[Federal Register Volume 77, Number 217 (Thursday, November 8, 2012)]
[Notices]
[Pages 66966-66973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27299]


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DEPARTMENT OF ENERGY

Bonneville Power Administration

[BPA File No. BP-14]


Fiscal Year (FY) 2014-2015 Proposed Power and Transmission Rate 
Adjustments; Public Hearing and Opportunities for Public Review and 
Comment

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

ACTIONS:  Notice of FY 2014-2015 Proposed Power and Transmission Rate 
Adjustments.

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SUMMARY: BPA is holding a consolidated rate proceeding, Docket No. BP-
14, to establish power and transmission rates for FY 2014-2015.
    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 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) over a reasonable number of years 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, and for 
transmission rates only, that the costs of the Federal transmission 
system be equitably allocated between Federal and non-Federal power 
utilizing the system. By this notice, BPA announces the commencement of 
a power and transmission rate adjustment proceeding for power, 
transmission, control area services, and ancillary services rates 
proposed to be effective on October 1, 2013.

DATES: Anyone wishing to become a party to the BP-14 proceeding must 
provide written notice, via U.S. Mail or electronic mail, which must be 
received by BPA no later than 3:00 p.m. on November 15, 2012.
    The BP-14 rate adjustment proceeding begins with a prehearing 
conference at 9:00 a.m. on November 14, 2012, in the BPA Rates Hearing 
Room, 2nd floor, 911 NE 11th Avenue, Portland, Oregon 97232.
    Written comments by non-party participants must be received by 
February 15, 2013, to be considered in the Administrator's Record of 
Decision (ROD).

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 emailed to [email protected]. 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 Avenue, Portland, 
Oregon 97232, or via email to [email protected] and [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 email at: 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 BP-14 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 
email to [email protected].
    Responsible Officials: Mr. Raymond D. Bliven, Power Rates Manager, 
is the official responsible for the development of BPA's power rates, 
and Ms. Rebecca E. Fredrickson, Transmission Rates Manager, is the 
official responsible for the development of BPA's transmission, 
ancillary and control area services (ACS) rates.

SUPPLEMENTARY INFORMATION: 

Table of Contents

Part I. Introduction and Procedural Background
Part II. Scope of 2014 Rate Proceeding
Part III. Public Participation in BP-14
Part IV. Summary of Rate Proposals
Part V. Proposed 2014 Rate Schedules

Part I--Introduction and Procedural Background

    Section 7(i) of the Northwest Power Act, 16 U.S.C. 839e(i), 
requires that BPA's rates be established according to certain 
procedures, 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 Federal Register 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.

BPA Direct Case November 14, 2012

[[Page 66967]]

Prehearing Conference November 14, 2012
Parties File Petition to Intervene November 15, 2012
Clarification November 27-30, 2012
Motions to Strike December 7, 2012
Data Request Deadline December 7, 2012
Answers to Motions to Strike December 14, 2012
Data Response Deadline December 14, 2012
Parties file Direct Case January 18, 2013
Clarification January 29-February 1, 2013
Motions to Strike February 6, 2013
Data Request Deadline February 6, 2013
Answers to Motions to Strike February 13, 2013
Data Response Deadline February 13, 2013
Close of Participant Comments February 15, 2013
Litigants file Rebuttal March 5, 2013
Clarification March 7-8, 2013
Motions to Strike March 13, 2013
Data Request Deadline March 13, 2013
Answers to Motions to Strike March 20, 2013
Data Response Deadline March 20, 2013
Cross-Examination March 25-29, 2013
Initial Briefs Filed April 29, 2013
Oral Argument May 9, 2013
Draft ROD issued June 11, 2013
Briefs on Exceptions June 28, 2013
Final ROD--Final Studies July 22, 2013

    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), or nonprofit or 
public interest groups are considered outside communications and are 
subject to the ex parte rule. The 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 22, 2013.

Part II--Scope of 2014 Rate Proceeding

A. Joint Rate Proceeding

    BPA is holding one power and transmission rate proceeding with one 
procedural schedule, one record, and one ROD.

