Fiscal Year (FY) 2010-2011 Proposed Power and Transmission Rate Adjustments; Public Hearing and Opportunities for Public Review and Comment, 6609-6618 [E9-2750]

Agencies

• Bonneville Power Administration
• DEPARTMENT OF ENERGY

[Federal Register Volume 74, Number 26 (Tuesday, February 10, 2009)]
[Notices]
[Pages 6609-6618]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-2750]


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DEPARTMENT OF ENERGY

Bonneville Power Administration


Fiscal Year (FY) 2010-2011 Proposed Power and Transmission Rate 
Adjustments; Public Hearing and Opportunities for Public Review and 
Comment

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

ACTION: Notice of FY 2010-2011 Proposed Power and Transmission Rate 
Adjustments.

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SUMMARY: BPA is holding a consolidated rate proceeding, BPA-10, that 
will have separate sub-dockets for power and transmission rates for FY 
2010-2011. The rate proceeding will have one hearing officer, one 
schedule, one record, and one Record of Decision (ROD). The power sub-
docket is designated WP-10, and the transmission sub-docket, which 
includes transmission and ancillary services rates, is designated TR-
10. 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 that they are adequate to recover, in 
accordance with sound business principles, the costs associated with 
the acquisition, conservation, and transmission of electric power, 
including amortization of the Federal investment in the Federal 
Columbia River Power System (FCRPS) and BPA's other costs and expenses. 
The Northwest Power Act also requires that BPA's rates be established 
based on the record of a formal hearing. In addition, for transmission 
rates only, the Federal Columbia River Transmission System Act requires 
that transmission costs be equitably allocated between Federal and non-
Federal power using the system. By this notice, BPA announces the 
commencement of a power and transmission rate adjustment proceeding for 
proposed power, transmission, and ancillary services rates that will be 
effective on October 1, 2009.

DATES: Anyone wishing to become a party to the proceeding must provide 
written notice, via U.S. Mail or electronic mail, which is received by 
BPA no later than 4:30 p.m. on February 17, 2009. Parties need to 
submit only one notice to request intervention as a party in both the 
WP-10 and the TR-10 sub-dockets.
    The rate adjustment proceeding begins with a prehearing conference 
at 1:30 pm on February 18, 2009, in Portland, Oregon.
    Written comments by non-party participants must be received by 
April 24, 2009, to be considered in the Administrator's Record of 
Decision.

ADDRESSES:
    1. Petitions to intervene should be directed to Hearing Clerk--L-7, 
Bonneville Power Administration, 905 NE 11th Ave., Portland, Oregon 
97232, or may be e-mailed to 2010HearingClerk@bpa.gov. In addition, 
copies of the petition must be served concurrently on BPA's General 
Counsel and directed to both Mr. Peter J. Burger, LP-7, and Mr. Barry 
Bennett, LC-7, Office of General Counsel, 905 NE 11th Ave., Portland, 
Oregon 97232, or via e-mail to pjburger@bpa.gov and bbennett@bpa.gov 
(see section III.A. for more information regarding interventions).
    2. Written comments by participants should be submitted to the 
Public Engagement Office--DKE-7, Bonneville Power Administration, P.O. 
Box 14428, Portland, Oregon 97293. You may also e-mail your comments to 
comment@bpa.gov. BPA requests that all comments and documents intended 
to be part of the Official Record in this rate proceeding contain the 
designation BPA-10.
    3. The prehearing conference will be held in the BPA Rates Hearing 
Room, 2nd floor, 911 NE 11th Ave., Portland, Oregon 97232.

FOR FURTHER INFORMATION CONTACT: Ms. Heidi Helwig--DKE-7, Public 
Affairs Specialist, Bonneville Power Administration, P.O. Box 3621, 
Portland, Oregon 97208-3621; by phone at 503-230-3488 or toll free at 
1-800-622-4519; or via e-mail to hyhelwig@bpa.gov.
    Responsible Official: Mr. Raymond D. Bliven, Power Rates Manager, 
is the official responsible for the development of BPA's power rates, 
and Mr. Edison Elizeh, Commercial Business Assessment Manager, is the 
official responsible for the development of BPA's transmission and 
ancillary services rates.
    BPA Attorney Advisors: Mr. Peter J. Burger is the principal BPA 
attorney assigned to the power rates sub-docket proceeding, and Mr. 
Barry Bennett is the principal BPA attorney assigned to the 
transmission and ancillary services rates sub-docket proceeding. Mr. 
Burger may be contacted as follows: by U.S. Mail at Mr. Peter J. 
Burger, Office of General Counsel, LP-7, Bonneville Power 
Administration, P.O. Box 3621, Portland, OR 97208-3621; via e-mail at 
pjburger@bpa.gov; or by telephone at 503-230-4148. Mr. Bennett may be 
contacted as follows: by U.S. Mail at Mr.

[[Page 6610]]

Barry Bennett, Office of General Counsel, LC-7, Bonneville Power 
Administration, P.O. Box 3621, Portland, OR 97208-3621; via e-mail at 
bbennett@bpa.gov; or by telephone at 503-230-4053.

SUPPLEMENTARY INFORMATION: 

Part I--Introduction and Procedural Background

    Section 7(i) of the Northwest Power Act, 16 U.S.C. section 839e(i), 
requires that BPA's rates be established according to certain 
procedures, including publication in the Federal Register of this 
notice of the proposed rates; one or more hearings conducted as 
expeditiously as practicable by a hearing officer; opportunity for both 
oral presentation and written submission of views, data, questions, and 
arguments related to the proposed rates; and a decision by the 
Administrator based on the record. BPA's rate proceedings are further 
governed by BPA's Procedures Governing Bonneville Power Administration 
Rate Hearings, 51 FR 7611 (1986), which implement and expand the 
statutory requirements.
    This proceeding is being conducted under the rule for general rate 
proceedings, section 1010.4 of BPA's Procedures. A proposed schedule 
for the proceeding is provided below. A final schedule will be 
established by the Hearing Officer at the prehearing conference.

Parties File Petition to Intervene: February 17, 2009.
Prehearing/BPA Direct Case: February 18, 2009.
Clarification: February 24-27, 2009.
Motions to Strike: March 2, 2009.
Data Request Deadline: March 2, 2009.
Answers to Motions to Strike: March 9, 2009.
Data Response Deadline: March 9, 2009.
Parties file Direct Case: March 20, 2009.
Clarification: March 25-26, 2009.
Motions to Strike: March 30, 2009.
Data Request Deadline: March 30, 2009.
Answers to Motions to Strike: April 6, 2009.
Data Response Deadline: April 6, 2009.
Litigants file Rebuttal: April 17, 2009.
Close of Participant Comments: April 24, 2009.
Clarification: April 24, 2009.
Motions to Strike: April 29, 2009.
Data Request Deadline: April 29, 2009.
Answers to Motions to Strike: May 6, 2009.
Data Response Deadline: May 6, 2009.
Cross Examination: May 11-15, 2009.
Initial Briefs Filed: May 27, 2009.
Oral Argument: June 10, 2009.
Draft ROD issued: June 23, 2009.
Briefs on Exceptions: July 2, 2009.
Final ROD--Final Studies: July 21, 2009.

