2007 Supplemental Wholesale Power Rate Adjustment Proceeding, Public Hearings, and Opportunities for Public Review and Comment, 7539-7555 [E8-2339]

Agencies

• Bonneville Power Administration
• DEPARTMENT OF ENERGY

[Federal Register Volume 73, Number 27 (Friday, February 8, 2008)]
[Notices]
[Pages 7539-7555]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2339]


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DEPARTMENT OF ENERGY

Bonneville Power Administration


2007 Supplemental Wholesale Power Rate Adjustment Proceeding, 
Public Hearings, and Opportunities for Public Review and Comment

AGENCY: Bonneville Power Administration (BPA), Department of Energy 
(DOE).

ACTION: Notice of Proposed Wholesale Power Rates (Notice). BPA File 
No.: WP-07.

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SUMMARY: The Pacific Northwest Electric Power Planning and Conservation 
Act (Northwest Power Act) provides that BPA must establish and 
periodically review and revise its rates so they are adequate to 
recover, in accordance with sound business principles, the costs 
associated with the acquisition, conservation and transmission of 
electric power, and to recover the Federal investment in the Federal 
Columbia River Power System (FCRPS) and other costs incurred by BPA. 
BPA is reopening its WP-07 wholesale power rate proceeding, which 
established power rates for Fiscal Years (FY) 2007-2009, in order to 
respond to recent decisions from the United States Court of Appeals for 
the Ninth Circuit (Ninth Circuit or Court) and to revise rates for FY 
2009.
    This 2007 Supplemental Wholesale Power Rate Adjustment Proceeding 
(WP-07 Supplemental Proceeding) responds to the Court's remand of BPA's 
WP-02 power rates for FY 2002-2006. This proceeding also responds to a 
separate Court decision that found BPA's 2000 Residential Exchange 
Program (REP) Settlement Agreements (REP Settlement Agreements) 
contrary to law. In response, BPA proposes to determine the amounts of 
REP settlement costs improperly included in FY 2002-2008 power rates, 
recover those amounts from investor owned utility customers (IOUs) over 
time and return improperly included amounts to preference customers. 
The WP-07 Supplemental Proceeding also includes proposed revisions to 
BPA's Section 7(b)(2) Legal Interpretation and Section 7(b)(2) 
Implementation Methodology.
    Persons that previously intervened in BPA's WP-07 Wholesale Power 
Rate Adjustment Proceeding automatically continue their party status in 
the WP-07 Supplemental Proceeding. Other persons wishing to become a 
formal party to the proceeding must file a petition to intervene, 
notifying BPA in writing of their intention to do so in conformance 
with the requirements stated in this Notice.

DATES: Petitions to intervene must be received no later than 5 p.m., 
Pacific Standard Time, on February 18, 2008. Non-party participants may 
make written comments between February 8, 2008, and May 5, 2008. 
Comments must be received by 5 p.m., Pacific Daylight Savings Time, on 
May 5, 2008, in order to be considered in the Supplemental Record of 
Decision (Supplemental ROD). (See Part III (A) for more information.)

ADDRESSES: Petitions to intervene should be directed to Robert Welsh, 
Hearing Clerk, LP-7, Bonneville Power Administration, 905 NE 11th 
Avenue, Portland, OR 97232 or by e-mail to: wp07rate@bpa.gov. In 
addition, a copy of the petition must be served concurrently on BPA's 
General Counsel and directed to Kurt R. Casad, LP-7, Office of General 
Counsel, Bonneville Power Administration, 905 NE 11th Avenue, Portland, 
OR 97232 or by e-mail to: krcasad@bpa.gov. See Part III (A) for more 
information.) Written comments by non-party participants must be 
received by 5 p.m. Pacific Daylight Savings Time, on May 5, 2008, in 
order to be considered in the Supplemental Record of Decision 
(Supplemental ROD). Written comments may be made as follows: In person 
at the field hearings (see schedule and locations in Part I of this 
Notice), online at BPA's Web site: https://www.bpa.gov/comment, or by 
mail to: BPA Public Affairs, DKE-7, P.O. Box 14428, Portland, OR 97293-
4428. Please identify written or electronic comments as ``WP-07 
Supplemental Proceeding.'' The Supplemental ROD will consider and 
address the comments received.
    The WP-07 Supplemental Proceeding will begin with a prehearing 
conference at 9 a.m., Pacific Standard Time, on February 19, 2008, held 
in the BPA Rates Hearing Room, 2nd Floor, 911 NE 11th Avenue, Portland, 
OR. Due to increased security requirements, attendees should allow 
additional time to enter the building and complete the required 
screening process. Photo identification will be required for entry. BPA 
will release its 2007 Supplemental Wholesale Power Rate Proposal (WP-07 
Supplemental Proposal) and supporting documents at the prehearing 
conference. Compact discs (CDs) containing the WP-07 Supplemental 
Proposal will be provided to the parties at the prehearing conference. 
The WP-07 Supplemental Proposal will also be available on BPA's Web 
site at https://www.bpa.gov/corporate/ratecase.

FOR FURTHER INFORMATION CONTACT:
Ms. Heidi Helwig, Public Affairs Specialist, Public Affairs Office, 
DKE-7, P.O. Box 3621, Portland, OR 97208. Interested persons may also 
call 503-230-3458 or 1-800-622-4519 (toll-free)
Ms. Leslie M. Dimitman, Paralegal Specialist, Office of General 
Counsel, LP-7, P.O. Box 3621, Portland, OR 97208. Interested persons 
may also call Ms. Dimitman at (503) 230-5515, or the general BPA toll-
free numbers 1-800-282-3713 (answered Monday through Friday 6:30 a.m. 
to 5 p.m.) or 1-866-879-2303 (answered by voicemail)

    Information also may be obtained from:

Mr. Raymond D. Bliven, Power Rates Manager--PFR-6, P.O. Box 3621, 
Portland, OR 97208
Ms. Suzanne B. Cooper, Power Policy and Rates Manager--PF-6, P.O. Box 
3621, Portland, OR 97208
Ms. Elizabeth Evans, Policy Analysis Manager--PFB-6, P.O. Box 3621, 
Portland, OR 97208
Mr. Garry Thompson, Manager, Eastern Power Business Area; Mr. Ken 
Hustad, Senior Customer Account Executive; Ms. Carol Hustad, Customer 
Account Executive; Mr. Michael Normandeau, Customer Account Executive, 
Eastern Power Business Area--PSE, 707 W. Main, Suite 500, Spokane, WA 
99201
Mr. Scott Coe, Manager, Western Power Business Area; Mr. Charles 
Forman, Customer Account Executive; Ms. Claire Hobson, Customer Account 
Executive; Ms. Tina Ko, Customer Account Executive; Ms. Theresa 
Rockwood, Customer Account

[[Page 7540]]

Executive; Western Power Business Area--PSW-6, P.O. Box 3621, Portland, 
OR 97208
Mr. Larry King, Customer Account Executive, 2700 Overland, Burley, ID 
83318
Mr. C. T. Beede, Customer Account Executive, P.O. Box 40, Big Arm, MT 
59910
Mr. Dan Bloyer, Customer Account Executive, 1011 SW Emkay Drive, Suite 
211, Bend, OR 97702
Mr. Larry Felton, Senior Account Executive, Kootenai Building, Room 
215, N. Power Plant Loop, Richland, WA 99352-0968
Mr. Stuart Clarke, Senior Customer Account Executive; Mr. George Reich, 
Senior Customer Account Executive; Ms. Shannon Greene, Customer Account 
Executive; Ms. R. Kirsten Watts, Customer Account Executive; 909 First 
Avenue, Suite 380, Seattle, WA 98104-3636