B. 2012 Integrated Program Review

    BPA began its 2012 Integrated Program Review (IPR) process in June 
2012. The IPR process is designed to allow persons interested in BPA's 
program levels an opportunity to review and comment on BPA's expense 
and capital spending level estimates prior to the use of those 
estimates in setting rates.
    The 2012 IPR focused on FY 2014 and FY 2015 program levels for 
BPA's Power Services and Transmission Services as well as a review of 
FY 2013 program levels. After the opening workshop on June 5 and 
release of information, participants were allowed three weeks to 
request specific workshops. Participants requested additional 
information through the end of July 2012. BPA responded to 
participants' requests for additional information and held two days of 
technical workshops through July 18, 2012. BPA took public comment 
through August 10, 2012.
    Between March and April 2012, prior to the initiation of the IPR, 
BPA hosted the 2012 Capital Investment Review (CIR), a new public 
process focused on reviewing and discussing draft asset strategies and 
10-year capital forecasts. Public comments received during the CIR 
informed capital cost projections for FY 2014-2015 in the 2012 IPR.
    On October 26, 2012, BPA issued the Final Close-Out Report for the 
IPR. In the Final Close-Out Report, BPA established the program level 
cost estimates that are used in the Initial Proposal to establish both 
the power and transmission rates. BPA does not anticipate additional 
public review of proposed spending levels. However, BPA is open to 
revisiting spending levels in an ``IPR-2'' process if conditions in FY 
2013 warrant it. BPA would conduct this process separately from the 
rate proceeding to share updates and solicit feedback from customers 
and constituents before the final program levels are incorporated into 
the final rates.

C. Rate Case Workshops

    In preparation for the BP-14 rate proceeding, BPA held several 
public pre-rate case workshops with customers and interested parties 
from March through early October 2012. During the workshops, BPA staff 
presented and discussed information about costs, load and resource 
forecasting, generation inputs pricing, segmentation, cost allocation, 
redispatch, utility delivery, Montana Intertie, revenue forecasts, load 
forecasts, risk analysis and mitigation, products, pricing, and rate 
design. Customers and interested parties had extensive opportunity to 
participate, raise issues, present alternative proposals, and comment 
on the information BPA staff presented. The comments and alternative 
proposals received during these workshops have assisted in the 
preparation of the Initial Proposal.

D. Scope of the Rate Proceeding

    This section provides guidance to the Hearing Officer as to those 
matters that are within the scope of the rate proceeding and those that 
are outside the scope.
1. Program Cost Estimates
    Some of the decisions that determine program costs and spending 
levels have been made in the IPR public review process outside the rate 
proceeding. See section II.B. BPA's spending levels for 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, testimony, or other evidence that challenges 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 rate proceeding. This exclusion does not extend to 
those portions of the revenue requirements related to interest rate 
forecasts, interest expense and credit, Treasury repayment schedules, 
forecasts of depreciation and amortization expense, forecasts of system 
replacements used in repayment studies, Residential Exchange Program 
benefits, purchased power expenses, transmission acquisition expense 
incurred by Power Services, generation acquisition expense incurred by 
Transmission Services, minimum required net revenue, and the costs of 
risk mitigation actions resulting from the expense and revenue 
uncertainties 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 II.D.5.
2. Tiered Rate Methodology (TRM)
    The TRM restricts BPA and customers with Contract High Water Mark 
(CHWM) contracts from proposing changes to the TRM's ratesetting 
guidelines unless certain procedures have been successfully concluded. 
No proposed changes have been subjected to the required procedures.
    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,

[[Page 66968]]

