[Federal Register Volume 75, Number 241 (Thursday, December 16, 2010)]
[Notices]
[Pages 78694-78703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31622]
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DEPARTMENT OF ENERGY
Bonneville Power Administration
[BPA File No.: REP-12]
Proposed Residential Exchange Program Settlement Agreement
Proceeding (REP-12); Public Hearing and Opportunities for Public Review
and Comment
AGENCY: Bonneville Power Administration (BPA), Department of Energy
(DOE).
ACTION: Notice of Residential Exchange Program Settlement Agreement
Proceeding (REP-12).
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SUMMARY: BPA is conducting the 2012 Residential Exchange Program
Settlement Agreement Proceeding (REP-12) to review the terms and
conditions of a proposed 17-year settlement of issues regarding the
implementation of
[[Page 78695]]
the Residential Exchange Program (REP). The REP is a statutory power
exchange program established by section 5(c) of the Pacific Northwest
Electric Power Planning and Conservation Act (Northwest Power Act). The
proposed settlement under review is the 2012 REP Settlement Agreement
(2012 REP Settlement). If adopted, BPA will include in its power rates
for FY 2012-2028 the REP benefits stated in the proposed 2012 REP
Settlement.
In addition to reviewing the terms of the proposed 2012 REP
Settlement, BPA's REP-12 initial proposal will describe BPA's proposed
implementation of the REP for its FY 2012-2013 rates in the event the
2012 REP Settlement is not adopted. The REP-12 initial proposal will
include studies and testimony supporting BPA's proposed implementation
of the section 7(b)(2) rate test for the FY 2012-2013 rate period, the
section 7(b)(3) surcharge allocation, Average System Cost (ASC)
forecasts, and the amount of refunds to be provided to BPA customers
overcharged during the FY 2002-2006 rate period, (i.e., Lookback
repayments). If, at the conclusion of the REP-12 proceeding the
Administrator decides not to adopt the 2012 REP Settlement, BPA will
incorporate into the BP-12 rate proceeding the studies, testimony, and
documentation associated with the section 7(b)(2) rate test, the
section 7(b)(3) surcharge allocation, ASC forecasts, and Lookback
repayment and use such studies and documentation in establishing the
BP-12 rates.
DATES: Anyone wishing to become a party to the REP-12 proceeding must
provide written notice, via U.S. Mail or electronic mail, which must be
received by BPA no later than 3 p.m. on December 23, 2010.
The REP-12 proceeding begins with a prehearing conference at 9:00
a.m. on December 17, 2010, in the BPA Rates Hearing Room, 2nd Floor,
911 NE 11th Avenue, Portland, Oregon 97232.
ADDRESSES: 1. Petitions to intervene should be directed to: Hearing
Clerk--L-7, Bonneville Power Administration, 905 NE 11th Avenue,
Portland, Oregon 97232, or may be e-mailed to [email protected]. In
addition, copies of the petition must be served concurrently on BPA's
General Counsel and directed to Mr. Kurt R. Casad, Office of General
Counsel, 905 NE 11th Avenue, Portland, Oregon 97232, or via e-mail to
[email protected] (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. Participants may also submit
comments by e-mail at: http://www.bpa.gov/comment. BPA requests that
all comments and documents intended to be part of the Official Record
in this rate proceeding contain the designation REP-12 in the subject
line.
FOR FURTHER INFORMATION CONTACT: Ms. Heidi Y. Helwig, DKC-7, Public
Affairs Specialist, Bonneville Power Administration, P.O. Box 3621,
Portland, Oregon 97208; by phone toll free at 1-800-622-4520; or via e-
mail to [email protected].
Responsible Official: Mr. Raymond D. Bliven, Power Rates Manager,
is the official responsible for the development of BPA's power rates.
SUPPLEMENTARY INFORMATION:
Table of Contents
Part I. Introduction
Part II. Procedures and Scope of Hearing
Part III. Public Participation in REP-12
Part IV. Background of REP Litigation
Part V. Summary of Proposal and Description of Major Studies
Part VI. Proposed 2012 REP Settlement Agreement
Part I. Introduction
BPA is conducting an evidentiary hearing, Docket No. REP-12, to
review the terms and conditions of a proposed 17-year settlement of
issues regarding the implementation of the Residential Exchange Program
(REP). The REP is a statutory power exchange program established by
section 5(c) of the Northwest Power Act (Act). See 16 U.S.C. 839c(c).
The proposed settlement under review, the 2012 REP Settlement, reflects
the efforts of a broad group of regional parties to resolve litigation
over BPA's implementation of the REP through a legally sustainable and
equitable settlement agreement. If adopted by the Administrator, BPA
will include in its power rates for FY 2012-2028 the REP benefits
stated in the proposed 2012 REP Settlement.
In addition to reviewing the terms of the proposed 2012 REP
Settlement, BPA's REP-12 initial proposal will describe BPA's proposed
implementation of the REP for its FY 2012-2013 rates in the event the
2012 REP Settlement is not adopted. The REP-12 initial proposal will
include studies and testimony supporting BPA's proposed implementation
of the section 7(b)(2) rate test, the section 7(b)(3) surcharge
allocation, ASC forecasts, and Lookback repayments for the FY 2012-2013
rate period. Any party wishing to contest BPA's proposed implementation
of the section 7(b)(2) rate test, allocation of section 7(b)(3)
surcharge amounts, development of the ASC forecasts, or determination
of Lookback refund amounts must raise such arguments in the REP-12
proceeding. At the same time BPA is reviewing the proposed 2012 REP
Settlement in the REP-12 proceeding, BPA is separately conducting a BP-
12 rate proceeding to establish power rates for FY 2012-2013. If, at
the conclusion of the REP-12 proceeding, the Administrator decides not
to adopt the 2012 REP Settlement, BPA will incorporate into the BP-12
rate proceeding the studies, testimony, and documentation associated
with the section 7(b)(2) rate test, the section 7(b)(3) surcharge
allocation, ASC forecasts, and Lookback repayment, and use such studies
and documentation in establishing the BP-12 rates.
Part II. Procedures and Scope of Hearing
A. Procedures Governing the REP-12 Proceeding
Because the proposed 2012 REP Settlement includes features that are
directly related to BPA's rates and ratemaking, the proposed Settlement
will be evaluated under the procedural terms of section 7(i) of the
Act, 16 U.S.C. 839e(i). 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 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 REP-12 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 BPA's Hearing Procedures prohibits ex parte
communications. The ex parte rule applies to all BPA and DOE employees
and contractors. Except as provided below, any communications with BPA
and/or DOE personnel regarding 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)
[[Page 78696]]
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 Record of Decision (ROD) is issued.