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction and Procedural Background
II. Policy Guidance and Scope of Hearing
III. Public Participation
IV. Summary of WP-07 Supplemental Proposal and Major Studies
V. Section 7(b)(2) Legal Interpretation and Implementation 
Methodology
VI. Summary of Proposal To Respond to the Court's Opinions Regarding 
BPA's 2000 REP Settlement Agreements, WP-02 Rates, and by Extension, 
WP-07 Rates
VII. 2007 Supplemental Wholesale Power Rate Case Schedules (FY 2009) 
and 2007 Supplemental General Rate Schedule Provisions (FY 2009)

Part I--Introduction and Procedural Background

A. Overview and Background to This Rate Filing

    BPA is proposing to conduct a WP-07 Supplemental Proceeding in 
order to: (1) Adjust BPA's FY 2009 power rates consistent with recent 
decisions of the Ninth Circuit regarding BPA's WP-02 power rates for FY 
2002-2006; and (2) respond to the Court's decision finding BPA's REP 
Settlement Agreements contrary to the Northwest Power Act.
    Due to the time it takes to conduct a general rate adjustment 
proceeding, BPA determined that its first opportunity to establish 
revised power rates to conform to the Court's opinions was prior to the 
one-year FY 2009 rate period. Because BPA's WP-07 rates (FY 2007-2009) 
are currently before the Federal Energy Regulatory Commission (FERC) 
for final approval, BPA asked FERC to stay its review until BPA was 
able to conduct a supplemental rate proceeding to address the issues 
noted above. This will permit FERC to review a single supplemented 
record supporting BPA's proposed rates for FYs 2007, 2008, and 2009.
    In developing BPA's WP-02 power rates, BPA's revenue requirement 
included anticipated costs of REP Settlement Agreements with six 
regional IOUs. BPA allocated the majority of these settlement costs to 
the Priority Firm Power (PF) Preference rate. Following final approval 
of BPA's WP-02 rates by FERC, a number of parties challenged the WP-02 
power rates in the Ninth Circuit. In Golden NW Aluminum, Inc. v. 
Bonneville Power Admin., 501 F.3d 1037 (9th Cir. 2007) (Golden NW), the 
Court held BPA had improperly allocated REP Settlement Agreement costs 
to BPA's rates for preference customers. During the litigation of 
Golden NW, but prior to the Court's decision, BPA conducted a 
subsequent hearing (WP-07) to establish power rates for FY 2007-2009. 
In establishing these rates, BPA allocated REP settlement costs in the 
same manner as in BPA's WP-02 rates. Because the Court held in Golden 
NW that BPA's allocation of REP settlement costs in its WP-02 rates was 
improper, BPA's allocation of such costs in the WP-07 rates is 
similarly flawed.
    In addition, the Court held that BPA's WP-02 fish and wildlife cost 
estimates, and by extension the rates set pursuant to those estimates, 
were not supported by substantial evidence. The Court indicated BPA 
relied on outdated assumptions and had not appropriately considered 
information presented regarding its fish and wildlife costs. BPA's 
subsequent approach to forecasting fish and wildlife costs in the 
development of its WP-07 rates differed from the approach BPA used in 
developing its WP-02 rates. Nonetheless, as described in more detail in 
Part II.A.5, BPA is taking steps to ensure that its final WP-07 
Supplemental rates for FY 2009 are based on the most recent projections 
of fish and wildlife costs available at the time of rate development. 
In a procedural forum separate from the WP-07 Supplemental Proceeding, 
BPA will provide opportunities for fish and wildlife managers and 
others to provide input to BPA regarding BPA's fish and wildlife 
program costs for FY 2009. Decisions made based on the information 
gained from this separate program cost review forum will be used in the 
development of BPA's final WP-07 Supplemental rates.
    In a companion case to Golden NW, the Court held that BPA's REP 
Settlement Agreements with the IOUs were contrary to the Northwest 
Power Act. Portland General Elec. Co. v. Bonneville Power Admin., 501 
F.3d 1009 (9th Cir. 2007) (PGE). Also, subsequent to the Golden NW and 
PGE decisions, the Court reviewed three petitions for review 
challenging Load Reduction Agreements (LRAs) BPA executed with two IOUs 
during the energy crisis of 2000-2001. The Court dismissed two of the 
petitions for lack of jurisdiction and one petition as moot. The Court 
also reviewed challenges to amendments to the REP Settlement Agreements 
signed in 2004. In Public Utility Dist. No. 1 of Snohomish County, 
Wash. v. Bonneville Power Admin., 506 F.3d 1145 (9th Cir. 2007) 
(Snohomish), the Court remanded the amendments and a contract provision 
establishing a Reduction of Risk Discount to BPA. BPA must respond to 
the foregoing decisions. Because the ratemaking and REP issues are 
interrelated, BPA is proposing to address its response to the Court's 
decisions in the WP-07 Supplemental Proceeding.
    In summary, this WP-07 Supplemental Proceeding is being held for 
four primary purposes: (1) To establish new power rates for FY 2009; 
(2) to determine the amount of benefits that BPA's IOU customers 
received, or would have received, from FY 2002 through FY 2008 under 
REP settlements; (3) to determine the amount of REP benefits the IOUs 
would have received in the absence of the REP settlements; and (4) to 
address any difference between these two amounts. Specifically, the 
revised power rates for FY 2009 include the PF Preference rate and the 
PF Exchange rate. The average PF Preference rate of $26.2/MWh, about a 
four percent (4%) reduction, results largely from the reduced REP 
costs. The revised PF Exchange rate is used to determine REP benefits 
in FY 2009 As part of this process, BPA is also proposing revisions to 
BPA's Section 7(b)(2) Legal Interpretation and Section 7(b)(2) 
Implementation Methodology. An introduction to BPA's WP-07 Supplemental 
Proposal is contained in Part IV of this Notice. A summary of BPA's 
proposal regarding the calculation of REP benefits for FY 2002-2008 is 
contained in Part VI.

