# Appendix — Powerex Corporation v. California (No. 05-584) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_0430%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 2006 ## Text (%) : FILE _ 05-584 NOV - 4 2005 No.ggeice-uF THE CLERK IN THE Supreme Court of the United States POWEREX CORP., A CANADIAN CORPORATION DBA POWEREX ENERGY CORP.. Petitioner PEOPLE OF THE STATE OF CALIFORNIA EX REL. BILL LOCKYER, ATTORNEY GENERAL OF THE STATE OF CALIFORNIA, Respondent On Petition for a Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit APPENDIX TO PETITION FOR A WRIT OF CERTIORARI J. CLIFFORD GUNTER III DAVID C. FREDERICK ANDREW EDISON Counsel of Record BRACEWELL & GIULIAN! LLP BRENDAN J. CRIMMINS Pennzoil Plac South Tower KELLOGG, HUBER, HANSEN i111 Louisiana Street TODD. EVANS & FIGEL, Suite 2500 PLL Houston, Texas 77002-2781 1615 M Street. N.W., Suite (713) 223.2300 Washington, D.C. 20036 (202) 326-7900 PAUL W. FOX DEANNA E. KIN BRACEWELL & GIULIANI LLP 111 Congress Avenue Suite 2400 Austin. Texas 78701] -406i 1») ri } 472-7800 November 4 Counsel for Powerex Corp Se ome eee cr TABLE OF CONTENTS Order of the United States Court of Appeals for the Ninth Circuit Dismissing Appeal, California v. Powerex Corp., No. 05- 16682 (Oct. 6, 2005)... Order of the United States Court of Appeals for the Ninth Circuit, California v. Fowerex Corp., No. 05- 16682 (Sept. 2, 2005) Order of the Umited States District Court for the Eastern District of California, California vu Powerex Corp., No. 2:05-cv-143-GEB-PAN (Aug. 22, 2005) Powerex Corp.'s Request for Judicial Notice in Opposition to Motion To Remand, California uv. Powerex Corp., No. 2:05-cv-143-GEB-PAN (E.D. Cal. filed Mar. 7, 2005) (excerpt).. Declaration of Kenneth G. Peterson (Aug. Y, 2002), attached as Exhibit 5 to Defendant Powerex Corp.'s Response to Plaintiffs’ Mo- tion To Remand and Motion To Strike and/or Sever Cross-Complaints, Nos. CV 02-0990- JM(LAB) et al. (S.D. Cal. filed Aug. 9, 2002) (excerpt) Deposition of Kenneth Grant Peterson (Aug 21. 2002), attached as Exhibit 4 to Defen. dants’ Supplemental Joint Notice of Lodg- ment in Support of Supplemental Opposition to Plaintiffs’ Motion To Remand and Motion To Strike and/or Sever Cross-Complaints, Nos. CV 02-0990-RHW et al. (S.D. Cal. filed Sept. 4, 2002) (excerpt) ... il Opinion of the United States Court of Appeals for the Ninth Circuit, California v. NRG Energy In Nos. 02-57200 et al. (Dec. 8, 2004) Treaty Between the United States of America and Canada Relating to Cooperative Develop ment of the Water Resources of the Columbia River Basin, Jan. 17, 1961, T.LA.S. No. 5638, 15 U.S.T. 1555 Treaty Between Canada and the United States of America Relating to the Skamt River and Ross Lake, and the Seven Mile Reservoir on the Pend D'Oreilie River, Apr. 2, 1984, T.1.A.S. No. 11088, 1469 U.N.T.S. 309 North American Free Trade Agreement Between the Government of the United States of America the Government of Canada and the Government of the United Mexican States, done Dec. 17, 1992, 32 1.L.M. 289 (excerpt) Statutory Provisions Involved 28 U.S.C. § 144] 28 U.S.C. § 1442 28 U.S.C. § 1603 28 U.S.C. § 1605 Constitution Act, 1867 (No. 5) (The British North America Act, 1867), 30 & 31 Vict... Ch. 3 (U-K.) (excerpt) British Columma Hydro and Power Authority Act, [R.S.B.C. 1996], ch. 212 (excerpt) British Columbia Power for Jobs Development Act, [8.B.C. 1997], ch. 51 bhi Special Directive No. 4 to the British Columbia Hydro and Power Authority Special Direction No. 8 to the British Columbia Hydro and Power Authority Official Report of the Debates of the Legislative Assembly (Hansard), 34th Parliament, 2nd Ses sion (June 27, 1988) (excerpt) la UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 05-16682 (D.C. No. CV-05-00143-GEB Eastern California (Sacramento)) PEOPLE OF THE STATE OF CALIFORNIA EX REL. BILL LOCKYER, ATTORNEY GENERAL OF THE STATE OF CALIFORNIA, Plaintiff-Appellee, POWEREX CORP., A CANADIAN CORPORATION. DBA POWEREX ENERGY CORP., Defendant-Appellant [Oct. 6, 2005} ORDER Before: REINHARDT, RYMER, and HAWKINS, Circuit Judges We have reviewed the parties’ responses to the court's September 2, 2005, order to show cause. We dismiss the appeal for lack of jurisdiction. See 28 U.S.C. § 1447(d) Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 128 (1995) All pending motions are denied as moot DISMISSED. za UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 05-16682 (D.C. No. CV-05-00143-GEB Eastern California (Sacramento)) PEOPLE OF THE STATE OF CALIFORNIA EX REL. BILL LOCKYER, ATTORNEY GENERAL OF THE STATE OF CALIFORNIA, Plaintiff-Appellee, POWEREX CORP., A CANADIAN CORPORATION, DBA POWEREX ENERGY CORP., Defendant-Appellant. (Sept. 2, 2005} ORDER Appellant has filed an emergency motion for stay of the district court's August 23, 2005, remand order pending appeal. A review of the record suggests that this court may lack jurisdiction over the appeal because an order remanding a removed action to state court for lack of subject matter ju- risdiction is not reviewable on appeal. See 28 U.S.C. § 1447(d); Things Remembered v. Petrurca, 516 U.S. 124, 127 (1995) By September 7, 2005, appellant shall move for volun- tary dismissal of the appeal or show cause why it should not be dismissed for lack of jurisdiction. Appellee’s re- sponse to the emergency motion for stay pending appeal and this order to show cause is due September 12, 2005. The optional reply is due September 14, 2005. The parties shall file the memoranda by close of business on the due date and may contact the court's Motions Unit at (415) 556.9890 to obtain the number to file the memoranda by facsimile if appellant does not comply with this order, the Clerk PI } shall dismiss this appeal pursuant to Ninth Circuit Rule 42-1 Briefing on the merits of the appeal is suspended pend ing further order of the court For the Court, LESLEY HAL! Lesley Hale Motions Attorney/Deputy Clerk Sth Cir. R. 27-7 General Orders/Appendix A la IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA No. 2?:05-cv-143-GEB-PAN PEOPLE OF THE STATE OF CALIFORNIA EX REL. BILL LOCKYER, ATTORNEY GENERAL OF THE STATE OF CALIFORNIA, Plaintiff POWEREX CORP... A CANADIAN CORPORATION, DBA POWEREX ENERGY CORP., AND DOES 1 - 100, Defendants ORDER Plainuff moves to remand this action to Sacramento County Superior Court. Defendant Powerex Corp. op- poses the motion, contending that federal question re moval jurisdiction exists. Further, Defendant moves to dismiss Plaintiff's complaint under Federal Rule of Civil Procedure 12(b)(6). Plaintiff opposes this dismissal mo- tion BACKGROUND The California energy crisis of 2000-2001 provides the backdrop to this litigation. From 1998 to the present, De fendant. a Canadian corporation, has conducted electricity transactions in the California markets. (Compl. 44 4, 43.) Plaintiff alleges that from 1999 through 2901, Defendant engaged “in a number of unlawful, unfair, fraudulent, and manipulative trading schemes to the detriment of the People of the State of California,” in violation of Califor nia's Unfair Competition Law (Cal. Bus. & Prof. Code § 17200, et seq.) CUCL") and the California Commodity Law of 1990 (Cal. Corp. Code § 29500, et seq.). (Compl 7" 1, 19. 44.) Plaintiff's complaint seeks an injunction, 5a restitution, disgorgement, damages, civil penalties, and other equitable relief. (/d. “| 2.) DISCUSSION Motion to Remand Plaintiff argues this action must be remanded to state court because there is no federal question removal juris- diction. Plaintiff contends its complaint “is a law en forcement action brought against Powerex to enforce Cali- fornia’s antifraud and consumer protection laws. (PL.’s Mot. to Remand at 2.) Further, Plaintiff contends that “the Attorney General's case solely addresses the fraudulent market manipulation and gaming strategies employed by Powerex which adversely impacted the citi- zens of California.” (d.) Plaintiff further contends that “Powerex|'s} removal [cannot be] based on the Foreign Sovereign Immunity Act” and that “compelling the Attor- ney General to move its state-law related case to federal court would violate the Eleventh Amendment's provision protecting a state’s sovereign immunity.” (/d. at 13-14.) Defendant counters that removal was proper for two independent reasons: (1) there is federal question jurisdic- tion under the Federal Power Act, 16 U.S.C. § 825p (“FPA”), and (2) Defendant's “foreign state” status as de fined by the Foreign Sovereign Immunities Act, 28 U.S.C § 1603 et seq. (“FSIA”). Defendant contends federal ques- tion removal jurisdiction exists since “|t]he Attorney Gen eral’s claims arise under federal law because he alleges misconduct in wholesale power transactions, which are exclusively the province of federal law, and implicate spe- cific federal tariffs governing the transactions at issue.” (Def.’s Opp'n to PI.’s Mot. at 13.) Defendant also contends it was “entitled to remove this action because it satisfies the statutory criteria of a foreign state codified in [FSLA since] it is both an agent and instrumentality of the Prov- ince of British Columbia and is also a wholly owned subdivision of the Province’s statutory agent BC Hydro.” (/d. at 2.) A. Standard An action filed m state court can be removed to federal court if it “originally could have been filed in federal court.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987); see also 28 U.S.C. § 1441(b) (Any crvil action of which the district courts have orginal jurisdiction founded on a claim or right arising under the Constitu tion, treaties or laws of the United States shal] be remov able without regard to the citizenship or residence of the parties.) Defendant bears the burden of establishing fed eral jurisdiction, “and the removal statute is strictly con strued against removal jurisdiction.” Prize Frize, Inc. ' Matrix (U.S.) Inc., 167 F.3d 1261, 1265 (9th Cir. 1999) “The presence or absence of federal-question jurisdx tion w governed by the ‘well-pleaded complaint rule which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint The rule makes the plaintiff the master of the claim; [it] may avoid federal jurisdiction by exclusive rehance on state law. Caterpil lar Inc. v. Williams, 482 U.S. 386, 392 (1987) B. Federal Question Jurisdiction Under the Federal Power Act Plaintiff argues this action must be remanded because “It}he Attorney Generals well-pleaded Complaint solely asserts state causes of action based on California's con sumer protection and commodities laws [that] protect California citizens from fraud and deceit.” (Pl.'s Mot. to Remand at 13.) Plaintiff argues In particular, the Attorney General's Complaint al leges that Powerex's market manipulation and gam ing stratemes constituted “unfair and “fraudulent business practices pursuant to Califorma Business and Professions Code § 17200 (Complaint, $4 64 65), and that Powerex’s market manipulation and gaming strategies constituted “unlawful” business practices within the meaning of § 17200 “because they violate Calitorma law, including but not limited to Califorma Corporations Code § 29536." (Com plaint © 66). Additionally. the Complaint alleges that Powerex’s market manipulation and gaming strategies violated the California Commodity Law because they involved willful and fraudulent acts involving offers to sell, sales, offers to purchase, and purchases of commodities and commodity options *te [Blecause the Complaint does not rely on any fed eral law to create the causes of action or to seek re lef, it 1s clear that the Attorney General's well pleaded Complaint does not present a federal ques tion. Thus, removal is improper based on the face of the Complaint (id. at 5-6.) Defendant rejoins that Plaintiff cannot rely on the well pleaded complaint rule since Plaintiff's complaint is “art fully pled” to avoid federal! jurisdiction. Defendant con tends “the Attorney General's state law claims necessarily implicate substantial disputed questions concerning the FPA land] the Attorney General's state law claims are completely preempted by the FPA.” (Def.’s Opp'n to Pl.'s Mot. at 13.) Plaintiff counters that “courts have long rex ognized that there is no complete pre-emption under the FPA” and “Powerex has failed to demonstrate that the At torney General's Consumer Protection Action is an ‘art fully pleaded federal cause of action.” (Pl.'s Reply at 4, 9.) The artful pleading doctrine applies to a situation “where a plaintiff articulates an inherently federal claim in state-law terms.” Hrennan v. S.W. Airlines Co., 134 F.3d 1405, 1409 (9th Cir. 1998). “The doctrine allows courts to delve beyond the face of the state court com plaint and find federal question jurisdiction by recharac teriz{ing! a plaintiff's state-law claim as a federal claim Lippitt v. Raymond James Fin. Servs., Inc., 340 F.3d 1033, 1041 (9th Cir. 2003) (internal quotation marks and citations omitted). “Whether the [doctrine] apphes re quires an analysis of whether plaintiff[s|claams ‘arse Sa under’ federal law.” /n re Cal. Retail Natural Gas & Elec Antitrust Litig., 170 F. Supp. 2d 1052, 1056 (D. Nev 2001). “|Cjourts have used the doctrine in: (1) com- plete preemption cases, and (2) substantial federal ques tion cases. Subsumed within this second category are those cases where the claim is necessarily federal in char- acter, or where the right to relief depends on the resolu tion of a substantial, disputed federal question.” Lippitt, 340 F.3d at 1041-42 (internal citations omitted) A state law claim is completely preempted if federal law “provide|s] the exclusive cause of action for the claim as- serted and also set|s} forth procedures and remedies gov erning that cause of action.” /d. at 1042 (citing Beneficial Natl Bank v. Anderson, 539 U.S. 1, 8 (2003)). Complete preemption is rare; the Supreme Court has only found complete preemption in three categories of cases: certain causes of action under the Labor Management Relations Act, the Employee Retirement Income Security Act, and the National Banking Act. Beneficial Natl Bank, 539 U.S. at 8 “(T}he artful pleading doctrine [also] allows federal courts to lexercise} jurisdiction over state law claims that implicate a substantial federal question.” Lippitt, 340 F.3d at 1042. “[{A] case is ‘necessarily federal’ when it falls within the express terms of a statute granting fed- eral courts exclusive jurisdiction over the subject matter of the claim.” Hendricks v. Dynegy Power Mtkg., Inc.,160 F. Supp. 2d 1155, 1161 (S.D. Cal. 2001). Further, “lejven where state law creates the cause of action, federal! jurisdiction may still lie if ‘it appears that some substan- tial, disputed question of federal law is a necessary ele- ment of one of the well-pleaded state claims."” Arco Envtl Remediation, LLC v. Dept of Health & Envtl. Quality, 213 F.3d 1108, 1114 (9th Cir. 2000) (citing Rains v. Critzrion Sys., Inc., 80 F.3d 339, 345 (9th Cir. 1996)) The Ninth Circuit cautions that the artful pleading doc- trine “should [be] invoke/d] only in limited circumstances as it raises difficult issues of state and federal relation Ya ships and often yields unsatisfactory results. While the artful pleading doctrine is a useful procedural sieve to de tect traces of federal subject matter jurisdiction in a par- ticular case, it also has substantive implications on the scope of federal jurisdiction and efficiency.” Lippitt, 340 F.3d at 1041 (internal quotation marks and citations omitted) > lete Preemption Defendant argues “the FPA completely preempts the Attorney General's purported state law claims,” contend ing that “[t}he FPA creates an exclusive federal scheme for the regulation of wholesale electric power transactions, preempting state regulation.” (Def.’s Opp'n at 21-22.) Plaintiff counters that “courts have long recognized that there is no complete pre-emption under the FPA.” (PI.’s Reply at 3, 4.) The FPA does not completely preempt Plaintiff's state law claims since the claims do not seek to enforce any “li- ability or duty created by” the FPA. See Hendricks, 160 F. Supp. 2d at 1160; Calif. ex rel Lockyer v. Mirant Corp., 2002 WL 1897669, at *6 (N.D. Cal. Aug. 6, 2001); In re Cal. Retail Natural Gas & Elec. Antitrust Litig.,170 F. Supp. 2d 1052 (D. Nev. 2001); Indeck Maine Energy, LLC v. ISO New England, Inc., 167 F. Supp. 2d 675, 687 (D. Del. 2001). The FPA preempts only those claims that fall within the FPA'’s exclusive jurisdictional provision. This exclusive jurisdictional provision provides that the federal courts “shall have exclusive jurisdiction of violations of ithe FPA] or the rules, regulations, and orders there- under, and of all suits in equity and actions at law brought to enforce any liability or duty created by, or to enjoin any violation of, [the F?Al or any rule, regulation, or order thereunder.” 