to reduce the amounts that would otherwise
payable under the Financial Settlement Agreement and the Conditional Deferral
Agreement and reduce the interest rate as of October 1 , 2004 , that would otherwise be
applied in determining certain monthly payments after September 30,2006.
The Parties agree:
EFFECTIVE DATE. This Agreement shall become effective upon execution and
delivery by BPA and PacifiCorp ("Effective Date
AMENDMENT OF SETTLEMENT AGREEMENT. The Settlement Agreement
is amended as follows:
(a)Section 2(e) of the Settlement Agreement is deleted and replaced by the
following:
" (e)Forward Flat-Block Price Forecast" shall have the following
meanings:
04PB-11468, PacifiCorp
-- n
,,_-
(1)For the period from October 1, 2001 , through September 30
2006:
Forward Flat-Block Price Forecast" or "FBPF" means , for the
period from October 1, 2001 , through September 30 2006,
BP A's forecast, expressed in $/MWh, of the wholesale market
price for the purchase of additional amounts of power at
100 percent annual load factor established in the same BP
power rate case as that which established the RL Rate and for
the period of the RL Rate established in a BP A power rate case
Record of Decision ("ROD") as finally approved by the Federal
Energy Regulatory Commission and affirmed, if appealed, by
the United States Court of Appeals for the Ninth Circuit.
(2)For the period from October 1 , 2006, through September 30
2011:
Forward Flat-Block Price Forecast" or "FBPF" means, for each
Contract Year during the period from October 1, 2006 , through
September 30 2011 the FBPF , expressed in $/MWh , as
determined pursuant to Exhibit C , which is attached to this
Agreement.
(b)Section 2 (f) of the Settlement Agreement is deleted and replaced by the
following:
" (f)Lowest PF Rate" means the rates under the lowest cost-based power
rate schedule for purchases by BPA's preference customers of block
product service to meet their general requirements at 100 percent load
factor. Lowest PF Rate includes any applicable rate adjustment
clauses. "
(c)Section 20) of the Settlement Agreement is deleted and replaced by the
following:
RL Rate" means the then-current applicable Residential Load Firm
Power rate schedule or its successor. RL Rate includes any applicable
rate adjustment clauses.
(d)New sections 2(n), 2(0), and 2(p) as follows are added to the Settlement
Agreement:
(n)Monetary Benefit Cap," or "MBC " means, for the purposes of the
formula in section 4(c)(2)(B) below , the maximum amount, expressed
in $/MWh, by which the FBPF may exceed the RL (or Lowest PF , as
applicable) in the numerator of such formula for each Contract Year
during the period from October 1 2006 , through September 30,2011.
04PB-11468. PacifiCorp
-~, "-"'.-" - ..... -
_m '
.. .. .." ,.,....
(0)
(p)
(e)
, .... --' --,
Such maximum amount shall be equal to $15.59/MWh ($ 15.55/MWh
during a leap year).
Monetary Benefit Floor " or "MBF" means, for the purposes of the
formula in section 4(c)(2)(B) below , the minimum amount, expressed
in $/MWh, by which the FBPF may exceed the RL (or Lowest PF, as
applicable) in the numerator of such formula for each Contract Year
during the period from October 1, 2006 , through September 30,2011.
Such minimum amount shall be equal to $5.20/MWh ($5. 18/MWh
during a leap year).
Lowest PF" for a Contract Year means the hourly weighted annual
average Lowest PF Rate, expressed in $/MWh, for purchases for such
Contract Year by BP A's preference customers of block product service
at 100 percent annual load factor to meet their general requirements.
Section 4 (b) (2) of the Settlement Agreement is deleted and replaced by the
following:
(f)
(2)October 1, 2006, through September 30,2011
Notwithstanding any other provisions of this Agreement , no Firm
Power will be provided by BPA to PacifiCorp under this Agreement
during the period that begins on October 1 , 2006 , and continues
through September 30, 2011.
Section 4(c)(1)(B) of the Settlement Agreement is deleted and replaced by the
following:
(B)October 1, 2006, through September 30, 2011
BP A shall provide the following Monetary Benefit amounts, expressed
in annual aMW, to PacifiCorp from October 1,2006 , through
September 30, 2011:
Monetary Benefit Oregon Idaho Washington
Period of Time (annual aMW)(annual aMW)(annual aMW)(annual aMW)
10/1/06 through 9/30/11 586.8481 338.8481 140 108"
(g)
Section 4 (c) (2) (B) of the Settlement Agreement is deleted and replaced by the
following:
(B)October 1, 2006, through September 30,2011
(i)Monetary Benefit Monthly Payment Amounts
The Monetary Benefit monthly payment amounts for each
Contract Year shall be determined in accordance with the
following formula:
04PB-11468, PacifiCorp
-, '_..~~ -... --.,.., ""--------"--. --- --, --
MP =
(FBPF - RL) x MBx 8,760 hours (8,784 hours during a leap year)
12 months
Where:
MP=Monthly Payment Amount, expressed in dollars, for
each month of such Contract Year.
