# Appendix — California Energy Commission v. Bonneville Power Administration > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_1635%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1991 - **Citation:** 500 U.S. 904 ## Text OF THE United States OCTOBER TERM, 1990 CALIFORNIA ENERGY COMMISSION; CALIFORNIA PuBLIC UTILITIES COMMISSION; DEPARTMENT OF WATER AND POWER OF THE City oF LOS ANGELES; PUBLIC SERVICE DEPARTMENT OF THE CITY OF BURBANK; PUBLIC SERVICE DEPARTMENT OF THE CITY OF GLENDALE; WATER & POWER DEPARTMENT OF THE CITY OF PASADENA; PACIFIC GAS AND ELECTRIC COMPANY; SOUTHERN CALIFORNIA EDISON COMPANY; and SAN D1iEGO GaAs & ELECTRIC COMPANY, Petitioners, VS. BONNEVILLE POWER ADMINISTRATION; JAMES J. JURA, as Administrator; JAMES WATKINS, as Secretary of the Department of Energy of the United States of America; and the UNITED STATES OF AMERICA, Respondents. APPENDIX TO PETITION FOR A WRIT OF CERTIORARI February 4, 1991 WILLIAM M. CHAMBERLAIN* REX E. LEE GENERAL COUNSEL CARTER G. PHILLIPS JONATHAN BLEES GENE C. SCHAERR DEPUTY GENERAL COUNSEL DANIEL E. MALJANIAN CALIFORNIA ENERGY SIDLEY & AUSTIN COMMISSION 1722 “Eye” Street, N.W. 1516 Ninth Street, MS-14 Washington, D.C. 20006 Sacramento, CA 95814 (202) 429-4266 (916) 324-3237 * (‘ounsel of Record for Petitioners (More counsel on inside cover) Bowne of Los Angeles, Inc., Law Printers. (213) 627-2200 LA! G JANICE E. KERR EDWARD W. O'NEILL PETER G. FAIRCHILD CALIFORNIA PUBLIC UTILITIES COMMISSION 5066 State Building 505 Van Ness Avenue San Francisco, CA 94102 (415) 557-2786 HOWARD V. GOLUB STUART K. GARDINER PaciFIC GAS AND ELECTRIC COMPANY Post Office Box 7442 San Franciseo, CA 94120 (415) 973-2040 RICHARD K. DURANT STEPHEN E. PICKETT GLORIA M. ING SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Rosemead, CA 91770 (818) 302-1908 JOHN D. MCGRANE RICHARD M. MERRIMAN WILLIAM M. DUDLEY REID & PRIEST 701 Pennsylvania Ave. N.W. Suite 800 Washington, D.C. 20004 (202) 508-4080 JAMES K. HAHN EDWARD C. FARRELL STANTON J. SNYDER DEPARTMENT OF WATER AND .POWER OF THE City oF Los ANGELES 111 North Hope Street Los Angeles, CA 90012 (213) 481-6372 JAMES F. WALSH E. GREGORY BARNES San DigeGo Gas & ELECTRIC COMPANY 110 West “A” Street San Diego, CA 92101 (619) 699-5022 i APPENDIX TABLE OF CONTENTS APPENDIX A— Opinion of the United States Court of Appeals for the Ninth Circuit in Califor- nia Energy Commission v. Bonneville Power Admin- istration et al. Nos. 88-7280, 88-7315, 88-7318, 88-7319, July 26, 1990 (“CEC IT”) ............. APPENDIX B— Opinion of the United States Court of Appeals for the Ninth Circuit in Califor- nia Energy Resources Conservation and Develop- ment Commission v. Bonneville Power Adminstration et al. Nos. 84-7836, 85-7430, 84- 7838, 85-7470, November 6, 1987 (“CEC I’) .... APPENDIX C— Opinion of the United States Court of Appeals for the Ninth Cireuit in Depart- ment of Water and Power of the City of Los Angeles v. Bonneville Power Administration, No. 84-7618, DEE es De EOP PGs vcd sc cccccsces. APPENDIX D — Order of the United States Court of Appeals for the Ninth Cireuit denying peti- tion for rehearing and rejecting suggestion for rehearing en bane in California Energy Commis- ston v. Bonneville Power Administration et al. Nos. 88-7280, 88-7315, 88-7318, 88-7319, filed Octo- gk eR ee er er ee APPENDIX E — Bonneville Power Administra- tion, Long Term Intertie Access Policy and Re- cord of Decision for Long Term Intertie Access PE Ee BE nk ri % ‘ . “! 4 | : ‘ $ A-24 pate fully in using such interconnections.” Hearings before the Subecomm. on Irrigation and Reclamation of the Senate Comm. on Interior and Insular Affairs, 87th Cong., 2d Sess. 4 (1962). At those same hearings, former BPA Administrator Paul J. Raver also spoke in favor of the Intertie saying: It is also essential that the rights of the Northwest region as a whole be preserved directly. Likewise, it is necessary that no single utility or group of utilities, whether federally, municipally, or stockholder owned, be permitted to use the tie line or lines for the transmission of Federal power in such a manner as to control the destiny of any other utility or group of utilities. ... This bill, in our opinion, will provide the regulatory guidelines needed to insure that any tie line or tie lines, regardless of ownership, will be operated with due consideration to the rights and responsibilities of all the utilities of the Northwest and will be in the national] interest. Id. at 75. Later, a Department of Interior Report informed Con- gress that: BPA ha|dJ assured the public and private utilities of its service area access over Bonneville’s lines to California, Nevada, and Arizona markets proportionate to the respective surpluses of the various utilities. Department of Interior Report to the Appropriations Commit- tees of the Congress of the United States, Recommending a Plan of Construction and Ownership of EHU Electric Interties Be- tween the Pacific Northwest and Pacific Southwest 34 (Comm.Print 1964). Once construction of the Intertie was authorized, the Department of Interior presented copies of the Exportable Agreement — the original Intertie access policy — to Congress. The Exportable Agree- ment allocated the federal Intertie capacity on a pro rata basis. Congress never took any action to change this policy. In outlining this history we do not mean to suggest that Congress has approved Formula Allocation. This history does indicate, how- ever, that Congress has not prohibited such a policy and that it is within BPA’s discretion to adopt a pro rata allocation scheme. A-25 tion is consistent with the statutory requirement that excess capacity be made available to non-federal utilities ‘“‘on a fair and nondiscriminatory basis.” 16 U.S.C. § 838d. Therefore, it is within BPA’s discretion to develop a policy to protect the access of small utilities to the Intertie. If access were available only on a competitive basis, the larger utilities would nearly always be in a position to underbid the small utilities. This denial of access would be devastating to these small utilities which would be faced with the prospect of having to spill during Condition 1. Their only alternative would be to use the power which would otherwise be spilled to displace power purchases from BPA. BPA could sell some of that dis- placed power on the spot market, but the rates it could charge for the spot sales would generally be lower than those for the contemplated firm sales and its revenues would suffer. As we have already pointed out, BPA may consider its revenues when formulating its access policy.” Our task is not to determine whether the BPA policy is the best available, but whether BPA considered the proper factors and acted reasonably in light of its gov- erning statutes. In developing the Formula Allocation provisions, BPA reasonably balanced the interests it is required to consider.’ “BPA also justifies the pro rata allocation mechanism as a re- sponse to the monopsony power of California utilities over the southern portion of the Intertie. The parties dispute whether Formula Allocation may be upheld on this basis. Because evidence in the record of anticompetitive conduct among the California petition- ers is inconclusive and resolution of this issue is not necessary for our decision, we decline to rule on the issue here. CEC also asserts that the Preference Act and the Transmission Act prohibit BPA from affording Northwest non-federal power pnor- ity over non-treaty Canadian power for access to Intertie transmis- | { 4 | j ee A-26 D. The Assured Delivery Provisions The California petitioners and PSP challenge the As- sured Delivery Provisions of the LTLAP, but on different grounds from those proposed by DSI and WPAG. These challenges take two forms: 1) that the Assured Delivery limitations are inconsistent with BPA’s governing stat- utes; and 2) that the 800 MW limitation and mitigation provisions are arbitrary and capricious and not ade- quately supported in the Administrator’s Decision. 1. Compliance With the Governing Statutes [10] 16 U.S.C. § 837e requires that any Intertie capac- ity which is not required for the transmission of federal energy “shall be made available as a carrier for transmis- sion of other electric energy.” In addition, the Transmis- sion Act requires BPA “to make available to all utilities on a fair and nondiscriminatory basis” excess capacity which is available in the transmission system. 16 U.S.C. § 838d. The legislative history of § 837e explains that In determining the existence of capacity excess to the needs of the Government, Federal needs reasonably forseeable may be included but the Secretary may not decline to enter into a wheeling agreement merely because he may have energy available for sale to serve the same load. H.R.Rep. No. 590, 88th Cong., 2d Sess. (1963); 1964 U.S.Code Cong. & Ad.News at 3342, 3350. We interpret this statement to mean that BPA is permitted ...to reserve sufficient Intertie ca- pacity not only for its current needs but also for its sion. We expressly rejected this argument in LADWP. 759 F.2d at 693-94. A-27 “foreseeable” future needs, so long as the agency does not compete with other utilities on the mere speculation that it “may have energy available’ sometime in the future to sell to the same customer. LADWP, 759 F.2d at 692. The LTLAP provides 800 MW of Intertie capacity — out of a total capacity of approximately 5200 MW owned by BPA —to Northwest utilities for Assured Delivery service. BPA has projected that it will have a maximum of approximately 2100 MW of firm power and exchange contracts with California. Petitioners argue, then, that 2100 MW is the maximum ecapacity BPA can foreseeably have available to sell to California, and therefore should be the maximum amount BPA can reserve on the Intertie. The remaining 3100 MW, they claim, should be available to non-federal utilities for firm transactions. This result is plausible under, but not compelled by, the statutes. As long as the BPA is fair and nondiscriminatory, it has the discretion to allocate excess transmission capac- ity as it sees fit. LADWP, 759 F.2d at 693. There is no requirement in the governing statutes that BPA provide any access on a firm basis. In fact, in normal years, BPA 3 own surplus economy energy supply is sufficient to load the entire Intertie with federal energy 46% of the year. If BPA satisfied all of its needs before making capacity available to others, there would be no capacity available for year-round, non-federal, firm transactions. Thus, BPA could make all of the excess capacity on the Intertie available only on a non-firm basis or on a firm basis for only part of the year.” Instead, BPA has responded to “We recognize that utilities are able to use Intertie capacity more efficiently and profitably if allocated on a firm rather than a nonfirm basis. Nevertheless, this ability is but one of several factors BPA ‘ij A-28 the request of these non-federal utilities and provides capacity for some firm transactions. Moreover, BPA is statutorily required to satisfy its own needs before providing access to other utili- ties and to furnish transmission only as long as it does not interfere with its power marketing program. 16 U.S.C. §$839f(i) (3). BPA’s power marketing program includes its responsibility to recover its costs and to repay the Treasury. As we said in LADWP: [I]t is clear from the legislative history that Congress did not intend BPA to compete with other Northwest utilities for access to the Intertie. The theme of the [Preference] Act is that BPA, as owner and operator of the Intertie, should be allowed preference in trans- mission of its electricity over the Intertie as necessary to meet its statutory mandate of being self-financing. LADWP, 759 F.2d at 692. By limiting Assured Delivery to 800 MW —the amount BPA concluded it could supply and still meet its repayment obligations — BPA complied with the mandate of § 839f(i) (3). Although § 837e and its legislative history lends itself to various interpretations, that of BPA is reasonable. We therefore defer to BPA’s interpretation. 2. Whether the 800 MW Limit Is Arbitrary and Capricious To establish that BPA acted arbitrarily and capri- ciously in setting the 800 MW limit on Assured Delivery, petitioners must demonstrate that BPA “has relied on factors which Congress has not intended it to consider, considers in formulating the access policy. As will be discussed below, the disadvantages of allocating more power on a firm basis outweigh the benefits of efficiency. A-29 entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implau- sible that it could not be ascribed to a difference in view or the product of agency expertise.’’ Motor Vehicle Manu- facturers Ass'n v. State Farm Mutual Automotive Insurance Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983). Petitioners have failed to meet this standard. BPA offers three justifications for the 800 MW limit: revenue impacts; operational concerns; and environmental effects. The Administrator’s Decision contains adequate support for these justifications. a. Revenue Considerations {11] In setting the limit on Assured Delivery, BPA considered its need to sell its own economy energy, the potential economie effects of Assured Delivery, and the benefits to BPA of providing opportunities to Northwest utilities to sell their surplus power to the Southwest. BPA based its decision on its own public assessment of the revenue impact of its Assured Delivery proposal and on a study by the PNUCC. BPA’s study indicated that provid- ing Assured Delivery would cause it to lose economy energy sales in the Southwest and priority firm sales in the Northwest due to seasonal exchanges in the winter. BPA estimated its losses at $9 million each year through 2006 even with the mitigation requirements. PNUCC estimated the losses at $3 million to $24 million per year.’