[Federal Register Volume 73, Number 85 (Thursday, May 1, 2008)]
[Notices]
[Pages 24059-24062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-9572]


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DEPARTMENT OF ENERGY

Bonneville Power Administration

[BPA File No.: TRM-12]


2012 Tiered Rate Methodology Proceeding; Public Hearings and 
Opportunities for Public Review and Comment

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

ACTION: Notice of proposed tiered rate methodology.

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SUMMARY: BPA is proposing to adopt a new tiered rate design for setting 
its Priority Firm Power (PF) rates beginning with the FY 2012-2013 rate 
period. The primary feature of this Tiered Rate Methodology (TRM) 
proposal is one rate tier (Tier 1) based on generation output and costs 
attributed to BPA's current Federal base system resources and a second 
rate tier (Tier 2) based on the generation and costs associated with 
newly acquired resources.
    The TRM is part of BPA's effort to achieve the overall policy 
objectives of the Long-Term Regional Dialogue Policy (Policy). Under 
this Policy, BPA will offer 20-year Regional Dialogue Contracts to its 
Federal agency and public utility customers for power priced at a 
tiered PF rate. The TRM is intended to provide customers with a 
predictable and durable means by which to calculate BPA's PF tiered 
rate for the term of these contracts.
    Determinations of specific rate levels applicable to these 
contracts will not be established in this proceeding. Rather the 
specific rate levels will be developed consistent with the TRM in the 
respective Pacific Northwest Electric Power Planning and Conservation 
Act (Northwest Power Act) section 7(i) rate proceedings during the term 
of this TRM. BPA intends to set the actual power rates on a two-year 
cycle throughout the term of the Regional Dialogue contracts beginning 
with the FY 2012-2013 rate period.
    BPA is commencing this proceeding under section 7 of the Northwest 
Power Act to establish the TRM. Entities wishing to become a formal 
party to the proceeding must file a petition to intervene, notifying 
BPA in writing of their intention to do so in conformance with the 
requirements stated in this Notice.

DATES: Petitions to intervene must be received no later than 5 p.m., 
Pacific Daylight Time (PDT), on May 7, 2008. Proposed hearing dates are 
supplied in SUPPLEMENTARY INFORMATION, Part I.A. below. Non-party 
participants may make written comments between May 2, 2008, and July 
10, 2008. Comments must be received by 5 p.m., PDT, on July 10, 2008, 
in order to be considered in the Record of Decision.

ADDRESSES: Petitions to intervene should be directed to Camille 
Blakely, Hearing Clerk, LP-7, Bonneville Power Administration, 905 NE 
11th Avenue, Portland, OR 97232 or by e-mail to: [email protected], and 
must be received no later than 5 p.m., PDT, on May 7, 2008. In 
addition, a copy of the petition must be served concurrently on BPA's 
General Counsel directed to Peter J. Burger, LP-7, Office of General 
Counsel, Bonneville Power Administration, 905 NE 11th Avenue, Portland, 
OR 97232 or by e-mail to: [email protected]. (See Part III (A) for more 
information.) Written comments can be submitted online at BPA's Web 
site http://www.bpa.gov/comment, or by mail to: BPA Public Affairs, 
DKE-7, P.O. Box 14428, Portland, OR 97293-4428. Please identify written 
or electronic comments as ``TRM-12 Proceeding'' comments. Documents 
will be available for public viewing after May 9, 2008. The documents 
are available at: http://www.bpa.gov/corporate/ratecase, or at BPA's 
Public Information Center, BPA Headquarters Building, 1st Floor, 905 NE 
11th, Portland, Oregon, and will be provided to parties on a compact 
disk (CD) at the prehearing conference to be held on May 9, 2008, 
beginning at 1:30 p.m., Room 223, 911 NE 11th, Portland, Oregon. Due to 
increased security requirements, attendees should allow additional time 
to enter the building and complete the required screening process. 
Photo identification will be required for entry.

FOR FURTHER INFORMATION CONTACT: Ms. Nita Burbank, Lead Public Affairs 
Specialist, Power Policy Development, PFP-6, P.O. Box 3621, Portland, 
OR 97208. Interested persons may also call 503-230-3458 or 1-800-622-
4519 (toll-free).