16 U.S.C. § 825p. 2. Substantial Federal Question Defendant also contends that Plaintiff's removal was proper because Plaintiff's “state law claims necessarily implicate substantial disputed questions concerning the FPA.” (Def.’s Opp'n at13.) Defendant argues that Plain 4 - iVa uff's clanms arise under federal law because they “cannot be judged without consideration of the tariffs (filed with the Federal Energy Regulatory Commission (FERC )| (id. at 17.) Defendant contends Plaintill's complaint was artfully pled in the guise of state claims “to avoid jalleging| expheit claims of violations of the [SO and the PX tariffs.” since Plaintiff recognizes that “no court state or federal - could determine whether Powerex s con duct was ‘unlawful, unfair or fraudulent’ without resort to the tanffis.” Ud.) Defendant argues that Plaintiff's claime arise under federal law because Plaintiff alleges miscon duct in wholesale power transactions which are exclu sively the province of federal law, and implicate specify federai tarills governing the transactions at issue Piayntaff counters that the artful pleading doctrine does not apply because “The Complaint does not seek to en force any federal obligations that Powerex might have vio lated.” (Pi.'s Reply at 6.) Plaintiff argues that “any allu sions to federally-regulated entities hke the ISO and PX that were made in order to provide the context for the gaming allegations, do not change the state causes of ac tion into federal ones.” (/d. at 7.) Moreover, Plaintiff ar gues that “the Attorney General does not seek to enforce or challenge Powerex's agreements with the ISO or its ob hgations under the MMIP. Resolution of any issues re garding federal tariffs is not necessary to resolve the state law claims (/d.) Thus, the issue is “whether [Plaintiff] has artfully phrased a federal! clarm by dressing it in state law attire Lippitt, 340 F.3d at 104] A caretul reading of artful pleading cases shows that no specific recipe exists for a yurt to alchemuze a state clarm into a federal claim a (wurt must OOK at a compl x group of factors in any par ticular case to de whether a state claim actually irises under tedera!l law Id. at 1042-43 Defendant contends that Californie re Lockyer Dvnegwy 11 «(9th Cor. 2004) (Dynegy fis motion, arguing that the lia Attorney General unsuccessfully argued in Dynegy, as he does here, “that the core of his allegations was not that defendants expressly violated the FPA, but that they ‘en gaged in a pattern of fraudulent and unfair’ behavior in furtherance of their scheme to manipulate California en ergy prices. (Def.'s Opp'n at 18 (citing Dynexy. 375 F.3d at 841).) Defendant contends that “Here, as in Dynegy the Attorney General lacks an independent state law ba sis for its Unfair Competition Law claim because ‘Califor nia s state claim represented a naked attempt to enforce these federal obligations.” (Def.s Oppn at 19 (citing Dynegy, 375 F.3d at 843).) Defendant also contends that Even if some of the matters alleged in the Attorney Gen erals Complaint do not fall within the exclusive jurisdx tion provision of the FPA, the allegations regarding anci! lary services - which repeat the Attorney General's all gations in Dynegy — certainly do [and] |t|hose allegations alone justify removal.” (Def.'s Opp'n at 19.) Plaintiff counters, arguing Dynegy 1s distinguishable In Dynegy, the state’s lawsuit was expressly based on the defendants violation of the ISO tariff Thus, the cause of action was deemed necessarily federal in character Here, the Attorney General does not asser! violations of the ISO tariff. The al legation that Powerex fraudulently offered to sell ancillary services is asserted as one of the various gaming strategies and fraudulent market manipula tion schemes employe d by Powerex to deceive Cali formia consumers Moreover, not only does the Complaint fail to allege the ISO tariff, but the issue of whether Powerex violated the ISO tariff agre ment would not resolve whether anti-competitive conduct occurred under state law (Pi.'s Reply at 8.) The Ninth Circuit found in Dynegy that the “relief sougnt was] predicated on a subject matter committed exclusively to federal! jurisdiction The state lawsuit turnied], entirely, upon the defendant's compliance with a l2a federal regulation. The tanff define|d] the companies contractual obligation with respect to the conduct at issue Absent a violation of the FERC-filed tanff, no state law liability could survive.” Dynegy, 375 F.3d at 841. The Court further atated that “The very face of California's complaint betrays that the gravamen of the complaint ts the companies’ alleged violations of federal tariff obliga tions. It repeatedly cites the federal tariff and alleges that the companies violated the agreement embodied within »t.” /d. at 841 n.6. The claim for unlawfulness in Dynexy was “based entirely on alleged tariff obligations (1) to hold ancillary services capacity in reserve prior to re- ceipt of an ISO dispatch instruction and (ii) to comply with ISO's dispatch instructions. The federal tariff wholly governied| the lawfulness of the companies’ conduct Similarly, with respect to the ‘unfair’ and ‘fraudulent’ terms, the claims dependjed] entirely upon the federal tarifi. Id Plaintiff's reference to a federal tariff in its complaint in the instant case is unlike the reference in Dynegy be cause Plaintiff's claims do not seek to enforce any federal law duty or lability; rather, Plaintiff seeks only to enforce state law duties and liabilities. See id.; Compl. 4 66 Therefore, this case is distinguishable from Dynegy since in Dynegy, “|t)he state lawsuit turn/ed], entirely, upon the defendant's compliance with a FERC-filed tariff Id. at 841. Thus, in Dynegy, “the reference to and neces sity of relying upon federal law |was| unavoidable.” /d. at 841 0.7 (distinguishing Lippitt) Lippitt concerned allegations analogous to those alleged in Plaintiff's complaint. The Ninth Circuit held in Lippitt that since the plaintiff's complaint alleged fraud and de ceptive advertising practices, rather than any violation of federal regulations, there was no need for inquiry about federal law because Lippitt “merely allege!/d| that De fendants conduct was either unfair or fraudulent’ and did not allege that the conduct was “unlawful under federal law. Lippitt, 340 F.3d at 1043 ida “Lippitt iavolved a private attorney generals lawsuit under Cal. Bus. & Prof. Code § 17200 et seq. CUCL’) against several brokerage firms for sales and marketing practices associated with certain investment product Dynegy, 375 F.3d at 841 n.7. In the instant case, as in Lippitt, Federal law is not a necessary element of [Plain tiff}'s UCL claim. To bring a UCL claim, a plaintiff must show either an (1) unlawful, unfair, or fraudu lent business act or practice, or (2) untarr, deceptive untrue or misleading advertising. Because tion 17200 is written in the dispunctive, it hshes three vaneties of unfai competition-acts or practices which are unlawful, or unfair. or fraudu lent. [A] practice is prohibited as “unfair” or “decep tive” even if not “unlawful” or vice versa. Therefore [Plaintiff] does not have to rely on a violation of [the FPA or any federal tariffs] to bring a UCL claim in California state court Plaintiff) me rely has to lege that Defendant!'s| conduct was either raudulent. Lippitt, 340 F.3d at 1043 Plaintiff's “allegations are sufficient to sustain ments of [its] § 17200 claim without resert to federal law since Plaintiff “makes no effort to enforce l[any federa rights or obligations}. Rather, |Plaimtiff| seeks to us State statute[s|, namely California's Unfair Competition Law land the California Commodity Law], as vehi cle{s} to hold Defendant|) liable for [market manipulation and gaming strategies!) ld. Whether Plaintill « alleged activities underlying these state claims also violated th FPA or a federal tariff is wrelevant since Plaintiff, as master of its complaint, chose to allege that Delendant engaged in conduct that was unlawful under state law instead of alleging violations of federal law Caterpillar Inc., 482 U.S. at 392. “That the specific goal of protecting California customers trom dishonest business practic . May comport with the broader goals of the [FPA 1 l4a not enough to sweep |Plaintiff]'s complaint within the ex clusive jurisdictional ambit of [16 U.S.C. § 825p).” Lippitt, 340 F.3d at 1043-44 Since Plaintiff's complaint does not seek to enforce any hability or duty’ created by the FPA, and Plaintiff al leges it can show that Defendant violated the alleged Cah formia claims without reliance upon federal law, Plaintiff's complaint was not artfully pled and Defendant lacked federal removal jurisdiction under the FPA C. Federal Question Jurisdiction Under the Federal Sovereign Immunity Act Defendant also contends removal was appropriate since i 8 a foreign sovereign entitied to remove this action un- der FSLA. Under 28 U.S.C. § 1441(d), an action against a foreign state may be removed. A “foreign state includes a politucal subdivision of a foreign state or an agency or in strumentality of a foreign state. 28 U.S.C. § 1603(a). An “agency or instrumentality of a foreign state” means any entity (1) which is a separate legai person, corporate or otherwise, and (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and (3) which is neither a citizen of a State of the United States nor created under the laws of any third country.” /d. § 1603(b). In Califor ma vu. NRG Energy, inc., the Ninth Circuit held that Pow erex is “not a forewn instrumentality under FSIA.” 391 F.3d 1011, 1026 488 Cir. 2004) But Defendané argues that NRG Energy is distinguish able because ta ARG Energy, Powerex was not then a wholly owned subdivision of a province of Canada, and Powerex pow is a wholly owned subdivision of the Prov ince of British Columbia's statutory agent BC Hydro Thus, Defendant argues it is a foreign state for purposes of FSIA. However, “only a direct ownership of a majority of shares by the foreign state satisfies the statutory re quirement fof FSLA).” Dole Food Co. v. Patrickson, 538 U.S. 468, 474 (2003). Although Powerex is owned by BC L5a Hydro and BC Hydro is an agent of the Province, the Province does not itself own a majority of the shares ol Powerex. Therefore, Powerex is not a foreign state for purposes of FSLA Since feceral removal jurisdiction is lacking, Plaintiff's remand motion is granted.’ Therefore, this action is re manded to Sacramento County Supenor Court IT IS SO ORDERED Dated: August 22, 2005 s/ GARLAND E. BURRELL, JR GARLAND E. BURRELL, JR United States District Judge Because of this ruling. neither Plaintiff's Eleventh Amendment argument nor Defendant s motion to dismiss need be addressed loa ‘UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA Case No. 2:05-CV-00143-GEB-PAN PEOPLE OF THE STATE OF CALIFORNIA EX REL. BILL LOCKYER, ATTORNEY GENERAL OF THE STATE OF CALIFORNIA, Plaintiff, POWEREX CORP., A CANADIAN CORPORATION, DBA POWEREX ENERGY CORP., AND DOES 1 - 100, Defendants POWEREX CORP.'S REQUEST FOR JUDICIAL NOTICE IN OPPOSITION TO MOTION TO REMAND Pursuant to Federal Rule of Evidence 201, Defendant Powerex Corp. (“Powerex”) requests that the Court take judicial notice of the information contained in the follow- ing exhibits attached ereee Powerex requests that the Court take judicial notice of the following documents, which are true and accurate cop- ies of materials contained in the certified record on appeal in California v. NRG Energy, No. 02-57200 filed with the United States Court of Appeals for the Ninth Circuit on February 11, 2003:" * These documents are proved up hy the Declaration of Andrew M Edison in Support of Powerex Corp.'s Request for Judicial Notice in Opposition to Motion to Remand. See also U.S. vu. Bornev, Inc... 971 F.2d 244, 248 (9 Cir. 1992) (holding that a court may take judicial notice of the records of (1) any court of thes state, or (2) any court of record of the United States or of any state of the United States); DeMarco v. DepoTech Corp.. 149 F. Supp. 2d 1212, 1218-19 (5.D. Cal Declaration of Kenneth G. Peterson Entitlement Assignment Agreement Between the Province of British Columbia and Powerex Regard ing the Columbia River 10. Skagit River Agreement Between the Province of British Columha and the City of Seatth 1] Agreement for the Tranemission of Skagit Treaty Power Hetween the Province of Bontish Columbia Hydro ana Power Authority and the City of Seattle 12 Assignment Agreement between HC Hydro and Powerex Regarding the Skagit River Agreement 13. Orders in Council of the Province of Brootish Colum bia Nos. 8847/2001 (dated September Zo, 2001) and 15/2001 (dated Auguat 9, 2001) 14 Extract from the Minutes of a Meeting of the Board of Directors of British Columima Hydro and Power Authority held on October 18, 200) British Columbia Hydro and Power Act. R.S.B4 1968. Ch , ( olumpbia Basin Trust kK S HW Ch > 1496 British Columma Powe r tor Jobs le veiopment Act 5.B.4 1997. Ch. 5 Special Direction No. 8 to the British Columba Utuhties Commission 18. Special Directive No. 4 to the British Columma Hy dro and Power Authority, Excerpt rom BC Hydro’s 2002 Annual Report At Printout from Powerex's Website discussing Cana dian Entitlement Power Declaration of Valerve Lambert ish Columma Hydro and Power Authority s Motion To Dismiss Dated lSa Excerpt from the Deposition Transcript of Valerie C. Lambert, August 27, 2002, pages 1-36 Excerpt from the Deposition Kenneth G. Peterson, August 2], 200], volume |, pages 1-97 Excerpt from the Deposition Transcript of Kenneth G. Peterson, August 22, 2002, volume 2, pages 114 iseh Letter from the Honorable Jack Davis, Mints-.er Province of British Columbia to L.1. Bail, Chairman and CEO of BC Hydro. dated November 4, 1988 Deposition Trans ript of Kenneth Grant Peterson August 21, 2002, volume 1, pages 1-113 Revised Minutes of the Meeting of the Risk Man mzement Commuttee, August 3, J000 J March 7. 