    Section 1010.7 of BPA's 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 the merits of any issue in 
BPA's rate proceeding 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 proceeding, 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 for which BPA is 
responsible under statutes other than the ratemaking provisions; or (5) 
matters which 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 July 21, 2009.

Part II--Description of Joint Rate Proceeding and Information 
Applicable to Both Sub-Dockets

A. Joint Rate Proceeding

    Since BPA formed the power and transmission business lines in 1997, 
it has held separate power and transmission rate proceedings. This 
year, however, BPA is holding one rate proceeding with two sub-dockets, 
one sub-docket for power rates and one sub-docket for transmission 
rates, because both sets of rates are expiring on September 30, 2009. 
The rate proceeding will have one hearing officer, one schedule, one 
record, and one Record of Decision.
    The power rates sub-docket will address all power rates issues, 
including the calculation and pricing of capacity reserves for 
ancillary and control area services (regulating reserves, operating 
reserves, and wind balancing reserves). The power rates sub-docket will 
also include other generation inputs and inter-business line topics, 
including synchronous condensing, generation dropping, redispatch 
expense, energy and generation imbalance revenue, segmentation of U.S. 
Army Corps of Engineers and U.S. Bureau of Reclamation transmission 
facilities, and station service. Except for the above generation inputs 
issues, the transmission rates sub-docket will include all transmission 
rates issues, including rate design and rate schedules for all 
ancillary and control area services.
    Because BPA has separated its power and transmission functions and 
is setting its power and transmission rates in separate sub-dockets, it 
is appropriate that BPA's Power Services be a party to the transmission 
sub-docket. Accordingly, Power Services will be considered a party to 
the transmission sub-docket for all purposes under BPA's Procedures. 
Power Services may file testimony and briefs as a party and will be 
entitled to all other procedural rights of a party. In particular, 
Power Services shall be considered a party for purposes of ex parte 
communications.

B. Integrated Program Review

    BPA began its first Integrated Program Review (IPR) process in May 
2008 in response to customer and stakeholder requests for a 
consolidated program-level review of BPA's planned expenses. This 
process replaced prior public involvement efforts, including the 
Capital Program Review, Power Function Review, and Transmission's 
Programs in Review. The IPR process is designed to allow persons 
interested in BPA's program levels an opportunity to review and comment 
on all of BPA's expense and capital spending level estimates in the 
same forum prior to the use of those estimates in setting rates.
    The recently completed IPR focused on FY 2010 and 2011 program 
levels for BPA's Power Services and Transmission Services as well as a 
review of proposed Power Services FY 2009 program levels. Decisions on 
FY 2009 Power Services costs were announced in a separate document 
released July 18, 2008. BPA held 17 IPR workshops at which proposed 
spending levels were presented for each of BPA's programs. BPA 
carefully reviewed and considered the 18 written comments and numerous 
oral comments on FY 2010-2011 program levels that were made during this 
public process.
    On November 14, 2008, BPA issued the Close-Out Letter and 
accompanying report for the IPR, which summarizes the comments and 
outlines BPA's responses. In the Close-Out Letter and report, BPA 
established the program level cost estimates that are used in the WP-10 
and TR-10 Initial Proposals. In addition, BPA committed to reassessing 
the program spending levels to determine if further cost changes are 
appropriate, and conducting an abbreviated public review in the spring 
of 2009. BPA will conduct this process separately from the rate 
proceeding to share updated forecasts, define additional policy 
choices, and solicit

[[Page 6611]]

feedback from customers and constituents before the final program 
levels are incorporated into the final rates.

C. The National Environmental Policy Act

    BPA is in the process of assessing the potential environmental 
effects of its proposed power and transmission rates, consistent with 
the National Environmental Policy Act (NEPA). The NEPA process is 
conducted separately from the rate proceeding. As discussed in sections 
IV.B. and V.A.7. below, all evidence and argument addressing potential 
environmental impacts of rates being developed in the BPA-10 rate 
proceeding are excluded from the rate proceeding hearing record. 
Rather, comments on environmental effects should be directed to the 
NEPA process.
    Because this proposal involves BPA's ongoing business practices 
related to rates, BPA is reviewing the proposal for consistency with 
BPA's Business Plan Environmental Impact Statement (Business Plan EIS), 
completed in June 1995 (BOE/EIS-0183). This policy-level EIS evaluates 
the environmental impacts of a range of business plan alternatives for 
BPA that could be varied by applying various 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 
includes response strategies, such as adjustments to rates, that BPA 
could implement if BPA's costs exceed 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 Supplement Analysis to 
the Business Plan EIS. This Supplement 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 remain 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, including rates.
    Because the proposed rates 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 environmental impacts 
significantly different from those examined in the Business Plan EIS. 
Therefore, BPA expects that this rate proposal likely 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 Record of Decision that will be 
prepared for the BPA-10 rate proceeding, 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. Persons may submit comments regarding the 
potential environmental effects of the proposal 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 for Participant Comments identified in section III.A. 
below will be considered by BPA's NEPA compliance staff in the NEPA 
process that will be conducted for this proposal.

D. Power and Transmission Rate Workshops

    In preparation for the BPA-10 rate proceeding, BPA held several 
public rate case workshops with customers and interested parties from 
May 2008 through January 2009. BPA published notices for all workshops, 
which were well attended by customers and interested parties. During 
the workshops, BPA staff presented and discussed information about 
costs, load and resource forecasting, generation inputs pricing, 
revenue forecasts, risk analysis and mitigation, products, pricing, and 
rate design. Customers and interested parties had extensive opportunity 
to participate, raise issues, and comment on the information BPA staff 
presented. At the workshops, the customers approached BPA staff about 
partial settlement of the Transmission rate proposal, excluding 
generation inputs. Transmission Services met with parties several times 
to negotiate the partial settlement of the Transmission rate case. See 
section IV.A.