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 Federal Columbia River
Power System (FCRPS) over a reasonable period of years, and certain
other costs and expenses incurred by the Administrator.
BPA's proposal, study documentation, and the proposed 2012 REP
Settlement will be available for examination beginning December 17,
2010, on BPA's Web site at http://www.bpa.gov/corporate/ratecase/2012/rep-12.cfm. Hard copies of these documents will be available beginning
December 17, 2010, at BPA's Public Information Center, BPA Headquarters
Building, 1st Floor, 905 NE. 11th Avenue, Portland, Oregon.
A formal evidentiary rate hearing will be conducted that is open to
rate proceeding parties. Interested parties that previously intervened
in BPA's BP-12 rate proceeding must also file petitions to intervene in
order to take part in the REP-12 formal hearing. A proposed schedule
for the REP-12 proceeding is stated below. A Hearing Officer will
establish a final schedule at the prehearing conference.
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Intervention Deadline.................... December 23.
Prehearing/BPA Direct Case............... December 17.
Clarification............................ January 4-7.
Motions to Strike........................ January 11.
Data Request Deadline.................... January 11.
Answers to Motions to Strike............. January 18.
Data Response Deadline................... January 18.
Parties File Direct Case................. February 8.
Clarification............................ February 14-15.
Motions to Strike........................ February 22.
Data Request Deadline.................... February 22.
Answers to Motions to Strike............. March 1.
Data Response Deadline................... March 1.
Close of Participant Comments............ March 8.
Litigants File Rebuttal.................. March 8.
Clarification............................ March 14-15.
Motions to Strike........................ March 17.
Data Request Deadline.................... March 17.
Answers to Motions to Strike............. March 25.
Data Response Deadline................... March 25.
Cross-Examination........................ March 28-April 1.
Initial Briefs Filed..................... April 25.
Oral Argument............................ May 12.
Draft ROD Issued......................... May 23.
Briefs on Exceptions..................... June 6.
Final ROD--Final Studies................. June 27.
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No field hearings will be conducted in this proceeding.
B. Scope of the REP-12 Proceeding
This section provides guidance to the Hearing Officer regarding the
matters within the scope of the REP-12 proceeding and the matters not
within the scope of this proceeding.
1. Matters Within the Scope of This Proceeding
a. Proposed 2012 REP Settlement
All issues related to BPA's analysis, methodology, or review of the
proposed 2012 REP Settlement, including any issues related to the
models developed by BPA to evaluate the 2012 REP Settlement, are
expressly within the scope of this proceeding. Parties wishing to
challenge any aspect of the proposed 2012 REP Settlement, including but
not limited to any term of the proposed Settlement or whether BPA
should adopt the Settlement, must raise such arguments in this
proceeding.
b. Section 7(b)(2) Rate Test Implementation
All issues related to BPA's implementation, interpretation, and
forecast of the section 7(b)(2) rate test are within the scope of this
proceeding. Parties wishing to challenge any aspect of the
implementation of the section 7(b)(2) rate test for either the 2012 REP
Settlement implementation period (FY 2012-2028) or the BP-12 rate
period (FY 2012-2013) must raise such arguments in this proceeding.
c. Section 7(b)(3) Surcharge Implementation
All issues related to BPA's implementation, interpretation, and
forecast of the section 7(b)(3) reallocations or surcharges are within
the scope of this proceeding. Parties wishing to challenge any aspect
of the implementation of section 7(b)(3) for either the 2012 REP
Settlement implementation period (FY 2012-2028) or the BP-12 rate
period (FY 2012-2013) must raise such arguments in this proceeding.
d. Lookback Assumptions
All issues related to BPA's implementation, determination,
recovery, and repayment of Lookback Amounts are within the scope of
this proceeding. Parties wishing to challenge any aspect of BPA's
Lookback recovery or repayment for either the 2012 REP Settlement
implementation period (FY 2012-2028) or the BP-12 rate period (FY 2012-
2013) must raise such arguments in this proceeding.
e. ASC Forecasts
Except as provided below in section II.B.2.h, all issues related to
BPA's forecast of utilities' ASCs for the BP-12 rate test period (FY
2014-2017) and the 2012 REP Settlement implementation period (FY 2012-
2028) are within the scope of this proceeding. Parties wishing to
challenge any aspect of BPA's ASC forecasts for these periods must
raise their arguments in this proceeding. Challenges to the ASCs
determined in the Draft and Final ASC reports for FY 2012-2013 are
expressly excluded from the scope of this proceeding. See Section
II.B.2.h.
2. Matters Not Within the Scope of This Proceeding
a. BP-12 Rate Proceeding Issues
As noted above, BPA is conducting a rate proceeding to establish
wholesale power and transmission rates for FY 2012-2013 (BP-12) at the
same time BPA is conducting the REP-12 proceeding. Although some of the
information developed in the BP-12 rate proceeding will be used in the
models in the REP-12 proceeding, parties may not raise arguments or
issues with such data in the REP-12 proceeding. Instead, such arguments
or issues should be raised in the BP-12 rate proceeding if and to the
extent such issues are within the scope of that proceeding. Pursuant to
section 1010.3(f) of BPA's Hearing 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
appropriateness or reasonableness of any issue being addressed in the
BP-12 rate proceeding.
b. Program Cost Estimates
BPA began its 2010 Integrated Program Review (IPR) process in May
2010. The IPR process is designed to allow people 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. Concurrent with the IPR,
BPA held regional
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conversations about risk mitigation and debt management practices.
The 2010 IPR focused on FY 2012 and 2013 program levels for BPA's
Power Services and Transmission Services as well as a review of FY 2011
program levels. BPA held 19 technical workshops and two general manager
meetings at which proposed spending levels were presented for each of
BPA's programs. BPA carefully reviewed and considered the 26 written
comments and numerous oral comments on FY 2012 and 2013 program levels
that were provided during this public process.