B. Legal Requirements

    Section 7(i) of the Northwest Power Act, 16 U.S.C. 839e(i), 
requires that BPA's rates be established according to certain 
procedures. These procedures include, among other things: publication 
of a notice of the proposed rates in the Federal Register; one or more 
hearings conducted as expeditiously as practicable by a Hearing 
Officer; public opportunity to provide both oral and written views

[[Page 7541]]

related to the proposed rates; opportunity to offer refutation or 
rebuttal of submitted material; and a decision by the Administrator 
based on the record. This proceeding is governed by Sec.  1010 of BPA's 
Rules of Procedure Governing Rate Hearings, 51 FR 7611 (1986) (BPA 
Hearing Procedures). These procedures implement the statutory section 
7(i) requirements.
    Section 1010.7 of the BPA Hearing Procedures prohibits ex parte 
communications. The ex parte rule applies to all BPA and DOE employees 
and contractors. Except as provided below, any outside communications 
with BPA and/or DOE personnel regarding BPA's rate case by other 
Executive Branch agencies, Congress, existing or potential BPA 
customers (including tribes), and nonprofit or public interest groups 
are considered outside communications and are subject to the ex parte 
rule. The general rule does not apply to communications relating to: 
(1) Matters of procedure only (the status of the rate case, for 
example); (2) exchanges of data in the course of business or under the 
Freedom of Information Act; (3) requests for factual information; (4) 
matters BPA is responsible for under statutes other than the ratemaking 
provisions; or (5) matters that all parties agree may be made on an ex 
parte basis. The ex parte rule remains in effect until the 
Administrator's Final ROD is issued, which is scheduled to occur on or 
about August 18, 2008.
    The Bonneville Project Act, 16 U.S.C. 832, the Flood Control Act of 
1944, 16 U.S.C. 825s, the Federal Columbia River Transmission System 
Act, 16 U.S.C. 838, and the Northwest Power Act, 16 U.S.C. 839, provide 
guidance regarding BPA ratemaking. The Northwest Power Act requires BPA 
to set rates that are sufficient to recover, in accordance with sound 
business principles, the cost of acquiring, conserving and transmitting 
electric power, including amortization of the Federal investment in the 
FCRPS over a reasonable period of years, and certain other costs and 
expenses incurred by the Administrator.
    BPA's 2007 Supplemental Wholesale Power Rate Schedules (FY 2009) 
and 2007 Supplemental General Rate Schedule Provisions (GRSPs) (FY 
2009), as well as the Section 7(b)(2) Legal Interpretation and Section 
7(b)(2) Implementation Methodologye, are available for viewing and 
downloading on BPA's Web site at https://www.bpa.gov/corporate/ratecase 
as discussed in Part VII of this Notice. The studies addressing the 
factors used to develop these rates are listed in Part IV and will be 
available for examination beginning February 19, 2008, at BPA's Public 
Information Center, BPA Headquarters Building, 1st Floor, 905 NE 11th 
Avenue, Portland, Oregon, and will be provided to parties at the 
prehearing conference to be held on February 19, 2008, beginning at 9 
a.m., Pacific Standard Time, Room 223, 911 NE 11th Avenue, Portland, 
Oregon.
    Copies of the studies and documentation can be downloaded from 
BPA's Web site at https://www.bpa.gov/corporate/ratecase or can be 
requested (on a compact disc or hard copy) by calling BPA's document 
request line toll-free at: 1-800-622-4519.
    A formal evidentiary rate hearing will be conducted that is open to 
rate case parties. Interested parties that did not previously intervene 
in BPA's WP-07 power rate proceeding must file petitions to intervene 
in order to take part in the WP-07 formal hearing. A proposed schedule 
for the WP-07 Supplemental Proceeding is stated below.
    The Hearing Officer will establish a final schedule at the 
prehearing conference.

Prehearing/BPA Direct Case.....................                 02/19/08
Clarification..................................        02/27/08-02/29/08
Motions to Strike..............................                 03/07/08
Data Request Deadline..........................                 03/07/08
Answers to Motions to Strike...................                 03/14/08
Data Response Deadline.........................                 03/14/08
Spokane, WA Field Hearing......................                 03/18/08
Portland, OR Field Hearing.....................                 03/20/08
Parties file Direct Cases......................                 03/28/08
Clarification..................................        04/07/08-04/09/08
Motions to Strike..............................                 04/11/08
Data Request Deadline..........................                 04/11/08
Answers to Motions to Strike...................                 04/18/08
Data Response Deadline.........................                 04/18/08
Litigants file Rebuttal........................                 05/05/08
Close of Participant Comments..................                 05/05/08
Clarification..................................        05/12/08-05/14/08
Motions to Strike..............................                 05/15/08
Data Request Deadline..........................                 05/15/08
Answers to Motions to Strike...................                 05/22/08
Data Response Deadline.........................                 05/22/08
Cross-Examination..............................        05/27/08-05/30/08
Initial Briefs Filed...........................                 06/09/08
Oral Argument..................................        06/16/08-06/17/08
Publish Draft ROD..............................                 07/16/08
Briefs on Exceptions...........................                 07/28/08
Publish Final ROD--Final Studies...............                 08/18/08
 

    As noted above, BPA will conduct two public field hearings in the 
Pacific Northwest. Public field hearings are an opportunity for persons 
who are not parties in the formal rate hearing to have their views 
included in the official record. Written transcripts will be made at 
all of the field hearings. The field hearings have been scheduled to 
take place at the locations, dates, and times specified below. The 
hearing dates also will be posted on the BPA's Web site (https://
www.bpa.gov/corporate/ratecase) and through announcements in local 
newspapers. Any changes to the scheduled public hearings will be 
available on the rate case Web site. The BPA Public Affairs Office also 
may be contacted for this information at the telephone number 
previously listed.

[[Page 7542]]



                     Public Field Hearings Schedule
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03/18/08...............  6 p.m...............  Spokane, Washington.
03/20/08...............  6 p.m...............  Portland, Oregon.
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Part II--Policy Guidance and Scope of Hearing