® Despite these losses, BPA determined for reasons 16 CEC argues that BPA has not established that seasonal ex- changes would reduce BPA revenues because neither BPA por PNUCC accounted for the fact ihat if BPA failed to make sales of firm power in the winter, it could cover some of those losses by selling that energy on the spot market. These sales would increase BPA’s pro rata share of the Intertie and its revenues from nonfirm energy A-30 discussed previously that its Assured Delivery policy was superior to a federal-first policy. Petitioners argue that increasing the limit on Assured Delivery would not threaten BPA’s ability to market its surplus power, because BPA could force the firm suppli- ers to buy BPA’s surplus power at BPA’s prices and send it along the Intertie as part of the suppliers’ firm contract sales. This argument fails to consider the impact on BPA’s revenues of the market for non-federal surplus economy energy. Many Northwest utilities depend on economy energy exports during high water months for a significant portion of their revenues. If all excess capacity on the Intertie were filled under firm contracts, these utilities could not export their surplus economy energy. This inability would cause these utilities either to spill or to displace their normal purchases from BPA with their own surplus power, resulting in lost revenue to BPA from reduced sales and greater costs under the residential exchange program established by the Northwest Power Act. 16 U.S.C. § 839e(¢c). Again, BPA is entitled to take into account its own revenue requirements when it allo- cates time on the Intertie. The 800 MW Assured Delivery limitation adequately balances the interests of the utili- ties in having Intertie capacity available for firm transac- sales in the winter. Consequently, CEC contends, both BPA’s and PNUCC’s estimates of revenue losses were substantially overstated. On the other hand, BPA noted that its estimate was based on assumptions which may change, causing greater losses. Moreover, after BPA grants contractual rights to Assured Delivery, it cannot retrieve that Intertie capacity to minimize the effects of changed conditions until the contract terminates. Under LTIAP § 1.4, these contracts can last up to 20 years. Thus, BPA’s conservatism in granting Assured Delivery is justified by its prudent reluctance to decrease greatly its flexibility to respond to the uncertainties of the future. | A-31 tions and BP en D-3 CALIFORNIA PUBLIC UTILITIES COMMISSION, Petitioner, PUGET SOUND POWER AND LIGHT COMPANY; THE DEPARTMENT OF WATER & POWER OF THE City OF Los ANGELES; PUBLIC SERVICE DEPARTMENT OF THE CITY OF BURBANK; PUBLIC SERVICE DEPARTMENT OF THE CITY OF GLENDALE; WaTER & POWER DEPARTMENT OF THE CITY OF PASADENA; SAN DIEGO Gas & ELECTRIC COMPANY AND SOUTHERN CALIFORNIA EDISON COMPANY; PACIFIC GAS AND ELECTRIC COMPANY, Petitioner-Intervenor, V. BONNEVILLE POWER ADMINISTRATION; U.S. DEPARTMENT OF ENERGY, Respondents, PACIFIC POWER & LIGHT COMPANY; EUGENE WATER & ELECTRIC BoarD (“EWEB”); PUBLIC GENERATING POOL (“PGP”); NORTHWEST POWER PLANNING COUNCIL; DIRECT SERVICE INDUSTRIAL CUSTOMERS (“DSIS”’), Respondent-Intervenor. CA No. 88-7319 DC No. 0971-3; LTLAP D-4 ORDER BEFORE: CANBY AND LEAVY, CIRCUIT JUDGES AND ORRICK DISTRICT JUDGE* The panel as constituted in the above case has voted to deny the petition for rehearing and to reject the sugges- tion for a rehearing en banc. The full court has been advised of the suggestion for an en bane rehearing, and no judge of the court has re- quested a vote on the suggestion for rehearing en bance. Fed.R.App. P. 35(b). The petition for rehearing is denied and the suggestion for a rehearing en banc is rejected. *The Honorable William H. Orrick, Senior United States District Judge, for the Northern District of California, sitting by designation. APPENDIX E E-1 APPENDIX E LONG-TERM INTERTIE ACCESS POLICY GOVERNING TRANSACTIONS OVER FEDERALLY OWNED PORTIONS OF THE PACIFIC NORTHWEST — PACIFIC SOUTHWEST INTERTIE U.S. DEPARTMENT OF ENERGY BONNEVILLE POWER ADMINISTRATION MAY 17, 1988 EXECUTIVE SUMMARY _LONG-TERM INTERTIE ACCESS POLICY U.S. DEPARTMENT OF ENERGY BONNEVILLE POWER ADMINISTRATION MAY 17, 1988 > » reall A Rete we BE ew ae Sites Rds pa: a cintnne Glo ALnasi ne oe E-3 INTRODUCTION The Pacific Northwest-Pacific Southwest Intertie began operation in 1968. Congress authorized the construction of the Intertie to provide an additional market for surplus - BPA power, thereby providing greater assurance that we would repay the U.S. Treasury for the Federal invest- ments in the Northwest’s power system. To the extent there was capacity excess to Federal needs, Congress also intended that the Intertie allow nonfederal utilities in the Northwest and California to take advantage of the diverse load patterns and resource types between the two regions. The present capability of the Intertie is about 5,200 megawatts (MW), 3,200 MW on the two alternating- current (AC) lines and 2,000 MW on the direct-current (DC) line. Ownership of the Intertie in the Northwest is shared by BPA, Portland General Electric Company (PGE) and Pacific Power & Light Company (PP&L). We provide access to all Northwest generating utilities. Own- ership in California is shared by four investor-owned and municipal utilities. In the early 1980s demand for sales over the Intertie increased dramatically. Nearly every utility in the North- west had excess power to sel! and forecasted a surplus into the next decade and beyond. orthwest utilities frequently filled the Intertie with nonfirm energy and sought to negotiate long-term transactions with Califor- nia. Prior to 1984 and the implementation of the Interim Intertie Access Policy (LAP), BPA lost significant reve- nue opportunities by allowing other utilities unfettered access to the Intertie. Combined effects of (1) the North- west Preference Act, 16 U.S.C. § 837, et seq., which gives Northwest utilities a special competitive advantage over us; (2) oversupply conditions in the Northwest; and (3) a E-4 restricted market in California due to limited ownership of the Intertie in California caused us to lose sales. We were unable to make our payments to the U.S. Treasury. In 1984 we implemented the Interim LAP, followed by the Near-Term LAP in 1985. These policies governed access to the Intertie while we developed a Long-Term Intertie Access Policy (LTLAP). The LTLAP, issued by the Administrator on May 17, 1988, accomplishes the following objectives which have guided us throughout the process: % to The LTLAP assures BPA of reasonable access to the Intertie to sell both firm and nonfirm energy, thereby enhancing our ability to repay, with inter- est, $8 billion in Treasury investments. . The policy is a reasonable and effective means of safeguarding our $120 million investment in fish and wildlife protection. It balances the competing demands of nonfederal utilities for Intertie access to sell, exchange, or purchase both firm power (through long-term con- tracts) and nonfirm energy (through the short- term, spot-market). It provides a basis for greater planning certainty to utilities. It allows for efficient use of generating resources in the Northwest and California. It specifically addresses competitive concerns be- tween California and the Northwest. In doing all of the above, it strikes a balance between the Northwest and California, among generating and nongenerating utilities, other BPA E-5 customers, environmental interests and Federal taxpayers. Issuance of this policy culminates our review of com- ments submitted by over 150 different utilities, regulatory agencies and interest groups. Through a Combination of formal, transcribed meetings and informal discussions, we have increased our knowledge of their positions — and they of ours. We have twice appeared before the U.S. House Subcommittee on Water and Power Resources to answer questions regarding the LAP. Though often cum- bersome and lengthy, the process has produced a policy which addresses the demands of all parties. _ Balancing interests. We have been put in the difficult position of balancing the competing interests for use of the Intertie. The sum of the demands placed on the Intertie far exceeds the facility’s ability to meet them. Our total-requirements customers insist that BPA should protect its revenues in order to maintain stable power rates and to repay the U.S. Treasury in a timely manner. They suggest that BPA should allocate firm anc. nonfirm Intertie access to itself first, always assuring that BPA would be able to sell its surplus power. Northwest generating utilities seek a policy which allows sufficient and assured access for their own firm and nonfirm sales. California parties generally argue for a policy which allows them unconstrained access to inexpensive North- west and Canadian resources. Environmental organiza- tions support a policy that would prevent the Intertie from encouraging development that would harm fish and wildlife resources. Our main concern in reaching this balanced policy has been reconciling BPA’s need to meet its fiscal obligations with these other competing demands for use of the Inter- E-6 tie. While BPA has the discretion to implement the ‘Federal-first” policy supported by our full requirements customers, the LTLAP instead provides significant access to nonfederal utilities for a variety of transactions while protecting BPA from revenue shortfalls. It is not reasonable to suggest, as California com- menters did in the public process, that BPA incur revenue losses to be recovered through rate increases to its total- requirements customers. These customers have a strong statutory argument — explained in the decision — that we should adopt a Federal-first policy to maximize Fed- eral sales over the Intertie. By rejecting Federal-first, we incur an obligation to provide these customers with rate stability through alternative means. First among these alternative protections is the reservation of Intertie ca- pacity for BPA sales. If the revenue-protective measures adopted in the LTLAP prove unworkable or unduly controversial, the obvious remedy is not more access for nonfederal utilities. Instead, it is Federal-first. FORMULA ALLOCATION The Intertie accomodates transactions in two distinct markets. Sellers of power to California sell in two distinct markets, one for long-term transactions and one for short- term sales. Formula Allocation in the LTLAP refers to Intertie capacity made available for short-term sales of energy. We have taken a hard look at Formula Allocations as it has been one of the most hotly debated issues throughout the LTLAP’s development. The LTLAP continues the basic Formula Allocation method used in the Near Term Intertie Access Policy (NTLAP) of allocating access to the Intertie based on E-7 three possible conditions. We have changed the specifics of each Condition to reflect criticisms and suggestions made on the two LTIAP drafts. Provisions for Conditions 2 and 3 address directly the contentious anti-competitive concerns between California and the Northwest. Condition 1. Condition 1 under the NTLAP incorpo- rated the pre-existing Exportable Agreement, which ex- pires on December 31, 1988. Parties to the agreement declare amounts of surplus energy available for export at the applicable BPA rate. If total declarations of exporta- ble energy exceed the available Intertie Capacity or the size of the Pacific Southwest market, whichever is smaller, each party to the agreement is allocated access to the smaller amount based on its share of total declarations. The 1986 draft LTLAP proposed that upon expiration of the Exportable Agreement a condition of spill or likelihood of spill on the Federal Columbia River Power System (FCRPS) would trigger Condition 1. BPA and Northwest Scheduling Utilities could declare surplus en- ergy available for export and BPA would allocate access to the Intertie based on the ratio of each declaration to the sum of all declarations multiplied by the available Intertie Capacity. Each Scheduling Utility’s allocation would be limited by the ratio of its regional hydroelectric capacity to the total regional hydroelectric capacity of the Scheduling Utilities multiplied by the total of all declara- tions (the “Hydro Cap’’). Pre et wane Lael Os AN We received comments on the 1986 draft which led us to revise Condition 1 to mirror the Exportable Agreement more closely. Under the 1987 draft a cendition of spill or likelihood of spill on the FCRPS determined Condition 1. BPA and Scheduling Utilities could declare surplus en- ergy available for export at the applicabie BPA rate and E-8 receive a share of available Intertie Capacity based on the Hydro Cap. To the extent that the market for Northwest energy at BPA’s price was less than the available Intertie Capacity, we allocated access to the Intertie to equal that market. Generally, commenters on the 1987 draft did not argue against Condition 1 per se. They focused instead on its specific provisions. The bulk of the comments were di- rected at the Hydro Cap and at allocating Intertie capac- ity based on the size of the California market rather than the size of the Intertie capacity. In response to concerns heard at the public meetings in January 1988, we pro- posed an alternative Condition 1 allocation method. The LTLAP adopts this recent proposal. The True-Up. The market for power in California is often less than the available Intertie capacity because of minimum generation requirements in California. As the Intertie is expanded and Southwest utilities bring on new generation that cannot be displaced with spot-market purehases, the frequency of this situation is likely to grow. The 1987 draft allocated Intertie capacity based on the size of the California market as a protection against revenue shortfalls. Analyses indicated that we would lose approximately $16.4 million in 1989 by allocating to the Intertie rather than the market. This loss would decrease to $10.7 million in fiscal year 1992. Beyond 1992 the difference would increase, mainly due to projected fuel price increases. The heart of the revenue problem is the Northwest Regional Preference Act. 16 U.S.C. 837, et seq., which requires BPA to quote an energy price to Northwest utilities before making any sale to the Southwest. This E-9 creates a problem in which Northwest utilities, which are BPA’s competitors, know our price — but we do not know their prices. In Condition 1, where the size of the South- west market is less than available Intertie Capacity, Northwest utilities are able to use this information to undereut the BPA price and use their allocations to reduce BPA’s hourly sales to a small Southwest market. If a “real-time” BPA pricing iteration were even possible, we would still be required to announce our new price to the Northwest. Regional preference makes BPA a “sitting duck” for its competitors. Allocating according to the California market size would reduce BPA’s vulnerability by reducing the size of Scheduling Utility allocations. This provision came under attack, however, from both California and Northwest parties. The alternative discussed at the January 27 public meeting seemed to allay concerns regarding BPA’s market control. No one disputes that the Regional Prefer- ence Act causes BPA a revenue dilemma, especially at times when we face spill on the hydro system. The true-up alternative is the least intrusive remedy. The Hydro Cap. Both the 1986 and 1987 LTLAP drafts allocated Intertie capacity based on a utility’s hydroelec- trie capability. The logic for the Hydro Cap was that when the Federal system is spilling or likely to spill, the maximum allocation to utilities with greater hydroelectric resources would increase, thus decreasing the probability of wasting the resources by