Part III--Public Participation

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

    BPA distinguishes between ``participants in'' and ``parties to'' 
the hearings. Apart from the formal hearing process, BPA will receive 
written comments, views, opinions, and information from 
``participants,'' who are defined in BPA's Procedures as persons who 
may submit comments without being subject to the duties of, or having 
the privileges of, parties. Participants' written comments will be made 
part of the official record and considered by the Administrator. 
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. BPA customers whose rates are 
subject to this proceeding, or their affiliated customer groups, may 
not submit participant comments. Persons who are members or employees 
of organizations that have intervened in the rate proceeding may submit 
general comments as participants but may not use the comment procedures 
to address specific issues raised by their intervenor organization.
    Written comments by participants will be included in the record if 
they are received by April 24, 2009. Written views, supporting 
information, questions, and arguments should be submitted to the 
address listed in the ADDRESSES section of this Notice.
    Entities or persons become parties to the proceeding by filing 
petitions to intervene, which must state the name and address of the 
entity or person requesting party status and their interest in the 
hearing. BPA customers and affiliated customer groups will be granted 
intervention based on a petition filed in conformance with BPA's 
Procedures. Other petitioners must explain their interests in 
sufficient detail to permit the hearing officer to determine whether 
such petitioners have a relevant interest in the hearing. Pursuant to 
Rule 1010.1(d) of BPA's Procedures, BPA waives the requirement in Rule 
1010.4(d) that an opposition to an intervention petition be filed and 
served 24 hours before the prehearing conference. Any opposition to an 
intervention petition must instead be made at the prehearing 
conference. Any party, including BPA, may oppose a petition for 
intervention. All timely

[[Page 6612]]

petitions will be ruled on by the hearing officer. Late interventions 
are strongly disfavored. Opposition to an untimely petition to 
intervene must be filed and received by BPA within two days after 
service of the petition.

B. Developing the Record

    The hearing record will include, among other things, the 
transcripts of the hearing, written evidence and argument entered into 
the record by BPA and the parties, written comments from participants, 
and other material accepted into the record by the hearing officer in 
either sub-docket. The hearing officer then will review the record and 
certify the record to the Administrator for final decision.
    The Administrator will develop final rates based on the record, 
information from the program level workshops, documents prepared 
pursuant to the National Environmental Policy Act and other 
environmental statutes, Average System Cost determinations, and such 
other material or information as may have been submitted to or 
developed by the Administrator. The Administrator will serve copies of 
the Final Record of Decision on all parties. BPA will file its rates 
with the Federal Energy Regulatory Commission (Commission) for 
confirmation and approval after issuance of the Final Record of 
Decision.

Part IV--Transmission Sub-Docket TR-10

A. Partial Settlement of the Transmission Sub-Docket

    Transmission Services and most of its customers, including Power 
Services, are parties to a Partial Settlement Agreement that provides 
for Transmission Services to submit a Settlement Proposal that 
incorporates the provisions of the agreement. The Partial Settlement 
Agreement provides for Transmission Services to propose maintaining 
current FY 2008-2009 rates, with no rate increase for the FY 2010-2011 
period, for all transmission services and for two ancillary services: 
Scheduling, System Control and Dispatch Service and Reactive Supply and 
Voltage Control from Generation Sources Service. The remaining 
ancillary services and all control area services are not covered by the 
partial settlement.
    The Partial Settlement Agreement also includes changes to the 
Failure to Comply Penalty Charge, the Unauthorized Increase Charge, and 
the Network Integration Rate. In addition, it includes BPA's 
commitments to hold discussions with all interested parties regarding 
various ratemaking issues and to develop a business practice for 
implementing the revised Failure to Comply Penalty Charge. The Partial 
Settlement Agreement also provides that BPA will file with the 
Commission revised Attachment M to BPA's Open Access Transmission 
Tariff (OATT) and that the signatories to the Partial Settlement 
Agreement will not challenge the filing. The Attachment M filing will 
not be part of this rate proceeding.
    The Partial Settlement Agreement recognizes the possibility that 
parties to the TR-10 Transmission rate proceeding that have not signed 
the Partial Settlement Agreement may object to Transmission Services' 
Settlement Proposal. If any party objects to the Settlement Proposal, 
Transmission Services has the right to submit a revised proposal. If 
Transmission Services submits a revised proposal, signatories to the 
Partial Settlement Agreement may contest any aspect of the revised 
proposal. If Transmission Services does not revise the Settlement 
Proposal, and the Administrator establishes transmission rates 
consistent with the Settlement Proposal, the signatories may not 
challenge approval of the rates by the Commission or in any judicial 
forum.

B. Scope of the Transmission Rate Proceeding

    Some of the decisions that determine Transmission Services' costs 
have been or will be made in the IPR public review process outside the 
transmission rate proceeding. See section II.B. This section provides 
guidance to the hearing officer as to those matters that are within the 
scope of the TR-10 Transmission rate proceeding and those that are 
outside the scope.
    BPA's spending levels for transmission investments and expenses are 
not determined or subject to review in rate proceedings. Pursuant to 
section 1010.3(f) of BPA's Procedures, the Administrator directs the 
hearing officer to exclude from the record all argument and testimony 
or other evidence that challenges the appropriateness or reasonableness 
of the Administrator's decisions on transmission spending levels. If, 
and to the extent that, any re-examination of spending levels is 
necessary, such re-examination will occur outside of the rate 
proceeding. Excluded from this direction are revenue requirements 
related to interest rate forecasts, interest expense and credit, 
Treasury repayment schedules, forecasts of depreciation, forecasts of 
system replacements used in repayment studies, minimum required net 
revenue, and risk mitigation resulting from expense and revenue 
uncertainties and risks included in the risk analysis. The 
Administrator also directs the Hearing Officer to exclude argument and 
evidence regarding BPA's debt management practices and policies (see 
section V.A.6.).
    The Administrator also directs the Hearing Officer to exclude from 
the record all argument and testimony or other evidence that seek in 
any way to address the potential environmental impacts of the rates 
being developed in the TR-10 Transmission rate proceeding.