or other evidence that seeks in any way to propose revisions to the TRM 
made by BPA, customers with a CHWM contract, or their representatives, 
unless it can be established that the TRM procedures for proposing a 
change to the TRM have been concluded. This restriction does not extend 
to a party or customer that does not have a CHWM contract.
3. Service to the Direct Service Industries (DSIs)
    The manner and method by which BPA provides service to its DSI 
customers was recently addressed in the Alcoa v. Bonneville Power 
Administration decision, ------ F3d ------, 2012 WL 4873329, which 
reflected the Courts' prior decisions in Pacific Northwest Generating 
Cooperative, et al., v. Bonneville Power Administration, 580 F3d 792 
(9th Cir. 2008) (PNGC I) and Pacific Northwest Generating Cooperative, 
et al., v. Bonneville Power Administration, 590 F3d 1065 (9th Cir. 
2010) (PNGC II). BPA is assuming for the Initial Proposal that BPA will 
continue to serve Alcoa, Inc. (Alcoa) as well as Port Townsend Paper 
Corporation (Port Townsend) during FY 2014-2015. BPA's decisions to 
serve Alcoa, along with the method and level of service to be provided 
DSIs in the FY 2014-2015 rate period, will not be determined in this 
proceeding but instead will be made and documented in a Record of 
Decision following a currently open public comment period on a proposed 
ten year power sales contract with Alcoa.
    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 service 
to the DSIs, including BPA's decision to offer contracts to the DSIs 
and the method or level of service.
4. Generation Inputs
    BPA provides a portion of the available generation from the FCRPS 
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, BPA determines prices for the generation 
inputs that become the basis of the reserves-based ancillary and 
control area services. The forecast amount of generation inputs, the 
pricing methodologies BPA is proposing to use to determine the 
generation input costs, and associated proposed Ancillary and Control 
Area Service rates are matters that are included within the scope of 
the BP-14 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 any other issues related to the 
generation inputs or Ancillary and Control Area Services. This 
exclusion includes, but is not limited to, issues regarding reliability 
of the transmission system, dispatcher standing orders, e-Tag 
requirements and definitions, open acess transmission tariff 
provisions, and business practices. These non-rates issues are 
generally addressed by BPA in accordance with industry, reliability, 
and other compliance standards and criteria and are not matters 
appropriate for the rate proceeding.
5. Federal and Non-Federal Debt Service and Debt Management
    During the 2012 IPR and in other forums, BPA provided the public 
with 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. BPA's debt management 
policies and practices 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. This exclusion does not encompass how debt management 
actions are reflected in ratemaking.
6. Potential Environmental Impacts
    Environmental impacts are addressed in a concurrent National 
Environmental Policy Act (NEPA) process. See section II.E.
    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 
rate proceeding.
7. Average System Cost Methodology and Average System Cost 
Determinations
    Section 5(c) of the Northwest Power Act established the Residential 
Exchange Program, 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), which prescribes the methodology 
that the Administrator uses to calculate a utility's ASC. 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. Determinations of the 
ASCs of participating utilities are made in separate processes 
conducted pursuant to the ASCM. Those processes began with ASC filings 
on June 1, 2012, and are continuing through July 2013. The 
determinations of ASCs are not subject to challenge 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 seeks in any way to visit 
or revisit the appropriateness or reasonableness of the 2008 ASCM. The 
Administrator also directs the Hearing Officer to exclude from the 
record all argument, testimony, or other evidence that seeks in any way 
to visit or revisit the appropriateness or reasonableness of any of the 
ongoing ASC determinations.
8. Rate Period High Water Mark (RHWM) Process
    Under the Tiered Rate Methodology (TRM), BPA has established FY 
2014-2015 RHWMs for Public customers that signed contracts for firm 
requirements power service providing for tiered rates, referred to as 
CHWM contracts. In this RHWM Process, which preceded the BP-14 rate 
proceeding, BPA established the maximum planned amount of power a 
customer is eligible to purchase at Tier 1 rates during the rate 
period, the Above-RHWM Loads for each customer, the System Shaped Load 
for each customer, the Tier 1 System Firm Critical Output, RHWM 
Augmentation, the Rate Period Tier 1 System Capability (RT1SC), and the 
monthly/diurnal shape of RT1SC. The RHWM Process provided customers an 
opportunity to review, comment, and, if necessary, challenge BPA's 
determinations

[[Page 66969]]

