2012 Tiered Rate Methodology Proceeding; Public Hearings and Opportunities for Public Review and Comment

DEPARTMENT OF ENERGY

Bonneville Power Administration

[BPA File No.: TRM-12]

2012 Tiered Rate Methodology Proceeding; Public Hearings and

Opportunities for Public Review and Comment

Editorial Note: FR Doc. E8-9572 was originally published at

page 24059 in the issue of May 1, 2008. That document was

inadvertently published prior to the requested publication date, as

stated in an Office of the Federal Register correction notice

published at 73 FR 24496, May 2, 2008. FR Doc. E8-9572 is being

republished in its entirety in this issue of the Federal Register.

AGENCY: Bonneville Power Administration (BPA), Department of Energy

(DOE).

ACTION: Notice of Proposed Tiered Rate Methodology.

-----------------------------------------------------------------------

SUMMARY: BPA is proposing to adopt a new tiered rate design for setting

its Priority Firm Power (PF) rates beginning with the FY 2012-2013 rate

period. The primary feature of this Tiered Rate Methodology (TRM)

proposal is one rate tier (Tier 1) based on generation output and costs

attributed to BPA's current Federal base system resources and a second

rate tier (Tier 2) based on the generation and costs associated with

newly acquired resources.

The TRM is part of BPA's effort to achieve the overall policy

objectives of the Long-Term Regional Dialogue Policy (Policy). Under

this Policy, BPA will offer 20-year Regional Dialogue Contracts to its

Federal agency and public utility customers for power priced at a

tiered PF rate. The TRM is intended to provide customers with a

predictable and durable means by which to calculate BPA's PF tiered

rate for the term of these contracts.

Determinations of specific rate levels applicable to these

contracts will not be established in this proceeding. Rather the

specific rate levels will be developed consistent with the TRM in the

respective Pacific Northwest Electric Power Planning and Conservation

Act (Northwest Power Act) section 7(i) rate proceedings during the term

of this TRM. BPA intends to set the actual power rates on a two-year

cycle throughout the term of the Regional Dialogue contracts beginning

with the FY 2012-2013 rate period.

BPA is commencing this proceeding under section 7 of the Northwest

Power Act to establish the TRM. Entities wishing to become a formal

party to the proceeding must file a petition to intervene, notifying

BPA in writing of their intention to do so in conformance with the

requirements stated in this Notice.

DATES: Petitions to intervene must be received no later than 5 p.m.,

Pacific Daylight Time (PDT), on May 7, 2008. Proposed hearing dates are

supplied in Supplementary Information, Part I.A. below. Non-party

participants may make written comments between May 2, 2008, and July

10, 2008. Comments must be received by 5 p.m., PDT, on July 10, 2008,

in order to be considered in the Record of Decision.

ADDRESSES: Petitions to intervene should be directed to Camille

Blakely, Hearing Clerk, LP-7, Bonneville Power Administration, 905 NE

11th Avenue, Portland, OR 97232 or by e-mail to: [email protected], and

must be received no later than 5 p.m., PDT, on May 7, 2008. In

addition, a copy of the petition must be served concurrently on BPA's

General Counsel directed to Peter J. Burger, LP-7, Office of General

Counsel, Bonneville Power Administration, 905 NE 11th Avenue, Portland,

OR 97232 or by e-mail to: [email protected]. (See Part III (A) for more

information.) Written comments can be submitted online at BPA's Web

site http://www.bpa.gov/comment, or by mail to: BPA Public Affairs,

DKE-7, P.O. Box 14428, Portland, OR 97293-4428. Please identify written

or electronic comments as ``TRM-12 Proceeding'' comments. Documents

will be available for public viewing after May 9, 2008. The documents

are available at: http://www.bpa.gov/corporate/ratecase, or at BPA's

Public Information Center, BPA Headquarters Building, 1st Floor; 905

NE. 11th, Portland, Oregon, and will be provided to parties on a

compact disk (CD) at the prehearing conference to be held on May 9,

2008, beginning at 1:30 p.m., Room 223, 911 NE. 11th, Portland, Oregon.