A. Policy Guidance

    The following policies are foundational elements that guided the 
development of major components of this supplemental rate proposal.
1. BPA's Subscription Strategy
    On December 21, 1998, BPA issued a Power Subscription Strategy and 
Record of Decision (Subscription Strategy). The Subscription Strategy 
reflected BPA's position on the equitable distribution of Federal power 
for FY 2002-2011. The Subscription Strategy was the culmination of a 
multi-year public process that established BPA's plan for the 
availability of Federal power post-2001, the products from which 
customers could choose, and an outline of the contracts and pricing 
framework for those products.
    The Subscription Strategy provided a marketing framework for the 
WP-02 and WP-07 power rate cases. The WP-02 and WP-07 power rate cases 
developed the rate schedules necessary for the products and contracts 
that were developed through Subscription. The Subscription contracts, 
except for the REP Settlement Agreements, continue to be the basis for 
the contractual relationship between BPA and nearly all of its firm 
power customers. BPA is assuming for purposes of this WP-07 
Supplemental Proceeding that the IOUs, except Idaho Power Company 
(Idaho Power), would have signed Residential Purchase and Sale 
Agreements (RPSAs) in the fall of 2000 instead of the 2000 REP 
Settlement Agreements.
2. Regional Dialogue and the Near-Term and Long-Term Policies
    The Regional Dialogue process began in April 2002 when a group of 
BPA's Pacific Northwest electric utility customers submitted a ``joint 
customer proposal'' to BPA that addressed both near-term and long-term 
contract and rate issues. Since then, BPA, the Northwest Power and 
Conservation Council (Council), customers, and other interested parties 
have worked on these near- and long-term issues. Considering the depth 
and complexity of many of these issues, BPA concluded it was not 
practical to resolve all issues before the start of the WP-07 rate 
case. Therefore, BPA determined that it would address the issues in two 
phases. The first phase of the Regional Dialogue, referred to as the 
Near-Term Policy, addressed issues that had to be resolved in order to 
replace power rates that expired in September 2006. See Bonneville 
Power Administration's Policy for Power Supply Role for Fiscal Years 
2007-2011 (February 2005). The issues in the second phase were 
addressed in BPA's Long-Term Regional Dialogue Final Policy and Record 
of Decision, which was published on July 19, 2007. The Long-Term 
Regional Dialogue Final Policy is expected to be implemented through 
new power sales contracts and a future rate case conducted before such 
contracts go into effect in FY 2012. The Long-Term Regional Dialogue 
Final Policy does not affect this WP-07 Supplemental Proceeding.
3. Service to Direct Service Industries (DSIs)
    The Near-Term Policy established parameters for service to the DSIs 
that were further addressed in ``Bonneville Power Administration's 
Service to DSI Customers for Fiscal Years 2007-2011, Administrator's 
Record of Decision'' (DSI ROD) (June 30, 2005), and Supplement to 
Administrator's Record of Decision on Bonneville Power Administration's 
Service to Direct Service Industrial (DSI) Customers for Fiscal Years 
2007-2011, Administrator's Record of Decision (May 31, 2006), (together 
the ``DSI RODs'').
    In the DSI RODs, BPA determined to offer to aluminum company DSIs 
power sales contracts for an aggregate 560 aMW of benefits at a capped 
cost of $59 million. In addition, BPA offered a 17 aMW surplus firm 
power sales contract for Port Townsend Paper Company through the local 
public utility under the FPS rate (or the Industrial Firm Power (IP) 
rate, if viable) at a price approximately equivalent to, but in no case 
less than, its lowest-cost PF rate.
    BPA decided to allocate a share of the 560 aMW of service benefits 
to each DSI aluminum company for purposes of making an initial offer of 
service. Because of the financial risks inherent in providing actual 
power and in order to meet the known and capped cost prerequisite, BPA 
determined that the delivery mechanism would be to monetize the value 
of the below-market power sales to provide service benefits through 
cash payments.
4. Power Function Review and Other Cost Reviews
    In January 2005, BPA initiated an extensive process, known as the 
Power Function Review (PFR), to examine Power Services' (formerly known 
as Power Business Line or PBL) intended program spending levels. The 
PFR process consisted of two phases designed to give interested parties 
an opportunity to examine, understand and provide input on the cost 
projections that would form the basis for BPA's WP-07 Power Rate 
Proposal. The first phase concluded in June 2005 when BPA issued the 
PFR Final Report. At that time, BPA committed to re-examine the program 
levels prior to establishing power rates in BPA's final proposal. In 
early 2006, BPA conducted the second phase, known as PFR II, allowing 
interested parties an opportunity to review these program levels. 
Workshops were held during January through March, 2006 and in April of 
2006, BPA issued a draft closeout report for comment. After the close 
of comment, BPA reviewed all comments and issued the PFR II Final 
Closeout Report documenting BPA's decisions on June 1, 2006. These 
updated program levels were then incorporated into BPA's WP-07 Final 
Proposal.
5. Mid-WP-07 Rate Period Cost Forecast Changes
    For the WP-07 Supplemental Proceeding, BPA reviewed the FY 2009 
program levels incorporated into the WP-07 Final Proposal that were 
developed through the PFR I and II processes. BPA then evaluated 
whether these forecasts remain reasonable in light of current 
projections. From this evaluation, BPA determined that adjustments were 
needed in certain program areas to address significant changes in 
forecast program levels. Specifically, these cost areas include: The 
Residential Exchange Program; Columbia Generating Station (CGS) 
operation and maintenance; interest; amortization; depreciation; 
renewables; energy efficiency; long-term generating projects; 
augmentation; purchased power; and fish and wildlife costs. BPA 
described the nature of the non-REP cost changes to interested persons 
in a public workshop on October 10, 2007.
    In the October workshop, BPA notified attendees that it intended to 
initiate a separate public process to address possible changes to the 
fish and wildlife cost forecast for FY 2009, \1\ costs of operating the 
CGS, and other cost changes identified that are relevant to the WP-07 
Supplemental Proceeding. In

[[Page 7543]]

this separate forum, BPA will provide interested persons an opportunity 
to review and comment on any adjustments to program levels. After the 
close of comment, BPA will issue a closeout report detailing any 
necessary adjustments to program levels. These forecast costs will then 
be incorporated into BPA's final rate proposal for FY 2009.
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    \1\ Such changes could result from, for example, the issuance by 
NOAA Fisheries of a final Biological Opinion regarding the impacts 
of the mainstem Federal Columbia River Power System dams on 
threatened and endangered salmon and steelhead, and from any related 
commitments BPA may make in a long-term Memoranda of Agreement 
currently being discussed with some regional governmental entities.
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6. Post-2006 Conservation Program Structure Proposal
    The Conservation Program Structure Proposal was finalized and 
issued June 28, 2005. It describes BPA's approach to offering 
conservation programs during FY 2007 through FY 2009. The decisions of 
this post-2006 proposal were used as inputs in the development of BPA's 
WP-07 Power Rate Case Final Proposal. BPA does not propose any changes 
in this area for the WP-07 Supplemental Proceeding.
7. Transmission Rate Case
    BPA is committed to marketing its power and transmission services 
separately in a manner modeled after the regulatory initiatives adopted 
in 1996 by FERC to promote competition in wholesale power markets. 
FERC's initiatives in Orders 888 \2\ and 889 \3\ directed public 
utilities regulated under the Federal Power Act to separate their power 
merchant functions from their transmission reliability functions; 
unbundle transmission and ancillary services from wholesale power 
services; and set separate rates for wholesale generation, 
transmission, and ancillary services. Although BPA is not required by 
law to follow FERC's regulatory directives that promote competition and 
open access transmission service, BPA elected to separate its power and 
transmission operations and unbundle its rates in a manner consistent 
with the directives concerning open access transmission service. BPA 
develops its transmission rates in separate proceedings from its power 
rates.
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    \2\ Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery 
of Stranded Costs by Public Utilities and Transmitting Utilities 
Reg-Preamble, FERC Stats & Regs 1991-96, para. 31,036 (1996).
    \3\ Open Access Same-Time Information System (formerly Real-Time 
Information Networks) and Standards of Conduct, Reg-Preamble, FERC 
Stats & Regs 1991-96, para. 31,035 (1996).
---------------------------------------------------------------------------

    On February 5, 2007, BPA's Transmission Services (formerly known as 
the Transmission Business Line or TBL) initiated a rate case to 
establish transmission rates for the FY 2008-2009 transmission rate 
period. Prior to the initiation of that rate case, Transmission 
Services held several public meetings with customers from July through 
November 2006 to discuss transmission costs, revenues, and rate design 
issues for the FY 2008-2009 rate period. Customers expressed interest 
in meeting with Transmission Services to develop a settlement for the 
FY 2008-2009 rate period. Transmission Services continued meetings with 
customers between October and November 2006, resulting in the 2008 
Transmission Rate Case Settlement Agreement.
    On April 23, 2007, BPA issued the ``Final Transmission Rate 
Proposal Administrator's Record of Decision'' which adopted the 
transmission and ancillary services rates reflected in the 2008 
Transmission Rate Case Settlement Agreement. FERC granted interim 
approval to these rates on September 20, 2007. The Transmission 
Services rate case settlement established fixed rates for certain 
ancillary services and some transmission rates that incorporate 
ancillary services. The generation inputs that support the ancillary 
services and other control area services sold by Transmission Services 
are provided by Power Services. BPA is not proposing any changes to its 
generation input costs for FY 2009 except for the recognition of 
additional revenues expected from Transmission Services for Wind 
Integration.