2005 Counsel name/address block omitted] 1Ya UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA Coordination Proceeding Nos. CV 02-0990.) M(LAB) Special Title (Rule 1550(b)) CV 02-1000-LAJAH) CV 02-1001-B(POR) WHOLESALE ELECTRICITY ANTITRUST CASES I & I! This Document relates To Reliant Enerwzy Services, inc., et al. t Arizona Electric Power Cooperative, Inc.. et al f Duke Energy Trading and Marketing, LLC, et al. « Arizona Public Service Company, et al Reliant Energy Services. in« et al Arizona Electric Power Cooperative, Inc., et al DECLARATION OF KENNETH G. PETERSON | Kenneth G. Peterson. declare as follows | have personal knowledge of the facts contained in this Declaration, except for those matters stated on in formation and belief, as to which | believe them to be true If called as a witness, | could and would competently tes tify to all of the facts stated herein v4 | have held the position of President and Chief Ex ecutive Officer of Powerex Corporation (“Powerex’) since December 1, 1994 } | am trained as a resource economist and hold a masters degree in economics. Prior to wimng Powerex, | was employed for 14 years with the British Columbia Hy dro and Power Authority (“BC Hydro"). During my career at BC Hydro, | was responsible for various aspects of re source planning and, in wuiat capacity, developed ap inti HH) ZUa mate knowledge of BC Hydros generating resources, the evolution of domestic demand for electricity within Kf Hydros service area in British Columbia, and the poten tial for the export of electricity to interconnected jurisdx tions, particularly mm the United States. | had personal responsibility for overseeing the preparation of both re source plans and demand forecasts during my tenure at BC Hydro When ! began my career at BC Hydro, the corporation was in the latter stages of a very significant eXpansion of ite generating « apacity through the construc tion of major hydroelectric facihtieer in British Columbia My understanding of the genesis of that construction pro gram and ite subsequent evolution is set out in the follow Ing paragrapns 4 In 1962. the Provincial Government passed the British Col imma Hydro and Power Authority Act to es tablish a vehicle in which to hold assets it had acquired and lo promote mayor hydroelectric devel pment involving the construction of significant storage dams and generat ing capacity on the Peace and Columbia River systems (the “Two River Policy The Act was subject to litigation and ultemately declared ultra vires by the British Colum bia Supreme Court in 1963. In 1964 the Provincia! G: ernment passed another British Columba Hydro and Power Authority Act. which created the Provinca! Crown Corporation known today as BC Hydr ) Lince reated He Hvdro im ple mented the Two River Poliwy Specifically, it began planning for the devel ‘ opment of the wWwAt Kennett Dam to create the Willreton Reservoir on the Peace River. The Dam was completed in 196; Si rhe 1v6R, HC Hydro has further de. hydroelectric potential of the Peace River with the lation of the Peace Canyon Dam and other power related Laculetve 6 in cor m with the Two River Policy and its development of the Columba River evetem. KC Hudr joined the Provincial Government an Lanadian (0% ecrnmen nm negotiations with thre \ | 1 States between 1962 and 1964 to develop a Protocol to the Columbia River Treaty (‘Treaty’) The formal documents that comprise the arrange ments between Canada and the United States with re spect to the Treaty are compiled in a book issued by the Canadian Departments of External Affairs and Northern Affairs and National Resources and published by the Queens Printer and Controller of Stationery in February 1964. In April 1964, the Department of Externa! Affairs issued a further volume explaining additional aspects of the process that led to the finalization of the Treaty and the Protocol My review of these documents, together with my involvement with the Treaty in the context of my responsifilities at BC Hydro and later at Powerex, has informed my understanding of these historical events 8 Attached as Exhibit A hereto is a true copy of the following pages from the book described in Paragraph 8 58-81 (Columbia River Treaty), 82-90 (the formal press release wasued by the Prnme Miniter of Canada on danu ary 17, 1961, immediately after signing the Treaty, ex plaiung its ormin and effect); 100-106 (Canada-British Columma Agreement dated duly & 1963) 107-109 (Canada-Kntish Columma Agreement dated January 13 1964), 110-114 (exchange of Notes and Protocol regarding the Columma River Treaty), 115-121 (exchange of Notes and Attachment Relating to Terms of Sale) 4 The Treaty required Canada to construct storag: facilities in Canada to control the flow of the Columbia River in a way that would enable the United States to generate more power at its existing facilities on the Co lumba River (the “Downstream Benefits’), and entitled Canada to receive half of the Downstream Benefits over the 60-year life of the Treaty (the “Canadian Entitle ment ) In 1963. the British Columive Provincal Cov ernment negotiated an agreement with Canada that pro vided for British Columbea to directiv recerve the Down stream Benefits This Agreement m found at pages ALL 106 of Exhebit A > oi 10. Im 1964, the Province, Canada, and the United States agreed to a Protocol for the implementation of the Treaty. The Protocol is found at pages 110-114 of Exhibit A. In two separate documents, it was agreed that British Columbia would receive an upfront payment in place of the first 30 years of the Canadian Entitlement. These two documents are found at pages 107-109 and 115-121 of Ex hibit A ll. In October 1964 BC Hydro prepared a booklet that consolidated for convement reference a number of docu ments relating to the Treaty Attached as Exhibit B hereto is a true copy of the following pages from the book described in Paragraph 11: 1; 39-45 (Canadian Entitle ment Purchase Agreement), 47 (Designation of Canadian Entity), and 49-54 (Exchange of Notes) 12. In September 1964, Canada designated BC Hydro as the Canadian Entity under the Treaty. This Designa tion is found at page 47 of Exhibit B 1 BC Hydro played a key role, through its then Chairman Hugh Keenlyside., in the negotiations that pro duced these important international and interprovincial agreements. As a result, BC Hydro was responsible for onstruction of the reservoir facilities on the Columbia River to fulfill Canada’s obligations under the Treaty and has been responsible ever since for the ongoing implemen tation and administration of the Treaty. The arrange ments made for the mmuitial disposal are found in the Ca nadian Entitlement Purchase Agreement (the “CEPA’) between BC Hydro and Columbia Storage Power Ex hange. a non-profit corporation organized under the laws i the State of Washington. Mr. Keenlyside signed this document on behalf of BC Hydro and it was approved by an Exch inge ot Notes dated September 16. 1964. between Canada and the United States. True copies of the CEPA ind the Exchange of Notes are found at pages 39-45 and 19-54 of Exhibit B 2a 14. During the negotiations related to the Columbia River Treaty, BC Hydro continued its parallel develop ment of the Peace River pursuant to the Two River Policy 15. Construction of the facilities contemplated by the Two River Policy were completed in 1984 with the comple tion of the Revelstoke Dam on the Columbia River 16. During the 1980s, BC Hydro was an active seller of power to the United States entities, primanly the Bonne ville Power Administration (“Bonneville”), with such sales taking place at the international border 17. Im the late 1980's, the Provincial Government overhauled the legislation governing the energy sector in British Columbia. The Provincial Government created Powerex as an export agency for the purpose of marketing power to United States entities. The Provincial Govern. ment wished to ensure that BC Hydro’s surplus power was marketed in a manner that maximized the benefits to all British Columbians. Additionally, the Provincial Gov- ernment wished to promote the development of electricity produced by independent power producers for sales to the United States market 18. In December 1988, BC Hydro — acting as the agent of the British Columbia Provincial Government under § 3(1) of the Hydro Act - incorporated Powerex under the Company Act of British Columbia as a whoily owned sub sidiary of BC Hydro to serve the vital role of market- ing the Province’s surplus electric power. Powerex was originally incorporated as the British Columbia Power Export Corporation on December 13, 1988. The company changed its name to British Columbia Power Exchange Corporation on February 15, 1991, and then changed its name again to Powerex Corp. on September 6, 2000. True and correct copies of the Articles of Incorporation and Certificates changing the name of the company are at tached hereto as Exhibit C \9. Following its incorporation in 1988, Powerex as sumed its responsibility for marketing surplus power from the BC’ Mydro system. BC Hydro delivered surplus ele 24a tricity to Powerex at the Brtish Columine border and Powerex, m turn, sold it to entitres from the United States and Alberta at wholesale. Powerex continues to perform this function within this structure to the present day 20. Since its incorporation, Powerex has aiso been called upon to serve some specific policy objectives set for it by the Provincial Government. For instance, mm the early 1990's the Provincial Government approved Power ex as the appropriate vehicle to create a power exchange operation (PEO") in British Columma. The Provincial Government desired to promote a domestic independent power production industry by creating an efficrent market for the private power. The PEO was approved as opera tional as of September 1993. The PEO contemplated Powerex making an auction market for the trading of electrecity The objectives for Powerex were set out im a document prepared by Powerex entitled “Opportunities in the Short-Term Electricity Market,” which formed the ba sis for a presentation to stakeholders in early 1991 as part of the application process associated with the approval of the PEO. True copies of the relevant portions of this document are attached hereto as Exhibit D 21. The PEO was part oi the means by which Powerex was to meet the objectives of the Province. The PEO re mained in place for a number of years, but did not fulfill expectations because of lack of interest from the generat ing sector. The PEO is no longer operational ; 22. Powerex was directiy involved with the realization of Provincial objectives in connecticn with the Columbia River Treaty commencing early in the 1990s. It was at that time that the Province began the process of deter mining how to receive or dispose of the Canadian Ent tlement under the Treaty once their coutracts for the sale of the Downstream Benefits began to expire in 1998. Un der the Treaty, the United States would be obliged to re turn the Canadian Entitlement to Canada unless a resale could be negotiated and approved by both countnes 23. Commencing in early 1990, BC Hydro began dis cussions with the U.S. Army Corps of Engineers and Bon neviile (collectively the U.S. Entity under the Treaty) to define the Canadian Entitlement Discussions became more focused commencing in }¥93 as representatives of the Province, BC Hydro, Bonneville, and the U.S. Army Corps of Engineers began meetings to address the issue 24. Early on, the potential for resale of the Canadian Entitlement in the United States became a prominent part of the discussions. Mr. Ken Epp, then President of Powerex, was an early member of the negotiating team, along with the Deputy Minister of Energy, Petroleum Mines and Mineral Resources. Upon the retirement of Mr. Epp, | became President and CEO of Powerex. | was also a member of the Province’s negotiating team | re mained in both capacities through the completion of the negotiating process that resulted in arrangements with the United States for the return and/or resale of the Ca nadian Entitlement effective April 1, 1999. The negotia tion process with respect to the Canadian Entitlement took approximately seven years. While the negotiating team on the Canadian side varied from time to time, | was a part of it throughout the process. The final arrange ments approved by both countries include a significant role for Powerex 25. Pursuant to an Entitlement Assignment Agree ment, the Province assigned all of its rights, title, and in terests in the Entitlement to Powerex so that it can real ze the maximum benefits of the surplus power for British Columbians. While the precise amount of the Canadian Entitlement is determined pursuant to very ceraplex cal culations, it is a very significant resource. A true copy of the Entitlement Assignment Agreement is attached hereto as Exhibit E 26. In i997, the Province passed the Power for Jobs Act (“Jobs Act”). The Jobs Act contemplates diverting por tions of BC Hydro's surplus power or the Canadian Ent: tlement, which would otherwise be sold by Powerex to ex 26a ternal markets, to British Columbia industry for the pur- pose of job creation. Pursuant to the Jobs Act, the Provin- cial Government was empowered to instruct either BC Hydro or Powerex to supply power to British Columbia industry on terms defined by the Provincial Government. 27. On behaif of Powerex, | have been involved in nu- merous negotiations between the Provincial Government and industrial undertakings contemplating locating facilli- tres in British Columbia for which the price of power is a significant factor in making a location decision. Powerex was contemplated to play an important role in connection with the supply of power in each case. While those efforts have been unsuccessful, pursuant to the Jobs Act and at the direction of the Provincial Government, Powerex has supplied power on favorable terms to facilitate the expan- sion of some existing businesses in British Columbia. 