spilling. Under this provision, BPA’s share of allocations would tend to increase due to its large hydroelectric capacity. Much of the debate over the Hydro Cap focused on two issues. First, removing the Hydro Cap could cause hydro- based utilities to spill. Second, without the Hydro Cap, utilities could “overdeclare’ by including uneconomic E-10 combustion turbines in their declarations with no intent of ever operating them. ~ Diseussion at the January meetings helped resolve these concerns. When the Federal hydro system faces spill, other systems might not always be in the same condition. The Hydro Cap could give disproportionately large shares of Intertie Capacity to hydro-based utilities when they may not face a threat of spill, while frustrating the marketing activities of utilities with hydro and ther- mal resources. Furthermore, several utilities and BPA indicated that if a utility is facing spill with insufficient access to market the available energy on the Intertie, such energy could generally displace Northwest thermal generation. Several factors would help deter overdeclarations. First, the take-or-pay feature of our IS-87 transmission rate requires a utility to pay for its allocation whether or not it is used. Second, BPA monitors declarations and is aware of each utility's resources and capabilities. We have not observed significant overdeclarations under past poli- cies. Third, from time to time we can request documenta- tion on each utility’s declaration as a further insurance against abuse. Conditions 2 and 3. Allegations of anti-competitive practices on both the northern and southern portions of the Intertie were made during the debate over Formula Allocations. California commenters argue that pro-rata allocations to nonfederal utilities under the LTLAP would tend to stabilize prices at levels higher than those at which sellers might increase their total sales by reducing prices. The Northwest just as logically concludes that pro-rata allocations of California Intertie capacity sup- press prices below levels that would prevail in a market E-11 where more buyers independently bid for Northwest energy. We recognized that in implementing a long-term policy we must try to resolve this issue to meet the goals outlined for the LTLAP. We therefore proposed in section 5(d) of the 1987 draft LTLAP to cease pro-rata alloca- tions to non-Federal utilities under Conditions 2 and 3 after completion of the third AC Intertie, provided anti- competitive problems in the Southwest were cured by that time. This proposal was discussed extensively during the public meetings in January 1988 and again in comment letters, mainly from California parties. The final LTIAP takes this proposal a step further. Section 5(d) now ceases pro-rata allocations under Conditions 2 and 3 for an 18-month experimental period. We will analyze the success or failure of the experiment throughout_its term. We will be particularly concerned about the removal of restrictions on California’s portion of the Intertie. Utilities, regulators, and other interested parties will be encouraged to express their views in writing and through informal discussions. At least 30 days before the experiment ends, we will issue a written report on whether to continue the experiment. The experiment will work as follows. Under Condition 2, when the declarations of BPA and Northwest utilities exceed Intertie capacity, we will make a pro-rata alloca- tion to BPA and leave the remaining block of Intertie capacity available to Northwest utilities as a whole. Each Northwest utility could then compete to make sales to Southwest utilities, with no assurance of any individual allocation. Under Condition 3, when the. declarations of BPA and Northwest utilities are less than Intertie capac- ity, we will again make a pro-rata allocation to BPA and a block allocation to Northwest utilities. After regional E-12 utilities, U.S. extraregional utilities and then Canada have access to remaining Intertie capacity. During Condi- tion 3, we expect significant competition whenever the size of the California market is less than Intertie capacity. Until the experiment is in effect, Conditions 2 and 3 are similar to those in the NTIAP and the two LTLAP drafts. The LTLAP retains pro-rata allocations under Condi- tion 1. Allocation under Condition 1 appears to be of less eoncern to California commenters than allocation during other conditions. Alternative Formula Allocation propos- als recognized the importance of pro-rata allocations when the Northwest faces spill conditions. Retention of Condition 1 allocations will (1) help assure nonfederal utilities of Intertie access when hydrological conditions might otherwise force them to spill, and (2) provide an enforcement mechanism for the Protected Area provi- sions described below. Some commenters have suggested that we allow access to Canadian utilities equal to that of Northwest utilities. The courts, however, have upheld our policy that capacity excess to our needs must be provided on a fair and nondiscriminatory basis first to Northwest utilities. If the Free Trade Agreement between Canada and the United States now being considered in Congress and the Cana- dian parliament is implemented, the distinction between U.S. extraregional utilities and Canadian utilities will no longer be made. ASSURED DELIVERY Utilities seek firm access to the Intertie for long-term transactions. The LTLAP refers to this kind of access as E-13 Assured Delivery. The earlier NTIAP did not provide for Assured Delivery service. Amount. The final LTLAP reserves 800 MW for As- sured Delivery transactions. This is an increase from the 420 MW reserved in the 1986 draft. BPA lost $213 million in fiscal year 1987; we do not want to exacerbate this problem with the final LTILAP. Given these uncertainties, we are cautious about committing major portions of the Intertie for long-term nonfederal use. Yet, the 800 MW upper limit in itself is a fairly dramatic departure from the past. It will facilitate a greater number and variety of firm transactions than before. Our studies indicate an annual revenue loss of approximately $9 million in lost nonfirm revenue and displaced firm power sales to our public agency custom- ers. The revenue effects on BPA have been quantified further in a study by the PNUCC. These adverse revenue effects, offset by mitigation measures discussed below, have been found acceptable by a fairly broad cross-section of commenters. In the public meeting and comment letters, most par- ties seemed satisfied with the 800 MW if we were to consider increasing it upon completion of the third AC project. BPA will reassess the 800 MW limit upon com- mercial cperation or termination of the project. Exhibit B Allocations. As for the limits on types of transactions, BPA is convinced of the wisdom of imposing limitations on firm power sales. These limits are shown in Exhibit B of the LTLAP. From the standpoints of envi- ronmental quality and financial risks, it seems appropn- ate to limit Assured Delivery capacity to the amount of firm surplus presently available in the Northwest for export sales. In a change from the 1987 draft policy, the ae E-14 LTLAP provides that Scheduling Utilities may use their individual Exhibit B amounts for sales or exchanges. The final LTLAP does not allocate the remaining 356 MW of Assured Delivery capacity among Scheduling Utilities. That amount will »%e available for exchange transactions of Scheduling Utilities on a first-come, first- served basis. We have reached agreement (or agreement in princi- ple) covering 341 MW of Assured Delivery service. Agreements include a 20-year 105 MW firm power sale from Montana Power Company to Los Angeles Depart- ment of Water and Power; a 41 MW firm power sale from Tacoma City Light to Western Area Power Administra- tion (WAPA); a 45 MW firm power sale from Longview Fibre/Cowlitz County Public Utility District to WAPA; and a 20-year 150 MW seasonal exchange between The Washington Water Power Company and Pacific Gas and Electric Company. Each of these agreements accommo- dates our lost revenue concerns differently. To allow for maximum use of the Intertie, a utility granted Assured Delivery may shape its firm power sale into the months of September through December by delivering up to 1.8 times its Exhibit B amount. During those fall months, spot market energy sales tu the South- west tend to be less than in the spring when the region’s hydroelectric dams are more often near or in a spilling condition. If a utility shapes Assured Delivery energy into the fall, less firm energy may be shaped into remain- ing months of the operating year so that the total energy delivered does not exceed its annual Exhibit B energy maximum for firm sales. hiatal E-15 BPA will also continue to work with Nonscheduling Utilities to provide the opportunity to sell the output of their generating resources over BPA’s Intertie capacity. Mitigation. Mitigation refers to conditions imposed on a utility for an Assured Delivery contract. Intertie Capac- ity not available to BPA because of Assured Delivery contracts executed between a Northwest utility and a Southwest utility can reduce BPA revenues and inhibit BPA’s ability to make its Treasury payments. During the operating year BPA often has power available to fully load the Intertie. Assured Delivery granted under these circumstances would reduce BPA’s revenues, thereby putting at risk our ability to meet our obligations to the Treasury. This fiscal concern is in potential conflict with the policy objective underlying the 800 MW of Assured Deliv- ery — assisting Northwest utilities in disposing of their surpluses by means of long-term firm power sales to the Southwest. Strong objection was received from our Prior- ity Firm Power customers to our absorbing the entire cost (lost revenues) of these transactions and the subsequent passing of the costs to them in increased rates. California and Northwest generating utilities generally tend to agree that some form of mitigation is due BPA. They question the level of compensation and what provisions for mitigation should be included in the LTLAP. The 1986 draft of the LTIAP allowed Assured Delivery without regard to the adverse impacts on BPA’s ability to sell firm power or nonfirm energy. Both the 1987 draft and the LTIAP impose mitigation upon utilities with Assured Delivery contracts. The mitigation provisions in the LTLAP provide only partial compensation for the revenue impacts resulting from transactions, but provide E-16 sufficient assurance that these transactions over the In- tertie will not harm our revenue recovery. It would be a false precision to claim that we could develop mitigation measures that offset dollar-for-dollar the losses projected in any 20-year study. Assumptions about annual rainfall, gas prices, aluminum prices, and load growth make this exercise judgmental. With this limitation in mind, the LTLAP incorporates the following mitigation provisions. One mitigation measure requires that during any hour in which prescheduled energy sales are made under Con- dition 1 and Condition 2 Formula Allocation procedures, a utility must deduct its Assured Delivery amount from its Formula Allocation amount. The total amount of Intertie access granted to each utility is equal to its Formula Allocation. If a utility's Assured Delivery amount is greater than its Formula Allocation, then that utility must purchase enough energy from BPA or, during Condition 1, other Northwest utilities to make up the difference. This mitigation measure will partially offset the spot-market revenues BPA will lose by granting Assured Delivery. Under the other mitigation measure, if BPA has in- voked Condition 1 or Condition 2 Formula Allocations, cash out provisions of exchange contracts become inoper- ative. Cash outs allow a Northwest utility to accept dollar payments from a Southwest utility in lieu of actual energy returns. Prohibiting these during Conditions 1 and 2 has the effect of increasing the north-to-south capability of the Intertie when energy is being returned and increasing the size of the market for BPA and Scheduling Utility sales. E-17 The draft LTLAP required energy returns under sea- sonal exchanges to the California/Oregon border (COB) or the Nevada/Oregon border (NOB). This was initially included in the mitigation provisions for seasonal ex- changes. However, BPA needs the certainty of available capacity resulting from return requirements at COB/NOB. For this reason, the final LTIAP includes this provision as a standard requirement for all exchanges rather than considering it a mitigation measure. The LTLAP also allows utilities the opportunity to negot.a*e individual packages of mitigation in addition to the LTLAP’s stated mitigation provisions. Such case-by- case mitigation packages could be a combination of the above mitigation provisions or could inciude beneficial arrangements for BPA that have not been addressed in this policy. Our main concern in any mitigation package is recovery of any spot-market revenue losses, but we will also be looking at the operational impacts of any proposal. Extraregional Access. Provisions in the 1987 draft for firm transactions by extraregional utilities required that the utility must provide some benefit to BPA, such as increased storage, improved system coordination or oper- ation, or other consideration of value. In addition, the utility must agree to the mitigation provisions of the policy. Canadian utilities were required to wait for access until after the Intertie was rated at 7900 MW. In reconsidering this provision we saw no reason for denying Canadian utilities access for firm transactions until after the Intertie is upgraded to 7900 MW if Cana- dian utilities are willing to provide increased coordination or other items of value. This provision of limiting Cana- dian access to after an upgrade of the Intertie has been deleted from the LTLAP. E-18 As with Formula Allocation, BPA anticipates that if the Free Trade Agreement is passed the distinction be- tween U.S. extraregional utilities and Canadian utilities will no longer exist. FISH AND WILDLIFE PROTECTION Protected Areas. The LTLAP prohibits Intertie access | for new hydro projects licensed within “protected areas’”’ — river reaches withdrawn from hydro development due ) to the presence of wildlife or anadromous and high-value | resident fish. BPA also has designated areas where we ; have determined that investments in habitat, hatchery, | passage, or other projects may result in the presence of | anadromous fish. The Northwest Power Planning Council (Council) has proposed a protected area program that covers the entire Northwest. BPA’s designations, how- ever, cover only the Columbia River basin. Our focus is on hydro developments which will frus- trate our investments