On October 27, 2010, BPA issued a Final Close-Out Letter and
accompanying final report for the IPR, which summarizes the comments
received and outlines BPA's responses. The report also summarizes
comments and BPA's responses on the regional conversations about risk
mitigation and debt management. In the Final Close-Out Letter and
report, BPA established the program level cost estimates for both power
and transmission rates that are used in the BP-12 and REP-12 Initial
Proposals. BPA does not anticipate additional public review of proposed
spending levels. However, an abbreviated IPR process may be held if
conditions warrant. BPA would conduct this process separately from the
REP-12 and BP-12 proceedings to share updates and solicit feedback from
customers and constituents before the final program levels are
incorporated into BPA's final rates. BPA's spending levels for
investments and expenses are not determined or subject to review in the
REP-12 or BP-12 proceedings.
Pursuant to section 1010.3(f) of BPA's Hearing Procedures, the
Administrator directs the Hearing Officer to exclude from the record
all argument, testimony, or other evidence that seeks in any manner to
address the appropriateness or reasonableness of the Administrator's
decisions on cost and spending levels. If and to the extent that any
re-examination of spending levels is necessary, such re-examination
will occur outside of the REP-12 and BP-12 proceedings. This exclusion
does not extend to portions of BPA's revenue requirements related to
REP benefits, Lookback payments, or interest on Lookback payments. The
Administrator also directs the Hearing Officer to exclude argument and
evidence regarding BPA's debt management practices and policies.
c. Regional Dialogue Policy Decisions
BPA's Subscription contracts expire on September 30, 2011, at the
end of the current rate period. BPA previously engaged customers and
interested stakeholders in an extensive Regional Dialogue process that
led to new power sales contracts. BPA issued its Long-Term Regional
Dialogue Final Policy and ROD on July 19, 2007; its Long-Term Regional
Dialogue Contract Policy and ROD on October 31, 2008; the Tiered Rate
Methodology and ROD on November 10, 2008; and the Tiered Rate
Methodology Supplemental ROD on September 2, 2009. 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, such as establishing customer contract high water marks and
contract demand quantities, and these processes and decisions are
outside the scope of the REP-12 proceeding.
Pursuant to Sec. 1010.3(f) of BPA's Hearing 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 decisions
made in the Long-Term Regional Dialogue Final Policy ROD, Long-Term
Regional Dialogue Contract Policy ROD, the Tiered Rate Methodology ROD,
and the Tiered Rate Methodology Supplemental ROD.
d. Tiered Rate Methodology (TRM)
BPA previously established the TRM in a section 7(i) rate hearing.
The issues being examined in the REP-12 proceeding are not governed by
the TRM. Modifications to the TRM are not within the scope of this
proceeding. Pursuant to Sec. 1010.3(f) of BPA's Hearing 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 propose to revise the TRM developed by BPA.
e. Service to the Direct Service Industries (DSIs)
The manner and method by which BPA could provide service or
financial payments to its DSI customers were evaluated in Pacific
Northwest Generating Cooperative, et al., v. Bonneville Power
Administration, 580 F.3d 792 (9th Cir. 2008) (PNGC I) and Pacific
Northwest Generating Cooperative, et al., v. Bonneville Power
Administration, 590 F.3d 1065 (9th Cir. 2010) (PNGC II). In BPA's BP-12
rate proceeding, BPA has assumed that it will continue to serve Alcoa,
Inc. (Alcoa) as well as Port Townsend Paper Corporation (Port Townsend)
during FY 2012-2013. BPA's decisions to serve the DSIs, along with the
method and level of service to be provided DSIs in the FY 2012-2013
rate period, will not be determined in this proceeding.
Pursuant to Sec. 1010.3(f) of BPA's Hearing 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 BPA's decision to offer a
contract and the method or level of such service.
f. Potential Environmental Impacts
Environmental impacts are addressed in a concurrent National
Environmental Policy Act (NEPA) process. Pursuant to Sec. 1010.3(f) of
BPA's Hearing 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 rate proceeding.
g. Average System Cost Methodology
Section 5(c) of the Northwest Power Act established the REP, which
provides benefits to residential and small-farm 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 (ASCM). BPA uses the ASCM to calculate utilities' ASCs. On
September 4, 2009, the Federal Energy Regulatory Commission
(Commission) granted final approval of BPA's 2008 ASCM. The 2008 ASCM
is not subject to challenge or review in a section 7(i) proceeding.
Pursuant to Sec. 1010.3(f) of BPA's Hearing 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 the 2008 ASCM.
h. Average System Cost Review Processes
To receive REP benefits for FY 2012-2013, utilities must file
proposed ASCs with BPA pursuant to the terms and conditions of the 2008
ASCM. These filings are reviewed by BPA staff and other interested
parties in ASC review processes, which are separate administrative
proceedings conducted by BPA under the terms of the 2008 ASCM. In the
review processes, BPA staff and other parties evaluate the ASCs
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filed by participating utilities for conformance with the requirements
of the 2008 ASCM. At the conclusion of the processes, BPA issues ASC
Reports, which formally establish the utilities' ASCs for the Exchange
Period, which coincides with BPA's rate period.
On June 1, 2010, ten utilities filed proposed ASCs with BPA for FY
2012-2013. One utility subsequently withdrew its ASC filing. BPA staff
and other parties are currently reviewing the remaining nine filings in
the ASC review processes. Once these ASC review processes are complete,
and BPA has issued final ASC Reports, BPA will incorporate the final
ASCs into the administrative record of the REP-12 proceeding. Although
these ASC determinations provide important information for setting
BPA's rates, they are not made in section 7(i) hearings. Parties
intending to challenge BPA's draft or final ASC determinations for FY
2012-2013 must raise such issues in the ASC review processes according
to the procedures established in the 2008 ASCM.
Pursuant to Sec. 1010.3(f) of BPA's Hearing 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 BPA's draft or final ASC determinations for FY 2012-2013.
i. Contract High Water Mark (CHWM) Process
Under the Tiered Rate Methodology (TRM), BPA will establish both
CHWMs and FY 2012-2013 Rate Period High Water Mark (RHWMs) for public
agency customers that signed contracts for firm requirements power
service at tiered rates, referred to as CHWM contracts. The CHWMs and
RHWMs will be established in the CHWM Process, which will occur mainly
in Spring 2011. In this process, BPA will establish the maximum planned
amount of power a customer is eligible to purchase at Tier 1 rates
during the rate period. The CHWM Process provides customers an
opportunity to review, comment, and, if necessary, challenge BPA's
determinations regarding certain CHWM and RHWM determinations.
Pursuant to Sec. 1010.3(f) of BPA's Hearing 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 BPA's determination of a customer's CHWM or FY 2012-2013
RHWM.