C. Summary of Transmission Rate Proposal

    1. Transmission rates. Transmission Services is proposing four 
different rates for the use of its Integrated Network segment, four 
different rates for use of intertie segments, and several other rates 
for various purposes.
    The four rates for use of the Integrated Network segment are:
    Formula Power Transmission (FPT-10) rate--The FPT rate is based on 
the cost of using specific types of facilities, including a distance 
component for the use of transmission lines, and is charged on a 
contract demand basis. FPT customers are not subject to charges for the 
two required ancillary services, Reactive Supply and Voltage Control 
from Generation Sources, and Scheduling, System Control and Dispatch, 
because those services are included in the FPT rate. Transmission 
Services is not offering new FPT contracts, but a number of FPT 
contracts continue in place during the rate period.
    Integration of Resources (IR-10) rate--The IR rate is a postage 
stamp, contract demand rate for the use of the Integrated Network, 
similar to Point-to-Point (PTP) service. It includes a Short Distance 
Discount. IR customers are not subject to charges for the two required 
ancillary services, Reactive Supply and Voltage Control from Generation 
Sources, and Scheduling, System Control and Dispatch, because they are 
included in the IR rate. Transmission Services is not offering new IR 
contracts, but a number of IR contracts remain in place during the rate 
period.
    Network Integration Transmission (NT-10) rate--The NT rate applies 
to customers taking network integration service under the OATT and 
allows customers to flexibly serve their retail load. It includes a 
Load Shaping Charge applied to the customer's total load, and a Base 
Charge applied to the total load less Customer Served Load, if any. 
Customer Served Load is the amount of

[[Page 6613]]

load that the customer agrees to serve without using its NT service.
    Point-to-Point (PTP-10) rate--The PTP rate is a contract demand 
rate that applies to customers taking point-to-point service on BPA's 
network facilities under the OATT. It provides customers with flexible 
service from identified Points of Receipt to identified Points of 
Delivery. There are separate PTP rates for long-term firm service; 
daily firm and non-firm service; and hourly firm and non-firm service. 
The rate for long-term firm service contains a Short Distance Discount. 
All short-term PTP rates are downwardly flexible.
    In addition to the four rates for network use, other proposed 
transmission rates include:
    The Southern Intertie (IS-10) and the Montana Intertie (IM-10) 
rates are contract demand rates that apply to customers taking point-
to-point service under the OATT on the Southern Intertie and Montana 
Intertie. These rates are structured similarly to the rate for point-
to-point service on network facilities.
    The Townsend-Garrison Transmission (TGT-10) and the Eastern 
Intertie (IE-10) rates are developed pursuant to the Montana Intertie 
agreement.
    The Use-of-Facilities (UFT-10) rate establishes a formula for 
charging for the use of a specific facility based on the annual cost of 
that facility.
    The Advance Funding (AF-10) rate allows Transmission Services to 
collect the capital and related costs of specific facilities through an 
advance-funding mechanism. Other charges that may apply include a 
Delivery Charge for the use of low-voltage delivery substations; a 
Power Factor Penalty Charge; a Reservation Fee for customers that 
postpone their service commencement dates; incremental rates for 
transmission requests that require new facilities; a penalty charge for 
failure to comply with curtailment, redispatch, or load shedding 
orders; and an Unauthorized Increase Charge for customers that exceed 
their contracted amounts.
    2. Ancillary Services rates. Transmission Services is proposing 
rates for six ancillary services:
    Scheduling, System Control, and Dispatch Service is required to 
schedule and secure the movement of power through, out of, within, or 
into the BPA Balancing Authority Area. All transmission contract 
holders except FPT and IR customers are required to purchase this 
service from BPA. The billing factor is the same as the billing factor 
for the underlying transmission service. For NT customers, the billing 
factor is the same as that for the NT Base charge.
    Reactive Supply and Voltage Control from Generation Sources Service 
provides reactive support to the transmission system and is necessary 
to maintain transmission system voltages within acceptable limits. All 
transmission contract holders, except FPT and IR customers, must 
purchase this service from BPA. The billing factor is the same as the 
underlying billing factor for the transmission service. For NT 
customers, the billing factor is the same as that for the NT Base 
charge.
    Regulation and Frequency Response Service provides the continuous 
balancing of resources (generation and interchange) with load and 
maintains frequency at 60 Hz. This service is accomplished by 
committing on-line generation (predominantly through the use of 
automatic generation control equipment) whose output is raised or 
lowered to follow the moment-to-moment changes in load. Transmission 
customers serving load in the BPA Balancing Authority Area must take 
this service.
    Energy Imbalance Service is taken when a difference occurs between 
the scheduled and actual delivery of energy during a schedule hour to a 
load located within BPA's Balancing Authority Area.
    Operating Reserve-Spinning Reserve Service is used to serve load 
immediately in the event of a system contingency. The billing factor 
for this service is the customer's share of the reserve obligation of 
the balancing authority, as defined by the Western Electricity 
Coordinating Council (WECC) and the Northwest Power Pool.
    Operating Reserve-Supplemental Reserve Service is available to 
serve load within a short period of time in the event of a system 
contingency. This service may be provided by units that are on-line but 
unloaded, by quick-start generation, or by interruptible load. The 
billing factor for this service is the customer's share of the reserve 
obligation of the control area, as defined by the WECC and the 
Northwest Power Pool.
    In addition to the rates for Ancillary Services, Transmission 
Services is proposing rates for five Control Area services: Regulation 
and Frequency Response Service; Generation Imbalance Service; Operating 
Reserve-Spinning Reserve Service; Operating Reserve-Supplemental 
Reserve Service; and Wind Integration-Within-Hour Balancing Service.
3. Changes to Transmission Rates and Rate Schedules
a. Failure To Comply Penalty Charge
    The Failure to Comply Penalty Charge provides for a penalty if a 
party fails to comply with a curtailment, redispatch, or load shedding 
order issued by Transmission Services. Transmission Services is 
proposing to increase the penalty from 100 mills per kilowatthour to 
1000 mills per kilowatthour plus costs incurred by Transmission 
Services to manage the reliability of the Federal Columbia River 
Transmission System due to the failure to comply. In addition, 
Transmission Services is proposing to add dispatch orders to the list 
of orders to which the Failure to Comply Penalty Charge applies.
b. Unauthorized Increase Charge
    Transmission Services is proposing to modify the Unauthorized 
Increase Charge (UIC) for point-to-point transmission service and to 
clarify the waiver provisions of the rate schedule. The UIC applies 
when a customer's transmission demand exceeds the customer's 
transmission reservation. Under the current rate schedule, the UIC for 
PTP service is based on the length of the customer's reservation. Under 
Transmission Services' proposed rate schedule, the UIC is the lower of 
(1) 100 mills per kilowatthour plus the Commission's price cap for spot 
market sales of energy in the WECC (currently 400 mills per 
kilowatthour), or (2) 1000 mills per kilowatthour. In addition, 
Transmission Services is proposing to clarify the criteria under which 
BPA will waive the UIC and to specify the rate that applies to the 
excess transmission demand if BPA grants a waiver.
c. Energy and Generation Imbalance Service
    Transmission Services proposes to increase the rate that applies to 
positive deviations that BPA determines to be Intentional Deviations 
from 125 percent to 150 percent of incremental cost. Transmission 
Services also proposes to modify the incremental cost provisions so 
that the customer does not receive a credit for positive deviations if 
the deviation occurs in an hour in which the energy index used to 
determine incremental cost is negative.
    Transmission Services also is proposing to delete credit for 
negative deviations if the Federal System is in a spill condition, the 
energy index is negative, and the deviation remains within Deviation 
Band 1. If the negative deviation is in Deviation Band 2 or 3, 
Transmission Services proposes to charge the index price for the 
deviation.
    d. Intentional Deviation
    Transmission Services is proposing to modify the definition of 
Intentional Deviation to include the situation in which the generation 
schedule (i.e.,