B. Scope of the WP-07 Supplemental Proceeding

    Many of the policies that guide BPA's power marketing decisions 
have been made or will be made in other public review processes. In 
addition, many decisions about BPA's financial commitments, including 
for example, what BPA plans to spend on meeting its fish and wildlife 
obligations, are made in forums other than the rate case. This section 
provides guidance to the Hearing Officer as to those matters that are 
within the scope of the rate case, and those that are outside the 
scope.
1. Program Level Expense Forecasts and Commitments
    Section 7(i) rate proceedings establish the rates applicable to 
BPA's products and services at levels set to assure recovery of BPA's 
costs in total. The section 7(i) proceeding does not establish the 
program levels to be recovered during a rate period. Instead, program 
levels (including programmatic decisions and decisions regarding 
spending commitments) are decided in various forums outside the section 
7(i) proceedings. Once set, however, program levels are taken into 
consideration when designing the rates proposed in a section 7(i) 
proceeding to ensure such costs are recovered. As described in Part 
II.A.5, BPA evaluated whether updated forecasts of program levels were 
needed for this WP-07 Supplemental Proceeding, and determined that, 
except in a few instances, they were not. Therefore, except as noted 
above in Part II.A.5 and described below, this WP-07 Supplemental 
Proceeding will not revisit the previous forecasts of program levels 
for FY 2007-2009 made in the PFR I and II processes and incorporated 
into the WP-07 Final Proposal. Nor is this WP-07 Supplemental 
Proceeding the forum to revisit or seek new decisions regarding program 
spending commitments for this period.
    To allow public review and input on program level forecasts that 
BPA has determined require updating, BPA will hold a separate process 
to address adjustments to the program level forecasts for FY 2009 
associated with CGS costs, fish and wildlife costs and any other 
necessary program categories for which significant changes have or may 
occur before BPA's final rate proposal. This separate process will 
include an opportunity for entities, such as fish and wildlife 
managers, to engage BPA on the cost assumptions made and the 
appropriateness of any proposed adjustments in forecasts. Any 
adjustments adopted by BPA to the program level forecasts for FY 2009 
as a result of this separate process will be incorporated into BPA's 
final rate proposal for FY 2009. Because discussions regarding spending 
commitments or discussions about adjustments in forecasts of costs in 
these program areas will occur in forums separate from this rate 
proceeding, pursuant to Sec.  1010.3(f) of BPA Hearing Procedures, the 
Administrator hereby directs the Hearing Officer to exclude from the 
record any materials attempted to be submitted or arguments attempted 
to be made in the proceeding that seek to address program spending 
commitment decisions, or address adjustments in the program level 
forecasts for FY 2009 for CGS costs, fish and wildlife costs, and any 
other program categories.
2. Near-Term Policy Decisions
    As detailed above, BPA issued the Near-Term Policy on February 4, 
2005. The Policy resolved a number of policy decisions that affect 
BPA's WP-07 Supplemental Proposal. Those issues include, but are not 
limited to, decisions on the availability of the lowest cost PF rate to 
public agency customers; the term of the rate period; DSI service 
options; and the availability of products for new or existing 
customers. Pursuant to Sec.  1010.3(f) of the BPA Hearing

[[Page 7544]]

Procedures, the Administrator hereby directs the Hearing Officer to 
exclude from the record any materials attempted to be submitted or 
arguments attempted to be made in the proceeding that seek to in any 
way to revisit the appropriateness or reasonableness of BPA's decisions 
made in the Near-Term Policy ROD.
3. DSI Service
    The DSI Service RODs established the manner in which BPA would 
provide service and benefits to its DSI customers during FY 2007-2011. 
Pursuant to Sec.  1010.3(f) of the BPA Hearing Procedures, the 
Administrator directs the Hearing Officer to exclude from the record 
any materials attempted to be submitted or arguments attempted to be 
made in the proceeding that seek to in any way to revisit the 
appropriateness or reasonableness of BPA's decisions made in the DSI 
RODs.
4. Transmission Acquisition Expense
    In the PFR I and II processes, BPA reviewed with interested persons 
program levels related to Power Services' transmission acquisitions. 
These program levels represent the costs associated with services 
necessary to deliver energy from generating resources to markets and 
loads. These costs include: transmission expenses; ancillary services; 
real power losses; generation integration costs associated with BPA-
owned transmission facilities; and metering and communication 
requirements. Pursuant to Sec.  1010.3(f) of BPA Hearing Procedures, 
the Administrator hereby directs the Hearing Officer to exclude from 
the record any materials attempted to be submitted or arguments 
attempted to be made in the hearing that seek to in any way revisit the 
appropriateness or reasonableness of BPA's transmission acquisition 
program level estimates.
5. Other Transmission Issues
a. Generation Inputs
    Power Services provides a portion of the FCRPS's available 
generation to Transmission Services to enable Transmission Services to 
meet its various transmission and control area requirements. 
Transmission Services uses the generation inputs to provide ancillary 
and control area services. To recover the costs associated with 
providing these generation inputs, Power Services develops charges 
based on relevant FCRPS costs that are assessed the transmission 
function. The costs Power Services are proposing to use to determine 
the generation input costs and associated unit costs to Transmission 
Services were addressed in the BPA's WP-07 Final Proposal. Based on 
updated information, the WP-07 Supplemental Proposal will include 
revised charges for some generation inputs and these revisions are 
included within the scope of this rate proceeding. Pursuant to Sec.  
1010.3(f) of BPA's Hearing Procedures, the Administrator directs the 
Hearing Officer to exclude from the record any materials attempted to 
be submitted or arguments attempted to be made in the proceeding that 
seek in any way to revisit the appropriateness or reasonableness of any 
issues, other than the charges, related to the generation inputs. This 
exclusion includes, but is not limited to, issues regarding the level 
or quality of the generation inputs that Transmission Services requests 
from Power Services. These determinations are generally made by 
Transmission Services in accordance with industry, reliability, and 
other compliance standards and criteria, and are not matters 
appropriate for the WP-07 Supplemental Proceeding.
    In addition, BPA will conduct a section 7(i) process related to 
within-hour balancing capacity for wind generation. Pursuant to Sec.  
1010.3(f) of BPA's Hearing Procedures, the Administrator directs the 
Hearing Officer to exclude from the record any materials attempted to 
be submitted or arguments attempted to be made in the WP-07 
Supplemental Proceeding that seek in any way to address the issues 
contained within the scope of the within-hour balancing capacity for 
wind generation rate proceeding (Proposed Wind Integration--Within-Hour 
Balancing Service Rate (WI-09)), except that the appropriate treatment 
of the additional revenue resulting from this proceeding is a matter 
that is included within the scope of the WP-07 Supplemental Proceeding.
b. Transmission Rate Case
    On April 23, 2007, BPA issued the 2008 ``Final Transmission 
Proposal-Administrator's Record of Decision'' that adopted the 
transmission and ancillary services rates as reflected in the 2008 
Transmission Rate Case Settlement Agreement. FERC granted interim 
approval to these transmission rates on September 20, 2007. Pursuant to 
Sec.  1010.3(f) of BPA Hearing Procedures, the Administrator hereby 
directs the Hearing Officer to exclude from the record any materials 
attempted to be submitted or arguments attempted to be made in the 
hearing which seek in any way to revisit the appropriateness or 
reasonableness of issues determined in the transmission rate case. That 
proceeding addressed, among other things, transmission and ancillary 
service rate levels, redispatch costs between Transmission Services and 
Power Services related to Attachment K redispatch for FY 2008-2009, and 
the level of the GTA Delivery Charge for FY 2009.
6. Post-2006 Conservation Program Structure Proposal
    Through the post-2006 workgroup collaboration, customers and 
constituents provided input on the development of BPA's post-2006 
conservation approach. Pursuant to Sec.  1010.3(f) of BPA Hearing 
Procedures, the Administrator hereby directs the Hearing Officer to 
exclude from the record any materials attempted to be submitted or 
arguments attempted to be made in the hearing that seek to in any way 
revisit the appropriateness or reasonableness of BPA's conservation 
programs and establishment of their associated expense levels through 
the Post-2006 Conservation Program Structure Proposal dated June 28, 
2005. The Hearing Officer is also directed to exclude from the scope of 
this proceeding evidence regarding BPA's portfolio of conservation 
programs, as well as their expenses, that BPA intends to pursue during 
FY 2009.
7. Federal and Non-Federal Debt Service and Debt Management
    During the PFR, and in other forums, BPA has provided background 
information on its internal Federal and non-Federal debt management 
policies and practices. The discussions of these topics in the PFR and 
other forums were not intended to seek input from customers and 
constituents regarding BPA's debt management policies and practices. 
Rather, these discussions were intended to merely inform interested 
parties about these matters so that they would better understand BPA's 
debt structure. Although the PFR closeout letter did not make any 
decisions regarding BPA's debt management policies and practices, these 
remain outside the scope of the rate case. Therefore, pursuant to Sec.  
1010.3(f) of BPA Hearing Procedures, the Administrator hereby directs 
the Hearing Officer to exclude from the record any materials attempted 
to be submitted or arguments attempted to be made in the hearing which 
seek to in any way visit the appropriateness or reasonableness of BPA's 
debt management policies and practices.
8. Average System Cost Methodology
    Concurrent with the publication of this notice, BPA is publishing a 
separate notice in the Federal Register to commence a consultation 
proceeding to