C. The National Environmental Policy Act
BPA is in the process of assessing the potential environmental
effects that could result from implementation of the proposed 2012 REP
Settlement, consistent with NEPA requirements. BPA is reviewing this
proposal for consistency with BPA's Business Plan Environmental Impact
Statement (Business Plan EIS), completed in June 1995 (DOE/EIS-0183).
This policy-level EIS evaluates the environmental impacts of a range of
business plan alternatives for BPA and is intended to support a wide
range of subsequent BPA business-related decisions. In the Record of
Decision for the Business Plan ROD (Business Plan ROD, August 1995),
the BPA Administrator 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.
In April 2007, BPA completed a Supplement Analysis confirming the
Business Plan EIS's environmental analysis in light of current regional
conditions and BPA's current business practices. The Business Plan EIS
and ROD thus continue to provide a sound basis for making
determinations under NEPA concerning BPA's business-related decisions.
BPA will document its environmental evaluation for the proposed
2012 REP Settlement as part of the Administrator's Record of Decision
that will be prepared for this proposal. During the public review and
comment period for the proposed 2012 REP Settlement, 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 Close of
Participant Comments deadline identified in Part II.A will be
considered by BPA's NEPA compliance staff in the NEPA evaluation that
will be prepared for this proposal.
Part III. Public Participation in REP-12
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 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. 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 organizations.
Written comments by participants will be included in the record if
they are received by March 8, 2011. Written views, supporting
information, questions, and arguments should be submitted to the
address listed in the ADDRESSES section of this Notice.
Entities or individuals 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 the entity's or person's
interest in the hearing. BPA's customers and affiliated customer groups
will be granted intervention based on petitions filed in conformance
with BPA's Hearing Procedures. Other petitioners must explain their
interests in sufficient detail to permit the Hearing Officer to
determine whether the petitioners have a relevant interest in the
hearing. Pursuant to Rule 1010.1(d) of BPA's Hearing 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. The time limit for opposing a timely
intervention will be established at the prehearing conference. Any
party, including BPA, may oppose a petition for intervention. All
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
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from participants, and other material accepted into the record by the
Hearing Officer. The Hearing Officer will then review the record and
certify the record to the Administrator.
The Administrator will develop the Final ROD in the REP-12
proceeding based on the record and such other materials and information
as may have been submitted to or developed by the Administrator. The
Administrator will serve copies of the Final ROD on all parties. BPA
will incorporate the Administrator's final decision in this proceeding
into its BP-12 Final Rate Proposal.
Part IV. Background of REP Litigation
A. Background on the REP
1. Section 5(c) of the Northwest Power Act
As noted previously, section 5(c) of the Northwest Power Act
established the REP. 16 U.S.C. 839c(c)(1). Under the REP, any Pacific
Northwest utility may sell power to BPA at the utility's ASC. A
utility's ASC is determined in accordance with an ASC Methodology that
BPA develops pursuant to the requirements in the Act. In calculating a
utility's ASC, section 5(c)(7) of the Act mandates that BPA exclude
from ASC the cost of resources in an amount sufficient to serve a new
large single load (NLSL), the cost of additional resources in an amount
sufficient to meet any additional load outside the region occurring
after the effective date of the Act, and any costs of any generating
facility which is terminated prior to initial commercial operation. 16
U.S.C. 839c(c)(7)(A)-(C).
When a utility offers to sell its power to BPA at its ASC, BPA must
purchase such power and, in return, sell an equivalent amount of power
to the utility at BPA's rate for purchases under the REP, known as the
``PF Exchange rate.'' The PF Exchange rate is developed in accordance
with section 7 of the Northwest Power Act. The amount of power that is
bought and sold under the REP is equal to the utility's qualified
residential and small farm load (exchange load). Because the purchase
and sale between BPA and the utility involves the same amount of power
and is simultaneous, in almost all instances no actual power is bought
or sold under the REP. Instead, the REP is generally implemented as a
paper transaction where the net difference between the utility's ASC
and BPA's PF Exchange rate is multiplied by the utility's exchange load
and converted into a cash payment to the utility. The utility is
required by law to pass these payments onto its residential and small
farm consumers. 16 U.S.C. 839c(c)(3). The REP is implemented through a
Residential Purchase and Sale Agreement (RPSA) executed by BPA and the
utility. The REP is intended to provide regional residential and small
farm consumers a form of access to the power produced by the FCRPS.
Although intended primarily for the benefit of consumers located in
investor-owned utilities' (IOUs) service areas, any utility within the
region may participate.
2. Section 7(b)(2) of the Northwest Power Act and the PF Exchange Rate
The PF Exchange rate is the rate at which BPA ``sells'' power to
utilities participating in the REP. Section 7 of the Act prescribes the
manner in which this rate is set. Under section 7(b)(1), BPA
establishes the PF Exchange rate in much the same way BPA develops its
PF Public rate. See 16 U.S.C. 839e(b)(1). Section 7(b)(2) of the Act,
however, requires BPA to perform a ``rate test'' to determine whether
the PF Public rate charged to BPA's consumer-owned utility customers
(COUs) under the Act would be greater than a rate developed under five
specific assumptions stated in section 7(b)(2). These five assumptions
are:
(A) The [COUs'] general requirements had included during such five-
year period the direct service industrial customer loads which are (i)
served by the Administrator, and (ii) located within or adjacent to the
geographic service boundaries of such public bodies and cooperatives;
(B) [the COUs] were served, during such five-year period, with
Federal base system resources not obligated to other entities under
contracts existing as of December 5, 1980 (during the remaining term of
such contracts) excluding obligations to direct service industrial
customer loads included in subparagraph (A) of this paragraph;
(C) No purchases or sales by the Administrator as provided in
[section 5(c)] of this section were made during such five-year period;
(D) All resources that would have been required, during such five-
year period, to meet remaining general requirements of the public body,
cooperative and Federal agency customers (other than requirements met
by the available Federal base system resources determined under
subparagraph (B) of this paragraph) were (i) purchased from such
customers by the Administrator pursuant to section 839d of this title,
or (ii) not committed to load pursuant to section 839c(b) of this
section and were the least expensive resources owned or purchased by
public bodies or cooperatives; and any additional needed resources were
obtained at the average cost of all other new resources acquired by the
Administrator; and
(E) The quantifiable monetary savings, during such five-year
period, to public body, cooperative and Federal agency customers
resulting from (i) reduced public body and cooperative financing costs
as applied to the total amount of resources, other than Federal base
system resources, identified under subparagraph (D) of this paragraph,
and (ii) reserve benefits as a result of the Administrator's actions
under this chapter were not achieved.