FBPF = Forward Flat-Block Price Forecast, expressed in
$/MWh, for such Contract Year.
RL=The hourly weighted annual average RL Rate
calculated at 100 percent annual load factor
expressed in $/MWh, for such Contract Year.
MB=Monetary Benefit amount, expressed in annual
aMW.
(ii)Implementation of Monetary Benefit Cap and Monetary
Benefit Floor
For the purposes of the formula in section 4(c)(2)(B)(i) above
for each Contract Year , RL shall be subtracted from FBPF for
such Contract Year. If (FBPF - RL) is greater than
$15.59/MWh ($15.55/MWh during a leap year), then (FBPF-
RL) will be set equal to $ 15.59/MWh ($15.55/MWh during a
leap year) for such Contract Year. If (FBPF - RL) is less than
$5.20/MWh ($5. 18/MWh during a leap year), then (FBPF - RL)
will be set equal to $5.20/MWh ($5. 18/MWh during a leap year)
for such Contract Year.
(iii)Calculation of Monthly Payment Amounts Each Time
the RL Rate is Adjusted During a Contract Year
The following procedure will apply to the calculation of
Monetary Benefit payments each time the RL Rate is adjusted
for a portion of a Contract Year:
(aa)Calculate a weighted average annual RL (RLweighted) for
such Contract Year as follows:
RL (RLC x MONTHS(C)) + (RLN x MONTHS(N))weighted -
Where:
RLweighted = The weighted average RL , in $/MWh
calculated at 100 percent annual load
factor.
04PB-11468, PacifiCorp
'-- - ...._, -, ,---
_._m
---'---' .. ,
RLC =A rate , expressed in $/MWh, equal to the
hourly weighted average RL Rate(s) at
100 percent load factor used in the months
of such Contract Year prior to such RL Rate
adjustment.
MONTHS(C) = Number of months that the RL Rate(s)
applied in calculating RLC were used.
RLN=A rate , expressed in $/MWh, equal to the
hourly weighted average RL Rate at
100 percent load factor that becomes
effective (as a result of such RL Rate
adjustment) for the remaining months of
such Contract Year after such RL Rate
adjustment.
MONTHS(N) = Number of months that the RL Rate
applied in calculating RLN was used.
(bb)Determine pursuant to section 4 (c) (2) (B) (iii) (cc) below if
(FBPF - RLweighted) for such Contract Year is greater
than MBC or less than MBF.
(cc)Calculate a Revised Annual Monetary Benefit
(hereinafter referred to as "Revised AMB") for such
Contract Year using the applicable formula in
sections 4 (c) (2) (B) (iii) (cc) (1), 4 (c) (2) (B) (iii) (cc) (2),
4 (c) (2) (B) (iii) (cc) (3) below:
(1)If (FBPF - RLweighted) is less than MBC and
greater than MBF, then:
Revised AMB = (FBPF - RLweighted) x
586.8481 MW x 8,760 hours (8,784 hours during
a leap year).
(2)If (FBPF - RLweighted) is greater than MBC , then:
Revised AMB = MBC x 586.8481 MW x 8 760
hours (8 784 hours during a leap year).
(3)If (FBPF - RLweighted) is less than MBF , then:
Revised AMB = MBF x 586.8481 MW x
760 hours (8,784 hours during a leap year).
04PB-11468, PacifiCorp
..--..-.-, , '--.' ,--, ''-"" -- .....,..--..,
(dd)Subtract from the Revised AMB the sum of the amounts
paid as Monthly Payment Amounts for the months
during such Contract Year that the RL Rate(s) applied
in calculating RLC were used. This amount may
positive or negative. Divide this amount by
MONTHS(N), to determine the monthly payment
amount.
(ee)The monthly payment amount determined in
section 4(c)(2)(B)(iii)(dd) above will, if positive, be paid
by BPA to PacifiCorp as Monetary Benefit for each
month remaining in such Contract Year for which the
RL Rate applied in calculating RLN is used, or, if
negative, an amount equal to the absolute value of such
monthly payment amount will be paid by PacifiCorp to
BPA as a refund of Monetary Benefit for each month
remaining in such Contract Year for which the RL Rate
applied in calculating RLN is used.
(ff)If the RL Rate is adjusted more than one time during a
Contract Year, then sections 4(c)(2)(B)(iii)(aa) through
4(c)(2)(B)(iii)(ee) of the above procedure shall be
performed for each such RL Rate adjustment.