regarding certain RHWM determinations.
    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 visit 
or revisit BPA's determination of a customer's FY 2014-2015 RHWM or 
other RHWM Process determinations.
9. 2012 Residential Exchange Program Settlement Agreement (2012 REP 
Settlement)
    On July 26, 2011, the Administrator executed the 2012 REP 
Settlement with over one hundred customers and other regional parties 
resolving longstanding litigation over BPA's implementation of the 
Residential Exchange Program (REP) under section 5(c) of the Northwest 
Power Act, 16 U.S.C. 839c(c). Parties were afforded an opportunity to 
challenge the legal, factual, and policy merits of the 2012 REP 
Settlement in the REP-12 administrative hearing, an eight-month 
administrative proceeding conducted under the procedural rules of 
section 7(i) of the Northwest Power Act, 16 U.S.C. 839e(i). The 
Administrator's findings regarding the legal, factual, and policy 
challenges to the 2012 REP Settlement are thoroughly explained in the 
419-page REP-12 Record of Decision (REP-12 ROD). The 2012 REP 
Settlement and REP-12 ROD are currently under review before the U.S. 
Court of Appeals for the Ninth Circuit (Ninth Circuit).
    Because BPA's decision to adopt the 2012 REP Settlement was made as 
part of the REP-12 ROD, which is already under review by the Court, 
challenges to BPA's decision to adopt the 2012 REP Settlement and 
implement its terms in BPA's rate proceedings are not within the scope 
of this case. 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 visit or revisit BPA's determination to adopt the 2012 REP 
Settlement or implement its terms in this rate proceeding.
    Although challenges to BPA's decision to adopt the 2012 REP 
Settlement and implement its terms in BPA's rate proceedings are not 
within the scope of this case, the Hearing Officer shall permit BPA and 
the rate case parties, through a ``standstill'' agreement, to 
incorporate by reference material from the BP-12 proceeding, which 
includes the record from the REP-12 proceeding.

E. The National Environmental Policy Act (NEPA)

    BPA is in the process of assessing the potential environmental 
effects of its proposed power and transmission rates, consistent with 
NEPA. The NEPA process is conducted separately from the rate 
proceeding. As discussed in section II.D.6., all evidence and argument 
addressing potential environmental impacts of rates being developed in 
the BP-14 rate proceeding are excluded from the rate proceeding hearing 
record. Instead, 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 ROD (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 Alternative 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 will likely 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 
BP-14 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. 
Comments regarding the potential environmental effects of the proposal 
may be submitted 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.

Part III--Public Participation in BP-14

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

[[Page 66970]]

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 February 15, 2013. 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 the entity's or person's 
interest in the hearing. BPA customers and affiliated customer groups 
will be granted intervention based on petitions filed in conformance 
with BPA's 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 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. BPA is holding the OS-14 Oversupply rate 
proceeding at the same time as the BP-14 rate proceeding. However, 
these proceedings are separate. As a result, entities or persons 
wishing to intervene in both dockets must file a separate petition to 
intervene in each rate proceeding, and all filings must be made in the 
rate proceeding to which the filing pertains.

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. The 
Hearing Officer will review the record and certify the record to the 
Administrator for final decision.
    The Administrator will develop final rates 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 file its rates with the 
Commission for confirmation and approval after issuance of the Final 
ROD.