If BPA's proposed rates developed under section 7(b)(1) are greater
than the rates calculated under the section 7(b)(2) assumptions, BPA
must reduce the costs included in the 7(b)(1) rate charged to COUs by
assessing a surcharge pursuant to section 7(b)(3) to ``all other power
sold by the Administrator to all customers.'' 16 U.S.C. 839e(b)(3). One
of the rates assessed this surcharge is the PF Exchange rate.
Application of the 7(b)(3) surcharge to the PF Exchange rate has the
effect of increasing the level of the PF Exchange rate and reducing the
amount of REP benefits paid by COUs in their PF Public rates.
B. History of the REP
The history of BPA's implementation of the REP is marked by
controversy and litigation. Shortly after the passage of the Northwest
Power Act in 1980, BPA and regional parties negotiated the terms of
BPA's first ASC Methodology (1981 ASC Methodology) and the provisions
of 20-year RPSAs that would be used to implement the REP. After three
years of experience under the 1981 ASC Methodology, BPA's DSI and COU
customers requested that a consultation process be held to consider
revisions to the 1981 ASC Methodology. BPA granted the requests and
commenced a consultation process in 1983. In the consultation, BPA
determined that the source of data used in the 1981 ASC Methodology did
not include sufficient detail to ensure that BPA was excluding
terminated plant costs as required by section 5(c)(7) of the Northwest
Power Act. Consequently, BPA proposed to revise the ASC Methodology by
expanding the procedures used to review ASCs and excluding certain
costs that BPA determined were too difficult to accurately monitor. The
revised ASC Methodology was completed in 1984 and received approval
from the Commission shortly thereafter.
[[Page 78700]]
BPA's IOU customers vigorously opposed the changes to the 1981 ASC
Methodology. Eight IOUs and four State regulatory agencies filed
petitions with the United States Court of Appeals for the Ninth Circuit
challenging the Commission's final approval of the revised ASC
Methodology (1984 ASC Methodology). See PacifiCorp v. FERC, 795 F.2d
816 (9th Cir. 1986) (PacifiCorp). In PacifiCorp, the Court affirmed the
Commission's approval and BPA's decision to adopt the 1984 ASC
Methodology. Id. Even though the 1984 ASC Methodology was sustained by
the Court, litigation continued over BPA's implementation of the ASC
Methodology. Dozens of BPA's ASC determinations were contested before
the Commission, several of which were ultimately resolved by the Court.
See Wash. Util. & Transp. Comm'n v. FERC, 26 F.3d 935 (9th Cir. 1994);
CP Nat. Corp. v. Bonneville Power Admin., 928 F.2d 905 (9th Cir. 1991).
Due to the burdensome, expensive and contentious nature of
implementing the 1984 ASC Methodology, BPA and regional exchanging
utilities began negotiating settlements of the implementation of the
REP. Throughout the late 1980s and into the 1990s, BPA and regional
exchanging utilities entered into multiple REP settlements. By the late
1990s, BPA and five of the six exchanging IOUs executed REP settlement
agreements that resolved the implementation of the REP until June 30,
2001.
C. The 2000 REP Settlement Agreements
In early 1996, the governors of Idaho, Montana, Oregon and
Washington convened the Comprehensive Review of the Northwest Energy
System. The goal of the review was to develop recommendations for
changes in the region's electric utility industry, focusing on BPA,
through an open public process involving a broad cross-section of
regional interests. In December 1996, after over a year of intense
study, the Comprehensive Review Steering Committee released its Final
Report. The Final Report proposed a subscription system for purchasing
specified amounts of power from BPA at cost with incentives for
customers to take longer-term subscriptions (Subscription). In
connection with its Subscription proposal, the Steering Committee
encouraged BPA and other parties in the region to explore a settlement
of the REP with the region's IOUs for the FY 2002-2011 period.
In response to the Steering Committee's recommendation, BPA and
regional IOUs developed the 2000 Residential Exchange Program
Settlement Agreements (2000 REP Settlement Agreements). Under the 2000
REP Settlement Agreements, the IOUs agreed to forgo their participation
in the traditional REP for a period of ten years (FY 2002-2011) in
return for certain payments and deliveries of firm power from BPA. To
recover the costs of the 2000 REP Settlement Agreements for the FY
2002-2006 rate period, BPA proposed in its WP-02 Wholesale Power Rate
Proceeding to allocate a significant portion of the costs of the 2000
REP Settlement Agreements to the rates charged to COUs.
D. Challenges to the 2000 REP Settlements: The Ninth Circuit's
Decisions in Portland General Electric v. BPA, Golden Northwest
Aluminum v. BPA, and Snohomish PUD v. BPA
In January of 2001, certain parties filed petitions with the Ninth
Circuit challenging BPA's statutory authority to implement the REP
through the 2000 REP Settlement Agreements. In September of 2003,
following final Commission confirmation and approval of BPA's WP-02
rates, parties also filed challenges to BPA's decision to recover the
costs of the 2000 REP Settlement Agreements from the PF rates without
BPA's traditional manner of implementing the 7(b)(2) rate test.
While these challenges were pending before the Court, BPA commenced
a new rate proceeding, the 2007 Wholesale Power Rate Proceeding, to
establish rates for the FY 2007-2009 period (WP-07 rates). In the WP-07
rates, BPA again allocated a significant portion of the costs of the
2000 REP Settlement Agreements to the PF rates. The WP-07 rates were
filed with the Commission on July 28, 2006, and received interim
approval from the Commission on September 21, 2006.
On May 3, 2007, before final Commission approval of BPA's WP-07
rates, the Court issued two decisions in the pending challenges to the
2000 REP Settlement Agreements and the then-expired WP-02 rates. In
Portland General Electric v. Bonneville Power Admin., 501 F.3d 1009
(9th Cir. 2007) (PGE), the Court found that BPA had exceeded its
settlement authority when it entered into the 2000 REP Settlement
Agreements. 501 F.3d at 1037. In a companion case, Golden Northwest
Aluminum v. Bonneville Power Admin., 501 F.3d 1037 (9th Cir. 2007)
(Golden NW), the Court also held that BPA had improperly allocated the
cost of the 2000 REP Settlement Agreements to rates charged to the COUs
in violation of section 7(b)(2). 501 F.3d at 1048. The Court then
remanded the WP-02 rates to BPA with the instruction to ``set rates in
accordance with this opinion.'' Id. at 1053.