SUPPLEMENTARY INFORMATION: 

Table of Contents

Part I. Introduction and Procedural Background
Part II. Policy Guidance and Scope of Hearing
Part III. Public Participation
Part IV. The Tiered Rates Methodology

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. 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 proceeding is governed by section 1010 of 
BPA's Rules of Procedure Governing Rate Hearings, 51 FR 7611 (1986) 
(BPA Hearing Procedures). These procedures implement the statutory 
section 7(i) requirements.
    Section 1010.7 of the BPA Hearing Procedures prohibits ex parte 
communications. The ex parte rule applies to all BPA and DOE employees 
and contractors. Except as provided below, any outside communications 
with BPA and/or DOE personnel regarding BPA's rate case by other 
Executive Branch agencies, Congress, existing or potential BPA 
customers

[[Page 24060]]

(including tribes), and nonprofit or public interest groups are 
considered outside communications and are subject to the ex parte rule. 
The general rule does not apply to communications relating to: (1) 
Matters of procedure only (the status of the rate case, for example); 
(2) exchanges of data in the course of business or under the Freedom of 
Information Act; (3) requests for factual information; (4) matters BPA 
is responsible for under statutes other than the ratemaking provisions; 
or (5) matters that all parties agree may be made on an ex parte basis. 
The ex parte rule remains in effect until the Administrator's Final ROD 
is issued, which is scheduled to occur on or about September 29, 2008.
    The Bonneville Project Act, 16 U.S.C. section 832, the Flood 
Control Act of 1944, 16 U.S.C. 825s, the Federal Columbia River 
Transmission System Act, 16 U.S.C. 838, and the Northwest Power Act, 16 
U.S.C. 839, provide guidance regarding BPA ratemaking. The Northwest 
Power Act requires BPA to set rates that are sufficient to recover, in 
accordance with sound business principles, the cost of acquiring, 
conserving and transmitting electric power, including amortization of 
the Federal investment in the FCRPS over a reasonable period of years, 
and certain other costs and expenses incurred by the Administrator.
    BPA's proposed TRM is available for viewing and downloading on 
BPA's website at http://www.bpa.gov/corporate/ratecase and is discussed 
in Part IV below. BPA will be conducting a formal rate proceeding open 
to rate case parties. Interested parties must file petitions to 
intervene in order to take part in the formal hearing as discussed in 
Part III (A) below. A proposed schedule for the formal process is as 
follows. The Hearing Officer will establish a final schedule at the 
prehearing conference.


 
 
 
Prehearing/BPA Direct Case..............................        05/09/08
Clarification...........................................     05/14-15/08
Motions to Strike.......................................        05/16/08
Data Request Deadline...................................        05/16/08
Answers to Motions to Strike............................        05/22/08
Data Response Deadline..................................        05/22/08
Parties file Direct Cases...............................        06/13/08
Clarification...........................................     06/18-19/08
Motions to Strike.......................................        06/20/08
Data Request Deadline...................................        06/20/08
Answers to Motions to Strike............................        06/26/08
Data Response Deadline..................................        06/26/08
Litigants file Rebuttal.................................        07/10/08
Close of Participant Comments...........................        07/10/08
Clarification...........................................     07/14-15/08
Motions to Strike.......................................        07/16/08
Data Request Deadline...................................        07/16/08
Answers to Motions to Strike............................        07/22/08
Data Response Deadline..................................        07/22/08
Cross-Examination.......................................     07/24-25/08
Initial Briefs Filed....................................        08/04/08
Oral Argument...........................................        08/07/08
Draft ROD Issued........................................        09/02/08
Briefs on Exceptions....................................        09/08/08
Final ROD and Final TRM Issued..........................        09/29/08
 