[[Page 6614]]

generation estimate) submitted does not match the sum of the 
transmission schedules, including transmission schedules for the return 
of energy (i.e., payback schedules), before the start of that 
scheduling hour. In addition, Transmission Services proposes to include 
as an Intentional Deviation the situation in which a customer fails to 
submit a generation estimate or corresponding transmission schedule for 
the hour, but transmits energy during such hour under the definition of 
Intentional Deviation.
    BPA also proposes to classify as Intentional Deviations schedule 
deviations that occur for three or more consecutive hours at an amount 
greater than 15 percent of the schedule or 20 megawatts.
    For hours in which the energy index is negative, BPA proposes to 
charge the energy index price for negative deviations that BPA 
determines to be Intentional Deviations.
e. Incremental Rate
    BPA's Point-to-Point and Network Integration rate schedules provide 
that customers requesting new or increased firm service that would 
require BPA to construct Network Upgrades may be subject to incremental 
cost rates that would be developed in a rate proceeding. In this TR-10 
Transmission rate proceeding, Transmission Services is proposing a 
formula for allocating costs of Network Upgrades under incremental cost 
rates, with the cost allocation itself to take place in a separate 
public process to be held each time BPA offers service at an 
incremental rate. The proposed rate schedule includes the formula and 
describes the public process Transmission Services proposes to use to 
allocate costs under the incremental rate formula to derive the 
specific rate for a customer.
f. Conditional Firm Service for Network Integration Customers
    Transmission Services proposes to add conditional firm service to 
the availability section of the NT rate schedule to price the 
conditional firm service that has been added to the network integration 
section of the OATT.
g. Load Forecast for Network Integration and Utility Delivery Services
    Transmission Services is proposing to use a new methodology to 
forecast loads for Network Integration customers and Utility Delivery 
customers. Like the old methodology, the new methodology begins with 
each customer's historical metering data and adjusts the forecast based 
on known changes. Under the new methodology, however, additional 
adjustments would be based on statistical forecasting models, which 
allow for more sophisticated analysis, such as analyzing the impact of 
different weather assumptions on the forecast.

Part V--Wholesale Power Sub-Docket WP-10

A. Scope of the Wholesale Power Rate Adjustment Proceeding

    Many of the decisions that guide BPA's power marketing policies 
have been made, or will be made, in other public processes. This 
section provides guidance to the Hearing Officer as to those matters 
that are within the scope of the WP-10 sub-docket and those that are 
outside the scope.
1. Program Level Expenses Decided in the IPR
    As discussed in section IV.B. for the TR-10 proceeding, BPA's 
spending levels for generation investments and power expenses are not 
determined or subject to review in rate proceedings. Pursuant to Sec.  
1010.3(f) of BPA's Procedures, the Administrator directs the Hearing 
Officer to exclude from the record all argument, testimony, or other 
evidence that challenges the appropriateness or reasonableness of the 
Administrator's decisions on power spending levels. If, and to the 
extent that, any re-examination of spending levels is necessary, that 
re-examination will occur outside the rate proceeding. Excluded from 
this direction are revenue requirements related to interest rate 
forecasts, interest expense and credit, Treasury repayment schedules, 
forecasts of depreciation, forecasts of system replacements used in 
repayment studies, augmentation and balancing power purchases, 
residential exchange expense, revenue credits, minimum required net 
revenue, and risk mitigation resulting from expense and revenue 
uncertainties and risks included in the risk analysis.
2. Regional Dialogue Policy Decisions
    BPA's Subscription contracts expire September 30, 2011, the end of 
the WP-10 rate period. BPA has engaged customers and interested 
stakeholders in an extensive process to develop new power sales 
contracts. BPA issued its Policy for Power Supply Role for FY 2007-2011 
(Near-Term Policy) on February 4, 2005; its Long-Term Regional Dialogue 
Final Policy on July 19, 2007; its Long-Term Regional Dialogue Contract 
Policy on October 31, 2008; and the Tiered Rate Methodology Record of 
Decision on November 10, 2008. On or about December 1, 2008, BPA and 
its customers signed new power sales contracts under which the 
customers will purchase Federal power for the FY 2012-2028 period. 
Several aspects of the Regional Dialogue process are still ongoing, and 
these processes and decisions are outside the scope of this rate 
proceeding. Pursuant to Sec.  1010.3(f) of BPA's Procedures, the 
Administrator hereby directs the Hearing Officer to exclude from the 
record all argument, testimony, or other evidence that seeks in any way 
to revisit the appropriateness or reasonableness of BPA's decisions 
made in the Near-Term Policy ROD, Long-Term Regional Dialogue Final 
Policy ROD, Long-Term Regional Dialogue Contract Policy ROD, or Tiered 
Rate Methodology ROD, except for those issues, such as General Transfer 
Service Direct Assignment Guidelines, that were specified in these 
policies as being within the scope of the WP-10 proceeding.
3. Service to the Direct Service Industries (DSIs)
    The manner and method by which BPA could provide service or 
financial payments to its DSI customers is being reevaluated in light 
of the recent decision in Pacific Northwest Generating Cooperative, et 
al., v. Bonneville Power Administration, No. 05-75638, slip op. at 
16513 (9th Cir. Dec. 17, 2008). Power Services will forecast, solely 
for purpose of the Initial Proposal, that BPA will continue to serve 
the aluminum smelter DSIs, as well as Port Townsend Paper, under new or 
amended contracts that are consistent with the Court's opinion. BPA's 
decisions to serve the DSIs, along with the method and level of service 
to be provided DSIs in the FY 2010-2011 rate period, will be determined 
in the offering of these contracts or amendments and not in this 
proceeding. Pursuant to Sec.  1010.3(f) of BPA's Procedures, the 
Administrator directs the Hearing Officer to exclude from the record 
all argument, testimony, or other evidence that seeks in any way to 
revisit the appropriateness or reasonableness of BPA's decisions 
regarding the service to the DSIs, including the method or level of 
such service.
4. Generation Inputs
    Power Services provides a portion of the FCRPS available generation 
to enable Transmission Services to meet its various requirements. 
Transmission Services uses these generation inputs to provide ancillary 
and control area services. To recover the costs associated with 
providing generation inputs, Power Services assigns a portion of the 
FCRPS