(iv)True-up of Monetary Benefit Following Rate
Adjustments
During October following a Contract Year for which BP A has
adjusted (whether pursuant to an adjustment clause
otherwise) the RL Rate or Lowest PF Rate for a portion of such
Contract Year, BP A shall calculate a Monthly Payment
Amount using the formula in section 4 (c) (2) (B) (i), including
application of the MBC and MBF in section 4 (c)(2)(B)(ii) , and
setting RL equal to an amount based on the RL Rate(s) (or , if
required by section 4 (c)(3), the Lowest PF Rate(s) for such
Contract Year) actually charged during such Contract Year. If
(aa) the amount equal to such Monthly Payment Amount
multiplied by 12 minus (bb) the sum of amounts previously
determined pursuant to 4 (c) (2) (B) (i), 4 (c) (2) (B) (ii), and
4(c)(2)(B)(iii) and paid for each month of such Contract Year by
BP A (and subtracting from such sum any amounts paid by
PacifiCorp to BP A pursuant to section 4 (c) (2) (B) (iii) (ee) for
such Contract Year) is positive , such amount will be paid by
BP A to PacifiCorp as additional Monetary Benefit on the
monthly bill for October. If such amount is negative , an
amount equal to the absolute value of such amount will be paid
by PacifiCorp to BPA as a refund of Monetary Benefit on the
monthly bill for October.
04PB-11468, PacifiCorp
,-------..-
'c. -..... -...
-,-, '
(h)Section 4 (c) (3) of the Settlement Agreement is deleted and replaced by the
following:
(3)Exception to Use ofRL Rate in Section 4(c)
For the purposes of determining any Monetary Benefit amount
(including without limitation any true-up of Monetary Benefit
pursuant to section 4 (c)(2)(B)(iv)) using the formulae shown in
sections 4 (c) (2) (A) and 4 (c) (2) (B) above:
(A)
(B)
In the event there is no RL Rate in effect or RL exceeds Lowest
PF for a Contract Year, Lowest PF shall replace RL in such
formulae for calculating MP and (FBPF - RL); and
In the event RLC or RLN as calculated using the RL Rate
exceeds RLC or RLN if calculated using the Lowest PF Rate (in
lieu of the RL Rate), Lowest PF Rate shall replace RL Rate in
such formulae for calculating RLC and RLN.
Use of the Lowest PF Rate in such event shall apply to Monetary
Benefit provided in accordance with section 4(c)(1).
(i)Section 6 of the Settlement Agreement, as amended by the FY 2003 Deferral
Agreement, is deleted and replaced by the following:
P ASSTHROUGH OF BENEFITS
(a)Except as otherwise provided in this Agreement, cash payment
amounts, Firm Power, and Monetary Benefit amounts received
by PacifiCorp from BP A under this Agreement shall be passed
through, in full, to all residential and small farm consumers
comprising the Residential Load, as either: (1) an adjustment
in applicable retail rates; (2) monetary payments; or (3) as
otherwise directed by the applicable State regulatory
authority(s) .
(b)Monetary payments shall be distributed to the Residential
Load in a timely manner, as set forth in this section 6(b). The
amount of benefits held in the account described in section 6(c)
below shall not at any time exceed an amount equal to the
greater of: (1) the expected receipts of monetary payments
from BP A under this Agreement over the next 36 months, or
(2) the receipts of monetary payments from BP A under this
Agreement over the immediately preceding 36 months;
provided, however that any amount of benefits held in such
account shall be distributed to the Residential Load no later
than April 1 , 2012. References in this Agreement to monetary
payments mean monetary payments, whether with respect to
Monetary Benefit or cash payment. If the annual monetary
04PB-11468, PacifiCorp
-_.-- '_"~'-~ '--
(k)
payment is less than $600 000 , then PacifiCorp may distribute
benefits on a less frequent basis provided that distributions
are made at least once each Contract Year.
(c)Benefits shall be passed through consistent with procedures
developed by PacifiCorp s State regulatory authority(s). Such
procedures shall address the maximum amount of benefits
held in the account described in this section 6(c). Monetary
Benefit and any cash benefits under section 5 shall be
identified on PacifiCorp s books of account. Funds shall be
held in an interest bearing account, and shall be maintained as
restricted funds, unavailable for the operating or working
capital needs of PacifiCorp. Benefits shall not be pooled with
other monies of PacifiCorp for short-term investment purposes.
Firm Power shall be delivered monthly, and only to Residential
Load.
(d)Nothing in this Agreement shall require that any power be
delivered on an unbundled basis to residential and small farm
customers of PacifiCorp or that PacifiCorp provide retail
wheeling of such power.
Section 14(b) of the Settlement Agreement is deleted in its entirety.