[[Page 7545]]

develop a new Average System Cost (ASC) Methodology. Section 5(c) of 
the Northwest Power Act established the REP, which provides benefits to 
residential consumers of Pacific Northwest utilities based, in part, on 
a utility's ``average system cost'' of resources. Section 5(c)(7) of 
the Act authorizes the Administrator to consult with regional interests 
to develop an ASC methodology. The ASC Methodology prescribes which 
costs are included and excluded from a utility's ASC, as well as the 
procedural rules for filing proposed ASCs with BPA. Comments on BPA's 
proposed ASC Methodology will be submitted, reviewed and addressed 
solely in the separate consultation proceeding. For this reason, issues 
related to the proposed ASC Methodology are not within the scope of 
this proceeding. Therefore, pursuant to Sec.  1010.3(f) of BPA Hearing 
Procedures, the Administrator hereby directs the Hearing Officer to 
exclude from the record any materials attempted to be submitted or 
arguments attempted to be made in the hearing that seek to in any way 
visit the appropriateness or reasonableness of the proposed ASC 
Methodology.
9. Potential Environmental Impacts
    For the reasons stated in Section C below, the Administrator 
directs the Hearing Officer to exclude from the record all evidence and 
arguments that seek in any way to address the potential environmental 
impacts of the rates being developed in the WP-07 Supplemental 
Proceeding. Any such evidence and arguments submitted will be 
considered and addressed in the separate, concurrent process described 
in the next section.

C. The National Environmental Policy Act

    BPA is in the process of assessing the potential environmental 
effects of its WP-07 Supplemental Proposal, consistent with the 
National Environmental Policy Act (NEPA). BPA's Business Plan 
Environmental Impact Statement (Business Plan EIS), completed in June 
1995, evaluated the environmental impacts of a range of business plan 
alternatives that could be varied by applying policy modules, including 
one for rates. Any combination of alternative policy modules should 
allow BPA to balance its costs and revenues. The Business Plan EIS also 
addressed response strategies, including adjusting rates, that BPA 
could pursue if BPA's costs exceeded its revenues. In August 1995, the 
BPA Administrator issued a Record of Decision (Business Plan ROD) that 
adopted the Market-Driven Alternative from the Business Plan EIS. This 
alternative was selected because, among other reasons, it allows BPA 
to: (1) Recover costs through rates; (2) competitively market BPA's 
products and services; (3) develop rates that meet customer needs for 
clarity and simplicity; (4) continue to meet BPA's legal mandates; and 
(5) avoid adverse environmental impacts. BPA also committed to apply as 
many response strategies as necessary when BPA's costs and revenues do 
not balance. In April 2007, BPA completed and issued a Supplemental 
Analysis to the Business Plan EIS. The Supplemental Analysis found that 
the Business Plan EIS's relationship-based and policy-level analysis of 
potential environmental impacts from BPA's business practices remains 
valid, and that BPA's current business practices are still consistent 
with BPA's Market-Driven approach. The Business Plan EIS and ROD thus 
continue to provide a sound basis for making determinations under NEPA 
concerning BPA's policy-level decisions.
    Because the WP-07 Supplemental Proposal likely would assist BPA in 
accomplishing the goals identified in the Business Plan ROD, the 
proposal appears consistent with these aspects of the Market-Driven 
Alternative. In addition, this rate proposal is similar to the type of 
rate designs evaluated in the Business Plan EIS; thus, implementation 
of this rate proposal would not be expected to result in significantly 
different environmental impacts from those examined in the Business 
Plan EIS. Therefore, BPA expects that this WP-07 Supplemental Proposal 
will fall within the scope of the Market-Driven Alternative that was 
evaluated in the Business Plan EIS and adopted in the Business Plan 
ROD.
    As part of the Administrator's Supplemental ROD that will be 
prepared for the FY 2007 Supplemental Wholesale Power Rate Proposal, 
BPA may tier its decision under NEPA to the Business Plan ROD. However, 
depending upon the ongoing environmental review, BPA may, instead, 
issue another appropriate NEPA document. During the public review and 
comment period for the WP-07 Supplemental Proposal, persons interested 
in submitting comments regarding its potential environmental effects 
may do so by submitting comments to Katherine Pierce, NEPA Compliance 
Officer, KEC-4, Bonneville Power Administration, 905 NE 11th Avenue, 
Portland, OR 97232. Any such comments received by the comment deadline 
identified in Part I will be considered by BPA's NEPA compliance staff 
in the NEPA process that will be conducted for this Proposal.

