# Appendix — California Energy Resources Conservation & Development Commission v. Bonneville Power Administration

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1988
- **Citation:** 488 U.S. 818

## Text

87-183 5 9) Supreme Court, U.S.

FILED
No. MAY 4 we

IN THE | CLERK

~

Supreme Court of the United States
OCTOBER TERM, 1987

CALIFORNIA ENERGY RESOURCES CONSERVATION
AND DEVELOPMENT COMMISSION, Petitioner,

vs.

BONNEVILLE POWER ADMINISTRATION; JAMES J. JURA,
as Administrator; JOHN S, HERRINGTON, as Secretary of
the Department of Energy of the United States of America;

and the UNITED STATES OF AMERICA, Respondents.

CALIFORNIA PUBLIC UTILITIES COMMISSION, Petitioner,

vs.

BONNEVILLE POWER ADMINISTRATION; JAMES J, JURA,
as Administrator; JOHN S, HERRINGTON, as Secretary of
the Department of Energy of the United States of America;

and the UNITED STATES OF AMERICA, Respondents.

APPENDIX TO PETITIONS FOR A WRIT OF CERTIORARI

JANICE E. KERR* WILLIAM M. CHAMBERLAIN*

J. CALVIN SIMPSON General Counsel

PETER G. FAIRCHILD JONATHAN BLEES

CALIFORNIA PUBLIC Deputy General Counsel

UTILITIES COMMISSION CALIFORNIA ENERGY

50S Van Ness Avenue COMMISSION

San Francisco, California 94102 1516 Ninth Street, MS-14

(415) 557-2786 Sacramento, California 95814

*Counsel of Record for (916) 324-3237

Petitioner CPUC *Counsel of Record for
Petitioner CEC

May 4, 1988 REX E. LEE

SIDLEY & AUSTIN
1722 “Eye” Street, N.W.
Washington, D.C. 20006
(202) 429-4266

Publishing and Graphic Electronic Services, Inc. (PAGES) / (213) 474-7855

— | —

APPENDIX

TABLE OF CONTENTS
Page

APPENDIX A — Opinion of the United
States Court of Appeals for the Ninth
Circuit in California Energy Resources
Conservation and Development
Commission v. Bonneville Power
Administration, et al, Nos. 84-7836, 85-
7430, 84-7838, and 85-7470,
oa ec secmabsdnncsuveocens Al

APPENDIX B — Opinion of the United
States Court of Appeals for the Ninth
Circuit in Department of Water and
Power of the City of Los Angeles vy.
Bonneville Power Administration, No. 84-
TR PE Fs BPM acacia iaaio estan sense saceesceces. Bl

APPENDIX C — Order of the United
States Court of Appeals for the Ninth
Circuit denying petition for rehearing
and rejecting suggestion for rehearing
en banc in California Energy Resources
Conservation and Development
Commission v. Bonneville Power
Administration, et al, Nos. 84-7836, 85-
7430, 84-7838, and 85-7470, filed
I, FO i sctdineccestebiecsninsnseriacecccressccses Cl

APPENDIX D — Bonneville Power
Administration, Near Term Intertie
Access Policy (49 Federal Register
QRZ, TOPE Fe FT ceiacatncncsssnrssscescies. D1

APPENDIX E — Bonneville Power
Administration, Near Term Intertie
Access Policy, Administrator’s Record
of Decision, September 1984 ...... ee El

APPENDIX F — Bonneville Power
Administration, Draft Proposal of Near
Term Intertie Access Policy (February
1 DBS) ciccisnnssssinschcilbidindcceaea neat iacisbiacnesuen Fl

APPENDIX G — Bonneville Power
Administration, Near Term Intertie
Access Policy (50 Federal Register
26GZT, FOG BR Tee mdicaeeeimactenistgnecsicccses Gl

APPENDIX H — Bonneville Power
Administration, Near Term Intertie
Access Policy, Record of Decision, May
DGS .ccckcicchccssmscoacteseieeseaneeneee ee anmatiersestes Hl

APPENDIX I — Bonneville Power
Adminis*ration, Proposed Long Term
Intertie Access Policy, October 1986 ............ I]

APPENDIX J — Bonneville Power
Administration, Revised Draft Long
Term Intertie Access Policy, December
GOT .cxcunssscecnstonnnnnncensiinaliiniennin nian adia cat attaiccens Jl

APPENDIX K —— GGaeentae cecssccsstiissssstssissiecicicass. Kl

Section 6 of the Act of August 31, 1964
(Sometimes referred to as_ the
“Regional Preference Act’’), 16 U.S.C.
BES 70. xcesssssennciastiattinltensanbopaaasiatveisienss Kl

Section 6 of the Federal Columbia River
Transmission System Act of 1974, 16
U.S.C. QOBGR nadine saisthesteiedecedbartsantitancecs Kl

EB Rr A et ne Sete

Pe Ee ee es

—ili—

Section 2(b) of the Bonneville Project Act
OE FF, TO Base) cnccnsessnssccosccecee K2

Sections l(c) and (d) and 2 of the Act of
August 31, 1964 (sometimes referred
to as the “Regional Preference Act’’),
16 U.S.C. §§837(c) and 837(d) and

ER caebdlaknietcaabtaicdsdéuibndenundinssentcerinnernccnesee K2
Section 5 of the Flood Control Act of 1944,

ee res RIN cticubicehenthendctencacansnnecsiiasoones K3
Section 4(a) of the Bonneville Project Act

OF 1937, 16 U.S.C. GESZC(O) ......cccoccrroccedes K4

Section 7(k) of the Pacific Northwest
Electric Power Planning and Conser-
vation Act, 16 U.S.C. § 839e(k) ............006 K5

APPENDIX L — Excerpt from Pacific Gas
and Electric Co, FERC Docket E-7777-
000, Initial Decision, 26 FERC (CCH)
163,048 p. 65,178, 65,195-202 (1984) ............ Ll

APPENDIX M — Contract No. 14-03-73155
(the “Exportable Energy Agreement”),
between the Bonneville Power
Administration and 14 other signatories,
alll lcctiiemsbinnessecceccense Ml

APPENDIX N — Letter from James L.
Jones, Assistant BPA Administrator for
Power and Resources Management, to
Exportable Energy Agreement
Signatories, August 20, 1984 ..........eceeseseeees N1

APPENDIX A

pee es i

=

pone The Exportable Agreement allocates
Intertie capacity among competing producers during
times of potential spillover by permitting each
Northwest utility to sell a pro rata portion of its
surplus power to California purchasers and to transmit
that power over the Intertie until Intertie capacity has
been reached. When the Exportable Agreement
triggers an allocation of scarce Intertie capacity,
nonregional producers (i.e, electricity producers in
Canada) are precluded from using the Intertie. That

5 Agreement Executed by the United States of America
Department of the Interior by and through the Bonneville Power
Administrator and Utilities in the Pacific Northwest (BPA
Contract No. 14-03-73155, January 13, 1969).

_—

agreement was, until the policy which is the subject of
this litigation, the only means of allocating Intertie
Capacity. |

In the past, when river flows did not threaten a
spillover condition, BPA did not regulate Intertie
access. Instead, BPA allowed access to the Intertie (up
to its maximum capacity) to both Northwest and
Canadian utilities. Market forces determined how
much energy each Northwest or Canadian utility could
sell to purchasers in California. If Canadian utilities
offered the most attractive price to California
purchasers, for example, those utilities were permitted
to use potentially all Intertie capacity, at the exclusion
of Northwest utilities which were offering less
attractive prices. Canadian producers as a group have
been the second largest user of Intertie capacity, after
BPA itself.

There are several different ways by which California
utilities purchase Northwest power. The first, known
as a bilateral purchase, is a spot-market purchase of
electricity. After the seller and purchaser agree upon a
price, quantity and duration, the energy is “wheeled”
over the Intertie directly from the producer to the
purchaser.° Wheeling agreements provide a significant

© Wheeling is the procedure by which the owner of transmission
lines transmits electricity produced by another party for a specified
charge. See M.C. Blumm, The Northwest’s Hydroelectric Heritage:
Prologue to the Pacific Northwest Electric Power Planning and
Conservation Act, 58 Wash.L.Rev. 175, 212-13 (1982). While the
statutory authority for BPA wheeling originally was doubtful,
wheeling has long been a BPA practice. See BPA, Columbia River
Power for the People: A History of Policies of the Bonneville
Power Administration 201-07 (1981); Columbia River Act, 16
US.C.§ 838d.

=

percentage of the energy needs of some California
utilities including the City.’

The second major power sale arrangement is the
exchange agreement. An exchange agreement is a
reservation by a purchaser to borrow electricity which
is later returned to the producer. A purchaser reserves
capacity on the Intertie to accommodate the electricity
it needs to borrow (usually for peak daily usage), and
reserves capacity to return the same amount of
electricity at a later time (often the same day) when its
own generation capacity is not being fully used.
Because this energy transaction is used to accommo-
date peak electricity demands, the arrangement is
known as a peaking return exchange agreement. The
energy so transmitted is known as obligation energy.
Because the Intertie can be used for transmitting
electricity either to the north or to the south, the
Intertie can be used for both ends of the transaction:
the borrowing of electricity during peak times by
California utilities and the return of electricity to
Northwest utilities during California’s off-peak hours.

The City and BPA have had a long-standing
exchange agreement. Because market conditions in
recent years have made Canadian power very
attractive, however, the City has been satisfying its
obligation to return borrowed energy by purchasing
electricity from British Columbia Hydro Authority and
having that electricity returned to BPA at the British

7 Such agreements help California utility entities avoid the cost
of building expensive generating plants to accommodate demand
which arises only during peak daily usage. Of course, Northwest
utilities also benefit from the sale of electricity which might
otherwise be wasted. See generally D.W. Meek, 13 Environmental
Law 841.

=

Columbia — Washington border. Consequently, the
Intertie has been used by the City to borrow BPA
power but not to return the obligation energy. BPA and
the City have an ongoing dispute over whether this
arrangement is permissible under their exchange
agreement.® BPA has demanded that the City return
obligation energy at the same location where it borrows
it: the Oregon — Nevada border. If the City did return
borrowed electricity in the manner demanded by BPA,
Intertie capacity would be needed for both borrowed
and return obligation energy meaning that less power
could be transmitted from north to south on the
Intertie.

BPA INTERTIE ACCESS POLICY:
THIS DISPUTE

BPA is facing a potentially significant revenue
shortfall in coming years which may jeopardize its
ability to recover costs as is required by the Columbia
River Act. See 16 U.S.C. § 838g(3). It is this threat
which BPA cites as a primary reason for the policy
which is the subject of this litigation. The agency offers
two explanations for this unanticipated revenue
shortfall. First is a lower-than-expected demand for
firm power from those industrial customers who
purchase huge quantities of electricity directly from
BPA. Many of these customers are large aluminum
producers which have been affected by a depressed

8 The City has sued the federal government over the BPA
interpretation of the exchange agreement. Department of Water &
Power of the City of Los Angeles v. United States, No. 181-84C
(U.S.Ct.Cl. pending). Each party has claimed the other to be in
material breach of the exchange agreement.

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aluminum market. Cf. ALCOA, 104 S.Ct. at 2478.
Secondly, BPA has sold less than predicted amounts of
surplus power to extraregional utilities. In part because
of lower prices offered by Canadian vendors to
California customers (including the City), the market
has shrunk for BPA surplus power. See Calif. Energy
Resources Cons. and Develop. Comm’n v. BPA, 754 F.2d
1470, 1472 (9th Cir.1985); Portland Gen. Elec. Co. v.
Johnson, 754 F.2d 1475, 1477-78 (9th Cir.1985).

On September 7, 1984, BPA promulgated its Near
Term Intertie Access Policy [IAP]. 49 Fed.Reg. 44,232-
38 (November 5, 1984). The policy was adopted after a
series of public hearings and Federal Register notices.
48 Fed.Reg. 33,515 (July 22, 1983) (notice of intent to
develop policy on Intertie access); 49 Fed.Reg. 5,990
(Feb. 16, 1984) (comments on notice of intent); 49
Fed.Reg. 30,098 (July 13, 1984) (proposed Intertie
Access Policy). See generally Near Term Intertie
Access Policy: Administrator’s Record of Decision
(September 7, 1984). The policy is to remain in effect
until May 1, 1985, at which time the agency will decide
on a Long Term Intertie Policy. 50 Fed.Reg. 6,379
(Feb. 15, 1985) (extending expiration date from
March 1 to May 1, 1985).

While the IAP sets out three different allocation
formulae for different market and electricity supply
conditions, several assumptions underlie all three
formulae. Priority in access to the Intertie is always
afforded to Northwest electricity suppliers selling firm
power to California purchasers. IAP 1D.1, 49 Fed.Reg.
at 44236. The IAP assures delivery of power for
existing firm power contracts, IAP { D.1.a., and allows
those Northwest utilities capable of doing so to enter
into additional firm power contracts with California

—Bli—

utilities. IAP 1 D.1.b. Among those contracts which
will be afforded assured delivery are exchange
agreements including that between BPA and the City.
Only after firm power contracts are satisfied will BPA
allocate Intertie access for movement of nonfirm
power. IAP 4 D.2. Canadian utilities can never use the
Intertie to transmit firm power. IAP1E.

Once firm power contracts are satisfied, formulae
for allocation of Intertie capacity for nonfirm energy
depend upon supply and demand under three different
conditions.