A new Exhibit C (Determination of Forward Flat-Block Price Forecast
for Contract Years 2007 through 2011) is attached hereto and made a
part of the Settlement Agreement.
AMENDMENT OF CONDITIONAL DEFERRAL AGREEMENT
The Conditional Deferral Agreement is amended as follows:
(a)Section 3 of the Conditional Deferral Agreement is deleted and replaced by
the following:
The deferral period described in section 2 above shall terminate on
September 30 2006, and BPA shall, for each month during the period
that begins on October 1, 2006, and ends on September 30,2011 , pay
PacifiCorp $778 289. This amount is based on the following
calculation:
(a)The aggregate amount deferred pursuant to section 1 during
the period October 1 , 2002 , through September 30, 2006 , of
$80 757 816 shall accrue interest on the amounts deferred each
month , compounded monthly, at an annual rate of 4.46 percent
for the period prior to October 1 , 2004 , and at an annual rate of
09 percent after September 30 2004.
(b)The aggregate amount of deferral plus interest is $86 434 754
as of September 30 2006. Pursuant to this Agreement , on
04PB-11468 , PacifiCorp
, ..
,.....oo .,.. ...c ..
....
..'c'c
September 30,2006, PacifiCorp waives one-half of such
amount, leaving a balance of deferral plus interest equal to
$43,217 377.
(c)Such balance of deferral plus interest of $43 217 377 shall
accrue interest on unpaid amounts at an annual rate of
09 percent, compounded monthly until paid in 60 equal
monthly amounts during the period that begins on October 1
2006, and ends on September 30 2011.
The Parties agree that any amounts PacifiCorp is entitled to receive
after September 30 , 2006 , pursuant to this section
(1)shall be in addition to amounts PacifiCorp is otherwise
entitled to receive under provisions of the Settlement
Agreement , the FY 2003 Deferral Agreement, and the
Financial Settlement Agreement; and
(2)shall only reduce the amounts PacifiCorp is entitled to
receive under section 4 (c) (2) (B) of the Settlement
Agreement after September 30 2006, for the benefit of
its residential and small farm customers under such
agreement or otherwise , through its impact on the level
of the Lowest PF Rate as defined in the Settlement
Agreement.
The MBC and MBF applied under section 4(c)(2)(B)(ii) of the
Settlement Agreement shall not affect amounts PacifiCorp is entitled
to receive under this section.
(b)
(c)
Section 4 of the Conditional Deferral Agreement is deleted in its entirety.
Section 6 of the Conditional Deferral Agreement is deleted and replaced by
the following:
This Agreement shall remain in effect until the date that all payments owed
to PacifiCorp by BPA pursuant to section 3 above have been made.
OTHER
(a)The Financial Settlement Agreement, the Settlement Agreement (as
amended by this Agreement), the Conditional Deferral Agreement (as
amended by this Agreement), and the FY 2003 Deferral Agreement shall
each be and continue in full force and effect;
(b)If a court of competent jurisdiction issues a final, nonappealable order after
the Effective Date that holds that any provision of this Agreement to be void
unenforceable, or unlawful, then the Parties agree to negotiate in good faith
new provisions that will replace those held to be void, unenforceable , or
04PB-11468, PacifiCorp
ACIFICORP
Name
Title
Date
--- ---...., ,
unlawful with the objective of placing the Parties in the same financial
situation as applied prior to such final, nonappealable order. If the Parties
are unable to agree to mutually acceptable replacement terms, then the
Parties intend that the provisions of the Settlement Agreement and the
Conditional Deferral Agreement in effect prior to the Effective Date shall
apply and the provisions of this Agreement shall have no further force and
effect;
(c)If a court of competent jurisdiction issues a final , nonappealable order after
the Effective Date that holds that section 4(c) of the Settlement Agreement is
void, unenforceable , or unlawful , then this Agreement shall be void ab initio;
(d)This Agreement sets forth the entire agreement of the Parties with respect to
the subject matter hereof and may only be amended by writing hereafter
signed by each of the Parties;
(e)Either Party may deliver its executed Agreement by any of the following
means: (i) delivered personally, (ii) sent by registered mail, with return
receipt requested, (iii) sent by recognized overnight mail or courier service , or
(iv) sent by facsimile. If the agreement is delivered by facsimile, the Party
making delivery in such manner shall send the other Party a signed original
agreement; and
(f)Each signatory represents that he or she is authorized to enter into this
Agreement on behalf of the Party for whom he or she signs.