28. On March 30, 1984, the Provincial Government en- tered into an agreement with the City of Seattle, Wash- ington (“Seattle”), related to the Skagit River Treaty (the “Skagit Agreement”). Under the Skagit Agreement, Seat- tle agreed not to raise the High Ross Dam, which would have had the effect of flooding substantial areas of British Columbia. As compensation for the loss of the power benefits that would have been derived from the High Ross Dam, British Columbia agreed to deliver certain quanti- ties of electricity to Seattle until 2066. A true copy of the Skagit Agreement is attached hereto as Exhibit F. 29. On December 3, 1985, the Province assigned cer- tain of the Province’s benefits and obligations under the Skagit Agreement to BC Hydro. A true copy of this docu- ment is attached hereto as Exhibit G. As a result of a 1996 Bonneville rate case, lengthy negotiations com- menced between the Province, Seattle, and Bonneville re- garding the transmission arrangements relating to the power provider under the Skagit River Treaty. Powerex took the lead role (on behalf of the Province) in negotiat- ing a resolution of the issues among the parties. Effective February 1, 1999. BC Hydro entered into the “Agreement for the Transmission of Skagit River Treaty Power be tween British Columbia Hydro and Power Authority and the City of Seattle” (the “Skagt Transmission Agree ment’). A true copy of the Skagit Transmission Agre« ment is attached hereto as Exhibit H. Powerex executed a replacement power agreement with Bonneville, also effe: tive February 1, 1999, under which Seattle was able to call upon Bonneville to deliver power to Seattle for the account of Powerex in the event Powerex was unable to deliver the Skagit River Treaty power pursuant to the Skagit Agreement. Additionally. Seattle and Bonnevill executed a Point-to-Point Transmission Service Agree ment (“Skagit PTP Agreement”) for the necessary trans mission capacity for the provision of the Skagit Treaty power. BC Hydro assigned iis rights and obligations, and delegated its Operating responsibilities under the Skagit Transmissicn Agreement and the Skagit PTP Agreement to Powerex, to the extent permitted by such agreements A true copy of the BC Hydro Powerex Assignment Agreement is attached hereto as Exhibit | 30. Columbia Power Corporation (CPC") and CBT Power Corp. (“CBT”) were established by Columbia Basin Trust, a corporation established by Columbia Basin Trust Act. CPC and CBT were responsible for upgrading the Brilliant generating facilities. CPC/CBT’s upgrade was secured by a power purchase agreement with West Kootenay Power (now UtuliCorp Networks Canada, Inc) Powerex entered into a Backstop Agreement with CPC CBT to facilitate the Provincial Government's desire that CPC/CBT develop the Brilliant Dam upgrade. Under the Backstop Agreement, Powerex agreed to purchase elec tricity produced at the Brilhant facilities in the event West Kootenay Power defaults on its purchase obhgation due to insolvency. A true copy of the Backstop Agreement is attached hereto as Exhibit J 31. Powerex performs its role as the exclusive exporter of BC Hydro’s surplus under my direction. | report in the normal course to my Board of Directors, but, on a day-to ima day basis, my Management team and | are solely respon sible for determining the manner in which Powerex meets its mandate to maximize the value of its export activities Over the course of the 1990s, it became apparent that Powerex could better achieve its objectives by expanding its activities into acquiring and reselling power generated by parties other than BC Hydro. Again, under my direc tion, Powerex has expanded considerably in this area and has become an active trader in wholesale markets throughout North A.merica. This has occurred under my direction and it is my belief chat it has assisted British Columbia 1n achieving its objecteve of obtaining maximum value for the surplus power generated from British Co- lumbia to the benefit of British Columbia taxpayers and ratepayers $2. BC Hydro’s Board of Directors appoints Powerex’'s Board of Directors. A number of Powerex’'s current execu- tives previously worked at BC Hydro 33. Powerex does not pay Canadian federal and Pro- vincial income tax 44. BC Hydro ws a Crown corporation, incorporated in 1964 pursuant to the British Columbia Hydro and Power Authority Act. BC Hydro is owned in its entirety by Her Majesty the Queen in Right of the Province of British Co- lumbia, by which name the Province of British Columbia ithe “Province’) is formally known. Dividends from the operations of BC Hydro are payable only to the Province 35. The Lieutenant Governor in Council (the Executive Council of the Province) appoints BC Hydro’s Board of Di- rectors. A true copy of Orders in Council Nos. 751/2001, dated August 9, 2001, and 847/2001, dated September 25 2001, appointing SC Hydro’s Board of Directors, are at- tached hereto as Exhibit K. To my knowledge, no subse quent Orders in Council have been passed amending, re- scinding, or superseding the above-described Orders in Council. BC Hydro. as the sole shareholder of Powerex, is authorized to appoint Powerex’s Board of Directors. It does sp by issuing a resolution naming the Board mem- 29a bers. Outside members of Powerex's current Board of Di rectors were subject to concurrence by tine Office of the Premier. A true copy of the Extract from the Minutes of a Meeting of the Board of Directors of British Columbia Hy dro and Power Authority held on October 18, 2001, is at tached hereto as Exhibit L. 36. All substantive powers of BC Hydro are subject to, and can only be exercised with, the approval of the Lieu- tenant Governor in Council or the Minister responsible for BC Hydro. 37. BC Hydro’s corporate objective is to support the development of the Province of British Columbia through the efficient supply of electricity. On behalf of the Prov- ince, BC Hydro operates an electric utility involved in the generation, transmission, and distribution of electricity 38. BC Hydro maintains authority over Powerex through various arrangements, including a Risk Man- agement Committee that oversees the financial exposure to which Powerex is subject. The Risk Management Committee is required to make periodic reports to the Provincial Government's Ministry of Finance. 39. BC Hydro also acts as the treasury for Powerex and facilitates the issuance of letters of credit in support of Powerex’s commercial! arrangements. 40. BC Hydro’s borrowings and other fiscal arrange- ments are provided through, and therefore are supported by, the Provincial Government. As a result, BC Hydro maintains a credit rating equal to that of the Province Powerex's commercial arrangements, in tuen, are fre- quently supported by a guarantee from BC Hydro, thus providing Powerex the benefit of both BC Hydro’s credit rating as well as the implied backing of the Provincial Government 41. BC Hydro sells all of its surplus electricity to Pow- erex, and all of those salea take place et the Provincial border. BC Hydro does nat, and has not, sold power at points of delivery in the United States. BC Hydro has 30a never participated in the bidding process established by the CalPX and ISO 42. Powerex maintains two rate schedules on file with FERC under which it sells power generated by BC Hydro at wholesale in United States interstate commerce pursu- ant to market-based rate authority granted by FERC on September 24, \997 I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct, and that this Declaration was executed this 9th day of August 2002, at Belle Fourche, South Dakota /s/ Kenneth G. Peterson KENNETH G. PETERSON {Exhibits omitted] UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA Coordination Proceeding No. CV 02-0990-RHW Special Title (Rule 1550(b)) WHOLESALE ELECTRICITY ANTITRUST CASES I & II This Document relates To ALL ACTIONS DEPOSITION OF KENNETH GRANT PETERSON Volume }, Page 1 - 113 Wednesday, August 21, 2002 ree? eff Yes Is it related to a government pension plan” Does BC Hydro have a pension plan” it's a separate pension plan from the govern ments plan And are Powerex employees part of the BC Hvdro 195] pension plan” Yes, they are And are they part of BC Hydro’s — does BC Hydro have any other retirement plans’ No Do Powerex employees have the same employee benefits as BC Hydro employees” For the most part, in terms of standard employee benefits Such as Medical, dental Are there any limits on Powerex’'s ability to pay market compensation to tts traders? Yes What are they’ In the broad context of Provincial guidelines on compensation were under certain constraints We have a bonus compensation program that’s unique. No one else in the public service has anything like it. But that’s in order to be com petitive But other than the bonus compensation plan, there are - are Powerex’s employees paid within Provincial guidelines Not within Provincial guidelines I'm sorry. | must have misunderstood what you |96] said before | said within the context of what could be ac cepted provincially, you might say. Aga, public salaries or public-service salaries can be a politi cal issue. Powerex aims to compensate at the median of the Canadian market for its traders So higher compensation could be politically un palatable’ Yes And that would be a problem for the Provincial government? Yes 3da UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 02-57200 (D.C. No. CV-02-01001-RHW) PEOPLE OF THE STATE OF CALIFORNIA, ET AL.. Plaintiffs, ARIZONA ELECTRIC POWER COOPERATIVE. INC.. ET AL.. intervenor. V NRG ENERGY INC.. ET AL. Defendants, V RELIANT ENERGY SERVICES, INC., ET AL.. Cross-claimants-Appellants, 7 ARIZONA ELECTRIC POWER COOPERATIVE, INC., ET Al Cross-defendants-Appellees No. 02-57202 (D.C. No. CV-02-00990-RHW) PEOPLE OF THE STATE OF CALIFORNIA, ET AL.., Plaintif{s-Appellees, V NRG ENERGY, INC., ET AL.., Defendants, \ RELIANT ENERGY SERVICES, !NC., ET AL.., Cross-claimants-Appellants, Vv ARIZONA ELECTRIC POWER COOPERATIVE, INC., ET AL... Cross-defendants, AND BONNEVILLE POWER ADMINISTRATION, ET AL Cross-defendants-Appellees 4a No. 02-57211 (D.C. Ne. CV.02-.01000-RHW NRG ENERGY. INC.. ET AI Defendants AND) RELIANT ENERGY SERVICES. INC.. ETAI Defendants-Appellants DUKE ENERGY TRADING AND MARKETING. LLC. ET AI ( roas-ciaimants ARIZONA PUBLIC SV% TAI ( Tosa de fendants Appellees No. 05-55118 (D.C. No. CV.02-.01000-RHW) NRG ENERGY, INC., ET Al Defendants DUKE ENERGY TRADING AND MARKETING. LLC. eT Al ( ross-ciaimants App llees ARIZONA PUBLIC SVC, ET AI Cross-defendants AND POWEREX COR} Cross defendant -Appeliant No 03-55131 (D.C. Noe. CV.02-.00990-RHW) PEOPLE OF THE STATE OF CALIPORNIA. ET Al Plaintiffs vy NRG ENERGY, INC., ET AI Defendants v RELIANT ENERGY SERVICES, INC., ET Al Cross-claimants Appellee . ¥ ARIZONA ELECTRIC POWER COOPERATIVE, INC.. ET Al Cross-defendants AND POWEREX CORI Cross -defendant lppe liant No. 03-55176 (D.C. No. CV-02-01001-RHW) NRG ENERGY, INC.. ET Al Defendants-Appellees ¥ RELIANT ENERGY SERVICES, INC., ET Al Cross-claimants- Appellees \ ARIZONA ELFCTRIC POWER COOPERATIVE, INC... ET Al Cross-defendants, AND POWEREX Corp Cross-defendant Appellant 6a No. 03-5524] (D.C. No. CV-02-01000-RHW) NRG ENERGY. INC... ET AL Defendants Vv DUKE ENERGY TRADING AND MARKETING, LLC, ET Au.., Cross-claimanis-Appeuants, v ARIZONA PUBLIC SVC. ET AL Cross-defendants-Appellees No. 03-55249 (D.C. No. CV-02-01001-RHW) NRG ENERGY. INC.. ET AI Defendants, AND DUKE ENERGY TRADING AND MARKETING, LLC. €TAL.. Defendants -Appellants Vv RELIANT ENERGY SERVICES, INC., ET AL.. Cross-claimants \ ARIZONA ELECTRIC POWER COOPERATIVE. IN = & 883 Pend Oreille Pend Oreille Columbia Columbie Columbia SN S888 888 Bau 8888 88888 AD @ ww row ey ® Columbia Columbia Columbia Columbia wn ese @ .** 3 eres Séé~ S % 8 o } _ N w ~ , BREF SB z S = = is $235 ¥ Kootenay : 673,000 - - - . - Chelan 676,000 393 : 96 , 000 : 223,000 - a " . ~ WTAL 2% PROJECTS 13,.323,000(4) 3128 166 11,598,800 268 19,876,6 ——— The Welle project is not presently under construction; wen this project or any other project on the main stem of the Columbia River is completed, they will be integral componente of the base systen. Tmhecludes two 15,500 Kilowatt unite for fish attraction water. iy ay t the # Ho rvoir storage will & deterwini the base sysetes bilities with and withou ian sto e ree rese bimited to 3, , 000 peve-feck 1 full pool elevation of 3ae0 Feet} ant the 0 lee project will not include the effect of adding flashboards, limiting the storage to 5,072,000 acre-feet (mormal full pool elevation of 1268 feet) The total usable storage of the base systee as so adjusted Will be 13,000,000 acre-feet. Sila WHEREAS the Senate of the United States of America by their resolution of March 16, 1961. two-thirds of the Sena tors present concurring therein, did advise and consent to the ratification of the aforesaid treaty. WHEREAS the aforesaid treaty was duly ratified by the President of the United States of America on March 23 1961, in pursuance of the aforesaid advice and consent of the Senate, and was duly ratified on the part of Canada WHEREAS it is provided in Article XIX of the aforesaid treaty that the treaty shall come into force on the ratifica tion date and in Article XX of the aforesaid treaty that the instruments of ratification shall be exchanged at Ottawa AND WHEREAS the respective instruments of ratification of the aforesaid treaty were duly exchanged at Ottawa on September 16, 1964 by the respective Plenipotentiaries of the United States of America and Canada NOW, THEREFORE, be it known that |. Lyndon B. John son, President of the United States of America, do hereby proclaim and make public the aforesaid treaty to the end that the said treaty and each and every article and claus thereof may be observed and fulfilled, on and after Sep tember 16, 1964, with good faith by the United States of America and by the citizens of the United States of Amer ica and all other persons subject to the jurisdiction thereof IN TESTIMONY WHEREOF, | have hereunto set my hand and caused the Seal of the United States of America to be affixed . DONE at the Internationa! Peace Arch, Blaine, Washing ton. this sixteenth day of September in the vear of our Lord one thousand nine hundred sixty-four and of the In dependence of the United States of America the one hun dred eighty-ninth [Seal Omitted] LYNDON BKB. JOHNSON By the President DEAN RUSK Secretary of State Bla The Canadian Secretary of State for External Affairs to the Secretary of State THE SECRETARY OF STATE FOR