Part II--Policy Guidance and Scope of Hearing

A. Overview and Background

    The Regional Dialogue process began in April 2002 when a group of 
BPA's Pacific Northwest electric utility customers submitted a joint 
customer proposal to BPA that addressed both near-term and long-term 
contract and rate issues. Since then, BPA, the Northwest Power and 
Conservation Council (Council), customers, and other interested parties 
have worked on these near- and long-term issues. Considering the depth 
and complexity of many of these issues, BPA determined that it would 
address the issues in two phases. The first phase of the Regional 
Dialogue, referred to as the Near-Term Policy, addressed issues that 
had to be resolved in order to replace power rates that expired in 
September 2006. See Bonneville Power Administration's Policy for Power 
Supply Role for Fiscal Years 2007-2011 (February 2005). The issues in 
the second phase were addressed in BPA's Long-Term Regional Dialogue 
Final Policy and Record of Decision, which were published on July 19, 
2007. The Long-Term Regional Dialogue Final Policy is expected to be 
implemented through new power sales contracts and the TRM, which will 
be established in this rate case.
    This proposed TRM provides for a two-tiered PF rate design 
applicable to firm requirements power service for public utility 
customers that sign a Regional Dialogue Contract that provides for 
tiered rates. The TRM establishes a predictable and durable means by 
which to calculate BPA's PF tiered rate, beginning in FY 2012 when 
power deliveries commence. Tiered rate design differentiates between 
the costs of service associated with Tier 1 System Resources and the 
cost associated with additional amounts of power needed to serve any 
remaining portion of public utility customers' Net Requirement (Tier 
2). Rate Period High Water Marks (RHWM), determined according to this 
TRM, are the basis for determining how much of each customer's Net 
Requirement purchase from BPA is charged Tier 1 rates and how much may 
be charged Tier 2 rates. This TRM specifies how rates will be developed 
that ensure to the maximum extent possible that customers purchasing at 
Tier 1 rates do not pay any of the costs of serving other public 
utility customers' above RHWH load. Each customer may purchase up to 
its RHWM, limited by its Net Requirement, at Tier 1 rates. To meet its 
above-RHWM load, a customer may purchase Federal power, procure non-
Federal power or a combination of the two. To the extent a customer 
purchases Federal power for its above-RHWM load, a PF Tier 2 rate(s) 
will be applied to this portion of their Federal power service.

B. Scope of the TRM-12 Proceeding

    This section provides guidance to the Hearing Officer as to those 
matters that are within the scope of the rate case, and those that are 
outside the scope.
1. Regional Dialogue Policy and Contracts
    The design and scope of the power products and issues related to 
the terms and conditions of the Regional Dialogue contract are not 
determined in rate cases nor are they established by the TRM. Pursuant 
to section 1010.3(f) of BPA Hearing Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record any 
materials attempted to be submitted or arguments attempted to be made 
in the proceeding that seek to address the design and scope of the 
power products and terms and conditions of the Regional Dialogue 
contracts.
2. DSI Service
    The decision regarding whether BPA will provide service and/or 
benefits to its Direct Service Industry (DSI) customers beginning in FY 
2012 will be made in a supplemental process as outlined in the Long-
Term Regional Dialogue Final Policy. It should be noted that while the 
decision on DSI service and the manner, if any of such service will be 
determined in a separate process, the allocation of any cost associated 
with any DSI service under the TRM is a proper issue in this 
proceeding. Pursuant to section 1010.3(f) of the BPA Hearing 
Procedures, the Administrator directs the Hearing Officer to exclude 
from the record any materials attempted to be submitted or arguments 
attempted to be made in the proceeding that seek to in any way address 
the decision to serve the DSIs and the nature and manner of such 
service, except as any such material is relevant to the issue of the 
appropriate allocation of any cost associated with any DSI service 
under the TRM.

[[Page 24061]]

C. The National Environmental Policy Act

1. Potential Environmental Impacts
    As discussed in this section, potential environmental impacts of 
BPA's proposed actions are assessed through appropriate analysis and 
documentation under the NEPA. The NEPA process is conducted separately 
from BPA's formal rate proceedings. Therefore, pursuant to section 
1010.3(f) of the BPA Hearing Procedures, the Administrator directs the 
Hearing Officer to exclude from the record all evidence and argument 
that seek in any way to address the potential environmental impacts of 
the proposed TRM.
2. The National Environmental Policy Act
    BPA is in the process of assessing the potential environmental 
effects that could result from implementation of its proposed TRM, 
consistent with the National Environmental Policy Act (NEPA). Because 
this proposal implicates BPA's ongoing business practices, BPA is 
reviewing the proposal in light of BPA's Business Plan Environmental 
Impact Statement (Business Plan EIS), completed in June 1995 (DOE/EIS-
0183), as refreshed April 2007. This EIS evaluates environmental 
impacts potentially resulting from a range of business plan 
alternatives that can be varied by applying policy modules, including 
modules specifically designed for varying tiered rate methodologies. 
Any combination of alternative policy modules should allow BPA to 
balance its costs and 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.
    In April 2007, BPA completed and issued a Supplement Analysis to 
the Business Plan EIS. The 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 are still consistent with BPA's 
Market-Driven approach. The Business Plan EIS and ROD thus continue to 
provide a sound basis for making determinations under NEPA concerning 
BPA's business-related decisions.
    Because the proposed TRM 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, the proposed TRM is similar to the types of tiered rate 
constructs identified and considered in the Business Plan EIS; thus, 
implementation of this proposal would not be expected to result in 
significantly different environmental impacts from those examined in 
the Business Plan EIS. Therefore, BPA expects that the proposed TRM 
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 ROD that will be prepared for the 
proposed TRM, BPA may tier its decision under NEPA to the Business Plan 
ROD. However, depending upon the ongoing environmental review, BPA may, 
instead, issue another appropriate NEPA document. During the public 
review and comment period for the TRM, 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 July 10, 2008, will be considered 
by BPA's NEPA compliance staff in the NEPA process that will be 
conducted for the proposed TRM.