After issuing the PGE and Golden NW decisions, the Court also
reviewed challenges to certain amendments to the 2000 REP Settlement
Agreements signed in 2004. See Pub. Util. Dist. No. 1 of Snohomish
County, Wa. v. Bonneville Power Admin., 506 F.3d 1145 (9th Cir. 2007)
(Snohomish). In Snohomish, the Court remanded the 2004 amendments to
the 2000 REP Settlement Agreements and a ``Reduction of Risk''
provision amended by the 2004 amendments to BPA. Id. at 1154. The Court
explained that it was remanding these amendments to BPA in order to
permit BPA to determine ``in the first instance'' whether these
amendments remained valid in light of the Court's opinions in PGE and
Golden NW. Id.
E. BPA's Response to PGE, Golden NW, and Snohomish: The WP-07
Supplemental Hearing and the Development of the 2008 RPSAs
Following the issuance of the PGE, Golden NW, and Snohomish
decisions, BPA ceased making payments under the 2000 REP Settlement
Agreements. Thereafter, BPA commenced a series of public meetings to
discuss with interested parties BPA's response to the Court's opinions.
At the conclusion of these meetings, BPA announced that it was
commencing a section 7(i) process to determine whether and to what
extent the 2000 REP Settlement Agreements caused illegal costs to be
included in rates charged to the COUs. This proceeding, referred to as
the WP-07 Supplemental Rate Hearing, began in February of 2008. In the
WP-07 Supplemental Rate Hearing, BPA proposed to revise its prospective
WP-07 rates for FY 2009 (the third year of the rate period), replacing
the costs of the 2000 REP Settlement Agreements with REP benefits
calculated in accordance with sections 5(c) and 7(b)(2) of the
Northwest Power Act. In addition, BPA proposed to perform an analysis,
referred to as the ``Lookback,'' to determine whether BPA had
overcharged the COUs during the WP-02 rate period (i.e., FY 2002-2006)
and the first two years of the WP-07 rate period (i.e., FY 2007-2008).
The Lookback compared the payments the IOUs received or would have
received under the 2000 REP Settlement Agreements with the amount of
REP benefits the IOUs would have received under a traditional
implementation of the REP pursuant to sections 5(c) and 7(b) of the
Northwest Power Act. For those IOUs that received more in REP benefits
under the 2000 REP Settlement Agreements than allowed by sections
[[Page 78701]]
5(c) and 7(b)(2) of the Act, BPA assessed a refund obligation known as
a ``Lookback Amount.'' BPA proposed to collect the Lookback Amounts
from the IOUs by withholding future benefits owed to the IOUs under the
REP and issuing refunds to the injured COUs.
At the conclusion of the WP-07 Supplemental Hearing in September of
2008, BPA presented its final findings in the WP-07 Supplemental Record
of Decision (WP-07 Supplemental ROD). In the WP-07 Supplemental ROD,
BPA determined that the COUs had been overcharged by approximately $1
billion during the FY 2002-2008 period. BPA proposed to return these
overcharges to the injured COUs with an initial lump-sum cash payment
in 2008 and then through future reductions in REP benefit payments to
the applicable IOUs.
In addition to determining the refunds and overcharges caused by
the 2000 REP Settlement Agreements, the WP-07 Supplemental ROD also
addressed BPA's final decisions on the appropriate amount of REP
benefits to pay the IOUs, and include in rates, for FY 2009. To make
this determination, BPA had to address a host of controversial issues
related to the section 7(b)(2) rate test. Over 270 pages of the WP-07
Supplemental ROD were dedicated to addressing the issues and arguments
presented by the parties on the section 7(b)(2) rate test.
Because the traditional REP was being implemented for FY 2009, BPA
also needed to negotiate and execute new RPSAs with the IOUs intending
to participate in the REP. Thus, concurrent with the WP-07 Supplemental
Hearing, BPA also engaged in a public process to develop a new RPSA.
After taking public comment on a prototype RPSA, BPA published a final
RPSA in September of 2008. Among other terms included in the RPSA, BPA
adopted a provision that would allow BPA to recover the Lookback
Amounts from the IOUs by reducing future REP benefit payments. BPA's
justification for including this and other provisions in the RPSA were
explained in the 2008 RPSA Record of Decision (2008 RPSA ROD).
F. Challenges to BPA's WP-07 Supplemental ROD and RPSA Decisions: The
Assoc. of Pub. Agency Customers v. Bonneville Power Admin., Idaho Pub.
Util. Comm'n v. Bonneville Power Admin, and Avista Corp. v. Bonneville
Power Admin
BPA's decisions in the WP-07 Supplemental ROD and the 2008 RPSA ROD
were vigorously opposed by both COUs and IOUs. The COUs and entities
supporting the COUs' position claimed that BPA had grossly
underestimated the IOUs' refund obligation and that the actual
overcharge to COUs for the FY 2002-2008 period was at least $2 billion.
The IOUs, public utility commissions, and ratepayer advocacy groups, in
contrast, argued that no refunds were owed at all because the Court did
not direct BPA to provide refunds and because the terms of the 2000 REP
Settlement Agreements specifically prohibited BPA from recouping REP
benefits paid under those agreements. The IOUs and COUs also opposed
BPA's interpretation and implementation of the section 7(b)(2) rate
test for both the Lookback period and for setting rates in FY 2009.
In December 2008, fourteen petitions were filed in the Ninth
Circuit challenging the Lookback-related findings and decisions BPA
reached in the WP-07 Supplemental ROD. These challenges were
consolidated into The Assoc. of Pub. Agency Customers v. Bonneville
Power Admin., et al. (APAC). Also in December 2008, seven petitions
were filed by a number of IOUs and public utility commissions
challenging BPA's decision to adopt the final RPSAs. These challenges
were consolidated into Idaho Pub. Util. Comm'n v. Bonneville Power
Admin. (IPUC). On July 16, 2009, the Commission granted final approval
to BPA's WP-07 rates for FY 2009. Shortly thereafter, fifteen more
petitions challenging BPA's final WP-07 rates were filed with the Ninth
Circuit and consolidated into Avista Corp., et al. v. Bonneville Power
Admin. (Avista). Briefing on the issues in the APAC and IPUC cases
began in August of 2009 and concluded in March of 2010. Briefing on the
rate issues in Avista has yet to occur.