Condition 1 applies when there is a surplus_of _
Northwest electricity and Northwest utilities are
willing to sell electricity to California purchasers at a
BPA-established rate. This portion of the IAP does not
change existing BPA policy; it incorporates the terms
of the Exportable Agreement. IAP 1 D.2.b.(1). The
City does not challenge this formula.

Condition 3 is the opposite of Condition 1. IAP 1
D.2.b6.(3). This formula applies when: (1) demand for
Intertie use among Northwest utilities is less than
available Intertie capacity, and (2) California utilities
want to purchase more electricity than Northwest
utilities have available to sell but the amount available
will not fill the Intertie to capacity. Under this
condition, BPA makes Intertie transmission capacity
freely available to any Northwest or Canadian utility
desiring access. The City does not challenge this
formula.

The text of the Condition 2 formula appears in the
margin.” Condition 2 applies when there is a slight

9 (2) Condition 2. When the Exportable Agreement allocation
formula is not in effect, but BPA and other Scheduling Utilities

—Bl2—

oversupply of Northwest electricity but not such an
extreme oversupply that Northwest utilities must
generate excess electricity to avoid spilling water over
their dams. IAP 4 D.2.b.(2). In this situation (when
California utilities are willing to purchase, and
Northwest utilities are willing to sell, more electricity
than the Intertie can handle), there is competition
among Northwest utilities. Canadian utilities may not
use the Intertie to enter the competition unless those
utilities first enter into acceptable planning agreements
with BPA. IAP 1 E.3. No Canadian utilities currently
have acceptable agreements with BPA.

Under Condition 2, all Northwest utilities (and
qualified Canadian utilities, if any) wishing to sell
power would notify BPA of the amount of power
available for sale each day. If the total available power
is greater than Intertie capacity, each seller (including
BPA) is allocated a share of Intertie capacity based

declare amounts of power available for access to the Pacific
Intertie that exceed the available Intertie Capacity determined as
described in paragraph a. above, the capacity will be allocated
pursuant to the following procedure:
(a) On any day the Scheduling Utilities observe as 2
normal workday, each Scheduling Utility shall submit to
BPA declarations of daily quantities of energy and hourly
capacity it has available for sale to the Southwest for the
period beginning at midnight of the day of declaration
and continuing through midnight of the next normal
workday.
(b) Allocations for each hour among Scheduling Utilities
will be determined and will approximate the ratio of each
Scheduling Utility’s declaration to the sum of all
declarations for each hour multiplied by the available
~Atertie Capacity ....
IAP 1D.2.b.(2), 49 Fed.Reg. at 44,237.

i al

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upon a pro rata reduction from its declared available
electricity, just as it is under Condition 1. Allocations
cannot be exceeded or traded even if a utility later
discovers it requested too much or too little capacity.

The effect of Condition 2 is to reduce competition
among Northwest utilities both for Intertie capacity
and for California purchasers and to equalize the
prices at which Northwest power can be sold. The
question on which this litigation turns is whether the
Condition 2 restrictions are consistent with BPA’s
statutory authority.

One related issue also has been raised in this
litigation. The City challenges the formula by which
the IAP calculates Intertie capacity for the purpose of
allocating access under Condition 2. Instead of
allocating physical Intertie capacity, BPA allocates net
scheduled Intertie capacity. IAP 1 A.8. Scheduled
Intertie capacity is a measure not of physical capacity
but of “capacity ... controlled . . . through ownership
or contract right.” That capacity includes the amount
of any return electricity which California utilities are
obligated to return to Northwest utilities pursuant to
peaking return exchange agreements. Id. Because
peaking return exchange agreements permit the
utilities to use the Intertie, the BPA definition
presumes that all electricity transactions as part of
those agreements use the Intertie.

The scheduled capacity would be, therefore, larger
than the physical capacity of the line if all parties to
exchange agreements actually used the Intertie to
return their obligation energy. But some utilities do not
use the Intertie to satisfy their return obligations. The
City, for example, satisfies its obligations by purchasing
from British Columbia Hydro Authority electricity

— Bl4—

which is delivered to BPA without passing through the
Intertie. Other utilities may purchase electricity from
one Northwest utility and have that electricity
transmitted to another Northwest utility to satisfy
peaking return obligations. That energy, also, does not
pass through the Intertie. Because scheduled capacity
allocates capacity which need never be physically used,
the City argues that it is arbitrary and capricious for
BPA to use scheduled rather than actual capacity to
allocate Intertie access.

THIS COURT’S REVIEW

This detailed history provides the background for
our analysis of the case at bar. The City asks this court
to find that the IAP exceeds BPA’s statutory autliority
and is arbitrary and capricious. Under the Administra-
tive Procedure Act, this court may set aside an agency
action if it is found to be arbitrary, capricious, an abuse
of discretion, or in excess of statutory authority. 5
U.S.C. § 706(2). This standard of review is highly
deferential and assumes the agency action to be valid.
Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402,
415, 91 S.Ct. 814, 823, 28 L.Ed.2d. 136 (1971). Insofar
as agency action is the result of its interpretation of
organic statutes, the agency’s interpretation is to be
given great weight. ALCOA, 104 S.Ct. at 2479-80
(discussing BPA administrative actions).

In reviewing actions BPA takes under its enabling
legislation, this court gives substantial deference to the
agency for three reasons. First, the enabling legislation
is highly technical and complex. Second, the agency
was intimately involved in the drafting and consider-
ation of the legislation at the time of its passage.
ALCOA, 104 S.Ct. at 2480. Finally, Congress has, for

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nearly half a century, monitored BPA performance in
electricity regulation and allocation. Statutory inter-
pretations offered by BPA represent “‘contemporane-
ous construction of a statute by [those] charged with
the responsibility of setting its machinery in motion, of
making the parts work efficiently and smoothly while
they are yet untried and new.” Udall v. Tallman, 380
U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965). See
Central Lincoln Peoples’ Util. Dist. v. Johnson, 686 F.2d
708, 710-11 (9th Cir.1982), rev’d on other grounds, _—
U.S. ——, 104 S.Ct. 2472, 81 L.Ed.2d 301. See also
American Paper Inst. v. American Elec. Power Service
Corp., 461 U.S. 402, 423, 103 S.Ct. 1921, 1933, 76
L.Ed.2d 22 (1983).

Nevertheless, ‘» making this review, this court must
determine whether the challenged decision was based
upon a consideration of the relevant factors and
whether there has been a clear error of judgment.
Citizens to Preserve Overton Park, 401 U.S. at 416, 91
S.Ct. at 823. While this court may not substitute its
judgement for that of the Bonneville Power Adminis-
trator, its factual inquiry is to be “searching and
careful.” Id.

ALLOCATION OF INTERTIE CAPACITY!”

We first examine the Administrator’s authority to
allocate use of the Intertie. Each of the four applicable
statutes imposes restraints upon the manner in which
BPA may exercise its discretion in managing electricity

10 The City only challenges Intertie allocation under Condition
2. We therefore address only those restrictions which apply under
that Condition.

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and operating the Intertie. A review of applicable
legislation reveals the boundaries of BPA authority.

The Project Act authorizes and directs BPA to
construct, operate and maintain the Intertie for
transmitting federal energy. 16 U.S.C. § 832a(b). The
Act makes no reference to sharing these facilities with
other electricity producers. Preference in BPA sale of
electricity is to be accorded to public bodies. 16 U.S.C.
§ 832c(a). Consequently, allocation of Intertie use is
not inconsistent with BPA’s statutory authority to use
the federally-owned portions of the Intertie in any
manner consistent with “transmitting electric energy,

from [BPA] to existing and potential markets
....’16U.S.C. § 832a(b).

The Preference Act was passed at the time the
Intertie plan was considered and approved. See Pub.L.
No. 88-257, 77 Stat. 844 (1964); Pub.L. No. 88-511, 78
Stat. 682 (1965) (appropriations for construction of the
Intertie). The purpose of the Act was, inter alia, to
permit interconnection of the Bonneville power system
with the systems of other regions without the risk that
BPA’s customers in the Pacific Northwest would lose
their preference for electricity needed to meet present
and future needs. H.R.Rep. No. 590, 88th Cong., 2d.
Sess., reprinted in 1964 U.S.Code Cong. & Ad. News
3342, 3342-43 (1964). Congress was concerned to
ensure that this interconnection, so vital to the
economic interests of both the Northwest and the
Southwest, was not made at the expense of the lowcost
electricity needed to support economic growth in the
Northwest. Id. at 3342-44. At the same time that
Congress recognized the availability of electricity
surplus to the needs of the Northwest, it also
recognized the temptation for consumers elsewhere in

)

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the West to use this cheap power for their own
economic development at the expense of the
Northwest. Id. at 3343-44.

The Act establishes a preference both for electricity
sales, 16 U.S.C. § 837a, and for use of Intertie capacity
to transmit that electricity. 16 U.S.C. § 837e. This is
also the statute which limits the sale, delivery or
exchange of BPA electricity outside the Northwest to
“surplus energy and surplus peaking capacity.” 16
U.S.C. § 837a. Surplus energy is defined to be that
energy which would otherwise be wasted because of the
lack of a market in the Northwest. Surplus peaking
capacity is that peaking capacity for which there is no
demand in the Northwest at any established rate. 16
U.S.C. § 837(c), (d).

Transmission lines used for BPA energy in the
Northwest are to be made available to other users if not
needed by BPA. 16 U.S.C. § 837e. The legislative —
history of the Act explains that

In determining the existence of capacity
excess to the needs of the Government,
Federal needs reasonably foreseeable may be
included, but the Secretary may not decline to
enter into [agreements to transmit other
utilities’ BSE merely because he may have
energy available for sale to serve the same
load.

H.R.Rep. No. 590; 1964 U.S.Code Cong. & Ad.News at
3350. BPA is permitted, therefore, to reserve sufficient
Intertie capacity not only for its current needs but also
for its “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.

aaa

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Underlying Congressional passage of the Preference
Act was its concern to ensure that BPA could repay the
huge federal debt incurred in constructing Northwest
hydroelectric facilities. See 1964 U.S.Code Cong. &
Ad.News at 3382 (Additional views of Rep. Craig
Hosmer). In its statement of the need for the
Preference Act, the House Committee explained that
construction of the Intertie would permit BPA to raise
additional revenue which “‘would go a long way toward
putting the Bonneville power system back on a sound
financial basis.” H.R.Rep. No. 590, 1964 U.S.Code
Cong. & Ad.News at 3343.

The City has argued that the IAP violates the
Preference Act, 16 U.S.C. § 837e, by automatically
giving BPA priority in sale of electricity to California
regardless of market price and competition from other
Northwest electricity producers. Nevertheless, it 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 Act is that
BPA, as owner and operator of the Intertie, should be
allowed preference in transmission of its electricity
over the Intertie as necessary to meet its statutory
mandate of being self-financing. Only if the agency
still has capacity remaining on the Intertie after it has
sold available and foreseeable power, is it required to
make the Intertie available to other utilities.

The Columbia River Act deals primarily with
financing arrangements for BPA. The Act does,
however, require BPA to make its facilities available to
all utilities fairly once its own needs are satisfied:

The Administrator shall make available to
all utilities on a fair and nondiscriminatory
basis, any capacity in the [Intertie] which he

|

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determines to be in excess of the capacity
required to transmit electric power generated
or acquired by the United States.

16 U.S.C. § 838d.

Neither the Act nor the Congressional Report
provide any further guidance for the Administrator’s
discretion in making excess capacity available to other
utilities. The Act recognizes, however, that BPA must
make available only excess capacity, not all Intertie
capacity.

The Northwest Power Act reaffirms the authority of
BPA to allocate and manage Intertie capacity. 16
U.S.C. § 839f(i)(1)(B). BPA is explicitly limited to
providing transmission services over the Intertie which
are “not in conflict with the [BPA’s] other marketing
obligations,” id., and which do not cause a “substantial
interference with [the BPA] power marketing program
....” 16 U.S.C. § 839f(i)(3).!! See H.R.Rep. No. 976,
Part II, 96th Cong.2d Sess., reprinted in 1980 U.S.Code
Cong. & Ad.News 5989, 6054.

The City argues that the IAP alters free market
forces which would otherwise allocate Intertie access
according to price and demand. The City’s argument,
however, fails because electricity generation, transmis-
sion and distribution in the Pacific Northwest have not
been subject to free market forces since passage in 1937
of the Project Act which created a virtual federal
monopoly over transmission of hydroelectric energy in
the region. Notwithstanding the fact that BPA has
permitted the operation of market forces to allocate
Intertie usage at some times in the past, Congress has

'l The IAP was likewise designed to ‘enhance BPA’s power
marketing program.” 49 Fed.Reg. at 44233.