Part III--Public Participation

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

    BPA distinguishes between ``participants in'' and ``parties to'' 
the section 7(i) hearing process. Apart from the formal hearing 
process, BPA will accept comments, views, opinions, and information 
from ``participants,'' who are defined in the BPA Hearing Procedures as 
persons who may submit comments without being subject to the duties of, 
or having the privileges of, parties. Participants' written and oral 
comments will be made a part of the official record and considered by 
the Administrator when making his decision. Participants are not 
entitled to participate in the prehearing conference; may not cross-
examine parties' witnesses, seek discovery, or serve or be served with 
documents; and are not subject to the same procedural requirements as 
parties.
    The views of participants are important to BPA. Written comments by 
participants will be included in the record if they are received by 5 
p.m., PDT, on July 10, 2008. Written views, supporting information, 
questions, and arguments should be submitted to BPA Public Affairs at 
the address listed in the Addresses section.
    Persons wishing to become a party to BPA's rate proceeding must 
notify BPA in writing and file a Petition to Intervene with the Hearing 
Officer. Petitioners may designate no more than two representatives 
upon whom service of documents will be made. Petitions to Intervene 
must state the name and address of the person requesting party status 
and the person's interest in the hearing. Petitions to Intervene as 
parties in the rate proceeding are due to the Hearing Officer by 5 
p.m., PDT, on May 7, 2008, and should be directed as stated in the 
Addresses section above.
    Petitioners must explain their interests in sufficient detail to 
permit the Hearing Officer to determine whether they have a relevant 
interest in the proceeding. Pursuant to section 1010.1(d) of BPA 
Hearing Procedures, BPA waives the requirement in section 1010.4(d) 
that an opposition to an intervention petition must be filed and served 
24 hours before the prehearing conference. Any opposition to an 
intervention petition may instead be made at the prehearing conference. 
Any party, including BPA, may oppose a petition for intervention. 
Persons who have been denied party status in any past BPA rate 
proceeding shall continue to be denied party status unless they 
establish a significant change of circumstances. All timely 
applications will be ruled on by the Hearing Officer. Late 
interventions are strongly disfavored.

B. Developing the Record

    The record will comprise, among other things, verbal and written 
comments made by participants, including the transcripts of all 
hearings, any written materials submitted by the parties, documents 
developed by BPA staff, and other materials accepted into the record by 
the Hearing Officer. Written comments by participants will be included 
in the record if they are received by 5 p.m., PDT, on July 10, 2008. 
The Hearing Officer will then review the record, supplement it if 
necessary, and will certify the record to the Administrator for 
decision.
    The Administrator will adopt the final TRM based on the entire 
record, which includes the record certified by the Hearing Officer, as 
described above. The basis for the final TRM first will be

[[Page 24062]]

expressed in the Administrator's Draft ROD. Parties will have an 
opportunity to respond to the Draft ROD as provided in the BPA Hearing 
Procedures. The Administrator will serve copies of the Final ROD on all 
parties. The ROD will also be publicly available at http://www.bpa.gov/corporate/ratecase.
    BPA must continue to meet with customers in the ordinary course of 
business during the rate case. To comport with the rate case procedural 
rule prohibiting ex parte communications, BPA will provide the 
prescribed notice of meetings involving rate case issues in order to 
permit the opportunity for participation by all rate case parties. 
These meetings may be held on very short notice. Consequently, parties 
should be prepared to devote the necessary resources to participate 
fully in every aspect of the rate proceeding and attend meetings any 
day during the course of the rate case.