UNITED STATES OF AMERICA
Department of Energy
Bonneville Power Administration
Name
(Print/Type)(Print/Type)
Title Account Executive
Date
04PB-11468, PadfiCorp
-.-.---, .-- , _.- -.., , ------
_no 0' -
Exhibit C
DETERMINATION OF FORWARD FLAT-BLOCK PRICE FORECAST
FOR CONTRACT YEARS 2007 THROUGH 2011
OVERVIEW
The Forward Flat-Block Price Forecast (hereinafter referred to as "FBPF"), as
defined in section 2 (e) (2) of the body of this Agreement , as amended, is an
integral part of the formula used to calculate monthly Monetary Benefit
payments during each Contract Year 2007 through 2011. This Exhibit
establishes a procedure to determine the FBPF during each Contract Year 2007
through 2011.
DEFINITIONS
(a)Committee" means a committee composed of one BPA representative,
one Participating PNW Investor-Owned Utility representative, and one
PNW Public representative.
(b)Eligible Data Provider " or "EDP " means an entity that (1) routinely
buys and sells bulk power for resale in the Pacific Northwest;
(2) routinely produces Forward Price Data for use in risk accounting in
the normal course of business; (3) is regularly audited by an outside
accounting firm; and (4) has been selected by an affirmative vote by each
representative on the Committee for inclusion on the list of EDPs and
submitted to the QTP in accordance with section 5 of this Exhibit
(c)Firm Power" means the power product containing the following
attributes: Power (i) that is pre-scheduled as firm energy consistent with
the then current rules of the Western Electricity Coordinating Council or
its successor, and (ii) for which the seller or the buyer is liable for
liquidated damages for failure to deliver or receive, as applicable, unless
such failure is due to an uncontrollable force or force majeure event. At
this time, a power product that meets the above criteria is Western
Systems Power Pool Agreement Service Schedule C firm energy.
(d)Forward Price Data" means the forward price routinely used by the EDP
for risk accounting in the normal course of business for a flat block of
Firm Power for delivery at the Mid-C trading hub for a Contract Year.
Such forward price shall be the midpoint between the bid price and the
offer price, if the EDP's forward price curve shows both prices. If an EDP
does not develop a single forward price for a flat block of Firm Power , but
rather only develops a forward price for heavy load hour ("HLH") and
light load hour ("LLH") Firm Power, then the QTP shall request such
HLH and LLH forward prices and shall calculate the hourly weighted
average of the two forward prices to determine the FBPF.
04PB-11468, PacifiCorp lof9
, ,_. ---.--" ',--,.._-- -
(e)Marketer" means an entity that sells bulk power for resale and has a
market-based rate schedule on file with the Federal Energy Regulatory
Commission (FER C), and is not a PNW Investor-Owned Utility, a PNW
Public , or BP A.
(f)Mid-C" means the trading hub located in eastern Washington that is
commonly recognized by EDPs and other industry participants as the
Mid-C trading hub.
(g)
PNW Investor-Owned Utility" means each of the following investor-
owned utilities (and its investor-owned utility successors and assigns)
that serves residential and small farm customers in the Pacific
Northwest: Puget Sound Energy, Inc., PacifiCorp, Portland General
Electric , Avista Corporation, Idaho Power Company, and NorthWestern
Energy Division of NorthWestern Corporation. "Participating PNW
Investor-Owned Utilities" means PacifiCorp and all other PNW
Investor-Owned Utilities that have executed an agreement that includes
provisions equivalent to this Exhibit.
(h)PNW Public" means a Pacific Northwest public or people s utility
district, municipality, or cooperative that is entitled to preference and
priority under the provisions of the Bonneville Project Act.
(i)Qualified Third Party," or "QTP " means a third party that has extensive
expertise in the electric power industry, including experience in auditing
F AS 133 (or its successor) compliance and risk accounting for publicly
reporting entities in the electric power industry, and is selected by BPA
in accordance with section 4 of this Exhibit C.
Replacement Information Event" means (1) sufficient Forward Price
Data as described in this Exhibit C is unobtainable for any reason, or
(2) fewer than six entities (i) are on the list of EDPs, (ii) are willing and
able to provide Forward Price Data, and (iii) have not been excluded
pursuant to section 5.
COMMITTEE
(a)The BP A representative will be selected by the Vice President, Bulk
Marketing & Transmission Services or that person s successor. The PNW
Public representative will be selected by the Public Power Council
Executive Committee or that Committee s successor. The PNW Investor-
Owned Utility representative will be selected by agreement of PacifiCorp
and the other Participating PNW Investor-Owned Utilities. If a
representative on the Committee is replaced , then the new representative
04PB-11468 , PacifiCorp 2 of 9
Exhibit C, Determination of Forward Flat-Block Price Forecast for Contract Years 2007 Through
2011
. ~,------,-~---,
, ""-00'. -
(b)
shall notify the other two representatives in writing of such
replacement(s) .