made in the region to achieve the goals of the Council’s Fish and Wildlife Program. The LTLAP ensures that those expenditures and existing productive habitat will not be harmed by future hydro developments. BPA has designated protected areas by using information collected through the Council’s Hydro Assessment Study. Under the LTLAP, we will consider the Council’s final protected area program or any revisions the Council may include in the future. We will also consider appropriate state comprehensive river plans. The policy should effec- tively eliminate utilities’ fears that they never know with certainty whether a hydro resource will qualify, or con- tinue to qualify, for access to the Intertie. | E-19 The LTIAP does not necessarily prevent hydro devel- opment in protected areas. However, the protected area provisions will send an unambiguous, self-enforcing mes- sage to FERC, other regulators, and hydro developers that no Intertie access will be provided for projects constructed in areas of greatest concern to BPA and the Council. Enforcement. If a Scheduling Utility proceeds to ac- quire a license or purchase power from a hydro project developed in a protected area, BPA will reduce the amount of that utility’s power transmitted over the Inter- tie during Condition 1. Depending upon the size of the project, the reduction may affect both Assured Delivery and Formula Allocations. These reductions will take place regardless of whether power from the protected area project is actually transmitted on the Intertie. There is no need to trace power flows from a protected area resource. Projects not affected by the Policy. For all hydro projects not affected by BPA’s protected area designa- tions, BPA will intervene in FERC proceedings if we determine that projects — new or existing, inside or outside the Columbia Basin — pose significant threats to our fish and wildlife responsibilities. The provisions do not affect hydro projects licensed before the effective date of the policy. While we recognize @ potential for existing projects to harm BPA fish and wildlife investments, we do not believe there is sufficient evidence to indicate that those projects are presently operating contrary to the Council’s Fish and Wildlife Program or that the Council has been unable or unwilling to implement Program measures through the FERC pro- cess. Measures affecting existing projects in the Council’s Program are explicitly directed to FERC and state agen- cies for implementation. E-20 We have provided a limited procedure to provide access to the Intertie in the case of a project a developer believes will contribute to the Council’s Fish and Wildlife Pro- gram and BPA investments. However, our decision to provide access relies on a clear demonstration of the benefits and a regional consensus. Finally, the LTLAP creates a limited exception for Protected Area projects that an investor-owned utility might be forced to acquire under PURPA. To qualify, however, the affected utility must pursue all legal reme- dies available to avoid purchasing the Protected Area project output. | LONG-TERM INTERTIE ACCESS POLICY GOVERNING TRANSACTIONS OVER FEDERALLY OWNED PORTIONS OF THE PACIFIC NORTHWEST-PACIFIC SOUTHWEST INTERTIE U.S. DEPARTMENT OF ENERGY BONNEVILLE POWER ADMINISTRATION MAY 17, 1988 E-22 Table of Contents Section Page a0” ene eee rr ee reer ee E-23 ». Intertie Capacity Reserved for BPA........ E-28 8. Conditions for Intertie Access ...........-. E-28 4. Assured Delivery for Intertie Access ....... E-29 : 5. Formula Allocation ...........eee eee renee E-35 6. Access for Qualified Extraregional Resources E-38 7. Fish and Wildlife Protection .............. E-39 8. Other Enforcement Provisions ............. E-41 Exhibit A “Existing Agreements for Intertie Capacity” E-42 B “Intertie Capacity Available for Assured oS err rrerrrrrs eye ee ree eee eee E-43 C “Deptested AGGGS .occ csc ccvccececenteeess E-45 E-23 FINAL LONG-TERM INTERTIE ACCESS POLICY Section 1. Definitions 1. “Administrator” means the Administrator of Bonneville Power Administration (BPA) and is used interchangeably with BPA. 2. “Administrator's Power Marketing Program” re- fers to all marketing actions taken and policies developed to fulfill BPA’s statutory obligations. These actions and policies are based on exercises of authority to act, consis- tent with sound business principles, to recover revenue adequate to amortize investments in the Federal Colum- bia River power and transmission systems, while encour- aging diversified use of electric power at the lowest practical rates. In the Northwest, the Administrator's Power Marketing Program covers BPA’s obligations to provide an adequate, reliable, economical, efficient, and environmentally acceptable power supply, while preserv- ing public preference to Federal power. In the Southwest, the Administrator’s Power Marketing Program covers activities to market surplus Federal power at equitable prices, while preserving regional and public preference to Federal power, and to assist in marketing Northwest nonfederal power. 3. “Allocation” means the share of the Intertie Capac- ity made available for short-term sales of energy. 4. “Assured Delivery” means firm transmission ser- vice provided by BPA under a transmission contract to wheel power covered by a contract between a Scheduling Utility and a Southwest utility. Assured Delivery con- tracts may not exceed 20 years in duration. The service is interruptible only in the event of an uncontrollable force or a determination made pursuant to sections 7 or 8 of this policy. K-24 5. “Available Intertie Capacity” is defined as the phys- ically available capacity controlled by BPA, reduced by the capacity reserved under Section 2 of this policy, and the capacity necessary to satisfy Assured Delivery con- tracts not subject to operational mitigation requirements under this policy. 6. “BPA Resources” means Federal Columbia River Power System hydroelectric projcets; resources acquired by BPA under long-term contracts; and resources ac- quired pursuant to section 11(b)(6)(i) of the Federal Columbia River Transmission System Act. 7. “Exchange” refers to various types of transactions that take advantage of diversity between Northwest and Southwest loads through deliveries of firm power, at prespecified delivery rates, from North to South during the Southwest’s peak demands and returns of capacity and/or energy from South to North during other times. Transactions vary depending on the lag between deliv- eries and returns. A “naked capacity” transaction might require off-peak energy returns within 24 hours, whereas a seasonal exchange might call for firm power returns within 6 months. 8. “Extraregional Utilities” are generating utilities, or divisions thereof, that do not provide retail electric ser- vice and do not own or operate significant amounts of generating capacity in the Northwest. 9. “Formula Allocation” means the process by which Intertie Capacity made available for short-term sales of energy. 10. “Intertie’’ means the two 500-kv alternating cur- rent (AC) transmission lines and one 1000 kv direct current (DC) line, which extend from Oregon into Cali- fornia or Nevada, and any additions thereto identified by E-25 BPA as Pacific Northwest-Pacific Southwest Intertie facilities. 11. “Intertie Capacity” means the North to South transmission capacity of the Intertie controlled by BPA through ownership or contract; increased by power sched- uled South and North, decreased by loop flow, outages, and other factors that reduce transmission capacity; and further decreased by Pacific Power & Light Company’s schedules, under its scheduling rights at the Malin sub- station (BPA Contract Nos. DE-MS79-86BP92299 and DE-MS79-79BP90091). 12. “Mitigation” refers to the requirements imposed by BPA on a utility in return for an Assured Delivery contract. Mitigation helps offset operational and economic problems, attributable to a Scheduling Utility's firm power transaction, that inhibit BPA’s ability to generate revenues. The Mitigation measures specified in this policy must be included in all Assured Delivery contracts, un- less a scheduling utility either agrees to a specially designed charge or negotiates substitute measures with BPA on a case-by-case basis. 13. “Nonscheduling Utility’ means a _ nonfederai Northwest utility that owns a Qualified Northwest Re- source, but does not operate a generation control area within the Pacific Northwest. A Nonscheduling Utility requesting Intertie access for its resource must do so through the Scheduling utility (or BPA) in whose control area the resource is located. 14. “Pacific Northwest” (or Northwest’’) is defined in the Northwest Power Act, 16 U.S.C. § 839e, as the states of Oregon, Washington, and Idaho; the portion of Mon- tana west of the Continental Divide; portions of Nevada, Utah, and Wyoming within the Columbia River drainage E-26 basin; and any contiguous service territovies of rural electric cooperatives serving inside and outside the Pa- cific Northwest, not more than 75 air miles from the areas referred to above, that were served by BPA as of Decem- ber 1, 1980. 15. “Protected Area” means a stream reach within the Columbia River drainage basin specially pretected from hydroelectric development because of the presence of anadromous or high value resident fish, or wildlife. Pro- tected areas may also include stream reaches which could support anadromous fish if investments were made in habitat, hatcheries, passage, or other projects. 16. “Qualified Extraregional Resource” means: (a) a generating unit located outside the Northwest that was in commercial operation on the effective date of this policy. However, the term excludes portions of units covered as Qualified Northwest Resources. (b) after BPA has determined that the capacity of the Interties is rated at approximately 7,900 MW, all re- sources located outside of the Northwest, other than the portions of extraregional resources covered as Qualified Northwest Resources. 17. “Qualified Northwest Resource” excludes BPA Resources, but includes: (a) Resources located inside the Northwest that are in commercial operation as of the effective date of this policy. (b) Scheduling Utility extraregional generating re- sources dedicated to Northwest loads on the effective date of this policy. This term includes pro rata portions of Montana Power Company’s and Pacific Power and Light Company’s shares of the Colstrip No. 4 generating sta- ooo E-27 tion, based on the ratio of their respective regional loads to their respective total loads; and idaho Power Com- pany’s share of Valmy No. 2. (c) New regional resources of Scheduling utilities, except for hydroelectric resources located in Protected Areas. 18. “Resource” means an electric generating unit or stack of particular electric generating units identified to supply power or capacity for sale over the Intertie. 19. “Scheduling Utility’’ means the Northwest portion of a nonfederal utility that operates a generation control area within the Northwest, or any utility designated as a BPA “computed requirements customer.” The term ex- cludes Utah Power & Light Company, either as a sepa- rately owned company or as a division of another corporation, which has sufficient transmission capacity to the Southwest without access to the Federal Intertie. 20. “Seasonal Exchange’ means a transaction that takes advantage of seasonal diversity between Northwest and Southwest loads through transfers of firm power, at a prespecified delivery rate, from North to South during the Southwest’s summer load season and from South to North during the Northwest’s winter load season. Sea- sonal Exchanges may involve payments o° additional consideration to reflect the relative seasonal values of power throughout the western United States. Seasonal Exchange schedules of Northwest utilities will be re- ferred to as “deliveries,” and schedules of Southwest utilities will be referenced as “returns.” A Scheduling Utility must be able to support its summertime firm power deliveries with generating resources that are surplus to its Northwest requirements. The sum of a Scheduling utility’s energy resources for each month in which deliv- ——————— E-28 eries are made (with special concern for August) must exceed its corresponding Northwest loads by an amount sufficient to support the Seasonal Exchange. 21. “Section 9(i)(3) resource” means a Scheduling Utility resource that BPA has granted pricrity in receiv- ing BPA transmission, storage and load factoring ser- vices as defined in § 9(i) (3) of the Northwest Power Act. Section 2. Intertie Capacity Reserved for BPA The Administrator reserves for BPA’s use Intertie Capacity sufficient to: (a) transmit all of BPA’s surplus firm power and to serve other obligations, (b) perform obligations, including, but not limited to, the existing transmission contracts listed in Exhibit C, to the extent such obligations differ from the conditions specified in this policy, (ec) provide Assured Delivery service for transactions not subject to limits under Exhibit B to this policy, and (d) satisfy BPA firm obligations, that have not been prescheduled, by using unutilized portions of Formula Allocation amounts. Section 3. Conditions For Intertie Access (a) All Intertie access will be granted pursuant to the conditions and procedures of this policy, unless otherwise specified in the three existing BPA transmission con- tractsisted in Exhibit A. (b) BPA will provide Intertie access only for BPA Resources and the Qualified Northwest Resources of Scheduling Utilities, except to the extent that Qualified E-29 Extraregional Resources are permitted access under this policy. (c) BPA will provide Assured Delivery and allocate remaining Intertie Capacity when providing such access will not substantially interfere with operating limitations of the Federal system. Examples of these limitations, which reflect BPA’s obligation to operate in an economi- cal and reliable manner consistent with prudent utility practices, include: (1) The BPA Reliability Criteria and Standards, (2) Western Systems Coordinating Council mini- mum operating reliability criteria, (3) North American Electric Reliability Council Op- erating Committee minimum criteria for operat- ing reliability, and (4) coordinating agreements among BPA, schedul- ing utilities and other Federal agencies regard- ing resource and river operations. (d) Any utility that has contractual or ownership rights to Pacific Northwest-Pacific Southwest Intertie capacity or to other transmission lines to California or the Southwest market must fully utilize such capacity prior to receiving any access to BPA’s Intertie Capacity. If a Scheduling Utility with Intertie rights needs BPA Inter- tie Capacity to reach a particular Southwest utility, BPA will consider negotiated swaps of