[Federal Register Volume 81, Number 218 (Thursday, November 10, 2016)]
[Notices]
[Pages 78999-79005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27181]


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DEPARTMENT OF ENERGY

Bonneville Power Administration

[BPA File No.: BP-18]


Fiscal Year (FY) 2018-2019 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).

ACTION:  Notice of FY 2018-2019 Proposed Power and Transmission Rate 
Adjustments.

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SUMMARY: BPA is holding a consolidated rate proceeding, Docket No. BP-
18, to establish power and transmission rates for FY 2018-2019.
    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 requires that BPA's rates 
be established based on the record of a formal hearing. For 
transmission rates only, the Northwest Power Act requires 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, ancillary, and control area 
services rates to be effective on October 1, 2017.

DATES: Anyone wishing to become a party to the BP-18 proceeding must 
provide written notice by U.S. Mail or electronic mail. BPA must 
receive such notice no later than 3:00 p.m. on November 18, 2016.
    The BP-18 rate adjustment proceeding begins with a prehearing 
conference at 9:00 a.m. on November 17, 2016, in the BPA Rates Hearing 
Room, 1201 NE Lloyd Boulevard, Suite 200, Portland, Oregon 97232.
    Written comments by non-party participants must be received by 
February 17, 2017, 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. Kurt Casad, LP-7, and Mr. Matthew 
Perkins, LT-7, Office of General Counsel, 905 NE 11th Avenue, Portland, 
Oregon 97232, or by 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 BPA 
Public Involvement, Bonneville Power Administration, P.O. Box 14428, 
Portland, Oregon 97293. Participants may also submit comments 
electronically 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-18 in the subject line.

FOR FURTHER INFORMATION CONTACT: Ms. Ebony Amato, DKE-7, BPA 
Communications, Bonneville Power Administration, P.O. Box 3621, 
Portland, Oregon 97208; by phone toll free at 1-800-622-4520; or by 
email to [email protected].
    Responsible Officials: Mr. Daniel H. Fisher, 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,

[[Page 79000]]

ancillary, and control area services rates.

SUPPLEMENTARY INFORMATION: 

Table of Contents

Part I. Introduction and Procedural Background
Part II. Scope of BP-18 Rate Proceeding
Part III. Public Participation in BP-18
Part IV. Summary of Rate Proposals
Part V. Proposed BP-18 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.

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Prehearing Conference/BPA Initial     November 17, 2016.
 Proposal.
Parties File Petitions to Intervene.  November 18, 2016.
Clarification.......................  December 6-7, 2016.
Motions to Strike...................  December 16, 2016.
Data Request Deadline...............  December 16, 2016.
Answers to Motions to Strike Due....  January 10, 2017.
Data Response Deadline..............  January 10, 2017.
Parties File Direct Cases...........  January 31, 2017.
Clarification.......................  February 7-8, 2017.
Motions to Strike Due...............  February 14, 2017.
Data Request Deadline...............  February 14, 2017.
Close of Participant Comments.......  February 17, 2017.
Answers to Motions to Strike Due....  February 21, 2017.
Data Response Deadline..............  February 21, 2017.
Litigants File Rebuttal Cases.......  March 14, 2017.
Clarification.......................  March 20, 2017.
Motions to Strike Due...............  March 24, 2017.
Data Request Deadline...............  March 24, 2017.
Answers to Motions to Strike Due....  March 31, 2017.
Data Response Deadline..............  March 31, 2017.
Parties Give Notice of Intent to      March 31, 2017.
 Cross-Examine.
Cross-Examination...................  April 6-7, 2017.
Initial Briefs Filed................  May 2, 2017.
Oral Argument.......................  May 9, 2017.
Draft ROD issued....................  June 13, 2017.
Briefs on Exceptions Filed..........   June 30, 2017.
Final ROD and Final Studies issued..  July 26, 2017.
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    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 26, 2017.