Part III--Public Participation

A. Distinguishing Between ``Participants'' and ``Parties''

    BPA distinguishes between ``participants in'' and ``parties to'' 
the section 7(i) hearing process. Apart from the formal hearing 
process, BPA will accept comments, views, opinions, and information 
from ``participants,'' who are defined in the BPA Hearing Procedures as 
persons who may submit comments without being subject to the duties of, 
or having the privileges of, parties. Participants' written and oral 
comments will be made a part of the official record and considered by 
the Administrator when making his decision. Participants are not 
entitled to participate in the prehearing conference; may not cross-
examine parties' witnesses, seek discovery, or serve or be served with 
documents; and are not subject to the same procedural requirements as 
parties.
    The views of participants are important to BPA. Written comments by 
participants will be included in the record if they are received by 
5:00 p.m., Pacific Daylight Savings Time, on May 5, 2008. This date 
follows the anticipated submission of BPA's and all other parties' 
direct cases. Written views, supporting information, questions, and 
arguments should be submitted to BPA Public Affairs at the address 
listed in Paragraph 2 of the Summary. In addition, BPA will hold two 
field hearings in the Pacific Northwest region. Participants may appear 
at the field hearings and present verbal and written comments. The 
transcripts of these hearings will be part of the record upon which the 
Administrator makes his final rate decisions.
    Persons who previously intervened in BPA's 2007 Wholesale Power 
Rate Adjustment Proceeding automatically continue their party status in 
the 2007 Supplemental Proceeding. Other persons wishing to become a 
party to BPA's rate proceeding must notify BPA in writing and file a 
Petition to Intervene with the Hearing Officer. Petitioners may 
designate no more than two representatives upon whom service of 
documents will be made. Petitions to Intervene must state the name and 
address of the person requesting party status and the person's interest 
in the hearing.
    Petitions to Intervene as parties in the rate proceeding are due to 
the Hearing

[[Page 7546]]

Officer by 5 p.m., Pacific Standard Time, on February 18, 2008. The 
petitions should be directed as stated below or may be e-mailed to 
wp07rate@bpa.gov: Robert Welsh, Hearing Clerk-LP-7, Bonneville Power 
Administration, 905 NE 11th Avenue, P.O. Box 3621, Portland, OR 97208-
3621.
    Petitioners must explain their interests in sufficient detail to 
permit the Hearing Officer to determine whether they have a relevant 
interest in the proceeding. Pursuant to Sec.  1010.1(d) of BPA Hearing 
Procedures, BPA waives the requirement in Sec.  1010.4(d) that an 
opposition to an intervention petition must be filed and served 24 
hours before the February 19, 2008, prehearing conference. Any 
opposition to an intervention petition may instead be made at the 
prehearing conference. Any party, including BPA, may oppose a petition 
for intervention. Persons who have been denied party status in any past 
BPA rate proceeding shall continue to be denied party status unless 
they establish a significant change of circumstances. All timely 
applications will be ruled on by the Hearing Officer. Late 
interventions are strongly disfavored.

B. Developing the Record

    The record will comprise, among other things, verbal and written 
comments made by participants, including the transcripts of all 
hearings, any written materials submitted by the parties, documents 
developed by BPA staff, and other materials accepted into the record by 
the Hearing Officer. Written comments by participants will be included 
in the record if they are received by 5 p.m., Pacific Daylight Savings 
Time, on May 5, 2008. The Hearing Officer will then review the record, 
supplement it if necessary, and will certify the record to the 
Administrator for decision.
    The Administrator will develop final proposed rates for FY 2009 
based on the entire record, which includes the record certified by the 
Hearing Officer, as described above. The basis for the final proposed 
rates first will be expressed in the Administrator's Draft Supplemental 
ROD. Parties will have an opportunity to respond to the Draft 
Supplemental ROD as provided in the BPA Hearing Procedures. The 
Administrator will serve copies of the Final Supplemental ROD on all 
parties. At the conclusion of the rate proceeding, BPA will file the 
supplemental rate case record and rates for FY 2009 in a timely manner 
to receive FERC confirmation and approval effective October 1, 2008.
    BPA must continue to meet with customers in the ordinary course of 
business during the rate case. To comport with the rate case procedural 
rule prohibiting ex parte communications, BPA will provide the 
prescribed notice of meetings involving rate case issues in order to 
permit the opportunity for participation by all rate case parties. 
These meetings may be held on very short notice. Consequently, parties 
should be prepared to devote the necessary resources to participate 
fully in every aspect of the rate proceeding and attend meetings any 
day during the course of the rate case.

Part IV--Summary of WP-07 Supplemental Proposal and Major Studies

A. Summary of Proposed 2009 Wholesale Power Rate Structure

1. List of Proposed 2009 Wholesale Power Rates
    BPA is proposing to revise several rate schedules for its 2007 
Supplemental Wholesale Power Rates to respond to the Court's recent 
opinions. The rate schedules and the GRSPs are available for viewing 
and downloading on BPA's Web site at https://www.bpa.gov/corporate/
ratecase as discussed in Part VII of this Notice.
a. PF-07R Priority Firm Power Rate
    The PF rate schedule is comprised of two rates: the PF Preference 
rate and the PF Exchange rate.
    The PF Preference rate applies to BPA's firm power sales to public 
bodies, cooperatives, and Federal agencies for resale to their regional 
consumers. This power is guaranteed to be continuously available. The 
proposed average PF Preference rate is $26.2/MWh. The rate applies to 
the following products:

Full Service Product
Actual Partial Service Product--Simple
Actual Partial Service Product--Complex
Block Product
Block Product with Factoring
Block Product with Shaping Capacity
Slice Product

    The PF Exchange rate applies to sales of power to regional 
utilities that participate in the Residential Exchange Program 
established under section 5(c) of the Northwest Power Act. 16 U.S.C. 
839c(c). BPA is proposing to revise the PF Exchange rate to remove the 
demand and energy rates and substitute a single annual rate. In 
addition, BPA is proposing to include utility-specific supplemental 
rate charges, consistent with section 7(b)(3) of the Northwest Power 
Act. 16 U.S.C. 839e(b)(3). These PF Exchange rates are used in 
determining REP benefits in FY 2009.
b. NR-07R New Resource Firm Power Rate
    The New Resource Firm Power (NR) rate applies to net requirements 
power sales to IOUs for resale to ultimate consumers for direct 
consumption, construction, test and start-up, and for station service. 
NR-07R firm power is also available to public utility customers for 
serving New Large Single Loads. This rate applies to the following 
products:

New Large Single Loads
Full Service Product
Actual Partial Service Product--Simple
Actual Partial Service Product--Complex
Block Product
Block Product with Factoring
Block Product with Shaping Capacity
c. IP-07R Industrial Firm Power Rate
    The IP rate is available for discretionary firm power sales to DSI 
customers authorized by section (5)(d)(1)(A) of the Northwest Power 
Act. 16 U.S.C 839c(d)(1)(A).
d. FPS-07R Firm Power Products and Services Rate
    The FPS rate schedule is available for the purchase of Firm Power, 
Capacity Without Energy, Supplemental Control Area Services, Shaping 
Services, and Reservation and Rights to Change Services for use inside 
and outside the Pacific Northwest. The rates for these products are 
posted and/or negotiated. BPA is proposing only minor changes to this 
rate schedule for FY 2009.
e. GTA-07R General Transfer Agreement Delivery Charge
    The GTA Delivery Charge applies to customers who purchase Federal 
power that is delivered over non-Federal low voltage transmission 
facilities. This rate was originally set in the 2006 Transmission 
Services Rate Case Settlement to mirror the Utility Delivery rate from 
October 1, 2005, through September 30, 2007. BPA's 2007 Power Rate Case 
determined that the GTA Delivery Charge would continue to mirror the 
Utility Delivery rate, which is $1.119 per kilowatt through September 
30, 2009. For FY 2009, Power Services is proposing to continue to set 
the GTA Delivery Charge to the same rate as Transmission Services' 
posted monthly Utility Delivery rate, which is $1.119 per kilowatt.