capacity to accommo- date such requests. Section 4. Assured Delivery for Intertie Access Subject to the limitations and other conditions in this section and in other sections of this policy, BPA has determined that it can provide limited Assured Delivery to Scheduling Utilities without causing substantial inter- E-30 ference with the Administrator's Power Marketing Program. (a) General Provisions (1) Existing Transmission Contracts. BPA will pro- vide Assured Delivery for the remaining terms of the firm power sale and Seasonal Exchange contracts identified in Exhibit C to this policy. (2) Utilities Owning Or Controlling Southwest Intercon- nections. Assured Delivery is intended primarily for Scheduling Utilities which lack interconnections with the Southwest. Except for transactions covered by sec- tion 4(b) of this policy, a utility with capacity on an intertie, through contract or ownership, must utilize all such capacity on a firm basis before receiving any As- sured Delivery. (3) Nature Of Transactions. BPA will not provide As- sured Delivery for transactions which a Scheduling Util- ity cannot demonstrate to be other than an advance arrangement to sell nonfirm energy. (4) Waiver of BPA Service Obligation. (A) Hydroelectric Resources. Assured Delivery con- tracts that facilitate the export disposition of Northwest hydroelectric energy shall provide, under 16 U.S.C. § 837b(d), for a reduction of BPA’s power sale contract obligation the Northwest utility, for the period of the disposition, equal to the amount of energy for which Assured Delivery is provided. (B) Thermal Resources. Assured Delivery contracts that facilitate the export disposition of Northwest ther- mal energy shall provide, under 16 U.S.C. § 839f(c), for a reduction of BPA’s power sale contract obligation the Northwest utility, for the period of the disposition, equal — iE cata E-31 to the amount of energy for which Assured Delivery is provided. Such reduction shall become effective at the time BPA determumes that it has reached energy load/resource balance, or at a date as specified in the Assured Delivery contract. (5) Exchange Contracts. Exchange contracts must specify that all return energy be scheduled to either the AC Intertie point of interconnection at the California- Oregon border (“COB”) or the DC Intertie point of interconnection at the Nevada-Oregon border (“NOB”). Exchange contracts must also specify prescheduled deter- minations of hourly energy returns. (6) Satisfying Requests For Assured Delivery. All rele- vant power contracts must be presented for review no later than the date on which a request for Assured Delivery is made. (b) New Transactions Not Subject To Capacity Limits (1) Joint Ventures. Joint ventures between BPA and utilities, such as firm displacement contracts, which allow BPA to increase its sales of surplus power qualify for Assured Delivery. (2) Sales in Lieu Of Exchanges. BPA may offer to satisfy Scheduling Utility demands for Seasonal Ex- changes by selling them incremental amounts of surplus firm power during winter months. Upon committing to purchase such incremental firm power at negotiated prices that reflect BPA’s lost opportunities for summer sales, a Scheduling Utility will qualify for Assured Deliv- ery (with mitigation) to wheel an equal amount of firm capacity and energy over the Intertie during summer months. (3) Conditions. A scheduling utility may request at any time the Assured Delivery of transactions identified E-32 in sections 4(b) (1) and 4(b) (2). Relevant contracts must be presented for review when Assured Delivery is re- quested. BPA will satisfy a request within 60 days after a Scheduling Utility has demonstrated satisfaction of the requirements of this policy. (ec) Transactions Subject to Capacity Limits Under This Policy (1) Maximum Amounts Of Assured Delivery. BPA will provide 800 MW of Assured Delivery for firm power sales and Exchanges identified in this policy. BPA will reas- sess the amount of Assured Delivery capacity when the 3d AC Intertie project is either completed or abandoned. Moreover, the 800 MW amount may be subject to some reduction if the DC Terminal Expansion project is not completed on schedule. (2) Exhibit B amounts. (A) Current mazimum. Each Scheduling Utility's maximum Assured Delivery amount for firm sales equals its average firm energy surplus, shown in Exhibit B to this policy. BPA will reserve capacity equal to each Scheduling utility’s Exhibit B allocation subject to sec- tion 4(c) (2) (D) below. Except for Montana Power Com- pany (MPC), Tacoma City Light, and Cowlitz County Public Utility District, Exhibit B represents projected Scheduling Utility surpluses for the 1988-89 operating year. In satisfaction of all obligations to MPC under Northwest Power Act section 9(i) (3), MPC’s Exhibit B amount is set at 105 MW to facilitate long-term sales of firm power from its share of the Colstrip No. 4 coal-fired generating station. Exhibit B amounts for Tacoma and Cowlitz are increased to accommodate existing firm power transactions. E-33 (B) Shaping. Firm power sales eligible for Assured Delivery may be shaped within the following ranges. During the months of September through December, a Scheduling utility may deliver firm energy at a rate up to 1.8 times its Exhibit B average firm surplus amount. During the months of January through August, a Sched- uling Utility may deliver firm energy at a rate no greater than 1.0 times its Exhibit B amount. However, total delivered energy may not exceed the Exhibit B annual firm energy maximum. (C) Other uses of Exhibit B amounts. BPA will not entertain Assured Delivery requests for firm power sales in excess of a utility's Exhibit B maximum. However, a Scheduling Utility may use any portion of its Exhibit B maximum, not used for firm power sales, for exchange transactions supported by Qualified Northwest Resources. (D) Future changes. BPA may, at its discretion, re- vise Exhibit B to reflect changes in the firm power surpluses of individual utilities; however, the Exhibit B average firm surplus total is not subject to increase. Any unutilized Assured Delivery amount will be revoked if, upon revision, a utility’s individuai Exhibit B amount has declined or if a utility has sold firm power to another utility seeking to increase its Exhibit B average firm surplus amount. A Scheduling utility may increase its individual Exhibit B amount by purchasing surplus firm power from BPA or any Scheduling Utility with an Exhibit B amount. (3) Other Capacity. The remaining capacity available for Assured Delivery under this policy is offered to Scheduling Utilities, on a first-come, first-served basis, for Exchange transactions supported by Qualified North- west Resources. When section 4(c)(2)(D) of this policy E-34 is implemented to reduce the Exhibit B maximum of any Scheduling Utility, the reduction will be added to the capacity made available under this provision. Any utility with an Exhibit B amount must exhaust such capacity before requesting Assured Delivery under this provision. (d) Mitigation (1) Operational Mitigation (A) Southbound deliveries. During any hour in which BPA has invoked Condition 1 or Condition 2 allocation procedures to preschedule energy deliveries, each utility’s Assured Delivery amount shall be deducted from its formula allocation to determine its share of energy sched- uled on the Intertie. If the remainder is negative for a given utility, then that utility must make up the difference by purchasing sufficient energy as follows: (i) during Condition 1 from BPA or any Schedul- ing Utility with a Formula Allocation during that hour; (ii) during Condition 2 from BPA, however, if BPA is not in the market the utility may purchase sufficient energy from any other utility. (3) Northbound returns. During any hour in which BPA has invoked Condition 1 or Condition 2 aliocation procedures, a utility may utilize the cash-out provisions of an Exchange contract only by reducing one-for-one the amount of North-to-South Intertie capacity otherwise available to it under this policy. The rate of cash out during any condition shall not exceed the rate at which the exchange return could have been scheduled. (2) Negotiated mitigation. A Scheduling Utility may also elect to negotiate with BPA on a case-by-case basis a package of mitigation measures involving mutually agree- E-35 able consideration of value commensurate with the service provided. Section 5 Formula Allocation (a) Limits On Intertie Capacity Available For Formula Ailecation. Generally, BPA will determine Intertie Ca- pacity available for Formula Allocations after first taking into account the amount of Intertie Capacity necessary to satisfy requirements of the Administrator’s Power Mar- keting Program, existing transmission contracts listed in Exhibit C, and Assured Delivery contracts executed by BPA pursuant to this policy. However, in determining Available Intertie Capacity during Condition 1, BPA will not consider the Assured Delivery contracts to the extent they are subject to operational mitigation requirements. BPA may reduce any allocation, if additional Intertie Capacity is required to minimize revenue losses associ- ated with actions taken to protect fish in the Columbia River drainage basin. (b) Protected Area Decrements. Except as provided in section 4(d) (2) (A) of this policy, BPA will reduce each Scheduling Utility’s allocation by any Protected Area decrement imposed pursuant to section 7(d). (ec) Allocation Methods. (1) Condition 1 (A) Until December 31, 1988. Intertie Capacity will be allocated pursuant to the Exportable Agreement (BPA Contract No. 14-03-73155), when applicable. (B) After December 31, 1988. Condition 1 will be in effect when the Federal hydro system is in spill or there is a likelihood of spill, as determined by BPA. Available E-36 Intertie capacity will be allocated pursuant to the follow- ing procedure: (i) Each hour, the maximum Condition 1 alloca- tions for BPA and each Scheduling Utility will be based on the ratio of their respective declarations to total declarations, multiplied by the Available Inter- tie Capacity. (ii) During Condition 1, whenever BPA is unable to utilize its fuil pro rata share of intertie usage BPA will take larger allocations on ensuing days until the difference in pro rata intertie usage is eliminated. (2) Condition 2 (A) When Condition 1 is not in effect, but BPA and Scheduling Utilities declare amounts of energy that ex- ceed available Intertie capacity, Formula Allocations for BPA and each Scheduling Utility will approximate, by hour, the ratio of each declaration to the sum of all declarations, multiplied by the available Intertie capacity. (B) If BPA sales drop below 75 percent of its alloca- tion during Condition 2, BPA may take larger allocations on ensuing days until the difference is eliminated. (3) Condition 3 When Condition 1 is not in effect and when the total surplus energy declared available by BPA and Schedul- ing Utilities is less than the total available Intertie Capac- ity, BPA and Scheduling Utilities’ allocations will equal their declarations. The remaining Intertie capacity will be made available first to U.S. Extraregional Utilities and then to other Extraregional Utilities. Section 3(d) of this policy shall not apply to Scheduling Utilities during Condition 3. E-37 (d) Formula Allocation Experiment. BPA is inter- ested in exploring the proposal that it cease making individual Formula Allocations to Scheduling Utilities under Conditions 2 and 3. However, BPA must work with Northwest and Southwest utilities to develop the informa- tion capability to accommodate a new scheduling system for nonfederal access. As soon as this can be accom- plished BPA will substitute the following provisions for section 5(c) on an 18-month experimental! basis: (1) Condition 1 Same as section 5(c) (1). (2) Condition 2 (A) When Condition | is not in effect, but BPA and Scheduling Utilities declare amounts of energy that ex- ceed available Intertie capacity, the Formula Allocation for BPA will approximate, by hour, the ratio of BPA’s declaration to the sum of all declarations, multiplied by the Available Intertie Capacity. The remaining capacity will be made available as a block to Scheduling Utilities. Section 5(c) (2) (B) of this policy shall apply. (3) Condition 3 When Condition 1 is not in effect and when the total surplus energy declared available by BPA and Schedul- ing Utilities is less than the total available Intertie Capac- ity, BPA’s allocation will equal its declaration. The remaining Intertie capacity will be made available, first, as a block to satisfy the declarations of Scheduling Utilities, second, to U.S. Extraregional Utilities, and third to other Extraregional Utilities. Section 3(d) of this policy shall not apply during Condition 3. (e) Data Collection and Evaluation. Commencing when this policy goes into effect and continuing during E-38 the course of the experiment described in section 5(d), BPA will collect information on the following topics relevant to future allocation procedures: (1) effect on BPA revenue of allocating to nonfederal utilities as a group rather than individually, (2) impairment of Intertie access for California utili- ties presently lacking ownership in the southern portion of the Intertie, (3) any loss of sales to BPA due to a failure to share unused capacity among California entities with ownership or contractual interests in the Intertie, (4) effects of the experiment on small Scheduling Utilities. During the course of the experiment, interested parties may submit written comments and recommendations on these issues. (f) Findings and conclusiohis. At least 30 days before the end of the experiment described in section 5(d), BPA shall publish a report of its findings on the experiment and its decision on whether section 5(d), with possible modification, should be continued as the permanent method of Formula Allocation. Section 6. Access for Qualified Extraregional Resources (a) Assured Delivery. Any request for Assured Deliv- ery of power from a Qualified Extraregional Resource would be granted only by contract which, in addition to the Mitigation measures specified in section 4(d), must include benefits to BPA such as increased storage, im- proved system coordination or operation, or other comstd- eration of value commensurate with the services provided. Proposed contracts would be evaluated bt BPA and reviewed publicly to determine whether they would cause E-39 substantial interference with the Administrator's Power Marketing Program. An environmental review would also be conducted. (b) Formula Allocation. Under Condition 3, energy from Qualified Extraregional Resources has access to the Intertie. In addition, BPA may provide Extraregional Utilities with Formula Allocation under other conditions, if the utility