If a representative to the Committee has not been selected, the other
representatives or representative shall provide written notice to the
selecting entity or entities that have not provided a representative of the
need to select a representative for the Committee. If any such entity does
not appoint a representative within 30 days, the existing representatives
of the Committee shall be authorized to act on all matters of the
Committee requiring an affirmative vote by each representative on the
Committee.
(c)All actions and determinations by the Committee shall be by affirmative
vote of each representative on the Committee.
QTP
(a)Before each Contract Year, BP A shall select a QTP from among the Big 4
Accounting Firms or a list of additional qualified parties as may be
compiled and submitted to BP A by the Committee. Each addition of a
qualified party to be included on such list and each removal of a party
from such list will require an affirmative vote by each representative on
the Committee. As used in this Exhibit, "Big 4 Accounting Firms" shall
mean the four largest internationally recognized accounting firms, which
currently consists of KPMG, Deloitte and Touche
PricewaterhouseCoopers, and Ernst & Young.
(b)BP A will consult with the PNW IOU and the PNW Public representatives
on the Committee prior to selecting the QTP. The initial QTP selected
shall be retained for the first Contract Year only, with an option to
extend for subsequent Contract Years. BPA shall pay the costs for
services provided by the QTP.
(c), after consulting with the Committee, BPA determines that the
contract for the then-current QTP will not be extended, BPA will, upon
advice of the Committee, replace the existing QTP. The Committee will
consult and decide whether to add additional qualified parties to the list.
(d)Each contract with the QTP shall include a requirement that: (1) the
QTP maintain the confidentiality of the data collected from the EDPs
except for making the data available to a reviewer selected under
section 8, (2) the QTP shall maintain the Forward Price Data it has
collected under its contract until September 30, 2011 (3) the QTP shall
submit, in writing, for resolution by the Committee, consistent with the
purpose and requirements of this Exhibit C, any question it may have
regarding the determination of the FBPF under section 6, and (4) the
04PB-11468, PacifiCorp 3 of 9
Exhibit C, Determination of Forward Flat-Block Price Forecast for Contract Years 2007 Through
2011
----'--'---~'--- '
C"'--'
(e)
EDPs
QTP shall , not later than 60 days prior to its first survey under
section 6(a), provide the Committee and each of the Participating PNW
Investor-Owned Utilities a sample calculation of FBPF using
hypothetical survey data.
All contracts and communications between BPA and the QTP with
respect to the determination of the FBPF shall be shared promptly with
the Committee and each of the Participating PNW Investor-Owned
Utilities.
(a)Following the selection of the QTP by BPA , the Committee shall develop
a list of EDPs and submit such list to the QTP. Each EDP included on
such list will require an affirmative vote by each representative on the
Committee. If possible, such list will contain at least 10 EDPs, and , if
possible, each survey by the QTP will include at least two PNW Publics
two PNW Investor-Owned Utilities, and two Marketers. Such list may be
modified from time to time to (a) add EDPs that meet the criteria in
section 2(b) above, or (b) remove EDPs that no longer satisfy the criteria
specified in section 2(b) above , as determined by an affirmative vote by
each representative on the Committee.
(b)In addition, if any EDP submits Forward Price Data two or more times
during any period of four consecutive quarters and more than 50 percent
of such submittals by such EDP are (pursuant to section 6(b) of this
Exhibit) excluded as being the highest or lowest Forward Price Data, and
such excluded Forward Price Data for any such quarter differs from the
Quarterly FBPF for such quarter by more than 5 percent, the QTP shall
for the next four quarters following such period, not include such EDP in
the selection for its surveys.
DETERMINATION OF FBPF FOR EACH CONTRACT YEAR
(a)For each Contract Year, the QTP will randomly select six to eight EDPs
separately for each of four consecutive quarters , the first of which
commences 21 months prior to the beginning of such Contract Year and
the last of which ends 9 months prior to such Contract Year, from the list
of EDPs provided to it by the Committee. The QTP will then survey the
EDPs that have been selected. If there are fewer than six EDPs on the
list willing and able (and not excluded under section 5(b)) to provide
Forward Price Data, then the QTP will ask the Committee to add EDPs
to such list. If the Committee is unable to do so, and there are still fewer
than six EDPs on the list willing and able to provide Forward Price Data,
then the QTP will survey all of the EDPs on such list (excluding any EDP
that has been excluded pursuant to section 5 (b) above) until such time as
04PB-11468, PacifiCorp 4 of 9
Exhibit C, Determination of Forward Flat-Block Price Forecast for Contract Years 2007 Through
2011
-"~,,.._-----"" -. '~'-" '" ,., -------
there are at least six EDPs on such list. The QTP will notify the
Committee and each of the Participating PNW Investor-Owned Utilities
in writing if an EDP chooses not to participate in future surveys. The
QTP will ask each selected EDP to provide Forward Price Data for such
Contract Year as of a date randomly selected separately for each EDP by
the QTP during each such quarter; provided, however that such date
shall have occurred prior to date of request by the QTP.