— B20—

repeatedly expressed its intent that BPA control sale
and transmission of power in the Northwest consistent
with Congressional statements of policy. See H.R.Rep.
No. 590, 1964 U.S.Code Cong. & Ad.News at 3342-44;
H.R.Rep. No. 976, Part I, 96th Cong., 2d Sess., 1980
U.S.Code Cong. & Ad.News at 5989-93.!2

The history of BPA’s enabling legislation further
demonstrates that Congress has repeatedly required
BPA to operate in a manner which assures that the
agency is fiscally self supporting. See 16 U.S.C. § 832f
(BPA rate schedules designed to recover BPA costs)
H.R.Rep. No. 590, 1964 U.S.Code Cong. & Ad.News at
3343 (statute designed to put BPA back on sound
financial ground); 16 U.S.C. § 838g(2) (rate schedules
to be based upon BPA need to recover operating and
capital costs); 16 U.S.C. § 839e(a)(1) (rates to be
designed consistent with sound business principles and
with need to recover BPA costs); H.R.Rep. No. 976,
Part I, 1980 U.S.Code Cong. & Ad.News at 6001 (BPA
must be self supporting and must maintain financial
independence subject to Congressional oversight).
While market forces at times in the past may not have
threatened BPA’s Congressional mandate, BPA has
presented reliable evidence that without a policy which
carefully allocates Intertie access, it will experience
significant revenue shortfalls in coming years. To the
extent that the IAP is designed to mitigate projected
deficits, therefore, the policy is not only statutorily
authorized but statutorily mandated. Calif. Energy

12 The City argues that, by displacing competition, the IAP
violates the antitrust laws. That argument is frivolous because the
antitrust laws do not apply to the federal government. See Sea-
Land Service, Inc. v. Alaska R.R., 659 F.2d 243, 244 (D.C.Cir. 1981).

— B21—

Resources, 754 F.2d at 1472; Portland Gen. Elec. Co.,
754 F.2d at 1477-78.

These four statutes show repeated Congressional
insistence that BPA have preference in using Intertie
Capacity and that, so long as the agency is fair and
nondiscriminatory, BPA have the discretion to allocate
remaining transmission capacity. Under this court’s
narrow review, the IAP is neither arbitrary and
capricious, nor an abuse of discretion nor in
contravention of statutory authority. This court need
not find that the BPA interpretation of the four
statutes “ ‘is the only reasonable one, or even that it is
the result we would have reached had the question
arisen in the first instance in judicial proceedings.’ We
need only conclude that it is a reasonable
interpretation.” ALCOA, 104 S.Ct. at 2480, quoting,
— Paper Inst. 461 U.S. at 423, 103 S.Ct. at
1933.

EXCLUSION OF CANADIAN POWER

The City argues that the IAP violates BPA’s
statutory mandate to provide Intertie access to power
generated in Canada. 16 U.S.C. § 837e. See H.R.Rep.
No. 590, 1964 U.S.Code Cong. Ad.News [sic] at 3350
(Canadian energy “stands on the same basis as any

13 The legislative scheme is confusing and overlapping. It is not
at all clear that Congress considered all the ramifications of the
language used in different enactments since the Project Act was
enacted in 1937. Nevertheless, statutes dealing with the same
subject must be read together and harmonized where possible. See
2A Sutherland on Statutory Construction § 52.02. The BPA policy
is not inconsistent with the legislative scheme and is not an abuse
of discretion.

— B22—

other non-Federal energy”); 16 US.C.§ 838d
(capacity must be made available on a fair and
nondiscriminatory basis). The IAP currently prohibits
Intertie access for Canadian power under Conditions 1
and 2.!4

There are two types of Canadian power for which
Intertie access could be provided. The first is Canadian
treaty power, see 16 U.S.C. § 837h, which is firm power
generated in the Northwest as a result of water flows
from dams on Canadian rivers. Columbia River Basin
Treaty, 15 U.S.T. 1555, TIAS No. 5638 (Jan. 17, 1961).
See M.C. Blumm, 58 Wash.L.Rev. at 215-19; BPA,
Columbia River Power for the People: A History of
Policies of the Bonneville Power Administration 227-36
(1981). Firm treaty power is not affected by this
litigation.!> BPA is obligated to afford preference to
firm treaty power. 16 U.S.C. §§ 837e, 837h.

The second type of power is nontreaty surplus power
which Canadian utilities (particularly B.C. Hydro) sell
to California utilities and which is wheeled to those

'4 Access by Canadian utilities under Condition 2 is dependent
upon those utilities’ “participation in the Pacific Northwest’s
coordinated planning and operation to a greater extent than in the
past, or agreement to provide other appropriate consideration of
value to the Pacific Northwest.” LAP 1 E.3, 49 Fed.Reg. 44237.
This clause is entirely consistent with the environmental planning
concerns expressed in the Northwest Power Act. See 16 U.S.C. §
839b. As we have already noted, negotiations to enter into such an
agreement have not been successful.

15 Because Canada did not need the power to which it was
entitled under the Treaty, treaty power was sold back to BPA
under the Canadian Storage Power Exchange. BPA sold this firm
power to California utilities. The last remaining contract for the
sale of this power to California utilities expired two years ago. See
D.W. Meek 13 Env’tl L. at 894-96.

— B23—

purchasers over the Intertie. Surplus power does not
enjoy any preference at all. The agency:

may enter into agreements for the wheeling of
energy generated in Canada, but such energy
... does not have the priority granted to
Federal energy and Canada’s entitlement to
[treaty] power benefits... .

H.R.Rep. No. 590, 1964 U.S.Code Cong. & Ad.News at
3350 (emphasis added). That statement is in contrast to
the immediately prior paragraph in the legislative
history which requires BPA to make excess Intertie
capacity available to other non-Federal utilities.

The legislative history of both the Preference Act
and the Columbia River Act demonstrates that
Congress intended that the Intertie be used primarily
for the benefit of Northwest and Southwest utilities
and not for the benefit of Canadian utilities. Cf. 16
U.S.C. § 838d (excess intertie capacity to be made
available on a fair and nondiscriminatory basis);
H.R.Rep. 93-1375, 93d Cong.2d Sess., reprinted in,
1974 U.S.Code Cong. & Ad.News 5810, 5814 (section
838d “is not intended to represent a policy having
application other than in the Pacific Northwest’’).
While Canadian treaty power is to be accorded
preference in Intertie allocation, nontreaty power is
given nonpreference Intertie access, only once BPA
chooses to exercise its authority to enter into wheeling
agreements. The legislative history indicated no
Congressional mandate that BPA must enter into such
agreement. See H.R.Rep. No. 590, 1964 U.S.Code
Cong. & Ad.News at 3350. See generally U.S. Dep’t of
the Interior, Report to the Appropriations Committees
of the Congress of the United States Recommending a
Plan of Construction and Ownership of EHV Electric

_—

Interties Between the Pacific Northwest and Pacific
Southwest, at X, 2, 33-34 (1964) (discussing allowing
Intertie access for Canadian treaty power without any
reference to other Canadian power sales).

ALLOCATION OF
SCHEDULED CAPACITY

Instead of allocating physical Intertie capacity, the
IAP allocated contractual electricity flow, known as
scheduled capacity. The agency’s use of scheduled
Capacity is based on the agency’s conclusion that the
scarce commodity being allocated is not physical
Intertie capacity but interregional energy exchange
between California and the Northwest. Because of
exchange agreements, electricity is transmitted both
into and out from both regions. Consequently, the IAP
allocates the sum total of all energy exchange, whether
or not the energy is physically transmitted over the
Intertie. This enables BPA to coordinate scheduling of
Intertie access so that purchases and sales between
utilities can be offset against each other. Allocation of
scheduled capacity is apparently an_ established
industry practice designed to promote equitable cost
sharing and efficient planning. Evidence presented by
BPA suggests that this is a more efficient use of the
Intertie than is allocation according to. physical
capacity.!®

16 The agency has presented evidence to show that, in the last
five months of 1984 (including four months in which the IAP
controlled Intertie access), the Intertie was used to 93 per cent of
its capacity. During a comparable period in 1983, the Intertie was
used to 81 per cent of capacity. The BPA attributes this 12 per cent
increase in Intertie usage to more efficient allocation of capacity

"
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Pattee ELV OU NG

;
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1)
8
3
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3

— B25—

Although the City’s objections to the use of
scheduled capacity as unwise may have some validity, a
court is not the proper forum in which to address such
extremely technical, discretionary issues. Scheduling
transmission service capacity is a highly technical field.
Congress has consistently committed broad discretion
to BPA. This court does not substitute its judgment for
that of the administrative agency in technical fields
within the agency’s unique expertise. ALCOA, 104 S.Ct.
at 2480; Pacific Gas & Elec. Co. v. FERC, 746 F.2d
1383, 1387 (Sth Cir.1984). See Cincinnati Gas & Elec.
Co. v. FERC, 724 F.2d 550, 554 (6th Cir.1984).

CONCLUSION

The four BPA enabling statutes must be read in para
materia. Two common themes appear clear from these
statutes. The first is that BPA is required to market
federal power in a manner which ensures that the
agency is self-supporting. Secondly, BPA is required to
allocate use of federally-owned transmission facilities
in a manner which accords preference first to
transmission of federal power and then to transmission
of other Northwest-generated power. Once such
preferences are accommodated, the agency is prohibit-
ed from denying access to the Intertie by other
extraregional utilities within the United States. BPA is
permitted, but not required, to enter into wheeling
agreements to transmit Canadian-generated power.

Recognizing these common themes, we find that the
IAP is consistent with BPA statutory authority and is
not an arbitrary and capricious exercise of its

under the LAP.

— B26—

discretion. Accordingly, we uphold the validity of the
Near Term Intertie Access Policy.

APPENDIX C

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—, ye

APPENDIX C

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

CALIFORNIA
ENERGY RESOURCES
CONSERVATION and
DEVELOPMENT
COMMISSION,

Nos. 84-7836,
85-7430

Petitioner,

vs.

BONNEVILLE
POWER
ADMINISTRATION;
JAMES J. JURA,

as Administrator’; and
JOHN S. HERRING-
TON, as Secretary of the )
Department of Energy of )
the United States of
America,

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

)
)
)
Respondents. )
)

* James J. Jura, the current Administrator of the Bonneville
Power Administration, is substituted for his predecessor in office
pursuant to Fed. R. App. P. 43(c)(1).

ue 3, Sm

PUBLIC UTILITIES Nos. 84-7838,

COMMISSION of the 85-7470
STATE OF
CALIFORNIA
vs.
JAMES J. JURA, ORDER

)
)
)
)
)
)
)
)
as Administrator of )
the Bonneville Power )
Administration*; JOHN _)
S. HERRINGTON, )
as Secretary of of [sic] )
the Department of Energy)
of the United States )
of America; and the )
UNITED STATES )
OF AMERICA, )

)

)

)

Respondents.

Before: TANG, SCHROEDER, and NORRIS, Circuit
Judges

The panel as constituted above has voted to deny the
petition for rehearing and to reject the suggestion for
rehearing en banc.

The full court has been advised of the suggestion for
rehearing en banc, and no judge of the court has
requested a vote on the suggestion for rehearing en
banc. Fed. R. App. P. 35(b).

The petition for rehearing is denied and the
suggestion for rehearing en banc is rejected.

[Filed February 4, 1988]

APPENDIX D

=
APPENDIX D

[BONNEVILLE POWER ADMINISTRATION]
NEAR TERM INTERTIE ACCESS POLICY

[49 Federal Register 44232]
[Monday, November 5, 1984]

I. Background
A. Policy Development Process to Date

The development of BPA’s Intertie Access Policy
has been an extensive process. It commenced on
July 22, 1983, with publication in the Federal Register
of a Notice of Intent to Develop intertie Policy (48 FR
33515). This notice was provided consistent with BPA’s
“Major Power Marketing Policy Procedures” (May 12,
1981, 46 FR 26368). In response to that notice, BPA
met with numerous organizations and interest groups
to identify, discuss, and seek advice on the issues that
must be resolved by an access policy. BPA received 55
comments in response to the July 22 notice. These
comments and advice generated a Discussion Paper
that was published in the Federal Register on
February 16, 1984, with a request for comments from
the public (49 FR 5990). This Discussion Paper
described possible BPA policies for use of the Pacific
Intertie by BPA and others within existing contractual
obligations. BPa [sic] received 76 written comments in
response to the Discussion Paper and held informal
meetings with customer and public interest groups.

wit ai

The Administrator considered the comments on the
Discussion Paper in the context of BPA’s own efforts
to resolve basic access priority issues given the current
Pacific Northwest power surplus of firm and nonfirm
power. The Administrator concluded that a multi-
staged policy development was appropriate. This Near
Term Intertie Access Policy is the first stage of that
policy development.

B. Record of Decision Available

BPA has prepared a Record of Decision evaluating
the record of the proposed Near Term Intertie Access
Policy and the Administrator’s decisions on the issues
identified with the record. This Record of Decision is
available on request from BPA at the locations listed in
the addresses section of this notice.

This document presents BPA’s evaluation of the
record of the proposed Near Term Intertie Access
Policy and the Administrator’s decisions on the issues
identified within the record. The record on which this
Record of Decision is based consists of the comments
received on BPA’s proposed policy issued on July 13,
1984, and published in the Federal Register on July 30,
1984 (49 FR 30098); the comments made at the public
comment forums; any previous comments specifically
incorporated by reference by the commenters; and
related documents.

The Record of Decision is divided into four major
sections: (1) Introduction, addressing the purpose of
the Policy, the process used to develop the Policy, and
BPA’s legal authorities to implement the Policy; (2)
Preliminary issues, describing the context of the Policy
within BPA’s other actions and responsibilities and the

UPS OP REN ei MR SOREL REEL GATE ONS

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a

pervasive concepts embodied within the Policy; (3)
Conditions for Access, describing the overall standards
the Policy applies to determine whether access to the
Intertie will be provided for a particular resource or
arrangement; and (4) Firm Contracts and Formula
Allocation Methods, discussing the specific operative
elements of the Policy that are necessary to allocate
access to the Pacific Intertie. Within each section, the
appropriate comments are grouped by topic into issues.
The issues are divided into three sections: (1) A
summary of comments on the issue; (2) an evaluation
of the comments that discusses the various arguments
on the issue and BPA’s evaluation of those arguments;
and (3) the decision that explains the Administrator’s
decision on the issue as reflected in the Policy as
adopted.