agrees by contract either to increased partici- pation in the Pacific Northwest’s coordinated planning and operation, or to provide other consideration of value, apart from the standard BPA wheeling rate, commensu- rate with the services provided. Section 7. Fish and Wildlife Protection (a) Purpose. New hydroelectric projects constructed in Protected Areas may substantially decrease the effec- tiveness of, or substantially increase the need for, expend- itures and other actions by BPA, under Northwest Power Act section 4(h), to protect, mitigate or enhance fish and wildlife resources. Intertie access will not be provided to facilitate the transmission of power generated by any new hydroelectric projects located in Protected Areas and licensed after the effective date of this policy. This provi- sion does not apply to added capacity at existing projects. (b) Effect. This section imposes automatic opera- tional limitations on a utility by reducing the amount of energy that can be scheduled over the Intertie, thereby increasing costs or reducing revenues for any utility owning or acquiring the output of a Protected Area hydroelectric resource. (c) Implementation. Protected Area designations for stream reaches in the Columbia River Basin are shown in Exhibit C to this policy. Exhibit C uses Environmental Protection Agency stream reach codes. Subject to review a E-40 and possible modification, BPA will consider the adoption of comprehensive state watershed management plans and a comprehensive protected area program developed by the Pacific Northwest Electric Power and Conservation Plan- ning Council subsequent to implementation of this policy. BPA will also consider revisions to Protected Area desig- nations if the Council’s Program is amended. (d) Enforcement. If a Scheduling Utility or Non- scheduling Utility owns, or acquires the output from, a hydroelectric project covered under the restrictions of section 7(a), BPA will reduce that utility’s Formula Allocation by either the nameplate rating of the project (in the case of ownership), or the amount of capacity acquired by contract. (e) Exceptions. (1) PURPA Projects. BPA will entertain requests that it not enforce the provisions of section 7 in situations where an investor-owned utility has been compelled to acquire the output of a Protected Area hydroelectric resource under section 210 of the Public Utilities Regula- tory Policies Act (PURPA). To qualify for this exception, the investor-owned utility must demonstrate: (A) that it has exercised all opportunities available under federal and state laws and regulations to decline to acquire the output of the Protected Area resource in question; (B) that it has petitioned its state regulatory author- ity(ies) to reduce the rate(s) established under PURPA for purchases from Protected Area resources in recogni- tion of the increased costs or reduced revenues caused by operation of section 7(c) of this policy; E-41 (C) that BPA was provided reasonable notice of all relevant regulatory and judicial proceedings to allow for timely intervention in such proceedings; and (D) after taking all of the foregoing steps and ex- hausting all reasonable opportunities for judicial review, that it was compelled to acquire the output of a Protected Area hydroelectric resource by final order of FERC or a state regulatory authority issued under PURPA. (2) Projects Contributing to Council’s Fish and Wildlife Program or BPA Investments. Access will be automati- cally denied for projects developed in protected areas unless BPA receives sufficient demonstration that a par- ticular project will provide benefits to existing or planned BPA fish and wildlife investments or the Council’s Pro- gram. BPA’s determination will be based on: (A) Information provided by the project developer, Federal and state fish and wildlife agencies, and tribes; or (B) action by the Pacific Northwest Power Planning Council. Section 8. Other Enforcement Provisions (a) Whenever the terms of this policy are not being met, BPA will inform the appropriate utility of the nature of the noncompliance and actions that may be taken to achieve compliance. If noncompliance is not corrected within a reasonable period, BPA may deny access for a resource and refuse to accept schedules. (b) Upon approval of the proposed U.S.-Canada Free Trade Agreement by the Canadian Parliament and the United States Congress, any and all distinctions made in this policy between Canadian and United States Extrare- gional Utilities shall terminate on the effective date of the Agreement. EXHIBIT A EXISTING AGREEMENTS FOR INTERTIE CAPACITY This is a list of existing BPA transmission contracts that were signed before the implementation of the NTLAP and will continue to receive Intertie access under the LTLAP. Utility BPA Contract No. Washington Water Power Company DE-MS79-81BP90185 07/01/91 Washington Water Power Company 14-03-791101 09/01/88 Western Area Power Administration DE-MS79-84BP91627 10/31/90 E-43 EXHIBIT B INTERTIE CAPACITY AVAILABLE FOR ASSURED DELIVERY BPA has reserved 800 MW of Intertie capacity to be available for nonfederal firm transactions. This capacity is allocated as follows: A. Average Firm Surplus Allocations: Average MW Utility Firm Surplus Chelan County PUD #1 10 Cowlitz County PUD #1 45(1) Douglas County PUD #1 0(2) Eugene Water and Electric Board 14 Grant County PUD #1 26 Seattle City Light 23 Snohomish County PUD #1 0 Tacoma City Light 41(3) Idaho Power Company 87 Montana Power Company 105 (4) Puget Sound Power and Light 0 Washington Water Power _93 444 NOTE: The Average Firm Surplus (AFS) is directly from the PNUCC Northwest Regional Forecast of March 1987 for ‘he periud 1988-89 except as noted below. It includes resources operational on the effective date of this policy. Export contracts are included as loads. Utilities may use their AFSS allocations for long term firm sales or for exchanges. Portland General Electric Company and Pacific Power & Light Company are not eligible for an AFS allocation because of their existing interconnections with the Southwest. (1) (4) E-44 Cowlitz Co. PUD’s AFS is the amount of their existing export of the Longview Fibre resource. Longview Fibre is considered to be a Federal resource in the Northwest Regional Forecast and is not included under Cowlitz. Douglas County PUD’s AFS is 2; but Douglas has previously requested to show zero. The amount displayed for Tacoma is the amount of their existing exports displayed .n the North- west Regional Forecast. Montana Power Company’s AF'S was increased from 80 MW to 105 MW in settlement of obligations under Northwest Power Act section 9(i) (3). B. Intertie Capacity Available for Seasonal Exchanges: The above allocations for sales of firm surplus may be used for exchanges. The remaining 356 MW of capacity is available on a first come-first serve basis for exchanges only under the terms of the LTLAP. If there is a decrease in a utility’s firm surplus and the utility does not have a contract for that amount, BPA will allocate the difference to capacity available for exchanges by revising this Ex- hibit B. E-45 EXHIBIT C PROTECTED AREAS Exhibit C corresponds to the Northwest Power Planning Council protected area designations within the Columbia Basin, as specified in the Columbia River Basin Fish and Wildlife Program. Stream reaches designated as pro- tected areas are identified by Environmental Protection Agency stream reach codes. Information about designa- tions are contained on hard copy computer printouts or computer diskette copies which are available to the public upon request. E-46 ADMINISTRATOR’S DECISION LONG-TERM INTERTIE ACCESS POLICY U.S. DEPARTMENT OF ENERGY BONNEVILLE POWER ADMINISTRATION MAY 17, 1988 E-47 ADMINISTRATOR'S DECISION TABLE OF CONTENTS Page _ Abbreviations Used in Decision................. E-52 PART ONE — INTRODUCTION ............... E-57 Section 1. Operation Of The Intertie.......... E-57 Section 2. Evolution Of The Intertie Access PU Nabe Wet ce cae trian siete eck steeds’ E-63 Section 3. Concepts And Terms In The LTIAP_ E-70 Section 4. Environmental Consequences ....... E-73 PART TWO—TRANSMISSION CAPACITY AVAILABLE FOR SPOT-MARKET TRANS- ACTIONS: “FORMULA ALLOCATION” ..... E-76 Section 1. Federal Capacity Needs ........... E-76 ISSUE NO. 1: Should the LTLAP accommo- date all BPA’s transactions on the Intertie, and make only the residual capacity available to nonfederal utilities (the ‘“Federal-first”’ Ce nina cokes ban cs bbe had dak 0d E-76 ISSUE NO. 2: How should BPA compensate for side effects of the Regional Preference Act that impair its ability to sell energy in i ii ee a wee ee E-88 ISSUE NO. 3: Should Federal allocations be increased to minimize revenue losses from emergency actions taken to protect fish? ... E-94 E-48 ISSUE NO. 4: How much flexibility should we incorporate into the criterion for implement- ieee Chateibtlens 27 vs ones 6 dic vcns wenversvcs E-95 ISSUE NO. 5: Should the LTLAP incorporate the ‘Hydro Cap” limit to increase alloca- tions for BPA and other predominantly hyro- based utilities during times of likely spill? E-100 Section 2. Allocations Of Capacity To NeowGediognl GERGIOD oc onc nscasensdeeceses cs E-105 ISSUE NO. 1: How should the policy differ- entiate between the spot-market Intertie ca- pacity requirements of Northwest and extraregional utilities?................6-. E-105 ISSUE NO. 2: Should the LTLAP continue the Condition 2 and 3 practice of allocating individual capacity shares to Scheduling i Peper rr wil twill the iad E-110 Rection 3. Geher TS ki cb ek dae eines E-137 ISSUE NO. 1: Should BPA renew efforts to establish share-the-savings pricing for spot- market transactions with Northwest and Cal- oo keane a aeye a 20) ya Se E-137 ISSUE NO. 2: Should utilities with unused contractual or ownership rights to non-BPA transmission facilities be allowed access to BPA’s portion of the Intertie regardless dur- eh PT ee eee E-143 ISSUE NO. 3: Should the LTLAP incorpo- rate a mechanism to dispatch the North- west’s coal-fired generating units on the basis of sulfur dioxide emissions?......... E-144 E-49 PART THREE — TRANSMISSION CAPACITY AVAILABLE FOR LONG-TERM FIRM TRANSACTIONS OF NONFEDERAL UTILI- TIES: “ASSURED DELIVERY” ............. E-148 Section 1. Total Intertie Capacity Made EEE Pe oy ee ee ee ee ee E-148 ISSUE NO. 1: How much Intertie capacity should BPA reserve for Assured Delivery Es GM 6d CEN USAR OO edd ba 00 6s E-148 ISSUE NO. 2: How should the 800 MW set aside for Assured Delivery be allocated by utility and by type of firm transaction? ....E-162 ISSUE NO. 3: Should the LTIAP resolve a controversy over alleged rights to firm Inter- tie wheeling of Montana Power Company’s share of the Colstrip No. 4 coal-fired generat- ial Sod kk i408 646-05 40k 0 0-0 E-171 ISSUE NO. 4: Should conservation be in- cluded among the resources eligible for In- tertie access under the LTIAP?........... E-174 ISSUE NO. 5: How will access for non- scheduling utilities and computed require- ments customers be provided under the ES a en a ee E-177 ISSUE NO. 6: Should BPA maintain provi- sions for joint ventures and, if so, should BPA make the provisions more detailed? ..E-178 E-50 Section 2. Conditions on Assured Delivery Ac- ISSUE NO. 1: Should the LTLAP require scheduling utilities to waive BPA’s obliga- tion to serve their loads in return for As- sured Delivery capacity to facilitate long- term export sales? ........... eee ee eens E-180 ISSUE NO. 2: Should utilities owing or con- trolling interconnections to the Southwest be required to utilize such capacity before re- questing Assured Delivery capacity from PS kcxdawawaccnnds \aenedewssnnnenins E-185 ISSUE NO. 3: How should existing Intertie wheeling contracts be treated under the RAPE avn ache Wh enas seco daseddasene E-193 ISSUE NO. 4: Is the requirement for return of seasonal exchanges at COB/NOB a nego- ISSUE NO. 5: What provisions for Assured Delivery will be made for extraregional utili- ties, including Canadian utilities, in the pol- PCT TT eT Te eT Te Ee Tit tte E-196 Section 3. Mitigating Adverse Revenue ImpavtsE-198 ISSUE NO. 1: Should the LTLAP include mitigation provisions to offset adverse reve- nue effects of Assured Delivery service? ...E-198 ISSUE NO. 2: What specific mitigation pro- visions should be included in the LTLAP?. . E-203 ISSUE NO. 3: Should BPA provide schedul- ing utilities with a mitigation charge alterna- rer ey ee ee ry rays ake E-209 E-51 Section 4. Canadian Treaty Power ........... E-211 ISSUE: Should the LTLAP make express pro- vision for Canadian Treaty power? ........ E-211 PART FOUR — FISH AND WILDLIFE PROVI- SIONS: “PROTECTED AREAS” ............. E-213 ISSUE NO. 1: Should we adopt the “pro- tected area” concept as a means of satisfying our fish and wildlife responsibilities? ...... E-213 ISSUE NO. 2: Should protected area desig- nations be restricted to the Columbia River ISSUE NO. 3: Shouid BPA eategorically deny access to all projects located in pro- eT I i ok 9 0 04 bd Wo kh oie ee a a E-225 ISSUE NO. 4: How should BPA coordinate provisions concerning protected areas with the Northwest Power Planning Council? .. . E-228 ISSUE NO. 5: Should the LAP fish and wild- life provisions apply to existing projects? . . E-231 ISSUE NO. 6: Should the LAP provide an exemption for PURPA projects? .......... E-237 ISSUE NO. 7: How should the protected area provision be enforced? .............. E-241 PART FIVE — OVERALL EFFECTS OF THE LONG-TERM INTERTIE ACCESS POLICY . . E-244 APPENDIX Side-by-side comparison of LTLAP and the “1987 draft policy” of December 15, 1987 Anglers APAC Basin BC Hydro Benton Coop Benton PUD Big Bend BLM BPA Canby CEC Chelan Clark COE Cowlitz CPUC CRITFC DSI EWEB Ferry Flyfishers Grant Harney ICP E-52 Abbreviations Used in Decision LIST OF COMMENTERS Southwest Washington Anglers Association of Public Agency Customers Basin Electric Power Coop British Columbia Hydro and Power Authority : Benton Rural Electric Assn. Benton County PUD #1 Big Bend Electric Coop Bureau of Land Management Bonneville Power Administration Canby Utility Board California Energy Commission Chelan County PUD #1 Clark County PUD U.S. Army Corps of Engineers Cowlitz County PUD California Public Utilities Commission Columbia River Intertribal Fish Commission Direct Service Industries Eugene Water and El tric Board Ferry County PUD #1 Clark-Skamania Flyfishers Grant County PUC #2 Harney Electric Coop InterCompany Pool IPUC IPC LADWP Mason Mid-Columbia MPC NCAC NCPA NGPU NIU NMFS NOAA NRDC NWPPC OPUC ORECA PG&E PGE PGP © PNGC PNUCC Port Angeles PP&L PPC PSP&L Ravalli E-53 Idaho Publie Utilities Commission Idaho Power Company Los Angeles Department of Water and Power Mason County PUD #3 Mid-Columbia PUD Montana Power Company National Conservation Act Coalition Northern California Power Agency Non-Generating Public Utilities