Part IV--Summary of Rate Proposals

A. Summary of the Power Rate Proposal

1. Power Rates
    BPA is proposing five different rates for Federal power sales and 
services. In 2012, BPA signed the 2012 REP Settlement. See section 
II.D.9. Ratesetting in this proceeding implements the Settlement 
according to its terms.
    Priority Firm Power Rate (PF-14)--The PF rate schedule applies to 
net requirements power sales to public body, cooperative, and Federal 
agency customers made pursuant to section 5(b) of the Northwest Power 
Act and includes the PF Public rates for the sale of firm requirements 
power under CHWM Contracts and the PF Exchange rates for sales under 
Residential Purchase and Sale Agreements. The PF Public rate applies to 
customers taking load following or Slice/block service. Consistent with 
the TRM, Tier 1 rates include three charges: (1) Customer charges; (2) 
a demand charge; and (3) a load shaping charge. In addition, three Tier 
2 rates, corresponding to contract options, are provided for customers 
that have chosen to purchase power from BPA for service to their load 
above high water mark.
    About 75 percent of BPA's power revenues are paid under the PF rate 
schedule and 95 percent of the power revenues under rates adjusted in 
this proceeding (PF, IP, NR and FPS). Therefore, BPA expresses its 
overall rate increase in terms measured by the increase in the PF rate. 
However, the PF rate is a collection of rates charged on the basis of 
percentage of cost responsibility, marginal changes in demand and 
energy usage, purchase elections for loads in excess of power purchased 
at Tier 1 rates, product and service choices, and applicability of rate 
discounts. Very few of BPA's customers have exactly the same mix of PF 
rate components in common. Therefore, BPA has developed a 
quantification of the PF rate that measures the impact on an average 
customer purchasing at Tier 1 rates. This quantification, the Tier 1 
Average Net Cost, is increasing 9.6 percent in this proposal. 
Individual customer impacts vary around this increase, but most PF 
customers will experience a lower increase in its power bills, and 
customers that purchase the Slice product will experience a large 
portion of this increase through the lower value of Slice surplus power 
rather than through their BPA power bills. Altogether, BPA expects that 
this rate proposal will increase its revenues by $158 million per year, 
an 8 percent increase over revenues if rates did not change.
    The Base PF Exchange rate and its associated surcharges apply to 
the sale of power to regional utilities that participate in the REP 
established under section 5(c) of the Northwest Power Act. 16 U.S.C. 
839c(c). The Base PF Exchange rate establishes the threshold for 
participation in the REP; only utilities with ASCs above the 
appropriate Base PF Exchange rate may receive REP benefits. If a 
utility meets the threshold, a utility-specific PF Exchange rate will 
be established in this proceeding for each eligible utility. The 
utility-specific PF Exchange rate is used in calculating the REP 
benefits each participant will receive during FY 2014-2015.
    In addition, the proposed PF-14 rate schedule includes rates for 
customers with non-Federal resources that have elected to take Diurnal 
Flattening Service or Secondary Crediting Service, and a melded PF rate 
for any Public customers that elects a power sales contract other than 
a CHWM Contract for firm requirements service.
    New Resource Firm Power Rate (NR-14)--The NR-14 rate applies to net 
requirements power sales to investor-owned utilities (IOUs) made 
pursuant to section 5(b) of the Northwest Power Act for resale to 
ultimate consumers, direct consumption, construction, testing and 
start-up, and station service. The NR-14 rate is also applied to sales 
of firm power to Public customers serving new large single loads. In 
the Initial Proposal BPA is forecasting no sales at the NR rate. The 
average NR-14 rate in the Initial Proposal is $73.63/MWh, an increase 
of 5.9 percent from the NR-12 rate.
    Industrial Firm Power Rate (IP-14)--The IP rate is applicable to 
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). In the Initial 
Proposal BPA is forecasting annual sales of 312 average megawatts (aMW) 
to DSIs. See section IV.A.2c. The average IP-14 rate in the Initial 
Proposal is $38.98/MWh, an increase of 7.4 percent over the IP-12 rate.
    Firm Power Products and Services Rate (FPS-14)--The FPS rate 
schedule is applicable to purchasers of Firm Power, Capacity Without 
Energy, Supplemental Control Area Services, Shaping Services, 
Reservation and Rights to Change Services, and Reassignment or 
Remarketing of Surplus Transmission Capacity, for use inside and 
outside the Pacific Northwest. The

[[Page 66971]]