C. Process Remaining

The initial Near Term Intertie Access Policy is in
effect for approximately 6 months. During this 6-
month period, environmental analyses of the Policy
will be conducted and operational experience with the
Policy will be gained. Further opportunities for public
comment on proposed revisions to the initial Policy
also wiil be provided. Based on these comments, the
results of the environmental analyses and the operating
experience, the Near Term Policy may be revised at the
end of the 6-month period. The revised Policy then will
be adopted for the remaining approximately 18 months.
The Near Term Policy will be followed by a Long Term
Intertie Access Policy.

The Long Term Intertie Access Policy is necessary

because separate questions are raised regarding the
interrelationship of Intertie access priorities to long

— "oo

term firm power transaction, to new Intertie facilities
development, and to new resource development. These
longer term questions require consideration of dif-
ferent issues and involve different potential impacts.
These issues militate for additional features of an
access policy and require additional policy develop-
ment. The Near Term Intertie Access Policy by
comparison, will resolve immediate, more discrete
access issues that result from the present power
surplus.

BPA expects to commence scoping an environmental
analysis of the Long Term Policy during the Fall of
1984. BPA anticipates that, because of possible
implications for future resource development, the Long
Term Intertie Access Policy may require an environ-
mental impact statement. The environmental statement
could take as long as 2 years to complete.

II. Discussion
A. Reason for Action

BPA adopts this Near Term Intertie Access Policy in
order to enhance BPA’s power marketing program and
to provide certainty with respect to firm and nonfirm
transactions which may occur on the Federally owned
portions of the Pacific Intertie. Specifically, BPA’s
policy accomplishes several important purposes. First,
BPA’s Policy assures that BPA has use of its portion of
the Pacific Intertie as necessary for BPA’s power
marketing program. Second, BPA must consider the
financial impacts of Pacific Intertie usage on BPA’s
ability to recover adequate revenues. In this regard,
BPA’s Policy enhances BPA’s ability to recover
Tevenue that otherwise would be lost if BPA failed to

"a

manage prudently its portion of the Pacific Intertie.
Third, BPA’s Policy responds to the recent influx of
requests for more space on the Pacific Intertie than
there is available capacity. BPA’s Policy fosters
increased certainty in power sales between BPA,
Pacific Northwest utilities, and Pacific Southwest
utilities.

1. Power Marketing Program

BPA faces various marketing and operating con-
straints, including firm load requirements, limited
intertie capacity, Pacific Northwest Coordination
Agreement requirements, Exportable Agreement re-
quirements, and various nonpower requirements for
flood control, flows for fish enhancement, and the like.
Within these constraints, BPA seeks to achieve the
production and marketing of an optimal amount of
firm and nonfirm energy. The Pacific Intertie plays a
key role in BPA’s power marketing program. BPA’s
ability to market its firm and nonfirm energy over the
Pacific Intertie has a direct relation to BPA’s fiscal
integrity.

Among the most important reasons Congress
authorized construction of the Pacific Intertie are the
following: (1) the Pacific Northwest could sell surplus
energy the the [sic] Pacific Southwest in order to raise
revenues and displace more expensive Pacific South-
west energy; (2) each region could help the other to
meet peak loads; (3) Pacific Southwest energy could be
used to firm up Pacific Northwest power; and (4) a
market for surplus hydro peaking capacity of Federal
Pacific Northwest dams could be developed. Pacific
Intertie planners were also aware that uses of the
Pacific Intertie would vary over the years and that the
requirements of the Government could not be set forth

=. =

in complete detail with exact figures during hearings
On intertie authorization. Congress did anticipate,
however, that the benefits of the Pacific Intertie would
be shared approximately equally between the Pacific
Northwest and the Pacific Southwest.

2. Revenue Impacts

BPA is a self-financed Federal agency, and as such is
required to raise sufficient revenues through rates
charged for power and transmission services to pay all
of its costs, including the amortization of the large
Federal investment in the Federal Columbia River
Power System (FCRPS). One of the major criteria by
which Congress measured the desirability of the
Pacific Intertie was that BPA would receive substantial
revenue from the sale and exchange of surplus capacity
and energy in order to keep BPA rates low.
Consequently, Pacific Northwest consumers would
benefit by having some system costs recovered from
sales that otherwise could not be made.

BPA’s market in California primarily serves to
displace expensive oil and gas fired generation.
Recently, this displacement has occurred predominant-
ly in the form of economy energy transactions
involving Pacific Southwest purchases of Pacific
Northwest energy under nonfirm energy rate
schedules. In economy energy transactions, the buyer
obtains less expensive energy from another utility
instead of operating its own resource. Economy energy
transactions increase the operating efficiency of both
buyer and seller systems. The buyer can reduce costs of
generation. The seller obtains revenues from capacity
that otherwise would have been unproductive. Conse-
quently, Pacific Southwest consumers benefit from the
savings that result when lower cost Pacific Northwest

Se aS parton emma a

—_— =

energy is substituted for higher cost thermal
generation.

The distribution of benefits in an economy energy
transaction is measured by comparing the money saved
by the purchaser with the revenues received by the
seller. The goal in such transactions is to share
equitably the benefits. A comparison of the Pacific
Southwest savings with the revenues received by BPA
demonstrates that recently there has not been an
equitable sharing of economy energy benefits. BPA has
been selling economy energy at rates well below its
nonfirm energy Standard Rate and at a fraction of the
decremental costs of Pacific Southwest utilities. As a
result, rates to all other Federal power users have been
higher.

In addition to a supply of nonfirm energy, BPA
presently has firm resources surplus to BPA’s existing
firm loads. Some Pacific Northwest utilities are in a
similar surplus condition. Both BPA and other Pacific
Northwest utilities are seeking ways to market their
surplus firm resources under long term sales agree-
ments. To the extent BPA is unsuccessful in its efforts,
the output of these resources is often sold under
nonfirm energy rate schedules which fail to recover the
full costs of these resources. Again, the result is that
rates to all other Federal power users have been higher.

3. Demand for Firm Intertie Access

Currently, there is more demand for use of the
Pacific Intertie than ever before, not just by BPA, but
by other Pacific Northwest utilities and nonutility
developers. There is much more. energy available for
sale to the Southwest than Pacific Intertie capacity.

This energy is available for sale on both a nonfirm
and firm basis. It has become necessary, because of

=

competing and increasing demand for use of the
Pacific Intertie, for BPA to develop an [sic] Pacific
Access Policy. The Policy will provide the basis for
predictable business transactions. Absent this predict-
ability, BPA risks substantial interference with its
power marketing program, and it will become
increasingly difficult for the Pacific Northwest to
market its surplus to the Pacific Southwest on a firm
basis. BPA is now adopting a Near Term Intertie
Access Policy that will serve the needs of BPA’s own
power marketing program and the needs of Pacific
Northwest and Pacific Southwest utilities.

B. Overview of Policy

Under the Near Term Intertie Access Policy, BPA
will provide near term intertie access to other Pacific
Northwest scheduling utilities while retaining the
necessary right to make use of the Pacific Intertie to
implement BPA’s Power Marketing Program. BPA will
accomplish these tasks by: (1) Providing for uses of the
Pacific Intertie necessary to implement agreements in
support of BPA’s Power Marketing Program and
operational needs; (2) providing for assured delivery of
qualifying firm sales by BPA or other Pacific
Northwest utilities; and (3) allocating access to
remaining Pacific Intertie capacity among BPA and
other utilities.

Both existing and new contracts for the sale of firm
power from existing Pacific Northwest resources may
qualify for assured delivery. Nonfirm intertie access
may be provided for extraregional resources and
utilities when Pacific Northwest supply does not meet
or exceed Pacific Intertie capacity.

_—

Certain considerations are integral to the near term
Policy. Of particular concern are: (1) The relationship
between the Policy and the BPA’s Power Marketing
Program; (2) assured delivery for qualifying existing
and new contracts; (3) treatment of extraregional
resources, and (4) fish and wildlife provisions. Each of
these considerations is briefly addressed below. A more
complete explanation of these considerations is
provided in the Record of Decision.

1. Relationship to Administrator’s Power Market-
ing Program

The Policy assures that Pacific Northwest utilities
obtain fair and equitable access to the Pacific Intertie
without significant adverse impact on BPA’s power
marketing program. The Policy also assures that BPA
has access to a portion of its own intertie capacity on a
continuing basis. BPA can then make economy energy
sales to the Southwest at reasonable prices. If BPA can
have a reasonable expectation of selling its firm surplus
and nonfirm energy at established rates, its power
marketing program will experience minimal
interference.

2. Assured Delivery for Qualifying Existing and
New Firm Contracts

The Policy will provide assured delivery for existing
and new firm contracts. The criteria for qualifying
firm contracts are intended to limit the availability of
assured delivery to those sales that are not merely
advance arrangements to purchase economy energy
and that do not adversely impact the Administrator’s
obligation to operate in a prudent utility manner.

3. Treatment of Extraregional Resources

— D10—

This Near Term Intertie Access Policy provides
priority intertie access to utilities in the Pacific
Northwest. During periods when intertie capacity is
insufficient to meet all Pacific Northwest requests for
Capacity, the Pacific Intertie will be allocated only
among Pacific Northwest utilities. Under such circum-
stances, if the Exportable Agreement in [sic] not in
effect, BPA may, by contract, provide extraregional
utilities limited Intertie access. Such access, however,
would be conditioned either on such utilities’ participa-
tion in the Pacific Northwest’s coordinated planning
and operation to a greater extent than in the past or on
agreement to provide other appropriate consideration
of value to the Pacific Northwest. During periods when
the capacity of the Intertie is greater than the requests
from Pacific Northwest utilities, Intertie capacity in
excess of the need to serve Pacific Northwest utilities
will be made available to transmit energy from
extraregional resources.

4. Fish and Wildlife Provisions

The fish and wildlife provisions contained in the
Near Term Intertie Access Policy are intended to
assure that the Policy will neither enable nor encourage
resource construction or operation that would decrease
the effectiveness of or increase the need for
expenditures or other actions by the Administrator to
protect, mitigate and enhance fish and wildlife. These
provisions provide a means to mitigate any adverse
effects to the Administrator’s efforts on behalf of fish
and wildlife which might result from the operation of
resources scheduled on the Pacific Intertie.

3
3
|

—D11—

II. [sic] Near Term Intertie Access Policy
A. Definitions

1. “Administrator” means the Administrator of
BPA and is used interchangeably herein with BPA.

2. “‘Administrator’s Power Marketing Program,
The” or “BPA’s Power Marketing Program” means
the aggregate of BPA’s power marketing actions taken
and policies developed to fulfill BPA’s statutory
Obligations and policy directives. These action and
policies are based on the exercise of broad authority to
act, consistent with sound business principles, to
recover adequate revenue to repay the Federal
investment in the Federal system while, at the same
time, encouraging the widest possible diversified use of
electric power at the lowest possible rates for BPA
customers. BPA’s Power Marketing Program includes
the Administrator’s obligation to meet his power
supply obligations in the Pacific Northwest and to
market surplus power in the Pacific Northwest in a
manner that assures an adequate, reliable, economical,
efficient, and environmentally acceptable power
supply, while preserving regional and public preference
to Federal electric power, and maintaining BPA’s
present and future rates to all customers at the lowest
level possible consistent with sound business principles.
BPA’s Power Marketing Program also includes the
Administrator’s objectives to market surplus Federal
power to the Southwest utilities at equitable prices
under rates adopted pursuant to section 7(i) of the
Pacific Northwest Power Act and to assist in the
marketing of the region’s surplus firm power to the
Southwest.

—D12—

3. “Assured Delivery” means Intertie transmission
service provided by BPA under this policy that is only
interruptible as a result of Uncontrollable Forces.

4. “BPA Resources” means Federal Columbia
River Power System (FCRPS) hydroelectric projects;
resources acquired by the Administrator under long
term contracts in force on the effective date of
enactment of the Pacific Northwest Power Act;
Exchange Resources consisting of electric power
purchased under section 5(c) of the Pacific Northwest
Power Act; and resources acquired by the Administra-
tor under contracts in force on the effective date of this
Policy.

5. “Entity” means an owner of a resource other
than a Scheduling Utility.

6. “Existing Extraregional Resources” are those
resources located outside the Pacific Northwest which
are operational on the effective date of this Policy,
other than extraregional resources which qualify as
Existing Pacific Northwest Resources.

7. “Existing Pacific Northwest Resources” means
the regional resources of Pacific Northwest utilities
that are operational on the effective date of this Policy,
the extraregional resources of Pacific Northwest
utilities dedicated to regional load on the effective date
of this Policy, and the regional resources of other
Pacific Northwest entities that are operational and for
which relationships with Scheduling Utilities to serve
regional load have been established on the effective
date of this policy. Existing Pacific Northwest
Resources do not include BPA Resources.

8. “Intertie Capacity” means transmission capacity
on the Pacific Intertie controlled by BPA through
ownership or contract right, increased by electric

Mrs gee. anaes

—D13—

power scheduled South to North and decreased by loop
flow, outages, and other factors that reduce transmis-
sion capacity from North to South.

9. “Pacific Intertie” means the Pacific Northwest-
Pacific Southwest Intertie that consists of three high-
voltage transmission lines (two 500-kilovolt (kV)
alternating current (ac) lines and one 800-kV direct
current (dc) line) which extend from Oregon into
California or Nevada and any additions thereto.