(b)Following the completion of each quarterly survey conducted pursuant to
section 6(a) above , the QTP shall exclude the highest and lowest Forward
Price Data from the EDPs surveyed during each such quarter. The QTP
shall then calculate the arithmetic mean of the remaining Forward Price
Data amounts to determine that quarter s FBPF (the "Quarterly FBPF"
for such Contract Year.
(c)Following the completion of the four quarterly surveys identified in
section 6(a) above, the QTP shall calculate the arithmetic mean of the
four Quarterly FBPFs. The result of this calculation will be the FBPF
that will be used for such Contract Year, and the QTP shall promptly
report such FBPF to the Committee and each PNW Investor-Owned
Utility.
ED AGREEMENT
BP A, each of the Participating PNW Investor-Owned Utilities, and each EDP
shall be required to sign an agreement (hereinafter referred to as "EDP
Agreement ) which shall include without limitation the following provisions:
(a)For each EDP, an affirmation by an executive officer of the EDP that the
EDP is an active market participant in wholesale power markets of the
Pacific Northwest, that the EDP routinely produces Forward Price Data
in the normal course of business, that the process for producing such
Forward Price Data is routinely audited by an outside certified public
accounting firm, that the Forward Price Data is used in the normal
course of business, and that such Forward Price Data has been validated
by (1) the mid-office, e., Chief Risk Officer, or equivalent, or (2) the
back-office, e.g., Chief Financial Officer, or equivalent;
(b)A specification of the information to be provided as described in this
Exhibit C which shall include without limitation power product
definition , delivery point, contract period, and use of mid-point;
(c)Subject to section 7(g) below, each EDP shall be required to keep
confidential the dates on which it was surveyed and the Forward Price
Data that it provided;
04PB-11468 , PacifiCorp 5 of9
Exhibit C, Determination of Forward Flat-Block Price Forecast for Contract Years 2007 Through
2011
(d)A release of liability for each EDP from the consequences of any use of
surveyed Forward Price Data;
(e)Each EDP will consent to an agreed upon procedure described in
section 8 below to verify that the Forward Price Data provided to the
QTP was the same Forward Price Data routinely used by the EDP for
risk accounting in the normal course of business;
(f)The term of the EDP Agreement; and
(g)
Forward Price Data will be made available to an independent reviewer
and verifier on a confidential basis , for review and verification purposes
only pursuant to section
REVIEW PROVISIONS
(a)Verification of Use of Forward Price Data Provided by EDPs
(1)Not later than 90 days after each Contract Year, the PNW Public
representative on the Committee or any of the Participating PNW
Investor-Owned Utility or BP A may request a review of the
Forward Price Data provided by each surveyed EDP to the QTP
for that Contract Year for the purpose of verifying that the
Forward Price Data provided by the EDP to the QTP was the
same Forward Price Data routinely used by such EDP for risk
accounting in the normal course of business. Collectively, only one
review may be requested by the PNW Public representative on the
Committee, BPA, and the Participating PNW Investor-Owned
Utilities for any Contract Year;
(2)The review shall be conducted by one of the Big 4 Accounting
Firms ("Reviewer ), unless otherwise agreed to by BP A and the
Participating PNW Investor-Owned Utilities; provided, however
that any such review shall not be conducted by the QTP;
(3)For purposes of this section , a review is defined as "Agreed Upon
Procedures" described in section 8(a)(4) below and performed in
accordance with the standards established by the American
Institute of Certified Public Accountants;
(4)The Agreed Upon Procedures shall be limited to the Reviewer
verifying through review of internal documents for each EDP that
the Forward Price Data provided by the EDP to the QTP was the
same Forward Price Data routinely used by such EDP for risk
accounting in the normal course of business. The Agreed Upon
Procedures shall not include any form of general audit of the
04PB-11468, PacifiCorp 6 of 9
Exhibit C, Determination of Forward Flat-Block Price Forecast for Contract Years 2007 Through
2011
(5)
(b)
EDP's books, records , or documents. EDP methods for
determining Forward Price Data, accounting policies or
procedures, management decisions , activities or authorities, or
any decisions related to Forward Price Data shall not be included
in any such Agreed Upon Procedures and shall not be subject to
dispute;
The representative or entity requesting a review will be
responsible for the costs associated with the review in accordance
with the Agreed Upon Procedures and for the execution of a
confidentiality agreement with the Reviewer consistent with the
provisions of this section 8 (a); and
(6)The agreement with the Reviewer will require the Reviewer to
maintain the confidentiality of all entity-specific information
provided by the EDPs in the review. The Reviewer will report to
the entity requesting the review only the number of EDPs that
were surveyed each quarter for the Contract Year covered by the
review and the identity of any EDP where the Forward Price Data
provided to the QTP for a quarter was not the same Forward Price
Data routinely used by the EDP for risk accounting in the normal
course of business. The representative or entity requesting the
review shall promptly share such report with the Committee and
each of the Participating PNW Investor-Owned Utilities.