Shortly after petitions were filed in the APAC and IPUC cases, BPA
commenced a rate proceeding to establish rates for the FY 2010-2011
period (WP-10 Rate Proceeding). In the WP-10 Rate Proceeding, BPA
proposed to continue to implement its Lookback remedy by reducing the
IOUs' prospective REP benefit payments and paying refunds to the COUs
based on the determinations made in the WP-07 Supplemental ROD. BPA
also proposed to implement the section 7(b)(2) rate test in the same
manner as in the WP-07 Supplemental ROD. On July 21, 2009, BPA issued
its final ROD in the WP-10 Rate Proceeding (WP-10 ROD.) In October and
November of 2009, five IOUs filed precautionary petitions for review
with the Ninth Circuit challenging BPA's decision to continue to
implement the Lookback remedy in the WP-10 ROD. These appeals were
consolidated in Portland General Elec. et al. v. Bonneville Power
Admin. (PGE II). On August 6, 2010, the Commission granted final
approval to BPA's WP-10 rates. Subsequently, in November of 2010,
fifteen petitions were filed with the Ninth Circuit challenging the
ratemaking decisions BPA reached in the WP-10 ROD. The petitions
challenging BPA's WP-10 rate making decision have yet to be
consolidated.
Following the completion of the briefing in the APAC and IPUC
cases, the litigants in APAC, IPUC, Avista, and PGE II agreed to engage
in mediation in an attempt to resolve their numerous disputes. Because
many of the issues in the mediation would affect the prospective
implementation of the REP, the litigants invited regional parties not
involved in the litigation to participate in the mediation. The
mediation sessions commenced in early April of 2010 and continued
through May of 2010. Over fifty litigants and other parties
participated in the mediation. Although by the conclusion of the
scheduled mediation sessions the litigants and parties had not achieved
a settlement, significant progress had been made toward reaching a
compromise on all existing claims and the future implementation of the
REP. Principals from most of the litigants agreed to continue meeting
through August and September in an attempt to achieve a settlement.
In mid-September 2010, with assistance from the mediator, a large
contingent of COUs and IOUs agreed to pursue resolution of the
outstanding litigation and the future implementation of the REP
pursuant to the terms of a non-binding Agreement in Principle (AIP).
The AIP committed the negotiated parties to work in good faith on a
final settlement of the REP that adhered to certain terms and
conditions. From September to December of 2010, the parties worked to
transform the AIP into a final settlement document. The final version
of the proposed 2012 REP Settlement is expected to be completed by mid-
December.
G. Proposed 2012 REP Settlement Agreement
The proposed 2012 REP Settlement would resolve challenges over
BPA's implementation of the REP in return for a stream of REP benefits
to the IOUs for a term of 17 years. The COUs' obligation to pay REP
benefits in rates would be limited to the COUs' share of the stream of
REP benefits as set forth in the agreement. The distribution of these
REP payments to the IOUs would depend on each IOU's respective ASC and
exchange load. The IOUs would continue to file ASCs with BPA
[[Page 78702]]
pursuant to the 2008 ASCM. In addition to the stream of REP benefits,
the IOUs would receive a percentage of certain BPA Renewable Energy
Credits (RECs) and the payment of certain outstanding interim payments
due under the interim REP payment agreements between BPA and the IOUs.
The 2012 REP Settlement reflects a compromise by a substantial
majority of BPA's customers and most of the litigants to the litigation
on the outstanding REP-related issues. It was developed after extensive
negotiations by representatives of COU customers, IOU customers, public
utility commissions, and ratepayer advocacy groups. Many of these
entities signed the AIP and are expected to sign the 2012 REP
Settlement once it is completed. These parties have requested that BPA
review the proposed settlement, and, if consistent with law, execute
the Agreement and set rates consistent with its terms.
Part V. Summary of Proposal and Description of Major Studies
A. Summary of Proposal
Although BPA firmly believes that settlement of the existing REP
litigation is in the interest of all BPA ratepayers, BPA must ensure
that the terms and conditions in the 2012 REP Settlement are reasonable
and comply with all relevant statutory provisions before executing the
Agreement. BPA is conducting a section 7(i) proceeding to provide a
forum in which BPA and other interested parties can evaluate the
reasonableness and legal sufficiency of the proposed 2012 REP
Settlement.
At the conclusion of the REP-12 proceeding, the Administrator will
determine, after reviewing all evidence and arguments contained in the
record, whether the terms of the proposed 2012 REP Settlement comport
with BPA's statutory duties and authorities. If the Administrator
determines that the settlement is consistent with applicable law, and
is broadly supported by BPA's customers and other interested parties,
he will sign the proposed 2012 REP Settlement and set BPA's FY 2012-
2013 rates in accordance with the terms of the 2012 REP Settlement. In
such case, the 2012 REP Settlement would replace BPA's current
construct of withholding REP benefits due the IOUs and paying Lookback
refund credits to eligible COUs as described in the WP-07 Supplemental
ROD. In addition, the 2012 REP Settlement would settle the amount of
rate protection afforded to COUs for the term of the agreement,
obviating the need to continue the litigation over the section 7(b)(2)
decisions BPA reached in the WP-07 Supplemental ROD and the WP-10 ROD.
If the Administrator determines the proposed 2012 REP Settlement is
not consistent with BPA's statutory duties or is otherwise
unreasonable, the Administrator will not sign the 2012 REP Settlement
but will instead continue to set rates, recover Lookback Amounts and
issue refunds consistent with his decisions in the WP-07 Supplemental
ROD and the WP-10 ROD.
B. 2012 REP Settlement Analysis Initial Proposal
To test the reasonableness of the proposed 2012 REP Settlement, BPA
will perform an analysis that will develop a range of forecast REP
benefits reflecting the likely amount of REP benefits the IOUs would
receive (and conversely the amount of rate protection the COUs would
likely receive) in the absence of the 2012 REP Settlement. The range of
REP benefits will be developed by quantifying the major issues being
litigated by BPA, the IOUs, and the COUs in the current and pending
litigation. Broadly speaking, the major issues being litigated today
are the implementation of the section 7(b)(2) rate test, allocation of
rate protection costs under section 7(b)(3), and the development and
calculation of the Lookback Amounts. For each of these main issues, BPA
will develop a 17-year forecast of REP benefits that is based on the
parties' respective legal positions. The amount of REP benefits allowed
under these various assumptions will then be compared to the REP
benefits afforded to the IOUs under the 2012 REP Settlement to test
whether the terms of the 2012 REP Settlement are reasonable and
consistent with the protections provided by law.