[[Page 6615]]

costs to the transmission function. The cost allocations Power Services 
is proposing to use to determine the generation input costs and 
associated unit costs to Transmission Services are matters that are 
included within the scope of the WP-10 sub-docket. The forecast amount 
of generation inputs is also included within the scope of the WP-10 
sub-docket.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
directs the Hearing Officer to exclude from the record all argument, 
testimony, or other evidence that seeks in any way to revisit the 
appropriateness or reasonableness of any other issues related to the 
generation inputs. This includes, but is not limited to, issues 
regarding reliability of the transmission system and any existing or 
proposed Transmission Services dispatcher standing orders. These non-
rates issues are generally addressed by Transmission Services in 
accordance with industry, reliability, and other compliance standards 
and criteria and are not matters appropriate for the rate case.
5. 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's Procedures, 
the Administrator hereby directs the Hearing Officer to exclude from 
the record any material attempted to be submitted or arguments 
attempted to be made in the hearing that seek in any way to revisit the 
appropriateness or reasonableness of BPA's conservation program levels 
established through the Post-2006 Conservation Program Structure 
Proposal dated June 28, 2005.
6. Federal and Non-Federal Debt Service and Debt Management
    During the IPR and in other forums, BPA provided the public 
background information on BPA's internal Federal and non-Federal debt 
management policies and practices. While these policies and practices 
are not decided in the IPR forum, these discussions were intended to 
inform interested parties about these matters so that they would better 
understand BPA's debt structure. Although the IPR Close-Out Letter did 
not make any decisions regarding BPA's debt management policies and 
practices, these remain outside the scope of the rate proceeding. 
Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record all 
argument, testimony, or other evidence that seeks in any way to address 
the appropriateness or reasonableness of BPA's debt management policies 
and practices, except to the extent that BPA is required to make 
certain demonstrations under BPA's Slice Settlement Agreement, 
Agreement No. 07PB-12273, exhibit D. BPA's debt management policies and 
practices are subjects that will be discussed in an abbreviated IPR 
process in March 2009 and an Access to Capital public process that will 
occur in FY 2009.
7. Potential Environmental Impacts
    Environmental impacts are addressed in a concurrent NEPA process. 
See section II.C. Pursuant to Sec.  1010.3(f) of BPA's Procedures, the 
Administrator directs the Hearing Officer to exclude from the record 
all argument, testimony, or other evidence that seeks in any way to 
address the potential environmental impacts of the rates being 
developed in this WP-10 Power rate proceeding.
8. Average System Cost Methodology
    Section 5(c) of the Northwest Power Act established the Residential 
Exchange Program (REP), which provides benefits to residential 
consumers of Pacific Northwest utilities based, in part, on a utility's 
``average system cost'' (ASC) of resources. Section 5(c)(7) of the Act 
requires the Administrator to consult with regional interests to 
develop an ASC Methodology. The ASC Methodology prescribes the 
methodology that the Administrator will use to calculate a utility's 
ASC. Once BPA completes its regional consultation on the ASC 
Methodology, the methodology is filed with the Commission for the 
Commission's review and approval. On February 7, 2008, BPA initiated an 
ASC consultation process with regional parties to consider adjustments 
to the then-existing ASC Methodology. At the conclusion of the 
consultation process, on July 7, 2008, BPA submitted a revised ASC 
Methodology (2008 ASCM) to the Commission. The Commission granted 
interim approval of the 2008 ASCM on September 30, 2008. The Commission 
requested comments on the 2008 ASCM by November 10, 2008, and reply 
comments by December 15, 2008. The Commission is now considering the 
parties' comments on the 2008 ASCM. The ASCM is not subject to 
determination or review in a section 7(i) proceeding. Pursuant to Sec.  
1010.3(f) of BPA's Procedures, the Administrator hereby directs the 
Hearing Officer to exclude from the record all argument, testimony, or 
other evidence that seek to in any way visit or revisit the 
appropriateness or reasonableness of the 2008 ASCM.
9. Average System Cost Review Processes
    In order to receive Residential Exchange Program benefits for FY 
2010-2011, utilities must file a proposed ASC with BPA pursuant to the 
terms and conditions of the 2008 ASCM. These filings are reviewed by 
BPA staff and other interested parties in an ASC review process. The 
ASC review process is a separate administrative proceeding conducted by 
BPA under the terms of the 2008 ASCM. In this process, BPA staff and 
other parties evaluate the ASCs filed by participating utilities to 
determine whether the filings conform to the requirements of the 2008 
ASCM. At the conclusion of the process, BPA issues an ASC Report, which 
formally establishes the utility's ASC for the Exchange Period, which 
coincides with BPA's rate period.
    On October 15, 2008, eight utilities filed proposed ASCs with BPA 
for FY 2010-2011. BPA staff and other parties are currently reviewing 
these filings in eight ASC review processes. Once these ASC review 
processes are complete and BPA has issued final ASC Reports, BPA will 
incorporate into the administrative record of this proceeding the final 
ASCs. Although these ASC determinations provide important information 
for setting BPA's rates, they are not rate proceeding matters. Parties 
wishing to challenge a utility's proposed ASC or BPA staff's draft ASC 
determinations for FY 2010-2011 must raise such issues in the 
respective utility's ASC review process according to the procedures 
established in the 2008 ASCM.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record all 
argument, testimony, or other evidence that seeks to in any way visit 
or revisit a utility's proposed ASC, or BPA staff's draft or BPA's 
final ASC determinations for FY 2010-2011.

B. Major Studies for Wholesale Power Rate Case

1. Loads and Resources Study
    Explains and documents the compilation of the load and resource 
data and forecasts necessary for developing BPA's wholesale power 
rates. The Study has three major interrelated components: (a) The 
Federal system load forecast; (b) the Federal system resource forecast; 
and (c) the Federal system loads and resources balance.