Part II--Scope of BP-18 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. 2016 Integrated Program Review

    BPA began its 2016 Integrated Program Review (IPR) and Capital 
Investment Review (CIR) process in June 2016. The IPR/CIR process is 
designed to allow an opportunity to review and comment on BPA's expense 
and capital spending level estimates before the spending levels are 
used to set rates. On October 12, 2016, BPA issued the Final Close-Out 
Report for the IPR/CIR process. In the Final Close-Out Report, BPA 
established the program level cost estimates that are used in the BP-18 
Initial Proposal. Starting this fall, BPA will engage customers and 
stakeholders in a discussion to consider additional cost management 
alternatives which, if adopted, would be reflected in BPA's final 
rates.

C. 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. In addition to the items listed below, any other 
issue that is not a ratemaking issue is outside the scope of this 
proceeding.
1. Program Cost Estimates
    Some of the decisions that determine program costs and spending 
levels have been made in the IPR/CIR public review process outside the 
rate proceeding. See section II.B. BPA's spending levels for

[[Page 79001]]

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 any re-examination of spending levels is 
necessary, such re-examination will occur outside of the rate 
proceeding. The above 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, use of financial reserves, 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.C.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, 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. 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 level and method of service to DSIs during the FY 2018-2019 
rate period are established in existing contractual arrangements with 
Alcoa, Inc. and Port Townsend Paper Corporation. Neither the contracts 
nor the records of decision supporting those contracts were subject to 
any petition for review in the Ninth Circuit. For this reason, 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, 
level of service, or other terms embodied in the existing contracts 
with Alcoa and Port Townsend.
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.
    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 issues 
regarding reliability of the transmission system, dispatcher standing 
orders, e-Tag requirements and definitions, open access transmission 
tariff (OATT) 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 2016 IPR/CIR process 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/CIR forum, these 
discussions were intended to inform interested parties about these 
matters so the parties 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 National Environmental 
Policy Act (NEPA) process BPA conducts concurrent with the rate 
proceeding. See section II.D.
    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. 2008 Average System Cost Methodology (2008 ASCM) and Average System 
Cost Determinations
    Section 5(c) of the Northwest Power Act established the Residential 
Exchange Program, which provides benefits to residential and farm 
consumers of Pacific Northwest utilities based, in part, on a utility's 
``average system cost'' (ASC) of resources. 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, 
2016, and are continuing through July 2017. 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 or 
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
    The RHWM Process preceded the BP-18 rate proceeding. In that 
process, as directed by the TRM, BPA established FY 2018-2019 RHWMs for 
Public customers that signed contracts for firm requirements power 
service providing for tiered rates, referred to as CHWM contracts. 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

[[Page 79002]]

review, comment on, and challenge BPA's 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 2018-2019 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, which resolved 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). The Administrator's 
findings regarding the legal, factual, and policy challenges to the 
2012 REP Settlement are explained in the REP-12 Record of Decision 
(REP-12 ROD). The 2012 REP Settlement and REP-12 ROD were approved by 
U.S. Court of Appeals for the Ninth Circuit in Association of Public 
Agency Customers v. Bonneville Power Administration, 733 F.3d 939 (9th 
Cir. 2013). Because the 2012 REP Settlement was part of the REP-12 ROD 
and was approved 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 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 BPA's 
determination to adopt the 2012 REP Settlement or its terms in this 
rate proceeding.
10. Financial Reserves Policy
    BPA is proposing in this rate case a policy to establish targets 
(and upper and lower thresholds) for financial reserves for each of its 
business units and the agency as a whole. BPA's financial policies are 
normally not within the scope of BPA's rate cases; however, for 
administrative convenience BPA is using the BP-18 rate case process to 
develop the Financial Reserves Policy in lieu of conducting a parallel, 
but separate, public process. Therefore, the Financial Reserves Policy, 
and its implementation in the BP-18 rates, is within the scope of this 
rate proceeding.
11. Oversupply Management Protocol
    The proposed OS-18 Oversupply rate is a formula rate designed to 
recover BPA's oversupply costs. BPA incurs oversupply costs pursuant to 
the Oversupply Management Protocol, Attachment P of BPA's OATT. Under 
the proposed formula rates, BPA would recover actual costs incurred 
during the BP-18 rate period rather than forecast costs, therefore 
avoiding the need to perform a later true-up between forecast costs and 
actual costs. Pursuant to Rule 1010.3(f) of BPA's Procedures, the 
Administrator limits the scope of this proceeding to issues concerning 
the rates for recovering the costs of the Oversupply Management 
Protocol. In particular, the following issues are not part of the scope 
of the case, and the Hearing Officer is directed to strike all 
argument, testimony, or other evidence concerning these issues: the 
terms of the Oversupply Management Protocol; whether the Oversupply 
Management Protocol complies with orders of the Commission; and whether 
BPA took all actions to avoid using the Oversupply Management Protocol, 
including the payment of negative prices to generators outside of BPA's 
balancing authority area.
12. Power Product Switching
    On July 18, 2016, BPA issued a letter informing interested parties 
that Seattle City Light (Seattle) and Klickitat PUD (Klickitat) had 
requested an early change in their purchase obligations under their 
Regional Dialogue Power Sales Agreements (Regional Dialogue contracts). 
In the letter, BPA included its analysis of the proposed early change 
in purchase obligations and solicited comments from customers and other 
interested parties. On August 26, 2016, BPA issued a decision letter 
allowing Seattle and Klickitat to change their purchase obligations 
from the Slice/Block product to the Block product and Load Following 
product, respectively, effective October 1, 2017.
    Because BPA has already issued a decision document on Seattle and 
Klickitat's request for an early change in purchase obligations under 
their Regional Dialogue contracts, this issue is not within the scope 
of this 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 BPA's determination to grant Seattle and 
Klickitat's request for a change in purchase obligations in this rate 
proceeding.