EXTERNAL AFFAIRS CANADA 2, 1964 January 2 SIR | have the honour to refer to discussions which have been held between representatives of the Government of Canada and of the Government of the United States of America regarding the Treaty between Canada and the United States of America relating to cooperative develop ment of the water resources of the Columbia River Basin signed at Washington on January 17, 1961. On the basis of these discussions, the Government of Canada under- stands that the two Governments have agreed to the terms of the attached Protocol | should like to propose that, if agreeable to your Gov- ernment, this Note together with the Protocol attached thereto and your reply, shall constitute an agreement be- tween our two Governments relating to the carrying out of the provisions of the Treaty with effect from the date of the exchange of instruments of ratification of the Treaty Accept, Sir, the renewed assurances of my highest con sideration PAUL MARTIN Secretary of State for External Affairs The Honourable DEAN RUSK Secretary of State of the United States of America, Washington Sa ANNEX TO EXCHANGE OF NOTES DATED JANUARY 22, 1964 BETWEEN THE GOVERNMENTS OF CANADA AND THE UNITED STATES DING THE COLUMBIA RIVER TREATY PROTOCOL 1. if the United States entity should call upon Canada to operate storage in the Columbia River Basin to meet flood control needs of the United States of America pursuant to Article [V(2)(b) or Article [V(3) of the Treaty. such call shall be made only to the extent necessary to meet forecast flood control needs in the territory of the United States of America that cannot adequately be met by flood control facilities in the United States of America in accordance with the following conditions (1) Unless otherwise agreed by the Permanent Engineer ing Board, the need to use Canadian flood contro! fa cilities under Article [V(2)(b) of the Treaty shal! be considered to have arisen only in the case of potential floods which could result in a peak discharge in excess of 600,000 cubic feet per second at The Dalles, Oregon assuming the use of all related storage in the United States of America existing and under construction in January 1961, storage provided by any dam con structed pursuant to Article XII of the Treaty and the Canadian storage described in Article 1V(2)(a) of the Treaty. The United States entity will call upon Canada to op erate storage under Article [V(3) of the Treaty only to control potential floods in the United States of Amer ica that could not be adequately centrolled by all the related storage facilities in the United States of Amer ica existing at the expiration of 60 years from the rat) fication date but in no event shall Canada be required to provide any greater degree of flood contro! under Article [V(3) of the Treaty than that provided for un der Article 1V(2) of the Treaty S4a (3) A call shall be made only if the Canadian entity has been consulted whether the need for flood control is, or is likely to be, such that it cannot be met by the use of flood control facilities in the United States of America in accordance with subparagraphs (1) or (2) of this paragraph. Within ten days of receipt of a call, the Canadian entity will communicate its acceptance, or its rejection or proposals for modification of the call, together with supporting considerations. When the communication indicates rejection or modification of the call the United States entity will review the situa- tion in the light of the communication and subsequent developments and will then withdraw or modify the call if practicable. In the absence of agreement on the call or its terms the United States entity will submit the matter to the Permanent Engineering Board pro- vided for under Article XV of the Treaty for assistance as contemplated in Article XV(2)ic) of the Treaty. The entities will be guided by any instructions issued by the Permanent Engineering Board. If the Permanent Engineering Board does not issue instructions within ten days of receipt of a submission the United States entity may renew the call for any part or all of the storage covered in the original call and the Canadian entity shall forthwith honour the request 2. In preparing the flood control operating plans in accor- dance with paragraph 5 of Annex A of the Treaty, and in making calls to operate for flood control pursuant to Arti- cle 1V(2)(b) and Article I'V(3) of the Treaty, every effort will be made to minimize flood damage both in Canada and the United States of America 3. The exchange of Notes provided for in Article VIII(1) of the Treaty shall take place contemporaneously with the exchange of the Instruments of Ratification of the Treaty provided for in Article XX of the Treaty 4.(1) During the period and to the extent that the sale of Canadas entitlement to downstream power benefits within the United States of America as a result of an Soa exchange of Notes pursuant to Article VIII(1) of the Treaty relheves the United States of America of its obligation to provide east-west standby transmission service as called for by Article X(1) of the Treaty, Canada is not required to make payment for the east-west standby transmission service with regard to Canada’s entitlement to downstream power ben fits sold in the United States of America (2) The United States of America is not entitled to any payments of the character set out in subparagraph (1) of this paragraph in respect of that portion of Canada's entitlement to downstrea.n power benefits delivered by the United States of America to Canada at any point on the Canada- United States of America boundary other than at a point near Oliver, British Columbia, and the United States of America is not required to provide the east-west standby transmis sion service referred to in subparagraph (1) of this paragraph in respect of the portion of Canada’s enti- tlement to downstream power benefits which is so delivered 5. Inasmuch as control of historic streamflows of “he Kootenay River by the dam provided for in Article XI1(1) of the Treaty would result in more than 200,000 kilowatt years per annum of energy benefit downstream in Canada, as well as important flood contro! protection to Canada, and the operation of that dam is therefore of concern to Canada, the entities shall, pursuant to Article XIV(2)(a) of the Treaty, cooperate on a continuing basis to coordinate the operation of that dam with the operation of hydroeiec tric plants on the Kootenay River and elsewhere in Can ada in accordance with the provisions of Article X11(5) and Article X11(6) of the Treaty 6.(1) Canada and the United States of Ameria are in agreement that Article XII1I(1) of the Treaty provides to each of them a right to divert water for a con sumptive use 86a Any diversion of water from the Kootenay River when once instituted under the provisions of Article XIII of the Treaty is not subject to any limitation as to time. 7. As contemplated by Article [V(1) of the Treaty, Canada shail operate the Canadian stornge in accordance with Annex A and hydroelectric operating plans made there- under. Also, as contemplated by Annexes A and B of the Treaty and Article XIV(2)(k) of the Treaty, these operating plans before they are agreed to by the entities will be con- ditioned as follows: (1) As the downstream power benefits credited to Cana- dian storage decrease with time, the storage required to be operated by Canada pursuant to paragraphs 6 and 9 of Annex A of the Treaty, will be that required to produce those benefits The hydroelectric operating plans, which will be based on Step | of the studies referred to in para- graph 7 of Annex B of the Treaty, will provide a reservoir-balance relationship for each month for the whole of the Canadian storage committed rather than a separate relationship for each of the three Canadian storages. Subject to compliance with any detailed operating plan agreed to by the entities as permitted by Article XIV(2)(k) of the Treaty, the manner of operation which will achieve the specific storage or release of storage called for in a hydroelec- tric Operating plan consistent with optimum storage use will be at the discretion of the Canadian entity. Optimum power generation at-site in Canada and downstream in Canada and the United States of America referred to in paragraph 7 of Annex A of the Treaty will include power generation at-site and downstream in Canada of the Canadian storages re- ferred to in Article I1(2) of the Treaty, power genera- tion in Canada which is coordinated therewith, downstream power benefits from the Canadian stor- age which are produced in the United States of Sila America and measured under the terms of Annex B of the Treaty, power generation in the Pacific Northwest Area of the United States of America and power generation coordinated therewith 8 The determination of downstream power benefits pur suant to Annex B of the Treaty, in respect of each year un til the expiration of thirty years from the commencement of full operation in accordance with Article IV of the Treaty of that portion of the Canadian storage described in Article II of the Treaty which is last placed in full opera tion, and thereafter until otherwise agreed upon by the entities, shall ne based upon stream flows for the thirty year period beginning July 1928 as contained in the report entitled “Extension of Modified Flows Through 1958 — Co lumbia River Besin” and dated June 1960, as amended and suppleme:ted to June 29, 1961, by the Water Man agement Subcommittee of the Columma Basin Inter Agency Committee 911) Each load used in making the determinations re quired by Steps I and III of paragraph 7 of Annex B of the Treaty shal! have the same shape as the load of the Pacific Northwest area as that area is defined in that paragraph The capacity credit of Canadian storage shall not ex ceed the difference between the firm load carrying capabilities of the projects and installations included in Step Il of paragraph 7 of Annex B of the Treaty and the projects and installations included in Step iil of paragraph 7 of Annex B of the Treaty 10. in making all determinations required by Annex B of the Treaty the loads used shall include the power required for pumping water for consumptive use into the Banks Equalizing Reservoir of the Columbia Basin Federal Re lamation Project but mention of this particular load ts not intended in any way to exclude from those loads any use of power that would normally be part of such loads 11. In the event operation of any of the Canadian storages is commenced at a time which would result mn the United Ra States of America receiving flood protection for periods longer than those on which the amounts of flood contro! payments to Canada set forth in Article V1(1) of the Treaty are based, the United States of America and Canada shall consult as to the adjustments, if any, in the flood control payments that may be equitable in the light of all relevant factors. Any adjustment would be calculated over the longer period or periods on the same basis and in the same manner as the calculation of the amounts set forth in Arti- cle Vi{l) of the Treaty. The consultations shal! begin promptly upon the determination of definite dates for the commencement of operation of the Canadian storages 12. Canada and the United States of America are in agreement that the Treaty does not establish any general principle or precedent applicable to waters other than those of the Columbia River Basin and does not detract from the application of the Boundary Waters Treaty, 1909, to other waters 89a The Secretary of State to the Canadian Secretary of State for External Affairs DEPARTMENT OF STATE WASHINGTON January 22, 1964 SIR | have the honor to refer to your note dated January 22, 1964, together with the Annex thereto regarding the Treaty between Canada and the United States of America relating to cooperative development of the water resources of the Columbia River Basin signed at Washington on January 17, 1961 [ wish to advise you that the Government of the United States of America agrees that your note with the Annex thereto, together with this reply, shall constitute an agreement between our two Governments relating to the carrying out of the provisions of the Treaty with effect from the date of the exchange of instruments of ratifica- tion of the Treaty Accept, Sir, the renewed assurances of my highest con- sideration DEAN RUSK The Honorable PAUL MARTIN, P.C., Q.C., Secretary of State for External Affairs, Ottawa “Wa DEPARTMENT OF STATI WASHINGTON January 22, 1964 SIR | have the honor to refer to the discussions which have been held between representatives of the Government of Canada and of the Government of the United States of America regarding a sale of Canada’s entitlement to downstream power benefits under the Treaty between Canada and the United States of America relating to « oop erative development of the water resources of the Colum hia River Basin, signed on January 17. 196) On the basis of these discussions my Government un derstands that the two Governments recognize that it would be in the public interest of both countries if Can ada’s entitlement to downstream power benefits could be disposed of, as contemplated by Article VIII of the Treaty in accordance with general conditions and limits similar to those set out in detail in the attachment hereto, and fur ther, that before such a disposition can be concluded an confirmed by the two Governments, additional steps must be taken in each country. Therefore. in furtherance of this aim, it is understood the two Covernments are agreed that a) the Government of the United States will use its best efforts to arrange for disposition of Canadas entitiement to downstream power benefits within the United States of America in accordance with the general conditions and limits set forth in the at tachment, and hb) the Government of Canada will use its beat etiorts to accomplish all those things which are considered necessary and preliminary to ratification of the Treaty as quickly as possible, including any ar rangements for implementation and acceptance of the general conditions and limits set forth in the at tachment | should ike to propose that ta greeabie to our (rv ernment this note together with the attachment and your reply shall constitute an agreement by our tsovernments reiating t the 'T reaty Accept, Sir, the renewed assurances of my highest con sideration DEAN RUSK The Honorable PAUL MARTIN, P.C., QC Secretary of State for External Affairs (tau +i Ya ATTACHMENT RELATING TO TERMS OF SALE A. The disposition shall consist of the downstream power benefits to which Canada is entitled under the Treaty, other than Canada’s entitlement to downstream power benefits resulting from the construction or operation of a project described in Article IX of the Treaty, and shall be by way of a contract of sale authorized in ac- cordance with Article VIII of the Treaty between the British Columma Hydro and Power Authority and a single Purchaser containing provisions mutually satis- factory to the parties to the contract but shall be sub- yect to and be operative in accordance with the follow- ing general conditions and limits t.