Verification of QTP Calculations
(1)Not later than 90 days after each Contract Year, the PNW Public
representative on the Committee, any of the Participating PNW
Investor-Owned Utilities, or BPA may request a review to verify
the procedures and calculations used by the QTP under this
Exhibit C to determine the FBPF for each such Contract Year;
(2)The review shall be conducted by one of the Big 4 Accounting
Firms ("Verifier ), unless otherwise agreed to by BP A and the
Participating PNW Investor-Owned Utilities; provided, however
that any such review shall not be conducted by the QTP;
(3)For purposes of this section, a review is defined as "Agreed Upon
Procedures" described in section 8 (b) (4) below and performed in
accordance with the standards established by the American
Institute of Certified Public Accountants;
(4)The Agreed Upon Procedures shall be limited to verification of the
procedures required in section 6(a) were followed and the
04PB-11468 , PacifiCorp 7 of 9
Exhibit C , Determination of Forward Flat-Block Price Forecast for Contract Years 2007 Through
2011
-----_.- -- - '. ---
calculations required by sections 6(b) and 6(c) were performed
correctly;
(5)The representative or entity requesting a review will be
responsible for the costs associated with the review in accordance
with the Agreed Upon Procedures and for the execution of a
confidentiality agreement with the Verifier consistent with the
provisions of this section 8 (a); and
(6)The agreement with the Verifier will require the Verifier to
maintain the confidentiality of all entity-specific information
provided by the EDPs in the review. The Verifier will report to
the entity requesting the review its analysis whether the
procedures for section 6(a) were followed and its analysis of the
correct calculations for section 6(b) and section 6(c). The
representative or entity requesting the review shall promptly
share such report with the Committee and each of the
Participating PNW Investor-Owned Utilities.
REPLACEMENT INFORMATION EVENT
If BP A, or any of the Participating PNW Investor-Owned Utilities gives written
notice to each of the others that it has concluded that a Replacement
Information Event has occurred and describes the circumstances that give rise
to such conclusion, then BP A, Puget, and such other PNW Investor-Owned
Utilities shall endeavor to agree upon whether such Replacement Information
Event has occurred. If such parties agree, then such parties shall endeavor to
agree upon a reasonable and reliable substitute source of information that can
be expected to reasonably closely replicate the same Forward Price Data as
would have been developed under this Exhibit C in the absence of any
Replacement Information Event. If and to the extent such parties are unable to
agree (i) that a Replacement Information Event has occurred, or (ii) on a
substitute source of information, then the disputed matter shall be settled
arbitration under the procedures set forth in section 11 of the body of this
Agreement with BPA acting as one party in the arbitration and the Participating
PNW Investor-Owned Utilities acting as the other party in the arbitration
(including the selection of arbitrators). BP A and the Participating PNW
Investor-Owned Utilities agree to be bound by the result of such arbitration as
described in section 11 of the body of this Agreement. Prior to reaching
agreement that a Replacement Information Event has occurred, and again prior
to reaching agreement on a substitute source of information to remedy a
Replacement Information Event, BP A shall consult with the PNW Public
representative on the Committee. Such consultation shall include a discussion
regarding whether a Replacement Information Event has occurred, and if so, a
discussion regarding the alternatives being considered, and the alternative BP
believes most closely replicates the same Forward Price Data as would have
been developed under this Exhibit C in the absence of any Replacement
04PB-11468 , PacifiCorp 8 of 9
Exhibit C , Determination of Forward Flat-Block Price Forecast for Contract Years 2007 Through
2011
-,
w_-...-
Information Event. Subsequent to the selection of the arbitrators for an
arbitration pursuant to this section 9 , PNW Publics may intervene in such
arbitration and participate as a single intervenor party in the conduct of such
arbitration , with the same rights and obligations of any other party in such
arbitration (including being subject to an apportionment of the costs of such
arbitration). In resolving any dispute regarding a Replacement Information
Event, the arbitrators shall select, from among the alternative solutions
presented, the alternative that most closely replicates the same Forward Price
Data as would have been developed under this Exhibit C prior to any
Replacement Information Event. Any substitute source of information
developed pursuant to this section 9 shall only apply prospectively.
04PB-11468 , PacifiCorp 9 of 9
Exhibit C, Determination of Forward Flat-Block Price Forecast for Contract Years 2007 Through
2011