Northwest Irrigation Utilities National Marine Fisheries Service National Oceanic and Atmospheric Administration National Resources Defense Council Northwest Power Planning Council Oregon Public Utilities Commission Oregon Rural Electric Cooperative Association Pacific Gas & Electric Company Portland General Electric Company Publie Generating Pool Pacific Northwest Generating Company Pacific Northwest Utilities Conference Committee Port Angeles City Light Pacific Power & Light Company Public Power Council Puget Sound Power & Light Company Ravalli County Electric Coop SCE SCL SDG&E Sierra Skagit SMUD TANC TCL Tillamook Umatilla UP&L Vernon Vigilante WAPA Wasco WPAG WPSC WUTC WWP AC aMW ASC BPA COTP CT E-54 Southern California Edison Company Seattle City Light San Diego Gas & Electric Sierra Club Skagit System Cooperative Sacramento Municipal Utility District Transmission Agency of Northern California Tacoma City Light Tillamook County PUD Umatilla Electric Coop Utah Power & Light Company City of Vernon, CA Vigilante Electric Coop Western Area Power Administration Northern Wasco County PUD Western Public Agencies Group Wyoming Public Service Commission Washington Utilities and Transportation Commission Washington Water Power Company OTHER ABBREVIATIONS — alternating current — average megawatts — Average System Cost — Bonneville Power Administration . — California-Oregon Transmission Project — combustion turbine E-55 DC — direct current DOE — Department of Energy DSI — direct-service industrial customer EIS — environmental impact statement FCRPS — Federal Columbia River Power System FERC — Federal Energy Regulatory Commission FY -— fiscal year LAP — Intertie Access Policy IDU EIS — Intertie Development and Use Environmental Impact Statement IOU -— investor-owned utility kV — kilovolt (one thousand volts) kWh — kilowatthour (one thousand watthours) LTIAP — Long-Term Intertie Access Policy MW — megawatt (one thousand kilowatts) NEPA — National Environmental Policy Act NTILAP — Near-Term Intertie Access Policy O&M — operations and maintenance OY — operating year PF — priority firm power (rate) PNW — Pacific Northwest PURPA — Public Utility Regulatory Policies Act WNP — Washington Public Power Supply System Nuclear Project This decision on the Long-Term Intertie Access Policy (LTLAP or policy) is divided into five parts. Part One is an Introduction, covering important background informa- tion on the Intertie and our access policies. Part Two resolves issues regarding “Formula Allocation” provi- sions for short-term energy transactions utilizing the E-56 Pacifie Northwest-Pacific Southwest Intertie. Part Three analyzes issues on “Assured Delivery” of long-term firm power transactions. Part Four discusses issues related to the LAP’s fish and wildlife provisions. Part Five sums up the entire decision by analyzing the effects of the LTLAP on eack group interested in the outcome of our decisions on Intertie access. Issues each are discussed in three steps. First, we explain our proposal in the 1987 draft LTLAP. Second, we summarize the comments received in the public comment process. Third, we discuss the points raised in comments and explain our decision. The citations to the record of this proceeding are of two forms. Written comments are cited using the form: com- menter, record citation, and comment page number. Cita- tions to the transcript appear as “Tr. ___...” E-57 PART.ONE INTRODUCTION Section 1. Operation Of The Intertie The Facility. Since its completion in 1968, the Intertie has served as the p}incipal means for transmitting sur- plus capacity and firm power ard nonfirm energy between the Pacific Northwest and California. This section briefly describes the Pacific Northwest-Pacifie Southwest Inter- tie and gives a picture of the complex nature of its operation. Legislation authorizing construction of an Intertie sys- tem focuses on two objectives.’ First, Congress sought to provide an additional market for BPA power, enabling us to increase revenues and repay the U.S. Treasury in a timely manner. BPA owes the Treasury $8 billion associated with capital invest- ments in the Federal Columbia River power generation and transmission systems. By transmitting surplus power and energy to California, we can obtain additional reve- nue to repay the Treasury in a timely manner. Second, the Intertie makes more efficient use of re- sources in the Northwest and California. When the North- west has surplus power during summer months, power generally can be sold to California more cheaply than California utilities can operate their thermal generation plants. When the Northwest has “peak” needs in winter for heating and California loads are lower, the Northwest can purchase power from California. Existing resources ean be used more efficiently, and both regions can avoid building generation to meet peak loads at some times of the year. In the Northwest, the Intertie consists of several higk- voltage transmission lines — two 500-kilovolt (kV) alter- 16 U.S.C. §837 (Northwest Preference Act) (1964). See also Depariment of Waler and Power v. BPA, 759 F.2d 684 (9th Cir. 1985) E-58 nating-current (AC) lines, a portion of a third 500-EV AC line, and one 1,000-kV direct-current (DC) line (see Figure 1). The AC lines extend about 945 miles from John Day Substation near John Day Dam on the Colum- bia River in Oregon to the Lugo Substation near Los Angeles. They interconnect with other transmission lines at eight points. The 846-mile DC line runs from the Celilo Station near The Dalles Dam, Oregon, to the Sylmar Station near Los Angeles. The DC line transmits power between the Northwest and Southern California. The present physical capability of the Intertie lines is approximately 5,200 MW — about 3,200 MW on the AC lines and 2,000 MW on the DC line. The terminals at both ends of the DC line are currently being upgraded, which will increase the line’s capacity by approximately 1,100 MW. There are also plans to increase the capability of the AC lines to approximately 4,800 MW. In the Northwest, the facilities of the AC Intertie are individually and jointly owned by BPA, PGE, and PP&L. BPA owns or controls nearly 80 percent of the Intertie capacity north of the Oregon border. BPA shares its Intertie capacity with nonfederal utilities for both spot-market and long- term transactions. Discussing the northern portion of the Intertie tells only half the story. California utilities constructed AC and DC lines to meet the lines constructed in the North- west. Capacity on the southern portion matches that of the northern portion. Four utilities — PG&E, SCE, LADWP, and SDG&E — own approximately 80 percent of the Intertie capacity south o:1 the Oregon border. The Operation. It is important to distinguish between two distinct levels of operation to understand the complex and integrated nature of the Intertie system. E-59 Existing Intertie System ame Existing AC interte me Exstng OC intene Chuo = \ \ \ \ oe ee \ L me um \ \ \ t “| 1 1 San Frencrsco Los Angetes E-60 The first level is the daily operation of the Intertie. The three northern owners and all other utilities using the Intertie must coordinate and cooperate in the operation of the Intertie. The northern portion of the Intertie connects with two other utility service territories. The Intertie can receive and dispatch energy at each of these interconnec- tions for sales over the facility. In the north, we serve as the central scheduler for transactions and deliveries of energy. In the south, PG&E is the scheduler for the AC line and SCE is the scheduler for the DC line. All utilities who use the Intertie are in close communication with the schedulers. A single spot- market sale requires two utilities to agree in advance on quantity, price, and timing; to arrange with the schedulers in advance of the delivery; and then to deliver and receive the energy at the appointed time. Frequently these scheduled deliveries change on a “real-time” basis due to changes in a utility's system operations. As scheduler for the northern portion of the Intertie, we employ people around the clock to coordinate these activities. The Intertie serves a variety of markets. Energy may flow in either direction depending on the conditions of supply and demand. Utilities purchase energy both on the spot market for short periods of time and on a long-term basis. Utilities exchange energy on a daily, weekly, monthly, or seasonal basis. For instance, a Southwest utility may receive Northwest energy in the summer to meet its peak cooling load and return it to a Northwest utility in the winter to meet its peak heating load. The Northwest with its large hydroelectric and storage capa- bility is well equipped to meet the peaking capacity requirements of California. With this type of transaction a California utility purchases the right to demand energy E-61 over the Intertie if it needs it. In critically low water years, Northwest utilities can rely on Southwest utilities for similar needs. The second level of operation is contractual. The existing rights to the Intertie are based on ownership of facilities. On the northern portion, BPA owns the DC Intertie and the majority of facilities in the two AC lines. PGE owns a segment of the existing two-line AC Intertie and has contractual rights to 25 percent of the capacity produced by those two lines. Our agreement with PGE expires this year; BPA and PGE are currently negotiat- ing a replacement agreement. PP&L and BPA have executed an agreement that provides PP&L a firm right to 300 MW of capacity for delivery to California at the Malin substation. This right will increase if the AC systen is upgraded. We received the right to utilize PP&L’s facilities for Intertie deliv- eries and the right to participate with PP&L in construc- tion of a 500-kV line from Alvey substation to Meridian substation, if we determine that would be the best plan-of- service for increasing capacity in the Northwest to accom- modate the California-Oregon Transmission Project for upgrading AC Intertie capability in California. BPA’s agreement with PP&L expires in 2016. In addition, we have a number of agreements with PGE and PP&L addressing construction and operation and maintenance of Intertie facilities. Construction of the third AC line in the Northwest would add another layer of contract and ownership rights to the Intertie system, as would nonfederal participation in the third AC project. We have agreements with other Northwest utilities for use of BPA’s capacity on the Intertie and one agreement | E-62 with an extraregional utility, Basin Electric Cooperative in North Dakota. These agreements consist of long-term contracts for wheeling over the Federal portion of the Intertie. Prevalence of this type of contract will increase with adoption of the LTLAP. Competing Demands. The Intertie is a resource that generates hundreds of millions of dollars per year of revenues and that eliminates the need for new resources, particularly in the Southwest. Generating utilities in the Northwest and California have access for firm and spot- market sales. It is not surprising that these utilities compete for access rights to this limited resource. If the only demand on Intertie use came from utilities with surplus power to sell, the answers to the issues involved in developing a reasonable access policy might be more clear. However, other groups have placed demands on how and for what purpose the Intertie is used. One group is BPA's full requirements customers, which in- clude nongenerating public utilities and direct-service industrial customers, primarily aluminum smelters. They have consistently demanded a policy that would allow BPA to use the Intertie in such a manner as to maximize BPA revenues from sales of BPA’s surplus power. Environmental groups and fish and wildlife organiza- tions also have stated their preference for how the Inter- tie should be used. They have focused on implementing a policy which would have no adverse impact on fish and wildlife resources in the Northwest. Environmentalists support a policy which would prevent hydro development on rivers and streams in the Northwest, no matter how economically rewarding for developers. California utilities seek a policy which provides the maximum amount of Northwest energy at the lowest cost. E-63 They would like to rely on inexpensive, abundant North- west energy to meet their future load growth by means of either firm purchases or exchanges. Finally, BPA has demands of its own, based on the objectives specified in the enabling legislation for con- struction of the Intertie. The LTIAP must be structured tc assist us in repaying the $8 billion Treasury investment in the Federal power and transmission systems. Further- more, we do not want to encourage hydro development that could jeopardize our $120 million investment in fish and wildlife protection. Section 2. Evolution Of The Intertie Access Policy Interim IAP. Before adopting an Intertie access pol- icy, we were often unable to make the sales we wished due to the requirements of the Northwest Regional Preference Act, 16 U.S.C. § 837, et seq. Under this law we must announce our price to Northwest utilities prior to selling energy out of the region, which allows those utilities, our competitors, to underbid our price when they make sales to California. This situation was exacerbated by the restricted market in California, where there are relatively few buyers be- cause ownership of the Intertie is limited. Consequently, insufficient competition has existed on the southern end to balance the ‘ownward pressure on prices in the North- west. As we lost sales, our reservoirs would rise, hasten- ing the time when we would have to implement the Exportable Agreement (including the very low prices which at that time were tied to the Agreement). Although we were assured of sales under the Exportable Agree- ment, the prices we obtained were much lower than we otherwise would have received. | E-64 — The unexpected power surplus in the Northwest and Canada that materialized in the early 1980s caused us to review our use of the Federal share of the Intertie. BPA, as well as many of the generating utilities in the North- west, suddenly had a large firm power surplus. This was also the case for British Columbia Hydro and Power Authority (BC Hydro) and utilities as far away as North Dakota. All were hoping to sell their surplus in the Southwest over available Federal Intertie capacity. At the same time, BPA finances took a downturn due to (1) costs imposed by the Northwest Power Act for con- servation, fish and wildlife, the residential exchange sub- sidy program, and other Congressional goals; (2) decisions relating to the Washington Public Power Sup- ply System nuclear plants; (3) direct-service industrial customer (DSI) aluminum plant shutdowns and