(a) The storages described in Article Il of the “ Treaty shall be fully operative for power pur- poses in accordance with the following sched- ule Storage described im Article [1(2)c) —- approx- mately 1,400,000 acre feet on April 1, 1968, Storage described in Article [1(2)(b) — approxt- mately 7,100,000 acre feet on April 1, 1969, Storage described in Article I1(2)a) — approxi mately 7,000,000 acre feet on April 1, 1973 (ib) The period of sale of the entitlement allocated to each of the storages shall terminate and ex pire thirty years from the date on which that storage is required to be vully operative for power purposes in accordance with the sched- ule in subparagraph (a) of this paragraph (c) In the event any storage is not fully operative in accordance with the schedule in subpara- graph (a) of this paragraph or if, during the pe riod of sale, the storage is not operated as re- quired by the hydroelectric operating plans agreed upen im accordance with the Treaty, as modified by any detailed operating plan agreed upon im accordance with Article XIV(2)(k) of 93a the Treaty, and the Canadian entitlement is thereby reduced, the British Columba Hvdro and Power Authority shall pay the Purchaser an amount equal to the cost it would have to incur to replace that part of the reduction in the Canadian entitlement which the vendees of the Purchaser could have used other than costs that could have been avoided had every rea- sonable effort to mitigate losses been made by the Purchaser, the United States entity and the owners of non-federal dams on the Colum bia River in the United States of America. Al. ternatively, the British Columbia Hydro and Power Authority may, at its option, supply power to the Purchaser in an amount which as- sures that the Purchaser receives the capacity and energy which would have constituted that part of the reduction in the Canadian entitle ment that the vendees of the Purchaser could have used if there had been no default, to gether with appropriate adjustments to reflect transmission costs in the United States of America, delivery to be made when the loss of power would otherwise have occurred. lf the assurance described in paragraph B.5. of this attachment ts given to the Purchaser, the United States entity may succeed to all the rights of the Purchaser and its vendees to re ceive the entire Canadian entitlement, or that part that could be used by the vendees,. and to be compensated by British Columbia Hydro and Power Authority in the event of non receipt thereof The United States entity agrees that before it purchases more costly power from any third party for the purpose of supplying the necessary amount of the Cana dian entitlement to the Purchaser, it will first cause to be delivered to the Purchaser, or for Y4a its account, any available surplus capacity or ener.’ from the United States Federal Colum- bia River System and compensstion to the United States entity because of such deliveries shall be computed by applying the then appli- cable rate schedules of the Bonneville Power Administration to the deliveries In the event of disagreement, determination of compensation in money or power due under this paragraph shall be resolved by arbitration and shall be confined to the actual loss in- curred in accordance with the principles in this paragraph (d) For the purpose of allocating downstream power benefits among the Treaty storages from April 1, 1998 to April 1, 2003, the percentage of downstream power benefits allocated to each Treaty storage shall be the percentage of the total of the Treaty storages provided by that storage 2. For the period of the saie the British Columina Hy- dro and Power Authority shall operate and main- tain the Treaty storages in accordance with the provisions of the Treaty 3. (a) The purchase price of the entitlement shall be $254,400,000, in United States funds as of Oc tober 1, 1964. subject to adjustment, in the event of an earher payment of all or part thereof, to the then present worth, at a dis- count rate of 4 1/2 percent per annum (b) The purchase price shall be paid to Canada contemporaneously with the exchange of ratifi- cations of the Treaty and shall be applied to- wards the cost of constructing the Treaty pro- jects through a transfer of the purchase price by Canada to the Government of British Co- lumbia, pursuant to arrangements deemed sat- istactory to Canada, to be entered into between 4 95a Canada and the Government of British Colum bia If, during the period of the sale, there is any reduc- tion in Canada’s entitlement to downstream power benefits which results from action taken by the Ca nadian entity pursuant te paragraph 7 of Annex A of the Treaty, the British Columbia Hydro and Power Authority shall, by supplying power to the Purchaser, or otherwise as may be agreed, offset that reduciion in a manner so that the Purchaser will be compensated therefor The Purchaser shall have and may exercise the nights of the British Columma Hydro and Power Authority relating to the negotiation and conclusion with the United States entity, of proposals relating to the exchanges authorized by Article VI11(2) of the Treaty with respect to any portion of Canada's entitlement to downstream power benefits sold to the Purchaser B. The Notes to be exchanged pursuant to Article VII1I(1) of the Treaty shal! contain, inter alia, provisions tn corporating the following requirements l As soon as practicable after start of construction of each Treaty project the Canadian and United States entities shall agree upon a program for fill ing the storage provided by the project. The fill ing program shall have the objective of having the storages described in Article [1(2)(c) and Article 11(2)(b) of the ‘Treaty full by September | following the date when the storages become fully operative and the storage provided by the dam mentioned in Article 11(2)a) of the Treaty full to 15 millon acre-feet by September 1, 1975. This objective shall be reflected in the hydroelectric operating plans and shall take into account generating re quirements at-site and downstream in Canada and the United States of America to meet loads ho 96a In the event the United States of America be- comes entitled to compensation in respect of a breach of the obligation under Article IV(6) of the Treaty to commence full operation of a storage, compensation payable to the United States of America under Article XVIII(5)(a) of the Treaty shall be made in an amount equal to 2.70 mills per kilowatt-hour, and 46 cents per kilowatt of dependable capacity for each month or fraction thereof, in United States funds, for and in lieu of the power which would have been forfeited under Article XVILI(5)(a) of the Treaty if Canada’s enti- tlement to downstream power benefits had not been sold in the United States of America. Alter- natively, Canada may, at its option, supply capac- ity and energy to the United States entity in an amount equal to that which would have been for- feited, together with appropriate adjustments to reflect transmission costs in the United States of America, delivery to be made when the loss would otherwise have occurred. A diminution of Canada’s entitlement to down- stream power benefits sold in the United States of America which is directly attributable to a failure to comply with paragraph A. l(a) or paragraph A.2 of this attachment, in the absence of compensa- tion therefor by the British Columbia Hydro and Power Authority, constitutes a breach of the Treaty by Canada and Article XVIII(5) of the Treaty and the exculpatory provisions in Articie XVIII of the Treaty do not apply to such breach. Compensation or replacement of power as speci- fied in paragraph A.1(c) of this attachment shall be made by Canada and shall be accepted by the United States of America as complete satisfaction of Canada’s liability under this paragraph. For any year in which Canada’s entitlement to downstream power benefits is sold in the United 9Y7a States of America, the United States entity may decide the amount of the downstream power bene fits for purposes connected with the disposition thereof in the United States of America. This au thorization, however, shall not affect the rights or relieve the obligations of the Canadian and United States entities relating to joint activities under the provisions of Article XIV and Annexes A and B of the Treaty; nor shall it apply to deter mination of compensation provided for in para graph A.l(c) and paragraph B.2 of this attach ment. If necessary to accomplish the sale of Canada’s entitlement to downstream power benefits in a cordance with this attachment, the United States entity shall assure unconditionally the delivery to or for the account of the Purchaser, by appropriate exchange contracts, of an amount of power agreed between the United States entity and the Pur chaser to be the equivalent of the entitlement dur ing the period of the sale Canada shail designate the British Columbia Hydre and Power Authority as the Canadian entity for the purposes of Article XIV(1) of the Treaty Ga The Canadian Secretary of State for External Affairs to the Secretary of State THE SECRETARY OF STATE FOR EXTERNAL AFFAIRS CANADA January 22, 1964 SIR, I have the honour to refer to your Note dated January 22. 1964, together with the attachment thereto regarding the Treaty between Canada and the United States of America relating to cooperative development of the water resources of the Columbia River Basin signed at Washing- ton on January 17, 1961 | wish to advise you that the Government of Canada ayvrees that your Note with the attachment thereto, to- gether with this reply, shall constitute an agreement be- tween our two Governments relating to the Treaty Accept, Sir, the renewed assurances of my highest con- sideration PAUL MARTIN Secretary of State for External Affairs The Honourable DEAN RUSK, Secretary of State of the United States of America Washington 99a The Canadian Secretary of State for External Affairs to the American Ambassador DEPARTMENT OF EXTERNAL AFFAIRS CANADA OTTAWA, September 16, 1964 No. 140 EXCELLENCY, | have the honour to refer to the Treaty between Canada and the United States of America relating to cooperative development of the water resources of the Columbia River Basin signed at Washington on 17 January 1961, to the Protocol attached to my Note to the Honourable Dean -.usk, Secretary of State of the United States of America, dated 22 January 1964, and to the exchange of instru- ments of ratification of the Treaty which occurred today 1 also have the honour to refer to the discussions which have been held between representatives of the Govern- ment of Canada and of the Government of the United States of America in connection with the Exchange of Notes, dated 22 January 1964, regarding sale in the United States of America of Canada’s entitlement under the Treaty to downstream power benefits. My Government also understands that your Govern ment has designated the Administrator of the Bonneville Power Administration, Department of the Interior, and the Division Engineer, North Pacific Division, Corps of Engineers, Department of the Army, as the United States Entity for the purposes of Article XIV(1) of the Treaty, and I would inform you that the Government of Canada has designated the British Columbia Hydro and Power Au thority, a corporation incorporated in the Province of Brit- ish Columbia by the British Columbia Hydro and Power Authority Act, 1964, as the Canadian Entity for the pur poses of that Article. A copy of the designation is attached hereto On the basis of those discussions the Government of Canada proposes that the Canadian Entitlement Purchase 100a Agreement regarding the sale in the United States of America of the Canadian Entitlement under the Treaty to downstream power benefits entered into between the Brit- ish Columbia Hydro and Power Authority and the Colum- bia Storage Power Exchange, the single purchaser referred to in the attachment to your Note of January 22, 1964, re- lating to the terms of the sale, a copy of which agreement is attached hereto, be authorized for the purposes of Arti- cle VIII(1) of the Treaty as a disposal of the Canadian En- titlement in the United States of America for the period and im accordance with the other terms and provisions set out in the Canadian Entitlement Purchase Agreement. My Government also understands that your Govern- ment pursuant to paragraph E.5 in the attachment to Mr. Secretary Rusk’s Note of January 22, 1964, relating to the terms of the sale, has determined that the United States Entity shall enter into and that it has entered into the Ca- nadian Entitlement Exchange Agreements which agree- ments assure unconditionally the delivery for the account of the Columbia Storage Power Exchange of an amount of power agreed between the United States Entity and the Columbia Storage Power Exchange to be the equivalent of the Canadian Entitlement being sold under the Canadian Entitlement Purchase Agreement, and that the United States Entity has succeeded to all the rights and obliga- tions of the Columbia Storage Power Exchange under the Canadian Entitlement Purchase Agreement other than the obligation to pay the purchase price, and further that the United States Entity has, pursuant to Article XI of the Treaty, approved the use of the improved stream flow in the United States of America brought about by the Treaty by entering into Canadian Entitlement Allocation Agree- ments with owners of non-Federal dams on the Columbia River My Government also understands that the two Govern- ments are agreed that the Government of the United States of America undertakes that: (1) (3) (4) 1lOle So long as the Canadian Entitlement Exchange Agreements remain in force, the United States En- tity will perform all the obligations of the Colum- bia Storage Power Exchange under the Canadian Entitlement Purchase Agreement other than the obligation to pay the purchase price specified in Section 3 of the Canadian Entitlement Purchase Agreement, In the event the Canadian Entitlement is reduced as a result of a failure on the part of the Canadian Entity to comply with Section 4 of the Canadian Entitlement Purchase Agreement and if the failure results other than from wilful omission by the Ca nadian Entity to fulfill its obligations under that agreement, the United States Entity will, without compensation, offset the effect of that failure by adjusting the operation