rates for these products are negotiated between BPA and the purchaser. 
In addition, the FPS-14 rate schedule includes rates for customers with 
non-Federal resources that have elected to take Resource Support 
Services, Resource Shaping Services, or Transmission Scheduling 
Service/Transmission Curtailment Management Service and Forced Outage 
Reserve Service.
    General Transfer Agreement Service Rate (GTA-14)--The GTA rate 
schedule includes the GTA Delivery Charge and Transfer Service 
Operating Reserve Charge. The GTA Delivery Charge applies to customers 
that purchase Federal power that is delivered over non-Federal low-
voltage transmission facilities. BPA is proposing to change the basis 
for determining the GTA Delivery Charge. The proposed rate is based on 
the cost of low-voltage non-Federal delivery service provided by third-
party transmission providers. In addition, the proposed billing 
determinant uses the customer system peak. BPA is also proposing to 
continue an Operating Reserves rate for transfer service customers that 
will become effective when proposed changes to Western Electricity 
Coordinating Council (WECC) Operating Reserve Requirements become 
effective.
2. Important Features of the BP-14 Initial Rate Proposal for Power 
Rates and Ancillary Service and Control Area Service Rates
a. Tiered PF Rate
    No significant changes are proposed for the tiered PF rate. Several 
minor changes are proposed to address issues that have arisen during 
the first year of application of the tiered rate design, including 
modifications to the demand rate billing determinants and to certain 
aspects of Tier 2 rates, and wording corrections to some power rate 
schedules.
b. Generation Inputs; Ancillary and Control Area Services
    For FY 2014-2015, BPA expects to purchase balancing reserve 
capacity from non-Federal sources to provide balancing services within 
its balancing authority area. BPA is proposing a methodology to assign 
the costs of Federal balancing reserve capacity and non-Federal 
balancing reserve capacity.
    VERBS provides the generation capability (ability to both increase 
and decrease generation) to follow within-hour variations of variable 
energy resources in the BPA Balancing Authority Area. The proposed 
methodology for calculating the Variable Energy Resource Balancing 
Service rate for service from Federal resources is similar to the BP-12 
methodology. However, BPA is proposing to make several changes to its 
rate options under VERBS. The proposed VERBS rate recovers the cost of 
regulating reserves, following reserves, and imbalance reserves that 
are necessary to balance the within-hour schedule deviations of 
variable energy resources. The proposed VERBS rate will also recover 
certain directly assigned costs that are associated with providing 
VERBS.
    The proposed VERBS rate is comprised of a base rate and four 
formula rate adjustments, which are designed to recover the costs 
associated with: (1) The purchase of non-Federal balancing reserve 
capacity on a planning basis to provide VERBS; (2) replacing, if 
necessary, FCRPS balancing reserve capacity that becomes unavailable 
during the rate period with reserve acquisitions from non-Federal 
sources in order to continue providing VERBS and Dispatchable Energy 
Resource Balancing Service (DERBS) for the rate period; (3) purchases 
of non-Federal balancing reserve capacity to support a ``Full Service'' 
VERBS option for customers that elect this service; and (4) 
acquisitions of non-Federal balancing reserve capacity to support an 
unplanned increase in balancing services. BPA is also proposing to 
provide a rate credit to VERBS customers for embedded and variable 
costs associated with FCRPS balancing reserve capacity that becomes 
unavailable during the rate period because of hydro-related conditions.
    BPA is proposing to provide a discounted base rate to VERBS 
customers that participate in ``committed intra-hour scheduling,'' in 
which customers agree to schedule on a half-hour basis in every 
schedule interval at a specific level of scheduling accuracy.
    BPA is proposing to discontinue Provisional Variable Energy 
Resource Balancing Service (also known as ``Provisional Balancing 
Service'') and its associated rate.
    DERBS is necessary to support the within-hour deviations of thermal 
generation from the hourly generation estimate (i.e., schedule). BPA 
proposes to base its calculation of the DERBS rate on 5-minute average 
revenue meter data instead of 1-minute average SCADA meter data, which 
is currently used. In addition, BPA proposes a formula rate adjustment 
to the DERBS rate to recover the cost of any planned purchases of non-
Federal balancing reserve capacity that are necessary to provide DERBS 
and VERBS. BPA also proposes to exempt specific 5-minute average 
periods from the DERBS rate calculation for schedule deviations that 
were caused by automatic voltage control systems that corrected a grid 
frequency deviation.
    BPA proposes to change the calculation of its incremental cost for 
Energy and Generation Imbalance Services from an hourly market index to 
a weighted average cost of energy deployed. BPA also proposes to 
provide no credit for generator imbalances (actual generation exceeds 
scheduled amounts) under Generation Imbalance Service that occur during 
a scheduling period in which BPA issues a curtailment order. In 
addition, BPA proposes to exempt customers that participate in 
committed intra-hour scheduling from Deviation Band 2 penalty charges 
under Generation Imbalance Service. Finally, BPA proposes to exempt 
customers that participate in committed intra-hour scheduling or 
committed hourly scheduling from the Persistent Deviation penalty 
charge.
c. DSI Service for FY 2014-2015
    In the Initial Proposal, BPA is forecasting sales of 312 aMW to 
Alcoa and Port Townsend Paper for the FY 2014-2015 rate period. BPA 
proposed and received public comment on a ten-year contract with Port 
Townsend Paper that would provide service through FY 2022. BPA is 
currently receiving public comment on a proposed ten-year contract with 
Alcoa that would also provide service through FY 2022. The Initial 
Proposal does not make an explicit assumption about the outcome of 
either proposed contract; however, the Initial Proposal does assume 
that BPA will serve the two industries during the forthcoming rate 
period.
d. Risk Mitigation Tools
    The main financial risk mitigation tool BPA relies upon is 
financial liquidity, comprising cash, other investments in the 
Bonneville Fund at the U.S. Treasury, and a short-term liquidity 
facility with the U.S. Treasury. BPA proposes to include provisions for 
two rate adjustments: the Cost Recovery Adjustment Clause (CRAC), which 
can generate additional cash within the rate period, and the Dividend 
Distribution Clause (DDC), which can return cash to customers when 
BPA's financial reserves are larger than needed to meet its Treasury 
Payment Probability (TPP) standard. When available liquidity and the 
CRAC are insufficient to meet the TPP standard, BPA includes Planned