[[Page 6616]]

2. Revenue Requirement Study
    Explains and documents the level of revenues from wholesale power 
rates necessary to recover, in accordance with sound business 
principles, the FCRPS costs associated with the production, 
acquisition, marketing, and conservation of electric power. The 
generation revenue requirements include recovery of the Federal 
investments in hydro generation; recovery of fish and wildlife costs 
and costs of energy conservation; Federal agencies' operations and 
maintenance expenses allocated to power; capitalized contract expenses 
associated with such non-Federal power suppliers as Energy Northwest; 
other purchase power expenses, such as short-term power purchases; 
power marketing expenses; cost of transmission services necessary for 
the sale and delivery of FCRPS power; and all other power-related costs 
incurred by the Administrator pursuant to law.
    Cost estimates in the Revenue Requirement Study are based on the 
results of the Integrated Program Review, as presented in the Close-Out 
Letter of November 14, 2008. The repayment studies reflect updates of 
actual and projected repayment obligations and accommodate the ongoing 
implementation of BPA's Debt Optimization program. All new capital 
investments are assumed to be financed from debt or appropriations. The 
adequacy of projected revenues to recover rate test period revenue 
requirements and to recover the Federal investment over the prescribed 
repayment period is tested and demonstrated for the generation 
function.
3. Market Price Forecast Study
    Explains and documents forecasts of the variable hourly cost of the 
marginal resource for transactions in the wholesale energy market. The 
specific market used in this analysis is the Mid-Columbia trading hub 
in the State of Washington, although this price is influenced by 
conditions in other regions within the Western Interconnection. The 
Market Price Forecast Study also explains and documents the natural gas 
price forecast used in the ratesetting processes.
4. Risk Analysis and Mitigation Study
    Explains and documents two categories of risks and their impacts on 
Power Services' revenues and expenses. The first type of risk is 
comprised of operating risks such as variations in economic conditions, 
loads, and generation resource capability. These operating risks 
include the impacts of water supply variations and market price 
volatility on net revenues. The second type of risks comprises non-
operating risks--those risks included in the rate case risk modeling 
other than operating risks. Non-operating risks also include 
uncertainty in meeting cost levels identified in the Integrated Program 
Review.
    The Risk Analysis and Mitigation Study also evaluates the impact 
that different risk mitigation measures have on reducing net revenue 
risk by calculating the Treasury Payment Probability (TPP). The TPP is 
a measure of the probability that BPA will make each Treasury payment 
on time and in full. If the TPP is below BPA's two-year 95 percent 
standard, the combination of risk mitigation tools (e.g. , Cost 
Recovery Adjustment Clause, Biological Opinion (NFB) Adjustment, 
Emergency NFB Surcharge, Dividend Distribution Clause, Planned Net 
Revenues for Risk (PNRR)) is modified to meet the TPP standard.
    Power Services is proposing no changes in the form or methodology 
of the risk analysis as presented in the WP-07 Supplemental Final 
Proposal. The WP-10 Initial Proposal risk analysis contains updates for 
changes to input data that account for changes in BPA's loads, 
resources, costs, and financial position.
5. Wholesale Power Rate Development Study (WPRDS)
    Explains and documents details concerning the development of power 
rates. It reflects the results of all of the other studies and 
calculates the rates for wholesale power products and services. The 
WPRDS explains and documents the allocation and recovery of Federal 
power costs; development of the Slice cost table; the development of 
diurnal and monthly energy rates; the development of rates for demand, 
load variance, unauthorized increase usage, and excess load factoring; 
and other rate provisions (e.g. , the Low Density Discount, 
Conservation Rate Credit, and irrigation rate mitigation). The results 
of the WPRDS are reflected in the proposed wholesale power rate 
schedules.
6. Section 7(b)(2) Rate Test Study
    Section 7(b)(2) of the Northwest Power Act, 16 U.S.C. Sec.  
839e(b)(2), requires BPA to perform a test of the projected amounts to 
be charged for firm power to preference customers against an 
alternative power cost developed according to the statute. BPA has 
interpreted and described how this rate test is to be performed in the 
Section 7(b)(2) Legal Interpretation (Legal Interpretation) and Section 
7(b)(2) Implementation Methodology (Implementation Methodology) 
published in August 2008. WP-07-A-05 and WP-07-A-06. The Section 
7(b)(2) Rate Test Study explains and documents the results of the rate 
test.
    The 7(b)(2) rate test triggers in this proposal, creating rate 
protection for preference customers and causing costs to be reallocated 
to others in the test period. The Priority Firm Power (PF) Preference 
rate applied to the general requirements of the 7(b)(2) Customers has 
been reduced by the rate protection amount, which has been reallocated 
to other rates pursuant to section 7(b)(3). Other rates--the PF 
Exchange, New Resource Firm Power (NR), and Industrial Firm Power (IP) 
rates--have been increased by an allocation of the rate protection 
amount.
    Power Services is proposing minor modifications to the 
Implementation Methodology in this Initial Proposal. The proposed 
changes are included in the Section 7(b)(2) Rate Test Study. Although 
Power Services is proposing no changes to the Legal Interpretation, 
issues raised by parties in the course of the proceeding may result in 
the need to change the Legal Interpretation at the conclusion of the 
proceeding. Any such changes would be addressed in the Record of 
Decision.
7. Lookback Recovery and Return Study
    Explains and documents Power Service's proposed modifications to 
the amounts to be recovered from BPA's investor-owned utility customers 
(IOUs) and applied to their Lookback Amounts that were determined in 
the WP-07 Supplemental Final Proposal. Minor changes are proposed in 
this proceeding to correct for errors and new information discovered 
after the conclusion of the WP-07 Supplemental rate proceeding. The 
study sets forth the accounting of the portion of the Lookback Amounts 
expected to be recovered from the IOUs, and repaid to preference 
customers, prior to the FY 2010-2011 rate period. The study also 
proposes the portion of Lookback Amount, an average of $71.8 million 
per year that will be recovered from IOUs and returned to preference 
customers during the FY 2010-2011 rate period.
8. Generation Inputs Study
    Past Power rate proceedings have included the study and 
documentation for generation inputs and other inter-business line cost 
allocations in the WPRDS. In the WP-10 Initial Proposal, these issues 
are addressed in a separate Generation Inputs Study. The

[[Page 6617]]

Generation Inputs Study explains and documents the forecast of within-
hour balancing reserves needed by Transmission Services for regulation, 
wind balancing, and load following; the embedded cost methodology for 
regulating reserves and wind balancing reserves; the variable cost 
model for regulating reserves, wind balancing reserves, and operating 
reserves; the forecast of operating reserves and the embedded cost 
methodology for operating reserves; the cost allocation for synchronous 
condensing, generation dropping, segmentation of U.S. Corps of 
Engineers and U.S. Bureau of Reclamation facilities, and station 
service; and the revenue forecast for redispatch service. The results 
of the Generation Inputs Study are reflected as revenue credits in the 
Power ratesetting process.