of the portion of the Sys tem described in Step | of paragraph 7 of Annex B of the Treaty which is in the United States of America to the extent that the United States En- tity can do so without loss of energy or capacity to that portion of the System; and If the procedure described in paragraph (2) above does not fully offset the effect of the failure, then to the extent the entities agree thereon, an additiona! offsetting adjustment in the operation of the por- tion of the System described in Step I of Annex B of the Treaty which is in the United States of America and which would result in only an energy loss will be made if the Canadian Entity delivers to the United States Entity energy sufficient to make up one half that energy loss In order to make up any reduction in the Canadian Entitlement, which reduction is to be determined in accordance with Section 6 of the Canadian Enti- tlement Purchase Agreement, the United States Entity will cause to be delivered the least expen. sive capacity and energy available and, to the ex. 10a tent that it would be the least expensive available, will deliver, at the then applicable rate schedules of the Bonneville Power Administration, any available surplus capacity and energy from the United States Federal Columbia River System The Government of Canada also proposes that (5) Contemporaneously with the exchange of the in- struments of ratification CSPE shall have paid to Canada the sum in United States funds of $253,929,534.25, being the equivalent of the sum of $254,400,000 in United States funds as of Octo- ber 1, 1964 adjusted to September 16, 1964 at a discount rate of 4 1/2 percent per annum on the basis set out in the January 22, 1964 Exchange of Notes between our two Governments relating to the terms of sale, which sum shall be applied to- wards the cost of constructing the Treaty projects through a transfer of the sum by Canada to the Government of British Columbia pursuant to ar- rangements entered into between Canada and British Columbia (6) No modification or renewal of the Canadian Enti- tlement Purchase Agreement shall be effective un- til approved by the Governments of Canada and the United States of America, evidenced by an Ex- change of Notes (7) The storages described in Article Il of the Treaty shall be considered fully operative when the facili- ties for such storages are available and outlet fa- cilities are operable for regulating flows in accor- dance with the flood control and hydroelectric op- erating plans (8) As soon as practicable, the Canadian and United States Entities shall agree upon a program for fill- ing the storage provided by each of the Treaty pro- jects. The filling program shall have the objective of having the storages described in Article 11(2)(a), Article I1(2)b). and Article I1(2Mc) of the Treaty 103a filled to the extent that usable storage, in the amounts provided for each storage in Article II of the Treaty is available by September 1 following the date when the storage becomes fully operative, and of having the storage provided by the dam de- scribed in Article [1(2)(a) filled to 15 million acre- feet by September 1, 1975. This objective shall be reflected in the hydroelectric operating plans and shall take into account generating requirements at-site and downstream in Canada and the United States of America to meet loads and requirements for flood control In the event the United States of America becomes entitled to compensation from Canada for loss of downstream power benefits, other than Canadas entitlement to downstream power benefits, 1n re- spect of a breach of the obligation under Article 1V(6) of the Treaty to commence full operation of a storage, compensation payable to the United States of America under Article XVIII(5)(a) of the Treaty shall be made in an amount equal to 2.70 mills per kilowatt-hour of energy, and 46 cents per kilowatt of dependable capacity for each month or fraction thereof, in United States Funds, for and in lieu of the power which would have been forfeited under Article XVIII(5)(a) of the Treaty if Canada’s entitlement to downstream power benefits had not been sold in the United States of America. The power which would have been forfeited shall be Canada’s entitlement to downstream power bene fits attributable to the particular storage had it commenced full operation in accordance with Arti- cle 1V(6) of the Treaty and shall consist of (1) de- pendable capacity for the period of forfeiture and (2) that portion of average annual usuable energy which would have been available during the period of forfeiture assuming the energy to be available at a uniform rate throughout the year. Alternatively, 104a Canada may. at its option, offset the power for which compensation is to be made by delivering capacity and energy to the United States Entity, such delivery to be made, unless otherwise agreed by the entities, during the period of breach and at a uniform rate. The option for Canada to provide power in place of paying money shal! permit Can ada to make compensation partly by supplying power and partly by paying money, as may be mu tually agreed by the entities The Canadian Entity shall at reasonable intervals provide current reports to the United States Entity of the progress of construction of the Treaty stor ages. In the event there is a likelihood of delay in meeting the completion dates set out in Section 4 of the Canadian Entitlement Purchase Agreement or a delay which will give mse to a claim under paragraph (9) hereof the Canadian Entity will ad vise of the probability of power being available to make the compensation required To the extent the Canadian Entity does not make compensation for a reduction in the Canadian En titlement arising as a result of a failure to comply with Section 4 of the Canadian Entitlement Pur chase Agreement, Canada shall make such com pensation and such compensation shall be ac cepted in complete satisfaction of all claims arising out of the failure in respect of the reduction in the Canadian Entitlement for which such compensa thon was made For any year in which Canada’s Entitlement to downstream power benefits is sold to Columbia Storage Power Exc hange, the United States Entity may decide the amount of the downstream power benefits for purposes connected with the disposi tion thereof in the United States of America. This authorization, however, shall neither affect the rights or reheve the obligations of the Canadian 105a and United States Entities relating to joint activi ties under the provisions of Article XIV and An nexes A and B of the Treaty, nor shall it apply to determination of compensation provided for in the Canadian Entitlement Purchase Agreement or pursuant to paragraph (9) hereof or to deterni:na tion of the power benefits to which Canada ts enti tled (13) Any power delivered by the Canadian Entity or by Canada in accordance with the Canadian Entitle ment Purchase Agreement or this Note shall be de livered at points of interconnection on the Cana dian-United States border mutually acceptable to the eritities. Appropriate adjustments shall be made to reflect transmission costs and transmis sion losses in the United States of America (14) Any dispute arising under the Canadian Entitle ment Purchase Agreement, including, but without limitation, a dispute whether any event requiring compensation has occurred, the amount of com pensation due or the amount of any overdelivery of power is agreed to be a difference under the Treaty to be settled in accordance with the provisions of Article XVI of the Treaty, and the parties to the Canadian Entitlement Purchase Agreement may avail themselves of the jurisdiction hereby con ferred The Government of Canada therefore proposes that if agreeable to your Government this Note together with your reply thereto constitutes an agreement by our Gov ernments relating to the Treaty with effect from the date of the exchange of instruments of ratification of the Treaty Accept, Excellency, the renewed assurances of my high est consideration PAUL MARTIN Secretary of State for External Affairs LO0ba His Excellency W. WALTON BUTTERWORTH, Ambassador of the United States of America (Attawa LO7a P.C. 1964-1407 Certified to be a true copy of a Minute of a Meeting of the Committee of the Privy Council, approved by His Excellency the Governor Genera! on the 4th September, 1964 CANADA PRIVY COUNCIL The Committee of the Privy Council, on the recommen- dation of the Right Honourable Lester B. Pearson, the Prime Minister, advise that Your Excellency may be pleased to designate the British Columbia Hydro and Power Authority, a corporation incorporated in the Prov ince of British Columbia by the British Columbia Hydro and Power Authority Act 1964, as the Canadian entity for the purposes of Article XIV of a treaty dated January 17. 1961 at Washington, D.C. U.S.A. between Canada and the United States of America relating to co-operative devel- opment of the water resources of the Columbia River Ba- sin, such designation to take effect on the date on which the Instruments of Ratification of the Treaty shall be ex changed. /s/ (Iegible} CLERK OF THE PRIVY COUNCIL | USa CANADIAN ENTITLEMENT PURCHASE AGREEMENT This Agreement executed this thirteenth day of August 1964. by and between COLUMBIA STORAGE POWER EX CHANGE, a nonprofit corporation organized under the laws of the State of Washington, heremafter referred to as CSPE and BRITISH COLUMBIA HYDRO AND POWER AUTHORITY, a corporation incorporated in the Province of British Colum ba, Canada, by the British Columbia Hydro and Power Authority Act, 1964, hereinafter referred to as “the Au thority WHEREAS A The Governments of the United States of America and Canada are exchanging instruments of ratification of the Treaty Hetween Canada and the United States of America Relating to the Cooperative Development of the Water Resources of the Columha River Basin Signed at Washington January |7, 1961. By an Exchange of Notes dated January 22, 1964, the two Governments agreed upon the terms of a Protocol with effect from the date of the exchange of instruments of ratification of the Treaty aforesar’ (which Treaty and Protocol are hereinafter re ferred to as the “Treaty’) Bb. Under the .erms of the Treaty. Canada is entitled to receive from the United States ore half of the annual av erage usable energy and one half of the dependable hy droelectrn capacity which can be reahzed in the United Sates each year as a result of use of the improved stream flow on the Columbia River created by storage to be con structed in Canada { The Government of Canada and the Government of British Columbia have entered into an agreement dated & duly. 1963, and a supplementary agreement dated 13 Jenuary. 1964, wherem it was agreed that all proprietary rights, title and interests arising under the Treaty. includ ing all mghts to downstream power bDenetits belong to the — | = + ee? ee ee ee ae ew ee eee 1U0Ya Government of British Columbia, and providing that Can ada shall designate the Authority as the Canadian Entity as provided for in Article XIV of the Treaty. Pursuant to such agreement Canada is designating the Authority as the Canadian Entity D. The Authority is, by virtue of an Order in Council of the Province of British Columbia, dated August 7, 1964, required and authorized to exercise all the rights and powers granted to the Canadian Entity and to perform all the obligations imposed on the Canadian Entity by the Treaty and to enter into this Agreement E. CSPE is incorporated with the object of purchasing for a term of years Canada’s rights to downstream power benefits under the Treaty and incurring indebtedness to finance such purchase and disposing of such mghts under such arrangements as may be necessary to retire the cor porate indebtedness and to pay the necessary expenses of CSPE incidental thereto F. The Governments of the United States of America and Canada, as contemplated by Article VIII of the Treaty and in pursuance of the Agreement of the two Govern ments contained in an Exchange of Notes dated January 22, 1964, relating thereto, are by an Exchange of Notes authorizing the disposition for a term of years within the United States of America of Canada's rights to down stream power benefits under the Treaty, which disposition when so authorized ts to be effectuated by this Agreement in accordance with the provisions of the Treaty and docu ments supplementary thereto NOW, THEREFORE, it is agreed SECTION 1. TERM This Agreement shall be effective when authorized by the Governments of Canada and the United States of America by an Exchange of Notes pursuant to the Treaty and shall terminate at midnight on March :}1, 2003 SECTION 2. CONVEYANCE (1) The Authority does hereby sell, assign. and convey unto CSPE, and CSPE does hereby accept. the entitlement of Canada, as described in Article V(1) of the Treaty, to the downstream power benefits determined in accordance with Article VII of the Treaty, save and except the entitlement of Canada to the downstream power benefits resulting from the construction or operation of the project referred to in Article LX of the Treaty, for the following periods of time (a) The benefits resulting from the storage described in Article 11(2\Xc) of the Treaty (hereinafter referred to as Duncan Lake storage) for a penod of 30 years commencing April 1, 1968, and (b) The benefits resulting from the storage described in Article [1(2)(b) of the Treaty (hereinafter referred to as Arrow Lakes storage) for a period of 30 years commencing Apri! 1, 1969; and The benefits resulting from the storage described in Article 11(2)(a) of the Treaty (hereinafter referred to as Mica Creek storage) for a period of 30 years commencing April 1, 1973 (2) All of the entitlement to the dowastream power bene- fits hereby conveyed for the aforementioned periods of time, without the reductions provided for in paragraph 7 of Annex A of the Treaty is hereinafter referred to as “the Canadian Entitlement” (3) For the purpose of allocating downstream power benefits among the three Canadian storages provided for in the Treaty between April 1, 1998, and March 31, 2003, the percentage of downstream power benefits allocable to each of the said storages shall be the percentage of the to tal of the Canadian storages provided by that storage as set out wn Article Il of the Treaty SECTION 3. PAYMENT BY CSPE Contemporaneously with the exchange of the instru ments of ratification, CSPE 1s causing to be paid to Can llla ada the sum, in United States funds, of $254,400,000.00 as of October 1, 1964, subject to adjustment in the event of an earlier payment thereof to the then present worth at a dis count rate of 4 1/2 percent per annum. which sum shall be applied towards the cost of constructing the Treaty pro jects through a transfer of