10. “Pacific Northwest” means, as defined in the
Pacific Northwest Electric Power Planning and
Conservation Act, 16 U.S.C. 839e [sic] (Pacific
Northwest Power Act), the area consisting of the States
of Oregon, Washington, and Idaho, the portion of the
State of Montana west of the Continental Divide, and
such portions of the States of Nevada, Utah, and
Wyoming as are within the Columbia River Drainage
Basin, and any contiguous areas, not in excess of 75 air
miles from the area referred to above, which are a part
of the service area of a rural electric cooperative
customer served by the Administrator on the effective
date of the Pacific Northwest Power Act which has a
distribution system from which it serves both within
and without such region.

11. “Scheduling Utility” means BPA, those utilities
that operate generation control areas within the Pacific
Northwest, and those utilities within BPA’s generation-
control area that schedule with BPA and are
designated as Computed Requirements customers.

12. “Substantial increase” or “substantial
decrease,” or “substantially interfere” means a change
that is of qualitative significance, or significant
measurable effect, and of sufficient magnitude to
require remedial action.

a)

13. “‘Uncontrollable Forces” are defined in General
Wheeling Provisions, GWP Form-4R.

B. Term

This Policy is effective on September 7, 1984, and
will terminate on March 1, 1985, unless extended by
published notice. Scheduling pursuant to this Policy
shall commence on the date specified in a written
notice from BPA to other Scheduling Utilities.

C. Conditions for Intertie Access

1. The Admuustrator will provide Assured Delivery
or will allocate available Intertie Capacity to BPA and
to other Scheduling Utilities pursuant to the conditions
and procedures for scheduling and allocations set forth
in this policy, unless otherwise provided by the terms of
existing contracts listed in subsection D.1.a., below. An
Entity that desires access to the Pacific Intertie may
request access through the Scheduling Utility in whose
control area the Entity’s resource is located.

2. The Administrator will provide Assured Delivery
or allocate available Intertie Capacity only for power
from BPA Resources and Existing Pacific Northwest
Resources, except to the extent that Existing Extrare-
gional Resources are permitted access under this
Policy.

3. Subject to reserving Intertie Capacity otherwise
required by the Administrator to support his Power
Marketing Program, the Administrator will provide
Assured Delivery or allocate Intertie Capacity for an
Existing Pacific Northwest Resource or an Existing

— D15—

Extraregional Resource only when providing such
Intertie access:

a. Will not substantially interfere with:

(1) The Administrator’s Power Marketing
Program; or

(2) The operating limitations of the Feder-
al system; and |

b. Will not conflict with:

(1) The Administrator’s existing contrac-
tual obligations; or

(2) Any other legal obligations of the
Administrator; and

c. Will not result in scheduling of energy
from resources whose operation will adverse-
ly impact fish and wildlife in a manner that
results in a substantial decrease in the
effectiveness of, or a substantial increase in
the need for expenditures or other actions by
the Administrator to protect, mitigate, or
enhance fish and wildlife; or otherwise
substantially interferes with the obligations of
the Administrator under the Pacific North-
west Power Act to adequately protect,
mitigate, or enhance fish and _ wildlife,
including taking into account at each relevant
stage of decisionmaking processes to the
fullest extent practicable the fish and wildlife
program adopted by the Northwest Power
Planning Council pursuant to the Pacific
Northwest Power Act.

4. Operating limitations on the Federal Columbia
River Power System (FCRPS), which includes the
Federal power and transmission systems, result from

—D16—

the Administrator’s obligation to operate the FCRPS in
an economical and reliable manner consistent with
prudent utility practices. These operating limitations
include, but are not limited to:

a. The BPA Reliability Criteria and Stand-
ards;

b. Western System’s Coordinating Council
(WSCC) Minimum Operating Reliability
Criteria;

c. North American Electric Reliability
Council-Operating Committee Minimum Cri-
teria for Operating Reliability;

d. The limitations that result from the
Administrator’s coordination with other utili-
ties and Federal agencies regarding resource
and river operations.

5. The Administrator’s existing contractual obliga-
tions include, but are not limited to:

a. Current contracts numbered 14-03-73155,
14-03-55063, 14-03-56379, 14-03-79101, DE-
MS79-81BP901 85, DE-MS79-84BP91 627, 14-
03-54132, 14-03-53290, 14-03-53295, 14-03-
50323, 14-03-54134, 14-03-53297, 14-03-
58638, 14-03-54126. Section D below de-
scribes how BPA will implement its Assured
Delivery and allocation procedures to avoid
conflict with these contracts.

6. To verify consistency with this policy, upon the
Administrator’s request, Scheduling Utilities extrare-
gional utilities that are requesting or have received
Assured Delivery or a formula allocation, shall provide
the Administrator with a list of resources that are to be
operated or that were operated at such hours as access

an Ei.

to the Pacific Intertie will be or was provided, and such
other information as the Administrator may reasonably
1 need to implement the Policy. BPA will make such
information available to the public to the extent it is not
protected from disclosure by law.

7. Special provisions relating to fish and wildlife.

i '

; a. This Policy presumes that BPA Resources,
: Existing Pacific Northwest Resources, and
:
;

Existing Extraregional Resources are being

operated consistent with applicable licenses,
4 permits, or other provisions of State and
Federal law, and that the operation of these
: resources or providing access for these
: resources will not adversely impact fish and
; wildlife resources in a manner described in
subsection C.3.c. (conditions for Intertie
access), above, unless the Administrator
determines otherwise.

: b. Any interested person who wishes to

; challenge the presumption that an Existing
Pacific Northwest Resource or Existing
Extraregional Resource is being operated
consistent with applicable licenses, permits, or
other applicable provisions of State and
Federal law must make that challenge with
the State or Federal agency responsible for
regulation of the resource or administration
of that law.

c. Any interested person who wishes to
challenge the presumption that the operation
of an Existing Pacific Northwest Resource or
Existing Extraregional Resources will not
adversely impact fish and wildlife in the
manner described in subsection C.3.c., above,

—D18—

shall notify the Administrator in writing. The
notification shall state the manner in which
and the extent to which fish and wildlife are
being adversely impacted. The Administrator
will provide a copy of that notification to the
Scheduling Utility, to any other owner or
operator of the resource, and to State and
Federal agencies responsible for regulation of
the resource or administration of applicable
law, and accept public comment before
making a determination whether fish and
wildlife are being adversely impacted by the
operation of the challenged resource.

d. Upon receipt of a determination by the
relevant agency, under paragraph b. above,
that a resource is not in compliance with
applicable licenses or permits or other
applicable State or Federal law, and a
determination by the Administrator under
paragraph c, above, that operation of the
resource will adversely impact fish and
wildlife resources in the manner described in
subsection C.3.c., above, the Administrator
will not provide access to the Pacific Intertie
for that resource.

e. For a resource that is being operated in
compliance with applicable licenses or per-
mits and other applicable State or Federal
law, but that the Administrator determines
will adversely impact fish and wildlife in the
manner described in subsection C.3.c., above,
the Administrator will not provide access
unless:

D. Assured Delivery and Formula Allocation

i.

—D19—

(1) The owner or operator of the resource
agrees to modify the operation of the
resource in a manner to assure that the
operation of the resource will not have the
adverse impact determined by BPA; or

(2) The owner or operator of the resource
agrees to make expenditures or take other
actions not inconsistent with the program
adopted by the Northwest Power Planning
Council to protect, mitigate, or enhance
fish and wildlife to offset the adverse
impact to fish and wildlife described in
subsection C.3.c. above.

f. It is the Administrator’s intent that the
Long Term Intertie Access Policy will not
provide access to the Intertie Capacity under
that Policy for resources that are not included
in the definition of Existing Pacific North-
west Resources under the Near Term Policy,
if construction or operation of these resources
will adversely impact fish and wild!*fe
resources in the manner described in subsec-
tion C.3.c. above.

Methods for Intertie Access

Assured Delivery for Firm Contracts
a. BPA will continue to use Intertie Capacity
to perform its obligations under the following
BPA contracts:
(1) Portland General Electric Contract
No. 14-03-55063 providing annual Pacific
Intertie priority access rights;

— D20—

(2) Pacific Power & Light Contract No.
14-03-56379 providing annual Pacific In-
tertie priority access rights;

(3) Washington Water Power’s transmis-
sion Contract No. 14-03-79101;

(4) Washington Water Power’s transmis-
sion Contract No. DE-MS79-81BP901 85;

(5) Western Area Power Administration
Contract No. DE-MS-79-84B91627 for the
purchase of surplus firm power from BPA
and transmission of power purchased from
the Basin Electric Power Cooperative;

(6) Pacific Gas & Electric (PG&E) Con-
tract No. 14-03-54132 for the purchase of
BPA’s seasonal surplus capacity;

(7) BPA’s Capacity/Energy Exchange
Agreements, listed below:

Utility Contract No.
(14-03-___)
(a) Burbank 53290
(b) Glendale 53295
(c) Los Angeles 50323
(d) Pasadena 53297
(e) PG&E 54134
(f) SDG&E 58638
(g) SCE 54126

(8) BPA’s sale to PG&E confirmed by
letter dated July 31, 1984; and

(9) New BPA contracts for which BPA
claims Assured Delivery. BPA will give
notice to Scheduling Utilities of such
transactions.

—D21—

b. For existing or new contracts of a
Scheduling Utility other than BPA, Assured
Delivery may be provided for a term not to
extend beyond July 1986 to the extent that
such contract:

(1) Meets the conditions of section C
(conditions for Intertie access) above; and

(2) Provides for the sale of firm power
from specified resources by a Scheduling
Utility other than BPA in which the
amount of power to be delivered, the price,
and terms for delivery are specified in a
manner that assures that the contract is not
merely an advance arrangement to sell
nonfirm power; and

c. BPA will consider the following factors
among others, to determine the extent to
which a contract of a Scheduling Utility other
than BPA can receive assured Delivery:

(1) The extent to which the selling price is
subject to change based on day-to-day
fluctuation in market price;

(2) The extent to which the sale does not
increase the costs of the Administrator of
Exchange Resources; and

(3) The extent to which the buyer has the

right to displace purchases under the
contract with nonfirm energy.

d. Scheduling Utilities other than BPA
desiring to arrange for Assured Delivery for a
contract must submit such contract to the
Administrator. The Administrator shall de-
termine whether the submitted contract meets

—D22—

the eligibility criteria set forth above, and will
provide notification of this determination in
writing specifying the amount and term of
Assured Delivery to be provided for the
contract. BPA will use its best efforts to
notify the Scheduling Utility by mail of the
determination not later than 20 days from the
date BPA receives the contract.

e. In order to receive Assured Delivery
under a contract, firm hourly schedules must
be established by the Pacific Northwest and
Southwest parties, and be made available to
BPA prior to allocation of Intertie Capacity.
In no case will Assured Delivery be provided
for PBA’s [sic] or for a Scheduling Utility’s
total eligible contracts on any hour that
exceeds BPA’s or the Scheduling Utility’s
average firm energy surplus as shown in
Exhibit B of this Policy, as modified or
revised from time to time.

f. A Pacific Northwest utility may increase
its average firm energy surplus by purchasing
surplus firm power from BPA or any Pacific
Northwest utility. BPA will adjust the
average firm surplus amounts shown in
Exhibit B for the buying and selling utilities
accordingly.

g. When BPA firm deliveries and Assured
Deliveries of other Scheduling Utilities ex-
ceed the available Intertie Capacity as
determined by BPA, the Pacific Northwest
and Southwest parties will establish schedules
for delivery.

2. Formula Allocation Methods

— D23—

a. BPA will determine the Intertie Capacity
available for formula allocations described in
subsection b. below, after first taking into
account the conditions for Intertie access
specified in section C above, the Intertie
Capacity necessary to serve contractual
obligations as described in subsection D.1.a.
(Assured Delivery for Firm Contracts) above,
and the Intertie Capacity necessary to provide
Assured Delivery for qualifying firm con-
tracts as described in subsection D.1.b. above.
Access to the remaining available Intertie
Capacity will be allocated according to the
formulae described below.

b. One of three formulae will be applied
depending on which of the following three
conditions exists:

(1) Condition 1. When Exportable Energy
is being scheduled pursuant to the terms of
the Exportable Agreement (BPA Contract
No. 14-03-73155), then capacity will be
allocated pursuant to the Exportable
Agreement. An example of an allocation
under Condition 1 is shown in Exhibit A.
The allocation procedure of the Exportable
Agreement is an existing contractual
obligation and has not been changed as a
result of the Intertie Access Policy develop-
ment process.

(2) Condition 2. When the Exportable
Agreement allocation formula is not in
effect, but BPA and other Scheduling
Utilities declare amounts of power avail-
able for access to the Pacific Intertie that

=—f—

exceed the available Intertie Capacity
determined as described in paragraph a.
above, the capacity will be allocated
pursuant to the following procedure:

(a) On any day the Scheduling Utilities
observe as a normal workday, each Sched-
uling Utility shall submit to BPA declara-
tions of daily quantities of energy and
hourly capacity it has available for sale to
the Southwest for the period beginning at
midnight of the day of declaration and
continuing through midnight of the next
normal workday.

(b) Allocations for each hour among
Scheduling Utilities will be determined and
will approximate the ratio of such Sched-
uling Utility’s declaration to the sum of all
declarations for each hour multiplied by the
available Intertie Capacity. An example of
an allocation under Conditions [sic] 2 is
shown in Exhibit A.