D. 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.C.6., all evidence and argument 
addressing potential environmental impacts of rates being developed in 
the BP-18 rate proceeding are excluded from the rate proceeding 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 alternatives, 
including one for rates. Any combination of alternative policy choices 
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

[[Page 79003]]

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-18 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 Stacy Mason, NEPA Compliance Officer, ECP-4, 
Bonneville Power Administration, 905 NE 11th Avenue, Portland, Oregon 
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 is 
being conducted for this proposal.

Part III--Public Participation in BP-18

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

    BPA distinguishes between ``participants in'' and ``parties to'' 
the hearings. Separate 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 
participant comments as private individuals (that is, not speaking for 
their organizations) 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 February 17, 2017. Written views, supporting 
information, questions, and arguments should be submitted to the 
address listed in the ADDRESSES section of this notice.
    An entity or person becomes a party to the proceeding by filing a 
petition 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.

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

    BPA is proposing four rates for Federal power sales and services:
    Priority Firm Power Rate (PF-18)--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. It also 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, Block, 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, four Tier 2 rates, corresponding to contract 
options, are applied to customers that have elected to purchase power 
from BPA for service to their Above-RHWM Load.
    Because very few of BPA's customers are subject to exactly the same 
mix of PF rate components, BPA has developed a PF rate measure for an 
average customer purchasing at PF Tier 1 rates. This quantification, 
the Tier 1 Average Net Cost, is increasing from $33.75/MWh for the PF-
16 rate to $34.94/MWh for the PF-18 rate, which is an increase of 3.5 
percent for the two-year rate period, or 1.7 percent on an average 
annual basis.
    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 2018-2019.
    The proposed PF-18 rate schedule also includes resource support 
services rates for customers with non-Federal resources, and a melded 
PF rate for any Public customer that elects a power sales contract 
other than a CHWM contract for firm requirements service. Transfer 
service charges for delivery, operating reserves, and Western 
Electricity Coordinating Council (WECC) assessments are applicable to 
customers served under non-Federal transmission service agreements.
    New Resource Firm Power Rate (NR-18)--The NR-18 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-18

[[Page 79004]]

rate is also applied to sales of firm power to Public customers when 
this power is used to serve new large single loads. In addition, the NR 
rate schedule includes rates for services to support Public customers 
serving new large single loads with non-Federal resources. In the BP-18 
Initial Proposal BPA is forecasting no sales at the NR rate. The 
average NR-18 rate in the Initial Proposal is $79.63/MWh, an increase 
of 7.9 percent from the NR-16 rate.
    Industrial Firm Power Rate (IP-18)--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 75 average megawatts (aMW) 
to DSIs at the IP rate. The average IP-18 rate in the Initial Proposal 
is $42.82/MWh, an increase of 2.1 percent over the IP-16 rate.
    Firm Power and Surplus Products and Services Rate (FPS-18)--The FPS 
rate schedule is applicable to sales of various surplus power products 
and surplus transmission capacity for use inside and outside the 
Pacific Northwest. The rates for these products are negotiated between 
BPA and the purchasers. The FPS-18 rate schedule also includes rates 
for customers with non-Federal resources; the Unanticipated Load 
Service rate; rates for other capacity, energy, and scheduling products 
and services; and rates for reserve services for use outside the BPA 
balancing authority area.