C. Summary of Wholesale Power Rate Proposal

    1. Power rates. Based on the evidence set forth in the studies, 
Power Services is proposing five rates.
    Priority Firm Power Rate (PF-10)--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. The proposed average PF Preference rate is $29.43/MWh, which 
represents an increase of 9.4 percent over the FY 2009 average power 
rate.
    The Base PF Exchange rate and its associated supplemental rate 
charges apply to the sale of power to regional utilities that 
participate in the Residential Exchange Program (REP) established under 
section 5(c) of the Northwest Power Act. 16 U.S.C. 839c(c). The 
proposed PF Exchange rates are used in determining REP benefits in FY 
2010 and FY 2011. The proposed Base PF Exchange rate is $49.44/MWh. 
Utility-specific Supplemental 7(b)(3) Rate Charges are detailed in the 
proposed rate schedules. The proposed PF Exchange rates result in 
estimated REP benefits that average $264.1 million per year, of which 
$254.4 million is for participating IOUs. The REP benefits for the IOUs 
would be reduced by $71.8 million each year to continue the recovery of 
each IOU's Lookback Amount during the rate period resulting in a 
proposed average annual REP benefit paid to the IOUs of $182.6 million. 
The $71.8 million not paid to IOUs would be returned through credits on 
power bills to preference customers as partial repayment for past 
overcharges. The $254.4 million represents a 4.2 percent decrease from 
the REP benefits calculated in the WP-07 Supplemental Final Proposal 
for FY 2009.
    In this WP-10 Initial Proposal, Power Services is not materially 
changing the existing rate design for its FY 2010-2011 rates. Power 
Services proposes to add a load adjustment to the calculation of the 
Supplemental 7(b)(3) Rate Charges. This adjustment is specified in the 
proposed General Rate Schedule Provisions, Section S.
    New Resource Firm Power Rate (NR-10)--The NR rate applies to net 
requirements power sales to IOUs for resale to ultimate consumers for 
direct consumption, construction, test and start-up, and station 
service. Firm power at the NR-10 rate is also available to public 
utility customers for serving New Large Single Loads. Power Services is 
forecasting no sales at the NR rate in the Initial Proposal. The 
proposed NR-10 rate is $69.72/MWh, an increase of 1.9 percent over the 
NR-07R rate.
    Industrial Firm Power Rate (IP-10)--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). Power 
Services is forecasting sales to DSIs at the IP rate in the WP-10 
Initial Proposal. See section V.C.2.c. The proposed IP-10 rate is 
$36.37/MWh, an increase of 4.5 percent over the IP-07R rate.
    Firm Power Products and Services Rate (FPS-10)--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 either posted 
or negotiated. Power Services is proposing only minor changes to this 
rate schedule for FY 2010-2011.
    General Transfer Agreement Delivery Charge (GTA-10) and Other 
Transfer Items--The GTA Delivery Charge applies to customers who 
purchase Federal power that is delivered over non-Federal low voltage 
transmission facilities. For FY 2010-2011, Power Services is proposing 
to continue to set the GTA Delivery Charge at the same level as the 
Transmission Services Utility Delivery rate that is being established 
in the TR-10 proceeding. In addition, Power Services is proposing to 
add Transfer Service Supplemental Direct Assignment Guidelines to the 
General Rate Schedule Provisions (GRSPs) and develop an Operating 
Reserves rate for Transfer Service customers that will become effective 
if proposed changes to WECC Operating Reserve Requirements are approved 
by the Commission.
2. Significant Changes in the WP-10 Initial Rate Proposal
a. Generation Inputs and Other Inter-Function Costs and Credits
    A forecast of revenues from generation input cost allocations and 
provision of redispatch services and other power costs that are 
allocated to Transmission Services is described in the Generation 
Inputs Study. The allocation of generation input costs is similar to 
the generation input cost allocations in previous power rate 
proceedings, with a few significant differences. In the WI-09 Wind 
Integration rate proceeding, BPA first allocated capacity costs to wind 
generators for regulating reserves and load following. In this WP-10 
proceeding, Power Services is proposing to expand the cost allocation 
for capacity needed to support wind generators to include capacity 
associated with generation imbalance. In addition, Power Services is 
proposing a much more detailed analysis of the variable costs 
associated with providing capacity reserves that Transmission Services 
uses to provide ancillary and control area services.
b. Generation Inputs Revenue Credit Adjustment
    Power Services is including a generation inputs revenue credit 
adjustment in the WP-10 Initial Proposal to account for expected 
changes in the cost allocation for certain generation inputs. These 
expected changes are based on foreseeable changes to some of the 
assumptions used in the Initial Proposal. In order to prepare the 
Initial Proposal, Power Services had to start some of the studies in 
October 2008. Those studies relied on forecasts of certain generation 
input amounts that, for the sake of consistency, have been used 
throughout the Initial Proposal. One of the assumptions used in these 
forecasts involves the ability of wind generators to accurately 
schedule their generation. For the Initial Proposal, a two-hour 
persistence model was assumed for determining the amount of capacity 
needed for generation imbalance caused by the wind generators. After 
the Initial Proposal rate studies were started, extensive work has been 
done to establish operational solutions that will reduce the amount of 
capacity needed to provide generation imbalance to wind generators. 
Given the evolving status of this work, the WP-10 Initial Proposal also 
includes estimates of the amount of

[[Page 6618]]

reserves required, and the resulting cost associated with these reserve 
levels, assuming 30-minute, 45-minute and 60-minute persistence models.
    In order to account for these potential operational solutions, 
Power Services is including an ad hoc revenue credit adjustment in the 
WP-10 Initial Proposal that averages the changed revenue forecast 
associated with the 45-minute and 30-minute persistence models as 
compared to the two-hour persistence model. All cost allocation issues 
will be decided in the WP-10 rate proceeding, but Power Services 
believes that the ad hoc generation inputs revenue credit adjustment 
allows rate proceeding parties to understand the impact that these 
changes in the generation inputs proposal may have on BPA's other rates 
as they are presented in the Initial Proposal. BPA's final rate 
proposal will not have this ad hoc revenue credit adjustment. Instead, 
it will fully reflect the Administrator's decisions on these issues.
c. DSI Service for FY 2010-2011
    In light of the recent decision in Pacific Northwest Generating 
Cooperative, et al., v. Bonneville Power Administration, No. 05-75638, 
slip op. at 16513 (9th Cir. Dec. 17, 2008), BPA is in the process of 
reviewing its FY 2007-2011 contracts with its DSI customers--two 
aluminum smelters and Port Townsend Paper Company--and will be 
undertaking appropriate actions to conform the contracts with the 
Court's decision. The decision whether necessary modifications take the 
form of a new contract or amendment to existing contracts has yet to be 
determined, so there is some uncertainty regarding the ultimate cost of 
DSI service. Given this uncertainty, for purposes of the Initial 
Proposal, Power Services will forecast sales under the IP rate to its 
DSI customers for the