[[Page 7547]]

2. Significant Rate Development Issues
a. Residential Exchange Program Costs
    For FY 2009, BPA expects qualifying regional utilities to 
participate in the REP. BPA is concurrently developing a new ASC 
Methodology in a separate proceeding and will be offering new RPSAs to 
requesting utilities. In order to include the costs of an REP in BPA's 
FY 2009 rates, BPA is forecasting the ASCs of utilities expected to 
participate in the program. In addition, BPA is forecasting the 
expected utilities' system and exchangeable residential and small farm 
loads. However, the ASC Methodology being revised in a concurrent 
process will be used to conduct an expedited review of utilities' ASCs 
outside of this WP-07 Supplemental Proceeding. This review will 
determine the actual ASCs for eligible utilities for FY 2009. Those ASC 
determinations, when complete, will be incorporated into the final rate 
proposal and used to determine REP costs in FY 2009 rates.
b. Inter-Function Costs and Credits
    BPA is not proposing any changes to its inter-function generation 
input unit charges for FY 2009. The forecast of revenues for FY 2009 in 
the WP-07 Final Proposal will continue to be used. However, BPA will 
adjust the inter-function revenue credit to reflect the additional 
revenues that Power Services expects to receive from Transmission 
Services based on the proposed Wind Integration--Within-Hour Balancing 
Service Rate Proceeding (WI-09). Therefore, BPA is proposing to 
incorporate the forecast revenues determined in the Wind Integration 
rate case into the final rates of this proceeding.
c. DSI Service FY 2007-2011
    BPA continues to forecast no direct service sales under the IP rate 
to its DSI customers. Instead, BPA provides the DSI aluminum smelters 
560 aMW of surplus firm power service benefits for the FY 2007-2011 
period at a capped cost of $59 million per year. Benefits have been 
monetized under the contacts with these companies. In addition, BPA 
provides a 17 aMW surplus firm power sales contract for Port Townsend 
Paper Company through the local public utility under the FPS rate 
schedule at a rate that is approximately equivalent to BPA's lowest-
cost PF rate.
3. Rate Design and Rate Adjustments
    Consistent with the Partial Resolution of Issues negotiated between 
BPA and rate case parties before the WP-07 Final Proposal, BPA is 
generally continuing its existing WP-07 rate design for its FY 2009 
rates, with only minor modifications listed below. In addition, BPA is 
generally continuing its existing set of rate adjustments for its FY 
2009 rates, also described below.
a. Conservation Rate Credit (CRC)
    BPA is not proposing any changes from its WP-07 Final Proposal for 
the CRC.
b. Risk Mitigation Tools
    Other than resetting the cap for the FY 2009 Cost Recovery 
Adjustment Clause (CRAC) and the thresholds for the FY 2009 CRAC and 
Dividend Distribution Clause (DDC), BPA is proposing no other changes 
to the CRAC or DDC in the WP-07 Supplemental Proposal. BPA will use the 
same technical methodology to assess risks and intends to employ the 
same risk mitigation measures as presented in the WP-07 Final \4\ 
Proposal.
---------------------------------------------------------------------------

    \4\ Accumulated Modified Net Revenue

                        Table 1.--CRAC Cap and CRAC and DDC Annual Thresholds for FY 2009
                                              [Millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                      Approx.
                                      AMNR                                         threshold as
                                  calculated at    CRAC or DDC     CRAC or DDC      measured in    Maximum CRAC
                                  end of fiscal    applied to      threshold in        power         recovery
                                      year         fiscal year       AMNR \4\        services'     amount  (cap)
                                                                                     reserves
----------------------------------------------------------------------------------------------------------------
CRAC...........................            2008            2009          ($81.4)            $750             $36
DDC............................            2008            2009           218.6            1,050             n/a
----------------------------------------------------------------------------------------------------------------

    BPA proposes to continue the National Marine Fisheries Service 
(NMFS) Federal FCRPS Biological Opinion (NFB) Adjustment and the 
Emergency NFB Surcharge. Although BPA expects to include the forecast 
cost of implementing the final Biological Opinion for the FCRPS in its 
final supplemental rates, litigation regarding the Biological Opinion 
may continue, so the Emergency NFB Surcharge and the NFB Adjustment 
remain appropriate. In order to balance the need to cover risk with 
overall rate levels, BPA proposes to meet its Treasury Payment 
Probability (TPP) standard through a combination of financial reserves, 
the CRAC, the NFB Adjustment, the Emergency NFB Surcharge, and the 
Flexible PF Rate Program. See Part IV.A.4.
c. Excess Factoring Charge
    This is a charge that applies to purchasers of the Complex Actual 
Partial Service Product under the PF rate schedule. BPA is proposing no 
changes to this charge as established in the WP-07 Final Proposal.
d. Green Energy Premium (GEP)
    BPA is proposing no changes to the GEP in this Supplemental 
Proposal. The proposed GEP continues to range from zero to 40 mills per 
kWh depending on the specific products and associated costs selected by 
each customer. BPA forecasts an average of $3 million of annual revenue 
from the GEP for FY 2009, which is an increase from the WP-07 Final 
Proposal. A portion of revenues from the GEP will support BPA's 
renewable-related research, development and demonstration projects.
e. Load Variance Charge
    Except for a change in its level, consistent with the Partial 
Resolution of Issues, BPA is proposing no other changes to the Load 
Variance Charge. This proposed charge of $0.45/MWh covers BPA's cost of 
meeting customers' load growth for reasons other than annexation or 
retail access load gain or loss. In addition, it provides Full and 
Partial Service purchasers the right to deviate from their monthly 
forecast of BPA purchases due to weather, economic business cycles, 
plant energy consumptions and other reasons.
f. Low Density Discount (LDD)
    BPA is proposing no changes to the LDD as established in the WP-07 
Final

[[Page 7548]]

Proposal and as agreed to in the Partial Resolution of Issues.
g. Monthly Demand and Energy Charges
    BPA is proposing no changes to the methodology for calculating 
demand and energy charges. There will be two diurnal periods, Heavy 
Load Hour (HLH) and Light Load Hours (LLH), for each month. BPA 
continues to adopt slight changes to the definitions of HLH and LLH to 
be consistent with NERC definitions. The proposed demand and energy 
charges will be updated consistent with the Partial Resolution of 
Issues.
h. PF Targeted Adjustment Charge (PF TAC)
    BPA is proposing no changes to the Targeted Adjustment Charge from 
that established in the WP-07 Final Proposal.
i. Unauthorized Increase Charges (UAI) for Power Sales
    These are penalty charges for Unauthorized Increases in Energy and 
Unauthorized Increases in Demand for deliveries that exceed contractual 
entitlements for energy and demand, respectively. BPA is proposing no 
changes relative to the WP-07 Final Proposal.
j. Demand Adjuster
    This is an adjustment that is made to the demand billing factor for 
certain requirements products. BPA is proposing no changes relative to 
the WP-07 Final Proposal.
k. Flexible PF and NR
    These are rate options available, at BPA's discretion, to 
purchasers under the PF and NR rate schedules. BPA is proposing no 
chan