[[Page 66972]]

Net Revenues for Risk (PNRR) in its rates.
    In the Initial Proposal, BPA proposes to include no PNRR and to cap 
the maximum revenue recoverable through the CRAC at $300 million per 
year. BPA is proposing some minor changes to the risk mitigation tools 
in the BP-14 Initial Proposal, including a revision to the metric used 
to determine whether a CRAC or DDC triggers. The thresholds for 
triggering the CRAC and DDC remain unchanged from the BP-12 rate case 
(equivalent reserve levels of $0 and $750 million respectively in 
financial reserves attributed to Power). BPA also proposes to continue 
the National Marine Fisheries Service FCRPS Biological Opinion 
Adjustment (NFB Adjustment) and the Emergency NFB Surcharge, given that 
litigation regarding the Biological Opinion continues.

B. Summary of the Transmission Rate Proposal

1. Transmission Rates
    BPA is proposing an overall 13 percent increase in transmission 
rates. This increase includes a proposed 25 percent increase in the 
Utility Delivery rate.
    BPA 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 Rate (FPT-14)--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.
    Integration of Resources Rate (IR-14)--The IR rate is a postage 
stamp, contract demand rate for the use of the Integrated Network, 
similar to Point-to-Point (PTP) service (see below).
    Network Integration Transmission Rate (NT-14)--The NT rate applies 
to customers taking network integration service under the Open Access 
Transmission Tariff (OATT) and allows customers to flexibly serve their 
retail load.
    Point-to-Point Rate (PTP-14)--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.
    BPA is proposing four rates for intertie use:
    The Southern Intertie Rate (IS-14) and the Montana Intertie Rate 
(IM-14) 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 Rate (TGT-14) and the Eastern 
Intertie Rate (IE-14) are developed pursuant to the Montana Intertie 
agreement.
    Other proposed transmission rates are:
    The Use-of-Facilities Rate (UFT-14) establishes a formula for 
charging for the use of a specific facility based on the annual cost of 
that facility.
    The Advance Funding Rate (AF-14) 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 dispatch, 
curtailment, redispatch, or load shedding orders; and an Unauthorized 
Increase Charge for customers that exceed their contracted amounts.
2. Ancillary and Control Area Services Rates
    BPA is proposing rates for six ancillary services: Scheduling, 
System Control, and Dispatch Service; Reactive Supply and Voltage 
Control from Generation Sources Service; Regulation and Frequency 
Response Service; Energy Imbalance Service; Operating Reserve-Spinning 
Reserve Service; and, Operating Reserve-Supplemental Reserve Service. 
In addition to the rates for Ancillary Services, BPA is proposing rates 
for six control area services: Regulation and Frequency Response 
Service; Generation Imbalance Service; Operating Reserve-Spinning 
Reserve Service; Operating Reserve-Supplemental Reserve Service; 
Variable Energy Resource Balancing Service; and Dispatchable Energy 
Resource Balancing Service.
3. Significant Changes in the BP-14 Initial Rate Proposal for 
Transmission Rates
a. Network Cost Allocation
    BPA is proposing to change its cost allocation methodology for 
allocating Integrated network costs to NT and PTP rates from a 1 
coincidental peak (1CP) method to a 12 non-coincidental peak (12 NCP) 
method. The rate impact of this change is approximately a 1.5 percent 
increase in the PTP rate and a 5.9 percent decrease in the NT rate.
b. Billing Determinants for NT and Utility Delivery Service
    BPA is proposing to change the billing determinants for NT service 
and Utility Delivery service to be consistent with the Network cost 
allocation methodology.
    Changes to ancillary and control area services rates are discussed 
in section IV.A.2.b.