(3) Condition 3. When the Exportable
Agreement is not in effect, but when BPA
and other Scheduling Utilities declare
power available for access to the Intertie in
an amount that does not exceed the
available Intertie Capacity, BPA’s and each
other Scheduling Utility’s allocation will be
equal to its declaration. An example of an
allocation under Condition 3 is shown in
Exhibit A.

ntact

j

—D25—

E. Extraregional Access

Extraregional utilities will be allowed access as
follows:

1. BPA will not provide Assured Delivery to
extraregional utilities.

2. Under Condition 1, the Exportable Agreement
precludes a formula allocation of Intertie Capacity to
potential users that are not parties to that agreement.

3. BPA may, by contract, provide extraregional
utilities limited access to Intertie Capacity under
Condition 2. Such access, however, would be condition-
ed on such utilities’ participation in the Pacific
Northwest’s coordinated planning and operation to a
greater extent than in the past or agreement to provide
other appropriate consideration of value to the Pacific
Northwest.

4. Under Condition 3, extraregional utilities will be
able to use Intertie Capacity to the extent that capacity
is available in excess to the declaration of Scheduling
Utilities.

F. Remedies

1. Access to Intertie Capacity is conditioned upon
compliance with the terms of this Policy.

2. Upon a determination by BPA that the terms of
this Policy are not being met, BPA will so notify the
appropriate person(s) setting forth the nature of the
noncompliance and the action(s) that may be taken to
achieve compliance.

3. BPA will provide a reasonable opportunity to
correct such noncompliance before imposing a remedy.

— D26—

BPA may impose a prospective remedy to account for
actions already taken that were not in compliance with
this Policy.

4. BPA may fashion and impose an appropriate
remedy for noncompliance. Remedies that BPA may
impose include, but are not limited to:

a. denial of access for a resource;
b. refusal to accept schedules; or
c. reduction in future allocations.

G. Exhibits
1. Exhibits A and Exhibit B are a part of this Policy.

Issued in Portland, Oregon, on October 22, 1984.

Peter T. Johnson,
Administrator.

eA ee hb asker ie AaB SRLED..

:
;

— D27—

Exhibit A — Example of Formula Allocation
Under Condition 1

Assumptions Used in This Example

l.

PrP YP

There is sufficient energy to load the potential
Intertie Capacity at 18.5 mills/kWh or less the
“applicable rate’”’ under the Exportable Energy
Agreement.

Declarations of available energy are hourly.
Some utilities have firm contracts.

Some utilities have intertie priorities.

Potential Intertie Capacity equals 5,800 MW.
Extraregional utilities are not able to declare or
receive an allocation in this condition.

— D28—

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[Exhibit A cont’d]
Description [of Condition 1 example above]:

Column 1 =

Column 2 =

Column 3 =

Column 4 =

Column 5=

Column 6 =

Column 7 =

Column 8 =

Utility that is declaring energy for the
allocation procedure.

The amount of firm energy each utility
will deliver, as specified prior to allocati-
on of nonfirm energy.

Each utility’s total hourly nonfirm en-
ergy declaration.

The initial allocation of the potential
nonfirm Intertie capacity.

The initial allocation of Intertie Capacity
(5,800 MW).

The reallocation that is required because
of Portland General Electric’s priority to
the Intertie. NOTE: BPA does not share
in these pro rata reductions necessitated
by enactment of priority rights.

The final nonfirm allocation of the
potential nonfirm Intertie capacity.

The final total allocation of the potential
Intertie Capacity (5,800 MW).

After the final allocation for each hour of the

preschedule

day or days is determined, Pacific

Northwest utilities would be informed of their
allocation and would either negotiate sales at other
than the 18.5 mills/kWh price or be combined with
BPA’s allocation at 18.5 mills/kWh and receive a pro
rata share of BPA sales.

— D30—

[Exhibit A cont’d]
Example of Formula Allocation Under Condition 2

Assumptions Used in This Example

1. Hourly energy available at 18.5 mills/kWh or
less within the region is not sufficient to cover the
potential SW market.

2. The hourly energy available at any price is more
than sufficient to cover the potential SW market.

3. Utah has other transmission paths and, therefore,
will not participate.

4. Some utilities have firm contracts.

5. Potential Intertie Capacity equals 5,800 MW.

6. No utility has a priority.

Example of the Houriy Declaration and Allocation

NF NF Total

Firm decl. alloc. alloc.

(1) (2) (3) (4) (5)
BPA 500 2,000 1,350 1,851
IOU} 200 1,300 877 1,077
IOU2 40 1,960 1,323 1,363
PGE 700 0 0 700
PA} 0 100 67 67
PA? 0 200 135 135
IOU3 0 900 607 607

Total 1,440 6,460 4,360 5,800

[Exhibit A cont'd]
Description [of Condition 2 example above]

Column 1 =

Column 2 =

Column 3 =

Column 4 =

Column 5 =

Utility which is declaring energy for the
allocation procedure.

The amount of firm energy each utility
will deliver, as specified prior to allocati-
on of nonfirm energy.

Each utility’s nonfirm energy
declaration.

The initial allocation of the potential
nonfirm market.

Total allocation (nonfirm + firm) of the
5,800 MW Intertie Capacity.

— D32—

[Exhibit A cont’d]
Example of Formula Allocation Under Condition 3

Assumptions Used in This Example

1. Energy available at any price is not sufficient to
cover the potential market (exclude BCH and
WK).

2. The potential Market equals 5,800 MW.

Some utilities have firm contracts.

4. No intertie priorities remain.

- a

Example of the Hourly Declaration and Allocation

NF NF Total

decla- alloca- alloca-

Firm ration tion tion

(1) (2) (3) (4) (5)
BPA 500 0 0 500
IOU} 200 800 800 1,000
IOU2 40 1,460 1,460 1,500
IOU3 700 0 0 700
PA 0 100 100 100
PA? 0 200 200 200
IOU4 as 500 500 500
Subtotal 1,440 3,060 3,060 4,500
BCH 0 2,400 1,200 1,200
WK 0 200 100 100
Total 1,440 5,660 4,360 5,800

Description:

The logic followed in columns 1-5, above, are the
same as used in Condition 2, except that BCH and WK
have been added. Their allocations are based upon the

— D33—

prorata [sic] distribution of the capacity remaining
after first reducing the Intertie Capacity by sum of the
firm and NF Declarations for BPA and other
scheduling utilities. It is understood that the net
interchange between BCH and BPA is limited to 2,000
MW.

a

Exhibit B
Average
Firm
Surplus!
Average August
Firm through
Utility Surplus? December”
Bonneville Power
Administration 1,473 2,651
Seattle City Light 0 0
Tacoma City Light + 7
Grant County PUD 40 72
Douglas County PUD 0 0
Chelan County PUD 23 41
Pend Oreille PUD 0 0
Eugene Water and
Electric Board 28 50
Cowlitz County PUD 3 5
Snohomish County PUD 0 0
Montana Power Company 3 5
Idaho Power Company 0 0
Pacific Power
& Light Company 361 650
Portland General
Electric Company 135 243

Puget Sound Power
& Light 0 0

— D35—

[Exhibit B cont'd]
Average
Firm
Surplus!
Average August
Firm through
Utility Surplus' December”
Utah Power
& Light Company 0 0
Washington Water
Power Company 53 95

_ . "

' Except that in no operating year may a scheduling utility have
Assured Delivery for more energy than the amount of Average
Firm surplus shown in Column | times the number of hours in the
Operating year, and except that in the remainder of the 1984-85
operating year no scheduling utility may have Assured Delivery
for more than the amount of Average Firm Surplus shown in
Column | times 6936 hours.

2 Except that in the months of November and December when
the Exportable Agreement is in effect, the Average Firm Surplus
shall be the amount shown in Column 1.

iat aaalilihe \ tered satiate it

PO Pee a Pee ee ae

APPENDIX E

isin ines

APPENDIX E
NEAR TERM INTERTIE ACCESS POLICY

ADMINISTRATOR’S RECORD OF
DECISION

SEPTEMBER 1984
I. Introduction

The Bonneville Power Administration (BPA) adopt-
ed the Near Term Intertie Access Policy to be in effect
for 6 months, in order to enhance BPA’s Power
Marketing Program and to provide certainty with
respect to firm and nonfirm transactions that may
occur on the Federally-owned portions of the Pacific
Intertie. Specifically, BPA Policy accomplishes several
important purposes. First, BPA’s Policy assures that
BPA has use of its portion of the Pacific Intertie as
necessary for BPA’s Power Marketing Program.
Second, BPA must consider the financial impacts of
Pacific Intertie usage of BPA’s ability to recover
adequate revenues. In this regard, BPA’s Policy
enhances BPA’s ability to recover revenue that
otherwise would be lost if BPA failed to manage
prudently its portion of the Pacific Intertie. Third,
BPA’s Policy responds to the recent influx of requests
for more space on the Pacific Intertie than there is
available capacity. BPA’s Policy fosters increased
certainty in power sales between BPA, Pacific
Northwest utilities, and Southwest utilities.

BPA has actively sought public comments on its
efforts to develop an Intertie Access Policy since
July 22, 1983. The record developed on this issue

consists of comments on Bonneville Power Administra-
tion (BPA’s) Notice of Intent to Develop Intertie
Policy published on July 22, 1983 (48 FR 33515);
comments on a Discussion Paper of policy issues
published on February 16, 1984 (49 FR 5990); the
transcripts of three public comment forums held on
July 24 and 25, and August 3, 1984, on a proposed
Near Term Intertie Access Policy; written notes of
BPA personnel of a July 24, 1984, meeting with
technical operators of the Intertie; written comments
received by the close of the comment period on this
proposal, August 13, 1984, and a reasonable time
thereafter; and additional correspondence on the topic
of extraregional access. The public comment forums
were attended by 124 persons, representing BPA
customers, interest groups and other government
agencies. BPA also received 55 written comments
totaling 398 pages from the above interests as well as
comments from individuals on the proposed Near
Term Intertie Access Policy. (See Appendix A for
abbreviations used in this document and Appendix B
for a listing of those persons attending the public
comment forums and those making written comments.)

This document presents the Bonneville Power
Administration (BPA) evaluation of the record of the
proposed Near Term Intertie Access Policy and the
Administrator’s decisions on the issues identified
within the record. The record on which this Record of
Decision is based consists of the comments received on
BPA’s proposed policy issued on July 13, 1984, and
published in the FEDERAL REGISTER on July 30,
1984 (49 FR 30098); the comments made at the public
comment forums; any previous comments specifically
incorporated by reference by the commenters; and
related documents. The Record of Decision is divided

elated AF ie 8 Oo Tin ae atlas

a,

into four major sections: (1) Introduction, addressing
the purpose of the Policy, the process used to develop
the Policy, and BPA’s legal authorities to implement
the Policy; (2) Preliminary Issues, describing the
context of the Policy within BPA’s other actions and
responsibilities and the pervasive concepts embodied
within the Policy; (3) Conditions for Access, describing
the overall standards the Policy applies to determine

whether access to the Intertie will be provided for a

particular resource or arrangement; and (4) Firm
Contracts and Formula Allocation Methods, discuss-
ing the specific operative elements of the policy that
are necessary to allocate access to the Intertie. Within
each section, the appropriate comments are grouped by
topic into issues. The issues are divided into three
sections: (1) a summary of comments that describes
BPA’s initial proposal on the issue and briefly
summarizes the comments on the issue; (2) an
evaluation of the comments that discusses the various
arguments on the issue and BPA’s evaluation of those
arguments; and (3) the decision that explains the
Administrator’s decision on the issue as reflected in the
Policy as adopted.

A. Process

The development of BPA’s Intertie Access Policy
has been an extensive process. It commenced on
July 22, 1983, with publication in the FEDERAL
REGISTER of a Notice of Intent to Develop Intertie
Policy (48 FR 33515). This notice was provided
consistent with BPA’s “Major Power Marketing Policy
Procedures.” (46 FR 26368) In response to that Notice,
BPA met with numerous organizations and interest
groups to identify, discuss, and seek advice on the

a 7

issues that must be resolved by an access policy. BPA
received 55 comments in response to the July 22
Notice. These comments and advice generated a
Discussion Paper that was published in the FEDERAL
REGISTER on February 16, 1984, with a request for
comments from the public (49 FR 5990). This
Discussion Paper described possible BPA policies for
use of the Intertie by BPA and others within existing
contractual obligations. BPA received 76 written
comments in response to the Discussion Paper and held
informal meetings with customer and public interest
groups.

The Administrator considered the comments on the
Discussion Paper in the context of BPA’s own efforts
to resolve basic access priority issues given the current
Pacific Northwest power surplus of firm and nonfirm
power. The Administrator concluded that a multi-
staged policy development was appropriate. This Near
Term Intertie Access Policy is the first stage of that
policy development.

The Administrator’s decision was based on his
recognition that there are both long term and short
term Intertie access issues. This Near Term Intertie
Access Policy is adopted for 6 months and is intended
to focus attention on the allocation of scarce Intertie
space among competing users of the Intertie. The
current power glut in the Pacific Northwest has caused
Intertie access conflicts regarding the amount and
quality of Intertie service. These conflicts, and
practices by Intertie owners in the Southwest, have
depressed prices in the Pacific Northwest for the power
utilizing the Intertie. These depressed prices have
resulted in BPA revenue shortfalls which have
handicapped BPA’s ability to recover the costs

—_- BS

associated with Federal investment in the Federal
Columbia River Power System (FCRPS). BPA and
others believe that these problems require immediate
solution.