B. Summary of the Transmission Rate Proposal

    BPA is proposing an overall 1.1 percent increase in transmission 
rates for the two-year rate period, or 0.5 percent on an average annual 
basis. BPA is proposing four rates for the use of its Network segment, 
four rates for use of intertie segments, and several other rates for 
various purposes. The four rates for use of the Network segment are:
    Formula Power Transmission Rate (FPT-18)--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-18)--The IR rate is a postage 
stamp, contract demand rate for use of the Network, similar to Point-
to-Point (PTP) service (see below), and includes Scheduling, System 
Control, and Dispatch Service.
    Network Integration Transmission Rate (NT-18)--The NT rate applies 
to customers taking network integration service under BPA's OATT and 
allows customers to flexibly serve their retail load.
    Point-to-Point Rate (PTP-18)--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-18) is a contract demand rate that 
applies to customers taking Point-to-Point service under BPA's OATT on 
the Southern Intertie. BPA is proposing to recognize a reduction in the 
number of high demand hours which results in a 225 percent increase in 
the Southern Intertie hourly rate.
    The Montana Intertie Rate (IM-18) applies to customers taking 
Point-to-Point service on the Eastern Intertie.
    The Townsend-Garrison Transmission Rate (TGT-18) is a rate for firm 
service over BPA's section of the Montana Intertie and is available to 
parties to the Montana Intertie Agreement.
    The Eastern Intertie Rate (IE-18) is a rate for non-firm service on 
the portion of the Eastern Intertie capacity that exceeds BPA's firm 
transmission rights and is available to parties to the Montana Intertie 
Agreement.
    Other proposed transmission rates are:
    The Use-of-Facilities Rate (UFT-18) establishes a formula rate for 
the use of a specific facility based on the annual cost of that 
facility.
    The Advance Funding Rate (AF-18) allows BPA to collect the capital 
and related costs of specific facilities through an advance-funding 
mechanism.
    The Scheduling, System Control, and Dispatch Service Rate and the 
Reactive Supply and Voltage Control from Generation Sources Service 
Rate are required ancillary services for transmission service on the 
Network, the Southern Intertie, and the Montana Intertie.
    The WECC and Peak rates (PW-18) are rates for costs assessed to BPA 
to cover WECC and Peak reliability functions.
    The Oversupply Rate (OS-18) recovers the costs BPA incurs to 
displace generation under the Oversupply Management Protocol, 
Attachment P to BPA's OATT.
    Other charges that may apply include a Delivery Charge for the use 
of low-voltage delivery substations; 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 
whose use exceeds their contracted amounts.

C. Ancillary Service and Control Area Service Rates

    Beginning in January 2016, BPA held rate case workshops and 
solicited stakeholder comments concerning generation inputs issues that 
form the foundation of most ancillary service and control area service 
rates. Starting in the summer of 2016, BPA and stakeholders developed a 
settlement agreement that would set the rates for most ancillary and 
control area services, including the Variable Energy Resource Balancing 
Service (VERBS) rates for wind and solar resources, the Dispatchable 
Energy Resource Balancing Service (DERBS) rate, the two Operating 
Reserves rates, and the Regulation and Frequency Response rate. The 
settlement agreement also provides for other limited changes to the 
rate schedules, as well as BPA's agreement to conduct certain 
analytical work associated with the future integration of solar 
generation into BPA's Balancing Authority Area.
    BPA asked all entities that intended to be parties to the BP-18 
rate proceeding to either sign the agreement or declare their intention 
to contest the agreement by October 5, 2016. By that deadline, 20 
parties signed or agreed not to contest the settlement agreement. No 
party declared an intent to contest the agreement.
    BPA will file the BP-18 generation inputs settlement agreement as 
part of the BP-18 Initial Proposal. Parties will be given an 
opportunity to contest the agreement pursuant to a timeline established 
by the Hearing Officer.

