[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
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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
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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
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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