The initial Near Term Intertie Access Policy is in
effect for approximately 6 months. During this 6-
month period environmental analyses of the Policy will
be conducted and operational experience with the
Policy will be gained. Further opportunities for public
comment on proposed revisions to the initial Policy
also will be provided. Based on these comments, the
results of the environmental analyses and the operating
experience, the Near Term Policy may be revised at the
end of the 6-month period. The revised Policy then will
be adopted for the remaining approximately 18 months.
The Near Term Policy will be followed by a Long Term
Intertie Access Policy.

The Long Term Intertie Access Policy is necessary
because separate questions are raised regarding the
interrelationship of Intertie access priorities to long
term firm power transactions, to new Intertie facilities
development, and to new resource development. These
longer term questions require consideration of
different issues and involve different potential impacts.
These issues militate for additional features of an
access policy and require additional policy develop-
ment. The Near Term Intertie Access Policy by
comparison, will resolve immediate, more discrete
access issues that result from the present power
surplus.

BPA expects to publish an initial draft of the Long
Term Intertie Access Policy during the Fall of 1984.
Concurrent with that publication, BPA will commence
scoping an environmental analysis of the Long Term

a)

Policy. BPA anticipates that, because of possible
implications for future resource development, the Long
Term Intertie Access Policy may require an environ-
mental impact statement. The environmental statement
could take as long as 2 years to complete.

Issue #1; Summary of Comments

Los Angeles Department of Water and Power
(LADWP) alleged that BPA had failed to comply with
the Administrative Procedures Act. (Cotton, LADWP,
comments dated 8/13/84, pp. 1-2.) Both Southern
California Edison (SCE) and the Western Area Power
Administration (Western or WAPA) felt BPA was
acting hastily to adopt the Near Term Intertie Access
Policy for the initial 6 months, and requested further
opportunity to comment. (Myers, SCE, letter dated
8/14/84, p. 1; Coleman, WAPA, letter dated 8/13/84
p. 5.) Pacific Gas and Electric Company (PG&E)
inquired as to the evaluation BPA would make of the
comments made on the Policy. (Fiske, PG&E, TR 383.)

Evaluation of Comments

LADWP maintains that the procedure utilized to
formulate this Policy does not comply with the
Administrative Procedures Act, particularly section
556. BPA notes that section 9(e)(2) of the Pacific
Northwest Electric Power Planning and Conservation
Act (Northwest Power Act) specifically provides that
in reviewing final actions of the Administrator ~
‘“... Nothing ...shall be construed to require a
hearing pursuant to section 554, 556, or 557 of title 5 of
the United States Code.” (16 U.S.C. § 839f(e)(2).)

— a

SCE objects to the adoption of the Policy after a 30-
day comment period, three public comment forums,
and an informal meeting with the Intertie operators,
charging that BPA is acting in haste. (Myers, SCE,
letter dated 8/13/84, pp. 1-2.) Western asserts that
because of the importance of the Policy and the
likelihood that substantial changes will occur from the
draft to the Policy as adopted, BPA should provide an
additional 30-day comment period. (Coleman, WAPA,
letter, dated 8/13/84, p. 5.) BPA believes that it has
provided more than adequate due process in the
formulation of its Policy.

The Policy is an action subject to BPA “Procedures
For Public Participation In Major Regional Power
Marketing Policy Formulation.” (46 FR 26368.) These
procedures, as adopted on May 12, 1981, require BPA,
when promulgating a major power marketing policy, to
provide notice and comment opportunities before
adoption of a policy. In keeping with these procedures
BPA has conducted over a year long public involve-
ment process to allow interested persons to comment
first on the concept of an Intertie Policy, next on
specific issues, and now on a draft Policy.

In formulating the policy itself, BPA provided a full
l-month comment period. Comments from interested
persons received after the final date identified for
receipt of comments also were considered. In the 1-
month comment period, BPA held three public
comment forums. The recorded meetings generated
327 pages of transcribed comments. The transcripts
reflect that the Policy was dealt with on a line-by-line,
issue-by-issue basis. BPA offered at the outset to hold
additional meetings within the comment period “. . . if
specific issues and problems...” were identified.

(Jones, BPA, TR 6-7.) One of the three meetings was
held for just such a purpose. (Jones, BPA, TR 212.)
Throughout this process SCE, Western, LADWP, and
PG&E, as well as 120 other interested utilities and
public interest groups, have participated and made
comments.

BPA has carefully considered and evaluated the
comments received, and written a Record of Decision
based on transcripts of the three public comment
forums and the comments received in response to the
July 13, 1984, draft Policy. Significant Policy revisions
have been made based on these comments. BPA has
stated that additional opportunities for public comment
will be afforded and that the Policy will not be
amended without adequate procedures. (Jones, BPA,
TR 305; Michie, BPA, TR 44-45; McLennan, BPA,
TR 47.)

Decision

BPA adopts this Near Term Intertie Access Policy
for an initial period of 6 months. BPA believes that it
has provided more than sufficient opportunity for
public comment on this policy.

Issue #2; Summary of Comments

Washington Water Power (WWP) commented that 6
months is not an adequate period in which to gain
operating experience under the Near Term Intertie
Access Policy. WWP asks for an initial adoption period
of 1 year. (Bryan, WWP, letter dated 8/9/84, p. 2.)

s pe

—

Evaluation of Comments

WWP recommends a 1-year initial adoption period
in order to gain operational experience under the
Policy during the range of operating conditions
experienced over an entire year. This recommendation
has merit from an operational perspective. However, as
stated in the general discussion above, BPA has chosen
a 6-month initial adoption period for two reasons. The
first reason is that 6 months is the period required to
conduct the necessary environmental analyses on a
proposed Near Term Policy to be in effect for
approximately 18 months. The second reason is to gain
operating experience. If the environmental analysis
finds that the Policy should be altered after the 6
months to avoid environmental effects, revisions in the
Policy could occur at that time.

Decision

BPA is implementing the Near Term Intertie Access
Policy for 6 months. After conducting necessary
environmental analyses, gaining operational experience
and inviting additional public comment, the Policy may
be revised to reflect any of these concerns. BPA
expects to adopt the revised Policy for approximately
18 months.

Issue #3: Summary of Comments

The Public Generating Pool (PGP) urged that any
revisions to the Policy during the effective period of
the Policy be made only after adequate opportunity has
been given for public comment. The PGP also urged
that the Near Term Intertie Access Policy remain in

—E10—

effect until the Long Term Policy is adopted.
(Garman, PGP, letter dated 8/9/84, p. 2.)

Evaluation of Comments

The PGP’s first comment reflects an apparent
concern that policy revisions might be made subject to
public notice only, without providing opportunity for
public comment. As stated above, during the initial 6-
month period, BPA will provide additional opportunity
for public comment on proposed Policy revisions.
These comments will be considered before a revised
Policy is adopted for the remaining 18 months. In
addition, should BPA determine during the remaining
18 months that the Policy requires a substantial
revision, BPA will provide opportunity for public
comment on the proposed revision.

The PGP’s second suggestion is that the Near Term
Policy remain in effect until the Long Term Policy is
adopted. BPA has considered this approach, but has
determined to reexamine the Near Term Policy in 6
months. BPA will adopt a final Near Term Policy for
about 18 months. As stated, BPA believes the
development of the Long Term Intertie Access Policy
and the necessary environmental analyses and docu-
mentation may require approximately 2 years. BPA
does not believe that development of the Long Term
Policy will take longer than 2 years; but, should that
occur, BPA would consider extending the effective
term of the Near Term Intertie Access Policy.

Decision

Consistent with its “Procedures for Public Participa-
tion in Major Regional Power Policy Formulation” and

—Elil—

other applicable law, BPA will provide opportunity for
public review and comment on any substantial
revisions to the Near Term Intertie Access Policy.

B. Authority
1. Introduction

Several commenters suggested that Congress man-
dated open access to the Intertie, and precluded an
allocation mechanism. (Myers, SCE, letter dated
8/13/84, p. 9; Niggli, SDG&E, letter dated 8/13/84,
p.2; Gardiner, PG&E, letter dated 8/10/84, p. 3;
Cotton, LADWP, letter dated 8/13/84, p. 3.) SCE and
PG&E assert that BPA does not have the legal
authority to restrict Canadian energy from Intertie
access. (Myers, SCE, letter dated 8/13/84, p. 9;
Gardiner, PG&E, letter dated 8/10/84, p. 10.) The
Direct Service Industries (DSI) assert, to the contrary,
that the Administrator has no authority to allow access
to the Federal Intertie until BPA’s surplus is sold.
(Wilcox, DSI, letter dated 8/13/84.)

2. The Administrator’s Power Marketing
Program

Issue #1: Evaluation of Comments

Many commenters questioned BPA’s conditioning of
Intertie access on compliance with its own Power
Marketing Program. Some of these comments concern
BPA authority. These and other Power Marketing
Program issues are discussed in the section of the
Record of Decision discussing Conditions for Access.

—E12—

3. Allocation of Intertie Capacity
Issue #2: Evaluation of Comments

During Condition 2, BPA proposed to allocate
available Intertie capacity for surplus power transac-
tions on the basis of each seller’s pro rata share of the
total available supply. SCE argued, without statutory
citation, that Congress mandated that competitive
market forces create Intertie allocation for Pacific
Northwest sellers. (Myers, SCE, letter dated 8/13/84,
pp. 9-10.) Similar assertions were made by San Diego
Gas and Electric (SDG&E) and PG&E. (Niggli,
SDG&E, letter dated 8/13/84, p. 2; Gardiner, PG&E,
letter dated 8/10/84, p. 3.)

References in the legislative history of the Regional
Preference Act to the benefits accruing to Pacific
Northwest utilities from the construction of the
Intertie primarily involved the benefits accruing
through lower BPA power sales rates as a result of the
increased revenues generated from sales of BPA surplus
in the Southwest market. (Hearings on H.R. 11201
Before the House and Senate Appropriation Commit-
tees, 88th Cong., 2d Sess. 9 (1964) (Dept. of Interior
Rep., at p. 34) (hereinafter Dept. of Interior Rept.).
The Department of Interior Report, however, also
recognized BPA’s intention to allocate some Intertie
capacity to Northwest generating utilities on the basis
of their respective shares of the regional nonfirm
surplus. (Id. at 27.) Also, in its bid to construct a
portion of the southern portion of the Intertie, the
California Power Pool stated that it would purchase
Pacific Northwest surplus energy not on a competitive
basis, but rather on an equitable pro rata basis from
participating Pacific Northwest sellers. (Supplement to

—E13—

Pacific Northwest Intertie Proposal of California
Utility Companies, May 9, 1964.) In contrast to the
above understandings, Congress showed relatively little
concern about competition issues and was satisfied that
diverse ownership of the Intertie, and the requirement
that owners make available to others any capacity they
did not need, would provide equitable access to all
generators and avoid any monopolization of the lines.
(Dept. of Interior Rep. at p. 20.)

The legislative history description of BPA’s pro rata
allocation plan was not incorporated into the words of
the statute. Rather, with respect to sales of Pacific
Northwest surplus power, Congress enacted section 6
of the Regional Preference Act to provide BPA the
authority to operate Federal Intertie capacity as a
vehicle for sale of BPA surplus power to the Southwest.
It left to BPA the decisions on how to manage the
remaining Intertie capacity. On the basis of the
expectations set out in the legislative history, BPA
implemented a pro rata sharing approach to Intertie
capacity in 1969 when it offered and executed the
Exportable Agreement (BPA Contract No. 14-03-
73155). The contract is a long-standing interpretation
of BPA’s statutory authority to allocate Intertie
Capacity on a pro rata basis.

PG&E’s references to statements in the legislative
history of the Northwest Power Act concerning the
continuing freedom of Pacific Northwest utilities to
develop their own resources and to dispose of their own
power are not relevant to the issue at hand. (Gardiner,
PG&E, letter dated 3/16/84, pp. 3-4.) Those state-
ments relate to the interrelationship of the Northwest
Conservation and Electric Power Plan to independent
utility resource development, to the ability of non-

a i)

Federal entities to sell their resources outside the
Pacific Northwest in a manner less restricted by
regional preference principles than those that apply to
BPA, and to the utilities’ continuing discretion to
choose the manner in which they intend to meet their
load obligations, that is, with or without BPA power or
its resource acquisition programs. These statements do
not affect in any way BPA’s authority with respect to
the management of the Federal Intertie.

SCE argues that section 6 of the Regional Preference
Act “compels the Federal government to make excess
Federal transmission capacity available as a common
carrier to transmit federal power for others.” (Myers,
SCE, letter dated 8/13/84, p. 12.) To the contrary, that
section does not use the term “‘common carrier”, which
is a term of art in the field of utility regulation. It uses
the term “carrier.” (16 U.S.C. §837e.) There is nothing
in the legislative history to suggest that Congress, by
use of that term, intended anything other than that
excess capacity be made available to “carry” non-
Federal energy. The Regional Preference Act does not
prohibit BPA from equitably allocating Intertie
Capacity among users. BPA has implemented an
allocation mechanism for Intertie access for 15 years
under the Exportable Agreement. As stated above, the
Interior Department reported to Congress BPA’s
intention to institute a pro rata allocation mechanism.
Congress did not reject this approach. In the absence
of any mandated method of providing Intertie access,
Congress must be found to have granted the
Administrator the discretion normally granted to
Federal agencies in the management and disposal of
Federal property. (See discussion, infra, Power
Marketing Program.)