Part IV--The Tiered Rate Methodology

    The TRM establishes a predictable and durable means by which to 
tier and calculate BPA's Priority Firm (PF) power rate. Specific 
determinations of rate levels will be made in each general rate case in 
a manner consistent with the TRM in the respective section 7(i) 
proceedings applicable during the term of this TRM. Tiered PF rates 
will be implemented beginning in FY 2012 when power deliveries under 
new contracts commence. The TRM provides for a two-tiered PF rate 
design applicable to requirements firm power service for those 
customers that participate in the contracts that provide for tiered 
rate service. Tiered rate design differentiates between the costs of 
service associated with the existing Federal system (Tier 1) and the 
cost associated with additional amounts of power needed to serve the 
remaining portion of customers' net requirements (Tier 2). This TRM 
specifies how rates will be developed that assure to the extent 
possible that customers will be able to purchase Tier 1 power that does 
not include the costs of serving other customers' load growth.
    The TRM addresses: (1) How to determine a customer's eligibility to 
purchase power at Tier 1 rates; (2) how to determine the amount of 
power to be charged at Tier 1 rates; (3) how costs will be allocated to 
the PF Tier 1 and Tier 2 rate pools; (4) how rates for Tier 1 and Tier 
2 sales will be designed; and (5) how rates for resource support 
services will be designed.
    The cost allocation and rate design methods will be implemented in 
each BPA power rate case during the term of the Regional Dialogue 
contracts, except under limited circumstances. Power rates will be 
calculated on a two-year cycle under the TRM.
    Rate Period High Water Marks (RHWM), determined according to this 
TRM, are the basis for separating which portion of each customer's net 
requirements purchase from BPA is charged Tier 1 rates and which is 
charged Tier 2 rates. Each customer may purchase up to its RHWM, 
limited by its net requirement, at Tier 1 rates. To meet its above-RHWM 
load, a customer may purchase Federal power, procure non-Federal power 
or both. To the extent a customer purchases Federal power to meet its 
above RHWH load, a PF Tier 2 rate will be applied to the Federal power 
service.
    BPA will limit the sum of all RHWMs to the planned firm power 
output of the existing Federal system as it is currently defined, plus 
a limited amount of augmentation.
    For purposes of the TRM, BPA will calculate the projected amounts 
of Federal system resource output, contract purchases, and contract 
obligations necessary for developing tiered rates for each rate period. 
The projected output of resources assigned to each rate tier will be 
used in the determination of RHWMs, which will be incorporated in the 
ratemaking process.
    In each applicable rate proposal, BPA will allocate all of its 
costs into three cost pools for determining Tier 1 rates and a number 
of Tier 2 cost pools corresponding to the Tier 2 rate alternatives that 
customers have selected.
    In each rate case, BPA will define risk mitigation mechanisms and 
set rates to support BPA's then-current Agency financial risk 
standard(s). The Agency financial risk standard(s) is (are) set in 
BPA's 10-Year Financial Plan, or its successor, subject to any required 
review in a 7(i) rate proceeding.
    The proposed TRM includes a rate design for Tier 1 rates that 
includes three components: customer charges, demand rates and load 
shaping rates. However, there are significant changes in the billing 
determinants to which these rates apply from BPA's current rate 
structure. There will be three customer charges, only two of which will 
be applicable to any particular product selected by the customer. The 
Composite Customer Charge and the Non-Slice Customer Charge will be 
applicable to purchasers of the Load Following and Block products, 
including the block portion of the Slice/Block product. The Composite 
Customer Charge and the Slice Customer Charge will be applicable to 
purchasers of the Slice portion of the Slice/Block product. The Demand 
Charge will apply to Load Following and Block with Shaping Capacity 
purchasers and will be charged to a portion of each customer's maximum 
hourly load in each month. The Load Shaping Charge will apply to Load 
Following and Block purchasers and will be charged to a portion of each 
customer's energy load during each diurnal period of each month.
    BPA's proposed TRM is available for viewing and downloading on 
BPA's Web site at http://www.bpa.gov/corporate/ratecase. Copies will 
also be available for viewing at BPA's Public Information Center, BPA 
Headquarters Building, 1st Floor, 905 NE 11th Avenue, Portland, Oregon.

    Issued this 24th day of April, 2008.
Stephen J. Wright,
Administrator and Chief Executive Officer.
[FR Doc. E8-9572 Filed 4-30-08; 8:45 am]
BILLING CODE 6450-01-P