C. Overview of Studies

    The initial rate proposal for power rates, transmission rates, and 
ancillary service and control area service rates is explained and 
documented in the following studies.
1. Power Rates Study
    The Power Rates Study explains and documents the development of 
power rates and billing determinants for BPA's power products and 
services. The results of the study are reflected in the proposed power 
rate schedules.
2. Power Loads and Resources Study
    The Power 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: the Federal system load forecast; the Federal 
system resource forecast; and the Federal system loads and resources 
balance.
3. Power Revenue Requirement Study
    The Power Revenue Requirement Study explains and documents the 
level of revenues from 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. 
Cost estimates in the Power Revenue Requirement Study are based on the 
results of the IPR, as presented in the Final Close-Out Report dated 
October 26, 2012. The repayment studies reflect actual and projected 
repayment obligations and transactions related to

[[Page 66973]]

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 the rate test period revenue requirement 
and to recover the Federal investment over the prescribed repayment 
period is tested and demonstrated for the generation function.
4. Power Risk and Market Price Study
    The Power Risk and Market Price Study has three major components: 
the electricity market price forecast used in setting power rates; the 
quantification of the risks accounted for in setting power rates; and 
the set of risk mitigation measures to include in rates that ensure 
that power rates meet the established TPP. The TPP is a measure of the 
probability that BPA will make its Treasury payments on time and in 
full during the rate period. If the TPP is below BPA's two-year 95 
percent standard, a combination of risk mitigation tools is proposed to 
meet the TPP standard.
    The electricity market price forecast portion of the study explains 
and documents forecasts of the variable cost of the marginal resource 
for transactions in the wholesale energy market. The market used in 
this analysis is the Mid-Columbia trading hub in the state of 
Washington, although this forecast is influenced by conditions in other 
regions within the Western Interconnection. The Power Risk and Market 
Price Study also explains and documents the natural gas price forecast 
used in setting rates.
5. Generation Inputs Study
    The Generation Inputs Study includes the study and documentation 
for generation inputs costs and other inter-business line costs. The 
study also includes the development and design of the proposed ACS-14 
Ancillary and Control Area Services rate schedule. The forecasts for 
balancing reserve capacity to provide regulation and frequency 
response, variable energy resource balancing service, dispatchable 
energy resource balancing service, operating reserve, and load 
following are explained and documented in the Generation Inputs Study. 
The Study explains and documents the embedded and variable cost 
methodologies for these balancing reserve capacity obligations and the 
resulting revenue credits reflected in the power rates.
6. Transmission Rates Study (TRS)
    The Transmission Rates Study explains the rate design process for 
developing transmission, ancillary and control area service rates. The 
purpose of the TRS is to derive rates that will recover transmission 
costs. The rate study also explains proposed changes to the 
Transmission Service Rate Schedules and General Rate Schedule 
Provisions.
7. Transmission Revenue Requirement Study
    The Transmission Revenue Requirement Study establishes the level of 
revenue needed from transmission rates to recover, in accordance with 
sound business principles, the costs associated with the transmission 
of electric power. The Transmission Revenue Requirement Study includes 
a risk analysis to ensure that the proposed transmission rates are 
sufficient to achieve a 95 percent probability of making end-of-year 
U.S. Treasury payments in full and on time during the two-year rate 
period.
8. Transmission Segmentation Study
    The Transmission Segmentation Study classifies transmission 
facilities by usage and assigns them to segments. Segments are groups 
of facilities that serve distinct functions (for example, integration 
of power into the transmission system or delivery of power at low 
voltage). The Segmentation Study also determines the plant investment 
and historical operations and maintenance expense for each segment 
based on the facilities that have been assigned to that segment.

Part V--Proposed 2014 Rate Schedules

    BPA's proposed 2014 Power Rate Schedules and proposed 2014 
Transmission Rate Schedules are a part of this notice and are available 
for viewing and downloading on BPA's Web site at www.bpa.gov/goto/BP14Schedule. Copies of the proposed rate schedules also are available 
for viewing in BPA's Public Reference Room at the BPA Headquarters, 1st 
Floor, 905 NE 11th Avenue, Portland, OR 97232.

    Issued this 29th day of October, 2012.
Stephen J. Wright,
Administrator and Chief Executive Officer.
[FR Doc. 2012-27299 Filed 11-7-12; 8:45 am]
BILLING CODE 6450-01-P