closures; and (4) an economic recession in the Northwest. BPA needed to take fuller advantage of its own transmission lines to market surplus power at fully allocated cost. We began to develop an Intertie access policy in the summer of 1983 with a public notice and request for comment. The purpose of the policy would be to “guide [BPA’s] response-to requests from nonfederal parties for use of [our] Intertie capacity, within the context of existing contractual obligations.” In early 1984, we pub- lished a paper discussing the major issues on Intertie access that had been identified to that point. In July of 1984, we proposed an Intertim Near-Term Intertie Access Policy (Interim LAP) that would be in effect while a long-term policy was being developed. We held public meetings and technical sessions on the propo- sal. In September of 1984, BPA implemented its interim policy. We expected that the Interim LAP woald be in effect for approximately six months pending further study E-65 of the issues. The policy responded both to increased nonfederal demand for access to the Intertie and a wors- ening BPA financial outlook. We decided to strike a middle ground among all of these needs. Our first concern was to retain sufficient Federal Intertie capacity for our own use to aid us in meeting our costs, including our Treasury payments. This required that BPA have access to the California market at all times to sell significant amounts of surplus firm power and nonfirm energy. Our second concern was to provide the opportunity for Northwest utilities to sell their own firm and nonfirm surpluses to California buyers. This was important for economic as well as legal reasons. With respect to Canadian and other extraregional utilities, we took the position that their needs were to be met last. The Interim LAP provided BPA and each Northwest generating utility with long-term access equal to their respective surplus firm power — this number could not be increased by new construction. Only firm sales were allowed. No new capacity-energy exchanges, capacity sales, or seasonal exchanges were allowed. No firm capac- ity was reserved for extraregional entities. Short-term capacity was made available on an hourly basis for BPA and each Northwest generating utility according to “Formula Allocation.” Allocations were made on a pro-rata basis based on each entity’s declara- tions of available surplus energy for sale. Entities could not transfer their allocations among themselves. Extrare- gional entities would be granted hourly access only when all needs of Northwest entities had been satisfied. Under the Interim LAP we were unable to make com- mitments for long-term power sales because of require- ments imposed by the National Environmental Policy E-66 Act. We provided the opportunity to make short-term firm arrangements only until July 1986. We also limited re- sources eligible for export to those in operation, removing incentive to construct new resources potentially damag- ing to the environment. The Interim LAP faced judicial review in Department of Water and Power v. BPA, 759 F.2d 684 (9th Cir. 1985). The Department alleged that (1) BPA could reserve only enough capacity on the Intertie to deliver existing sales; (2) BPA could not interfere with competition by allocat- ing shares of the Intertie on an hourly basis; and (3) BPA eould not discriminate against Canadian access to the Intertie. In its opinion, the Ninth Circuit upheld BPA on all points. The court held that (1) Congress intended that we have first priority on the Intertie for our existing and projected sales; (2) Congress did not intend for BPA to compete with other utilities for access to the Intertie and therefore BPA could allocate Intertie capacity among itself and Northwest utilities in a nondiscriminatory man- ner; and (3) BPA was required to provide access to U.S. extraregional utilities before providing access to Cana- dian power. Near Term IAP. In January 1985, we released a draft “Near-Term Intertie Access Policy” (NTLAP) for public comment. During the spring of 1985, the existing Interim LAP was extended twice while BPA prepared the final near-term policy. In May 1985, after completing an environmental assess- ment, BPA issued the NTLAP. In all but minor ways, it was identical to the Interim LAP. The short-term nature of the policy was based on the need to conduct extensive environmental analysis of providing for long-term firm E-67 transmission for Federal and nonfederal resources. We consequently initiated an environmental impact state- ment on alternative long-term policies. In establishing the policy, we stated that the Interim LAP had achieved the primary goal of assuring BPA access to the California market at prices based on our fully allocated costs. Though prices for Northwest nonfederal power had remained relatively stable under the Interim LAP, we found that prices for BPA’s surplus power had increased to the levels paid by California buyers for other Northwest power. Overall, Northwest power remained competitive with other power — available to California. The California Energy Commission and the California Public Utilities Commission challenged the Near Term LAP. Petitioners alleged that: (1) the NTLAP was a rate established without the process required under section 7 of the Northwest Power Act; (2) basing the NTIAP on BPA’s financial needs was arbitrary and capricious; (3) BPA was unlawfully discriminating against extraregional utilities; (4) the NTLAP failed to conform to antitrust policy; and (5) BPA unlawfully excluded new generating resources from Intertie access. On November 6, 1987, the Ninth Circuit again upheld our policy against legal challenge. The court held that: (1) the NTLAP was not a rate; (2) our financial rationale for adopting the policy was reasonable; (3) BPA and Northwest utilities have priority access over extrare- -gional utilities; (4) our balance of antitrust policy with other requirements was sufficient, although the court suggested that BPA review and consider the CEC alter- native for Formula Allocation in the development of its LTLAP; and (5) exclusion of new generating resources from the Intertie for environmental reasons was justified. E-68 California Energy Commission v. BPA, 831 F.2d 1467 (9th Cir. 1987). Long-Term IAP. Public involvement in the develop- ment of the LTLAP has been extensive. During the winter of 1985-86, we held several public meetings on the topics of long-term wheeling, nonfederal subscription rights to the Intertie, and access for extraregional resources. In March 1986, we issued a “Discussion Paper of Major Issues in the Development of the Draft Long-Term Inter- tie Access Policy.” In October of 1986, we issued our first propesed LTLAP and our draft “Intertie Development and Use Environ- mental Impact Statement” (IDU EIS) for public review and comment. The proposed LTLAP differed from the NTLAP in the following significant ways: 1. Long-term (20-year) firm wheeling (Assured De- livery) contracts; to Increased procedural requirements and harsher remedies for hydroelectric resources destructive of fish resources; 3. A “Hydro Cap” for spot-market allocations dur- ing “Condition 1” to ensure that utilities with hydro resources, particularly BPA, would have sufficient access to the Intertie during high water conditions; 4. Access for new resources necessary to support long-term firm transactions over the Intertie; 5. A requirement that noufederal Intertie owners use their own capacity before making demands for access to the Federal Intertie; 6. Access for resources entitled to priomty under Northwest Power Act section 9(i) (3); 7. E-69 A requirement that utilities exporting firm energy either commit to BPA service to meet their load growth or waive BPA’s obligation to provide such service. Extensive written comments were received on this pro- posal. During the summer of 1987, the Administrator held a series of face-to-face meetings with utility executives and interest groups for a frank discussion of the issues. Based on these comments and discussions, we issued a second draft LTLAP on December 15, 1987. Changes from the October 1986 craft were intended to provide greater specificity and a wider variety of transactions for pur- poses of greater planning certainty and enhanced revenue protection to BPA. The revised proposal contained the following changes: 1. to 3. A near doubling of the amount of Intertie capac- ity set aside for nonfederal utilities by providing 440 MW for seasonal exchanges; . Additional capacity for long-term transactions if they involve a joint venture with BPA; “Mitigation” requirements on firm transactions to reduce adverse impacts on our revenues result- ing from providing long-term firm Intertie capac- ity to nonfederal utilities; Allocation under Condition 1 based on the size of the market rather than the amount of available Intertie capacity; A statement that BPA would change the method of allocating short-term capacity to nonfederal utilities during Conditions 2 and 3 when the third AC Intertie was constructed; _ E-70 6. Prohibition of the transmission of the output of new hydroelectric projects located in “protected areas” within the Columbia River Basin. Since releasing this “revised draft” policy last Decem- ber, we have used a combination of formal and informal processes to better explain our proposal and better under- stand the positions of others. As a government agency, we are required to conduct a structured record-building pro- cess. At the suggestion of the California Energy Commis- sion and the California Public Utilities Commission, we used a mutually agreeable moderator during four public sessions to ensure that we heard every point of view. Since December, the formal process has yielded over 3,000 pages of transcript and written comments, which we have reflected in our decision. A total of 149 written comments were received on the draft policy. However, we did not stop there. Our project manager and staff have spoken informally to each utility and group expressing an interest in the policy. Section 3. Concepts And Terms In The LTIAP This section briefly discusses the provisions in the Long Term Intertie Access Policy and introduces some of the technical terms and concepts in the policy. Assured Delivery means long-term firm contracts for delivery of power over the Intertie. The long-term com- modity market between the two regions historically has been underdeveloped. The Interim and Near Term access policies did not provide for such transactions. Permitting long-term energy sales and exchanges can allow utilities to take advantage of the regional diversities between the Northwest and California. This will decrease the cost of E-71 power for both regions and defer future resource construction. A Scheduling Utility is the Northwest portion of a nonfederal utility that operates a generation control area within the Northwest, or any utility designated as a BPA “computed requirements customer.” The LTIAP will pro- vide 800 MW of Intertie capacity to Scheduling Utilities for Assured Delivery service. This amount may be in- ereased after the proposed third AC transmission line is completed. Of the 800 MW made available for Assured Delivery service, 444 MW is reserved for utilities with a firm power surplus for any type of transaction up to each utility’s total firm power surplus as shown in a utility’s Exhibit B. A utility’s Exhibit B as set in the Policy cannot increase. The remainder of the 800 MW is available to all Schedul- ing Utilities for any type of long-term energy transaction on a first-come, first-served basis. Utilities which own or control transmission lines of their own to California may receive access on the Federal portion of the Intertie after using their own capacity first. This provision attempts to distribute equally the benefits of the inter-regional transmission service. Mitigation means compensatory requirements imposed on a utility in return for an Assured Delivery contract. Mitigation helps offset operational and economic problems attributable to a Scheduling Utility’s firm power transaction that inhibit BPA’s ability to generate reve- nues. The LTLAP allows utilities the flexibility to negoti- ate, contract-specific mitigation measures or to choose the “generic” mitigation measures outlined in the Policy. Formula Allocation means the Intertie capacity made available to a particular utility for short-term sales of E-72 energy on the spot-market. This is the other important energy commodity market the Intertie serves in addition to long-term sales. Due to varying water and weather conditions, hydro-based Northwest utilities and BPA often have surplus energy to sell on the spot-market. If this energy goes unsold it may be spilled over dams, wasting the energy potential. Northwest utilities and BPA also use this market for selling surplus firm power on a short-term basis. Utilities in California have short- term needs that are met by the spot-market. Historically, the Intertie has been used mainly to serve this market. Billions of dollars of benefits have flowed between the regions since the completion of the Intertie in 1968. BPA has provided a methodology for allocating the remainder of the Intertie capacity after first providing for BPA firm contracts and Assured Delivery. This methodol- ogy varies with three differing conditions on the Intertie. BPA declares Condition 1 when the Federal Columbia River Power System (FCRPS) is in likelihood of spill. Condition 2 is when the FCRPS is not likely to spill but the supply of declared surplus energy in the Northwest exceeds the capacity of the Intertie. Finally, Condition 3 is when the supply of declared surplus energy in the Northwest is less than the capacity of the Intertie. During Condition 1 it is critical to provide sufficient Intertie access to both BPA and Northwest utilities in order to avoid unnecessary waste of hydroelectric re- sources. During spill or likelihood of spill conditions the amount of potential generation far exceeds the capacity of the Intertie. Consequently, Condition 1 reserves specific Intertie shares for utilities with energy to se#. Condi- tions 2 and 3 are more competitive, relying more on the marketplace to determine which nonfederal utility re- ceives access to the facility. E-73 Protection of fish and wildlife is an important part of this policy. BPA is committed to preserve and enhance its programs and investments for fish and wildlife in the Columbia River Basin. The LTLAP adopts the Protected Area concept first proposed by the Northwest Power Planning Council’s staff. The LTLAP prohibits Intertie access to resources developed in river and stream reaches within the Columbia River Basin designated by BPA as Prot [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_1635%3A2. Public record. Not legal advice.