the sum by Canada to the Gov ernment of British Columbia pursuant to arrangements entered into between Canada and British Columma. The Authority acknowledges that the receipt by Canada of the said sum is consideration for all the covenants of the au thority in this Agreement and particularly the covenants to construct and operate the Treaty projects and is a com plete discharge of CSPE for the full purchase price for the sale effected in Section 2 of thie Agreement SECTION 4. COVENANTS (1) The Authority covenants and agrees with CSI’h that it will undertake all requisite construction work in a guod and workmanlike manner and that the storages described in Article II of the Treaty shall be fully operative for power purposes under this Agreement by the following dates (a) The Duncan Lake storage, Apri) |, 1968 (b) The Arrow Lakes storage, Apri! 1, 1969 (c) The Mica Creek storage, April |, 1975 To be fully operative the factlities for such storages shall be completed to the extent that storages are available and outlet facilities are operable for regulating Nows in accor dance with flood control and hydroelectric operating plans as contemplated by the Treaty (2) The Authority covenants and agrees with CSVE that it will operate and maintaim the Treaty storages im a good and workmanlike manner and in accordance with the pro visions of the Treaty and any arrangements made pursu ant to the Treaty and that it wi)! not take any action pro hibited by the Treaty SECTION 5. FLOOD CONTRO! Nothing in this Agreement affects or alters the obliga tions, mghts, and privileges of the entities under the liza Treaty relating to operation and compensation for flood control and without restricting the generality of the fore- going, it 1s expressly agreed that any reduction in genera- tron in the United States brought about by operation for flood control under the Treaty or any flood control ar- rangements made pursuant to the Treaty shall not be a reduction in the Canadian Entitlement for which compen- sation is required under this Agreement SECTION 6. COMPENSATION In the event the Canadian Entitlement is reduced as a result of a failure to comply with Section 4 of this Agree- ment (1) If the failure results other than from wilful omission by the Authority to fulfill its obligations under this Agreement, the United States Entity has agreed that it will, without compensation, offset the effect of that failure by adjusting the operation of the portion of the system de- scribed in Step | of paragraph 7 of Annex B of the Treaty which is in the United States to the extent that the United States Entity can do so without loss of energy or capacity to that portion of the System. If the foregoing procedure does not fully offset the effect of the failure, then to the extent the entities agree thereon, an additional offsetting adjustment in the operation of the portion of the system described in Step | of Annex B of the Treaty which is in the United States and which would result m only an en ergy loss will be made if the Authority delivers to the United States Entity energy sufficient to make up one half of that energy hove 2) If the effect of the failure is not entirely offset by the procedure sperified in subsection (1) of this section, the reduction in the Canadian Entitlement shall be deemed to be one half of the difference in dependable hydroelectric capacity and average annual usable energy, capable of be- ing produced by (a) the Step I system as specified in Annex B of the Treaty for the year in which the reduction occurs, using the 30 year stream flow record provided for in lida Section 8 of the Protocol, with allowance in each of the 30 stream flow years for the effect of the Ad justment made in following the procedure specified in subsection (1) of this section and the same system for that year with the application of allowance in each of the 30 stream flow years for the effects of the occurrence causing the reduction and the dependable hydroelectric capacity and average annual usable energy for the purpose of paragraph (b) of this subsection shall be calculated on the basis of an op eration for optimum generation in the United States in the light of the offsetting adjustments and in the hight of the effects of the occurrence causing the reduction (3) If the failure is the result of an occurrence to which he procedure specified in subsection (1) of this section is wt applicable, the reduction shall be deemed to be one valf of the difference in dependable hydroelectric capacity ind average annual usable energy, capable of being pro luced by (a) the Step II system as specified in Annex B of the Treaty for the year in which the reduction occurs, using the 30 year stream flow record provided for in Section 8 of the Protocol, with no allowance for the effects of the occurrence causing the reduction and the same system for that year with the application of allowance in each of the 30 stream flow years for the effects of the occurrence causing the reduction and the dependable hydroelectric capacity and average annual usable energy for the purposes of paragraph (b) of this subsection shall be calculated on the basis of an operation for optimum generation in the United States in the hight of the effects of the occurrence causing the reduction (4) The Authority shall make compensation for reduc tions in the Canadian Entitlement, which reductions are to be determined in accordance with subsections (2) or (3) lida of this section, in amounts equal to the cost of replacing the reductions in the Canadian Entitlement (5) The Authority may at its option, and in lieu of the monetary compensation payable under subsection (4) of this section, make compensation by supplying capacity and energy in an amount equal to the reduction in the Ca- nadian Entitlement determined in accordance with sub- sections (2) or (3) of this section and adjusted to reflect transmission costs in the United States, delivery to be made when the loss would otherwise have occurred. The Authority may provide combinations of money, capacity and energy that are mutually acceptable in discharge of its obligation to make compensation under this section, (6) The Authority shall give notice as soon as possible af. ter it becomes apparent to it that compensation may be due and will at that time indicate the amounts of capacity and energy which it anticipates it will be able to make available (7) The United States Entity has agreed that, in order to take up any reduction in the Canadian Entitlement, it will cause to be delivered the least expensive capacity and energy available and, to the extent that it would be the least expensive, will deliver at the then applicable rate schedules of the Bonneville Power Administration any available surplus capacity and energy from the United States Federal Columbia River System. The cost of re- placement referred to in subsection (4) of this section shall be determined as if the reduction was in fact made up as contemplated by the agreement referred to in the preced. ing sentence (8) Compensation made in accordance with this section shall be accepted as satisfaction of all claims against the Authority with respect to the reduction in the Canadian Entitlement for which such compensation was made and with respect to the act or omission of the Authority from which the right to such compensation arose (9) Any obligation to mitigate damages by the United States Entity, CSPE, the vendees of CSPE, and the owners of the non-Federal dams on the Columbia River im the United States is satisfied by comphance with this section (10) If the Canadian Entitlement Exchange Agreements referred to in Section 10 are not in force, compensation for a reduction ni the Canadian Entitlement in accordance with subsections (2) and (3) of this section, ts required only in respect of that part of the reduction m the Canadian Entitlement which CSPE and its vendees could have used and only in respect of costs that could not have been avoidea had every reasonable effort to mitigate been made by CSPE and the owners of non-Federal dams on the Co lumbia River in the United States SECTION 7. REDUCTION OF THE CANADIAN ENTITLEMENT IN ACCORDANCE WITH THE TREATY Any reduction in the Canadian Entitlement resulting from action taken pursuant to paragraph 7 of Annex A of the Treaty shall be determined in accordance with subse tion (3) of Section 6 of this Agreement and unless other wise agreed, the Authority shall offset the reduction by supplying capacity and energy equal to the reduction, the energy to be supplied in equal monthly amounts SECTION 8. SETTLEMENT OF DISPUTES Any dispute arising under this Agreement, including but without limitation a dispute as to whether any event re quiring compensation has occurred, the amount of com pensation due or the amount of any overdelivery of power 1s agreed to be a difference under the Treaty to be settied in accordance with the provisions of Article XVI of the Treaty. Any determination of compensation in money or power due shall be confined to the actual loss incurred in accordance with the principles contained in Section 6 of this Agreement SECTION 9. EXCHANGES OF CAPACITY AND ENERGY (1) The Authonty agrees that CSPE shall have and may exercise the rights of the Authority as the Canadian En tity relating to the negotiation and conclusion with the United States Entity of proposals relating to tiv eX lloéa changes authorized by Article VIII(2) of the Treaty with respect .o any portion of the Canadian Entitlement ] (2) It is agreed that no exchange of capacity for energy or of energy for capacity or modification in the delivery of nergy in equal amounts each month as provided in the Treaty shall be taken into account in the determination of compensation to be made by the Authority pursuant to this Agreement SECTION 10. EXCHANGE AGREEMENTS The Bonneville Power Administrator acting as the Ad ministrator and for and on behalf of the United States En tity has by entering into Canadian Entitlement Exchange Agreements, assured unconditionally the delivery to the vendees of CSPE by appropriate exchange contracts of an amount of power agreed between the United States Entity and CSPE to be the equivalent of the Canadian Entitle ment, and the United States Entity. while those Agree- ments are im force, will succeed to all the mghts of CSPE and tts vendees to receive the ewtire Canadian Entitie ment and all other mghts of CSPE arising from this Agreement. CSPE therefore instructs the Authority, until otherwise notified, to make any compensation whether in power or money required to be made by the Authority pur suant to Section 6 or Section 7 of this Agreement to the United States Entity. CSPE agrees that any settlement of a claim tor compensation or arrangement entered into pursuant to this Agreement by the United States Entity shall be binding on CSPE SECTION 11. PAYMENTS (1) The Authority shall pay any amount in United States funds determined to be due in accordance with the terms hereot within thirty days of rece:pt of a wvorce for such imount (2) Should the Authority deliver power mm excess of the amount required as compensation, then appropriate ad justments shal! be made in kind or in monev SJCTION 12. APPROVALS No modification or renewal of this Agreement shall be effective until approved by the Governments of Canada and the United States of America, evidenced by an Ex change of Notes SECTION i3. DELIVERIES Any power delivered by the Authority pursuant to this Agreement shall be delivered at mutually acceptable points of interconnection on the Canadian-United States border. Appropriate adjustments shall be made to reflect transmission costs and transmission losses in the United State _ SECTION 14. NOTICES Any notices shall be in writing and shall be delivered or mailed prepaid as follows Columbia Storage Power Exchange 20 N. Main Street East Wenatchee, Washington, U.S.A United States Entity c/o Bonneville Power Administration P.O. Box 3621 Portiand, Oregon 97208 U.S.A British Columbia Hydro and Power Authority 970 Burrard Street Vancouver |, British Columba, Canada or such other address as may be signified by notice to the others IN WITNESS WHEREOF, the parties have caused this Avwreement to be executed as of the day and year tirst above written (SEAL) Attest (SEAL) Attest BRITISH COLUMBIA HYDRO ANI) POWER Al THORITY By { Aairman 1iYa The Amerwan Ambassador to the (Canadian weretary of Mate for A xternal Affairs EMBASSY OF THE UNITED STATES OF AMERICA (Htawa September 16, i964 | have t Pe honor i rr fer tj your nots No 140 of ee | tember 16. 1964, rewarding the disposal of the Canadian entitlement to downstream power benefits im the United States, in accordance with Article VIII(1) of the Treaty hx tween the United States of America and Canada relating to the cooperative development of the water resources of the Columima River Basin. signed at Washington. January is. 1S | wish to advise you that the Government of the United States of Ameria has designated the Administrator of the Bonneville Power Administration. Department of the Inte rior, and the Division Engmeer, North Paciiic Urvisiwn Corps of Engineers, Department of the Army. as the United States Entity for the purposes of Article AIV(1) of the Treaty vy of the designation i attached to this ryevte | wish aleo to advise that the Government of the Unned States of America confirms the proposals and understand mgs set forth in your note. and agrees that your note gether with this reply, shall constitute agreement by tween our two Covernments relating to the implementa tion of the provisions of the Treaty with effect from the date of the exchanwe « iments of ratiication Treaty \ccept, Sir, t! sideration The Henorabk PAUL MARTIN, P.C.. Q( Ww State for External (Hiawa lla EXECUTIVE ORDER No. 11177. PROVIDING FOR CERTAIN ARRANGEMENTS UN.- DER THE COLUMBIA RIVER TREATY WHEREAS the treaty between the United States and Canada relating to cooperative development of the water resources of the Columma River Basin (signed at Wash ington, D.C., on January 17, 1961: Executive C, 87th Con gress, lst Session) has come into force; and WHEREAS Article XIV of such treaty (hereinafter re- ferred to as the Treaty) provides for the designation of cer tain entities which are empowered and charged with the duty to formulate and carry out the operating arrange ments necessary to implement the Treaty, and authorizes the United States of America to designate one or more of such entities; and WHEREAS Article XV of the Treaty authorizes the United States of America to appoint two members of the Permanent Engineering Board established by that Article NOW, THEREFORE, by virtue of the authority vested in me by the Treaty and by the Constit [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_0430%3A2. Public record. Not legal advice.