D. Financial Reserves Policy

    In March 2016 BPA began public workshops to discuss establishing a 
financial reserves policy to guide management of the level of financial 
reserves available for risk (financial reserves) for BPA as a whole and 
for Power Services and Transmission Services separately. BPA received 
customer comment and feedback and used it to develop a financial 
reserves policy that will be filed as part of the BP-18 Initial 
Proposal.
    The financial reserves policy is intended to provide a consistent, 
transparent, and financially prudent method for determining target 
financial

[[Page 79005]]

reserves levels and upper and lower financial reserves thresholds for 
Power Services, Transmission Services, and BPA as a whole. The policy 
also describes the actions BPA may take in response to financial 
reserves levels that either fall below a lower threshold or exceed an 
upper threshold.

E. Risk Mitigation Tools

    BPA uses risk mitigation tools to buffer against poor financial 
performance over the rate period to protect the agency's solvency and 
strong credit rating. The main financial risk mitigation tool BPA 
relies upon is financial liquidity, which consists of financial 
reserves and a short-term liquidity facility with the U.S. Treasury.
1. Power Risk Mitigation Tools
    For Power Services, BPA proposes to use financial reserves 
attributed to Power Services and the short-term liquidity facility as 
primary risk mitigation tools. In addition, BPA proposes to include two 
rate adjustment mechanisms in the power rate schedules (and in certain 
ancillary and control area services rate schedules) that may adjust 
rates in the event Power Service's financial reserves fall below or 
exceed certain thresholds. The Cost Recovery Adjustment Clause (CRAC) 
will adjust rates upward to generate additional cash within the rate 
period if financial reserves attributed to Power Services fall below a 
defined lower threshold. BPA is proposing to replace the current 
Dividend Distribution Clause with a provision that expands the 
Administrator's options for using financial reserves attributed to 
Power Services when Power Services financial reserves and agency 
financial reserves are above established thresholds. When available 
liquidity and the CRAC are insufficient to meet the Power Services 
Treasury Payment Probability (TPP) standard of at least 95 percent, BPA 
includes Planned Net Revenues for Risk (PNRR) in Power rates. The TPP 
is the probability of BPA making its Treasury payments on time and in 
full each year of the two-year rate period.
    In the Initial Proposal, BPA proposes to include no PNRR and to cap 
the maximum revenue recoverable through the Power CRAC at $300 million 
per year. BPA also proposes to continue the National Marine Fisheries 
Service FCRPS Biological Opinion Adjustment (NFB Adjustment) and the 
Emergency NFB Surcharge, given the continuation of litigation regarding 
the Biological Opinion.
2. Transmission Risk Mitigation Tools
    BPA proposes to use financial reserves attributed to Transmission 
Services as the primary risk mitigation tool. BPA also proposes to 
include provisions for two rate adjustments in the Transmission rate 
schedules similar to those in the Power rate schedules: (1) The CRAC, 
and (2) an adjustment that provides options for using financial 
reserves attributed to Transmission Services when Transmission Services 
financial reserves and agency financial reserves are above established 
thresholds. When available liquidity and the CRAC are insufficient for 
Transmission Services to meet the TPP standard, BPA includes PNRR in 
Transmission rates. In the Initial Proposal, BPA proposes to include no 
PNRR and to cap the maximum revenue recoverable through the 
Transmission CRAC at $100 million per year.

Part V--Proposed BP-18 Rate Schedules

    BPA's proposed BP-18 Power Rate Schedules and Transmission Rate 
Schedules are a part of this notice and are available for viewing and 
downloading on BPA's Web site at http://www.bpa.gov/goto/BP18.

    Issued this 1st day of November, 2016.
Elliot E. Mainzer,
Administrator and Chief Executive Officer.
[FR Doc. 2016-27181 Filed 11-9-16; 8:45 am]
 BILLING CODE 6450-01-P