BPA has modified the near-term Rate Analysis Model and has
developed a new long-term section 7(b)(2) rate test model to quantify
the parties' various litigation positions on rates and forecast REP
benefits. The models will be used in tandem to quantify the near-term
and long-term financial impacts on REP benefits under a variety of
different litigation scenarios. Specifically, the models will evaluate
the following contested issues: Rate test treatment of conservation
resources and their effect on loads; treatment of conservation costs in
the rate test; rate test accounting and financing treatment of
conservation resource costs; rate test repayment study; treatment of
Mid-Columbia resources; treatment of secondary energy credit;
discounting of the stream of rate projections; elasticity of DSI loads;
and allocation of rate protection costs to surplus power sales. Other
scenarios may be added during the course of the proceeding. In addition
to the rate modeling, the quantitative analysis will include the effect
of parties' positions on the amount of Lookback Amounts owed on future
REP benefits.
For purposes of the REP-12 Initial Proposal, BPA will use the
above-noted issues to produce future REP benefits under different
litigation scenarios. These scenarios are presented in the 2012 REP
Settlement Agreement Study and Analysis. The models also quantify the
impacts of non-litigation issues on future REP benefits, such as future
growth in ASCs and BPA program costs.
C. Implementation of 2012 REP Settlement in Rates
In addition to the settling of the various REP issues in
litigation, the 2012 REP Settlement also specifies certain ratemaking
treatment of REP-related costs. Implementing the 2012 REP Settlement in
ratemaking will affect the PF Exchange rate, the Industrial Firm Power
rate (IP), and the New Resources rate (NR). While these ratemaking
treatments have been already incorporated into the initial rate
proposal in the BP-12 proceeding, the REP-12 proceeding will be
examining these various ratemaking specifications to test whether the
ratemaking treatments of the 2012 REP Settlement are reasonable and
consistent with law.
D. Initial Proposal for the Section 7(b)(2) Rate Test and Lookback
Amount Determinations in the Absence of Settlement
As noted above, BPA is evaluating the reasonableness and
sustainability of the 2012 REP Settlement in the REP-12 proceeding. If
the Administrator determines that the 2012 REP Settlement is not
reasonable or is otherwise unlawful, the 2012 REP Settlement will not
be executed and BPA will set rates assuming no settlement of the REP.
Consequently, as an alternative to the 2012 REP Settlement, BPA is also
proposing to implement the section 7(b)(2) rate test, the section
7(b)(3) allocations and surcharges, and the Lookback recovery and
return for FY 2012-2013 in accordance with the decisions BPA reached in
the WP-07 Supplemental ROD and WP-10 ROD, unless otherwise stated. If
the 2012 REP Settlement is not adopted, the final decisions BPA reaches
on these issues in this case will be incorporated into the BP-12 rate
proceeding.
[[Page 78703]]
E. Major Studies
1. 2012 REP Settlement Agreement Study and Analysis
The 2012 REP Settlement Agreement Study and Analysis (REP Study)
describes the terms of the 2012 REP Settlement and provides the
analytical work BPA staff is performing to test the reasonableness of
the 2012 REP Settlement. The REP Study is comprised of two major parts.
Part I of the REP Study reviews the history of the REP and the
background underlying the current litigation. This portion of the REP
Study also contains an overview of the section 7(b)(2) rate test and a
description of how rate protection works in BPA ratemaking. Part I also
describes the terms of the proposed 2012 REP Settlement and explains
how BPA staff intends to implement the terms of the proposed settlement
in BPA's rates.
Part II of the REP Study contains BPA staff's evaluation and
analysis of the 2012 REP Settlement. This portion of the REP Study
begins with an explanation of the criteria BPA staff is using to
evaluate the 2012 REP Settlement. This section is followed by an
overview of the models BPA staff developed to create a variety of near-
and long-term forecasts of REP benefits under various scenarios. Part
II of the REP Study also describes the various factors that will have
an effect on REP benefits, such as the current and future issues in
litigation and issues related to ASCs and the PF Exchange rate. At the
end of Part II of the REP Study, BPA staff presents its scenario
analysis. In this section, BPA staff presents near- and long-term REP
benefits under different scenarios. These scenario REP benefits are
compared to the REP benefits provided under the proposed 2012 REP
Settlement to determine, from an analytical perspective, whether the
2012 REP Settlement affords rate protection to COUs and is otherwise
reasonable.
2. FY 2012-2013 7(b)(2) Rate Test and Documentation
This Study will be used only if the 2012 REP Settlement is not
adopted.
BPA has interpreted the Northwest Power Act and described how the
section 7(b)(2) rate test will 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. 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 if no REP
settlement is assumed, creating rate protection for preference
customers and causing test period costs to be reallocated to others.
The PF Public rate applied to the general requirements of COUs has been
reduced by the rate protection amount and reallocated to other rates
pursuant to section 7(b)(3). BPA's other rates, the PF Exchange rate
and the NR and IP rates, have been increased by an allocation of the
rate protection amount. An allocation of the rate protection amount has
also been assigned to surplus power sales.
3. FY 2012-2013 Lookback Study
This Study will only be used if the 2012 REP Settlement is not
adopted.
This Study explains and documents BPA's proposed modifications to
the amounts to be recovered from the IOUs and applied to the Lookback
Amounts determined in the final WP-07 Supplemental Proposal. The Study
also sets forth the accounting of the Lookback Amounts expected to be
recovered from IOUs and repaid to COUs during the FY 2012-2013 rate
period. BPA also explains in this Study what amount of Lookback will be
recovered from IOUs and returned to applicable COUs for the FY 2012-
2013 rate period.
Part VI--Proposed 2012 REP Settlement Agreement
On December 17, 2010, a draft of the proposed 2012 REP Settlement
will be available for viewing and downloading on BPA's Web site at
http://www.bpa.gov/corporate/ratecase/2012/rep-12.cfm. Copies of the
draft 2012 REP Settlement will also be available for viewing in BPA's
Public Reference Room at the BPA Headquarters, 1st Floor, 905 NE. 11th
Avenue, Portland, OR 97232.
Issued this 7th day of December 2010.
Stephen J. Wright,
Administrator and Chief Executive Officer.
[FR Doc. 2010-31622 Filed 12-15-10; 8:45 am]
BILLING CODE P