—E15—

4. Access to the Intertie for Canadian Power
Issue #3: Evaluation of Comments

BPA proposed to .exclude transmission of power
between Canadian utilities and Southwest entities when
there were more requests from Pacific Northwest
sellers than available Intertie capacity. BPA also
sought comment on providing access for such
transactions if Canadian utilities agreed to participate
more fully in coordinated river operations. SCE and
PG&E argue that BPA has no authority to preclude
Canadian power from Intertie transmission during
times when there is more Pacific Northwest demand
for Intertie capacity than available capacity. (Myers,
SCE, letter dated 8/13/84, pp. 11-12; Gardiner,
PG&E, letter dated 8/10/84, p. 10.) Other commenters
supported the concept of a regional priority to
available Intertie capacity. (O’Banion, SMUD, letter
dated 8/10/84, p. 3; Bredemeier, PGE, letter dated
8/13/84, p. 2; Boucher, PP&L, letter dated 8/13/84,
p. 3; Pugh, NCPPA, letter dated 8/13/84, p. 2; Schultz,
ICP, letter dated 8/10/84, p. 2; Jacquot, WPSC, letter
dated 8/8/84, p. 2.)

BPA interprets its statutory authorities to allow it to
refuse Intertie access to Canadian entities when the
requests by Pacific Northwest utilities for use of the
Intertie are greater in amount than the available
Intertie capacity. Section 6 of the Regional Preference
Act assures access only to Canadian Treaty power, that
is, the power generated in the United States to which
Canada became entitled as a result of the USS. -
Canadian Treaty and its cooperative planning and
operation of the Columbia River system. (Treaty
between Canada and the United States of America

—E16—

Relating to Cooperative Development of the Water
Resources of the Columbia River Basin, Jan. 17, 1961,
15 U.S.T. 1555, T.1.A.S. No. 5638.) (See, Dept. of
Interior Rept. at p. 40.) Transmission of Canadian
Treaty power to California was a critical element in
obtaining Congressional approval of the Intertie, as
PG&E correctly points out. (Gardiner, PG&E, letter
dated 8/10/84, p.10.) However, Canadian Treaty
power excludes power not governed by the sales
contracts between the Columbia Storage Power
Exchange (CSPE), the nonprofit Pacific Northwest
corporation established to sell the Canadian entitle-
ment power during the period when Canada did not
need the power, and California utilities. Those
contracts have since terminated. No Canadian Treaty
power currently flows over the Intertie to California
entities. This statutory priority does not extend to non-
Treaty power.

The legislative history listing of benefits arising out
of construction of the Intertie included only benefits to
the Pacific Northwest and Pacific Southwest. (Dept. of
Interior Rept. at p. 32.) Energy transactions listed as
being the purpose of the Intertie were always described
as being between the two Pacific regions of the United
States. Even the sale of Canadian Treaty power took
the form of sales between the Pacific Northwest and
the Pacific Southwest. (Dept. of Interior Rept. at
p. 33.) The legislative history specifically states that the
Administrator “may” provide transmission for non-
Treaty Canadian power. (H.R. Rep. No. 590, 88th
Cong., 2d Sess. 9 (1964).) The subsequent statement
that non-Treaty power should be treated equally with
Pacific Northwest power, if it is provided Intertie
access, is a mere reassertion that non-Treaty power, as
other non-Federal power, does not have the priority

|)

given to Federal or Canadian Treaty power. The
legislative history of section 6 of the subsequently
enacted Federal Columbia River Transmission System
Act refers only to use of BPA’s transmission facilities
for the distribution of electric power “‘in and from the
Pacific Northwest.” (H.R. Rep. No. 1030, 93rd Cong.,
2d Sess. 9 (1974).)

5. BPA’s Obligation to Reserve Sufficient
Intertie Capacity to Sell All of Its
Available Surplus Prior to Providing
Capacity to Non-Federal Entities

Issue #4: Summary of Comments

The DSIs argue that BPA must reserve sufficient
Intertie capacity to market its available surplus before
providing access to non-Federal entities. (Wilcox, DSI,
letter dated 8/13/84.)

Evaluation of Comments

The DSIs legal conclusion that BPA is obligated to
utilize its Intertie facilities to force sales of its own
surplus goes too far. While BPA believes that it has the
discretion to act in this manner, such a policy would
not at this time best serve the Federal stewardship role
BPA presently sees for itself with respect to the
Intertie. BPA acts as Federal steward with ownership
or contract rights to most of the high voltage
transmission needed to sell power outside the Region.
As a steward, BPA believes the best policy at this time
is to offer to share this transmission capacity with
other Pacific Northwest scheduling utilities and
entities. This sharing concept can facilitate longer term

—E18—

sales of firm power to California than would otherwise
be possible. BPA is unable to make such sales directly
because of the restrictions of the Northwest Preference
Act. Howéver, BPA believes that non-Federal long
term sales can offer the opportunity to reduce the
regional surplus of power and, over time, can cause
those utilities which are BPA customers to purchase
additional power from BPA. In this manner BPA
believes that its Policy will benefit both the Pacific
Northwest and the Southwest and help assure the
widespread use of power to consumers at the lowest
possible rates consistent with sound business principles.

The objections raised against this policy are that
BPA will not maximize its own revenues and therefore
will be unable to keep rates as low as would otherwise
be possible. (Wilcox, DSI, letter dated 8/13/84 and
attachments.) BPA recognizes that its Policy will need
to be carefully balanced against BPA’s revenue
requirements. BPA believes that the revenue require-
ments provisions of the statutes which govern its
operations are incorporated into the Power Marketing
Program definition. BPA will weigh the effectiveness
of the Policy against these revenue requirements and
will review requests for access accordingly. BPA will
consider revising the Policy if among other reasons its
concept of shared access unreasonably impedes its
ability to meet its reasonable revenue needs. BPA
believes that this is consistent with the comments of
those who recognized that one of BPA’s obligations is
to generate revenues which will permit BPA to
maintain BPA rates at the lowest possible level
consistent with sound business principles while
repaying the Federal investment in the BPA system.
(Foleen, letter dated 8/10/84 at p.1; Wilcox, DSI,
letter and attachments dated 8/13/84, p. 2.)

—E19—

J

BPA has the authority to utilize Intertie capacity on
a priority basis to effectuate BPA’s own sales.
However, the statutes only provide the authority to do
so, not the obligation to apply it to the fullest extent
possible. As stated above, the Interior Department
reported to Congress in 1964 that BPA intended to
allocate transmission capacity to Pacific Northwest
utilities on the basis of their pro rata shares of the
Region’s surplus, a concept contradictory to the
present assertion of the DSIs. Obviously, BPA’s
contemporaneous understanding of the Regional
Preference Act was that it had been granted that
authority because it quickly offered and executed the
Exportable Agreement after the completion of Intertie
construction. That agreement is now in its 15th year of
operation.

In contrast to statutory obligations based on social
policy, such as the mandate to provide preference and
priority to public bodies and cooperatives in the sale of
BPA power, the statutes provide substantial discretion
to thte Administrator in exercising business judgment in
the use and management of Federal property,
including whether to sell surplus energy, how much,
and under what terms. This discretion also applies to
determine how much of the Intertie is appropriate or
necessary to carry out BPA’s Power Marketing
Program. Section 6 of the Federal Columbia River
Transmission System Act, cited by the DSIs to support
their assertion that Congress mandated use of
sufficient Intertie capacity to sell all of the available
Federal surplus, states that the Administrator (not
Congress) is to determine how much transmission
Capacity is needed by BPA. Section 9(i)(3) of the
Northwest Power Act, also cited by the DSIs, similarly
defers to the Administrator’s judgment with the words

— E20—

“unless he determines such services cannot be furnished
without substantial interference.” Even section 2(b) of
the Bonneville Project Act, which the DSIs cite as the
source of BPA’s power marketing obligations, strongly
defers to the Administrator’s judgment with the words
“‘as he finds necessary, desirable or appropriate”. The
statutory provisions referenced by the DSIs do not
contain the mandate which they assert has been
imposed on the Administrator. There is no such
mandate. Congress provided an authorization to make
first use of the transmission facilities, not a mandate.

Section 5(b) of the Bonneville Project Act was the
first statutory provision dealing with BPA’s system
surplus. It merely authorizes the Administrator to
enter into contracts for its sale or exchange. Similarly,
the provisions in the Regional Preference Act and the
Northwest Power Act relating to sales of Federal
surplus energy outside the region do not require the
Administrator to effectuate such sales; they merely
place restrictions on such sales if they are made.
Indeed, section 5(f) of the Northwest Power Act states
that “the Administrator is authorized to sell, or
otherwise dispose of, electric power . . . that is surplus
to his obligations... .” All of these sections are
consistent with Congress’ grant of broad discretionary
authority to the Administrator in section 2(f) of the
Bonneville Project Act to operate BPA’s system and
facilities essentially as a utility business, with the same
flexibility and decisionmaking freedom that chazacter-
izes a business. To argue that Congress mandated the
Administrator to use all available Intertie capacity to
sell all of BPA’s existing surplus is contrary to the
express wording of the statutes that the Administrator
has the discretion to enter into such sales. Such a
construction would result in a negation of that

—E21—

f

discretion and therefore is to be avoided. (C. Sands,
Sutherland Statutory Construction, §46.06 (4th ed.
1973).)

The DSIs argue that the Administrator has the
obligation to operate Federal Intertie ownership
consistent with sound business principles and that such
principles require the reservation of sufficient Intertie
capacity to transmit all of the available Federal
surplus. Though BPA respects others’ views of what
constitutes sound business principles, this decision
ultimately is lodged with the Administrator. Congress’
reference to “sound business principles” in section 5 of
the Flood Control Act of 1944 and in section 9 of the
Federal Columbia River Transmission System Act was
not an objective mandate, but rather a limitation on the
obligation to provide the “lowest possible rates.”
Congress’ use of the term in section 7(a)(1) of the
Northwest Power Act is in reference to establishing
rates to recover BPA’s costs. It is not a mandate to take
any particular power marketing action with respect to
| sales of Federal surplus.

6. Relationship to 7(i) and 7(k)
Issue #1: Summary of Comments

SCE suggests that the Intertie Access Policy
represents a change in the availability and implementa-
tion of BPA’s transmission and wholesale power rates.
(Myers, SCE, letter dated 8/13/84, p. 6.) LADWP
suggests that the Intertie Access Policy constitutes a
change in rates. (Cotton, LADWP, comment dated
8/13/84, p. 2.) PG&E suggests that the Intertie Access
Policy is a rate adjustment. (Gardiner, PG&E, letter
dated 8/10/84, p. 4.)

— E22—

Evaluation of Comments

SCE suggests that the Intertie Access Policy is an
integral part of the implementation of BPA’s rates
which should be subject to the procedural requirements
of section 7(i) of the Northwest Power Act. SCE does
not suggest that the Intertie Access Policy constitutes
ratemaking, rather that the Intertie Access Policy
constitutes an attempt to limit competition with BPA
sales of surplus firm power and nonfirm energy.
(Myers, SCE, letter dated 8/13/84, p. 7.) This alleged
attempt to limit competition is suggested by SCE to
effectively modify rates. (Jd. at 7.) SCE relies on
sections D.2.d. and E. of the draft Policy as
“demonstrating an intent to modify rates.”

Section D.2.d. provided:

d. In either Condition 2 or 3, if a Southwest
purchaser cannot purchase power because the
Pacific Northwest power available to it is
priced at a level that would not allow the
‘purchaser to displace the highest cost thermal
resources it would otherwise operate, and
there are no other Southwest utilities that are
able to accept the offer, then if the Pacific
Northwest utility is unwilling to lower the
price to an economic level, the Pacific
Northwest utility would lose the allocated
share of the Interties to other Pacific
Northwest suppliers.

Section D.2.d. required that a Pacific Northwest
utility which does not reduce its selling price to an
economic level would lose its allocated share of the
Intertie. Section D.2.d. generally was opposed by
Pacific Northwest and Southwest utilities for a variety

— E23—

of reasons and has been removed from the proposed
Intertie Access Policy. SCE’s argument based on
section D.2.d. is therefore moot.

SCE also suggests that section E of the Policy
“demonstrate[s] an intent to modify rates... .”
(Myers, SCE, letter dated 8/13/84, p. 7.) Section E,
however, provides conditions when extraregional
utilities may gain access to Intertie capacity. Again,
SCE has provided no explanation of how extraregional
access to the Intertie would affect BPA’s established
rates. There is no support for the suggestion that the
Policy constitutes ratemaking.

SCE apparently argues that the Intertie Access
Policy limits competition with BPA sales, thus allowing
BPA to maximize its revenues from nonregional
customers. As noted above, however, BPA can only
charge established rates for power. Nothing in the
Policy changes this fact. If BPA were to change its
rates, such changes would be subject to section 7(i)
proceedings. The Policy, however, does not modify
BPA’s rates.

LADWP cites section 7(a) of the Northwest Power
Act as supporting the proposition that the Intertie
| Access Policy constitutes a change in rates. (Cotton,
LADWP, comments dated 8/13/84, p.2.) Section
7(a)(1), (16 U.S.C. § 839e(a)(1)), provides in part:

“The Administrator shall establish and
periodically revise rates for the sale and
disposition of electric energy and capacity
and for transmission of nonfederal power.”
(emphasis added).
This provision requires the Administrator to
establish rates for transmi

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1720%3A2. Public record. Not legal advice.