Due to increased security requirements, attendees should allow

additional time to enter the building and complete the required

screening process. Photo identification will be required for entry.

FOR FURTHER INFORMATION CONTACT: Ms. Nita Burbank, Lead Public Affairs

Specialist, Power Policy Development, PFP-6, P.O. Box 3621, Portland,

OR 97208. Interested persons may also call 503-230-3458 or 1-800-622-

4519 (toll-free).

SUPPLEMENTARY INFORMATION:

Table of Contents

Part I. Introduction and Procedural Background

Part II. Policy Guidance and Scope of Hearing

Part III. Public Participation

Part IV. The Tiered Rates Methodology

Part I--Introduction and Procedural Background

Section 7(i) of the Northwest Power Act, 16 U.S.C. section 839e(i),

requires that BPA's rates be established according to certain

procedures. These procedures include, among other things: Publication

of a notice of the proposed rates in the Federal Register; one or more

hearings conducted as expeditiously as practicable by a Hearing

Officer; public opportunity to provide both oral and written views

related to the proposed rates; opportunity to offer refutation or

rebuttal of submitted material; and a decision by the Administrator

based on the record. This proceeding is governed by section 1010 of

BPA's Rules of Procedure Governing Rate Hearings, 51 FR 7611 (1986)

(BPA Hearing Procedures). These procedures implement the statutory

section 7(i) requirements.

Section 1010.7 of the BPA Hearing Procedures prohibits ex parte

communications. The ex parte rule applies to all BPA and DOE employees

and contractors. Except as provided below, any outside communications

with BPA and/or DOE personnel regarding BPA's rate case by other

Executive Branch agencies, Congress, existing or potential BPA

customers (including tribes), and nonprofit or public interest groups

are considered outside communications and are subject to the ex parte

rule. The general rule does not apply to communications relating to:

(1) Matters of procedure only (the status of the rate case, for

example); (2) exchanges of data in the course of business or under the

Freedom of Information Act; (3) requests for factual information; (4)

matters BPA is

[[Page 24962]]

responsible for under statutes other than the ratemaking provisions; or

(5) matters that all parties agree may be made on an ex parte basis.

The ex parte rule remains in effect until the Administrator's Final ROD

is issued, which is scheduled to occur on or about September 29, 2008.

The Bonneville Project Act, 16 U.S.C. section 832, the Flood

Control Act of 1944, 16 U.S.C. 825s, the Federal Columbia River

Transmission System Act, 16 U.S.C. section 838, and the Northwest Power

Act, 16 U.S.C. section 839, provide guidance regarding BPA ratemaking.

The Northwest Power Act requires BPA to set rates that are sufficient

to recover, in accordance with sound business principles, the cost of

acquiring, conserving and transmitting electric power, including

amortization of the Federal investment in the FCRPS over a reasonable

period of years, and certain other costs and expenses incurred by the

Administrator.

BPA's proposed TRM is available for viewing and downloading on

BPA's Web site at http://www.bpa.gov/corporate/ratecase and is

discussed in Part IV below. BPA will be conducting a formal rate

proceeding open to rate case parties. Interested parties must file

petitions to intervene in order to take part in the formal hearing as

discussed in Part III (A) below. A proposed schedule for the formal

process is as follows. The Hearing Officer will establish a final

schedule at the prehearing conference.

------------------------------------------------------------------------

------------------------------------------------------------------------

Prehearing/BPA Direct Case............................. 05/09/08

Clarification.......................................... 05/14-15/08

Motions to Strike...................................... 05/16/08

Data Request Deadline.................................. 05/16/08

Answers to Motions to Strike........................... 05/22/08

Data Response Deadline................................. 05/22/08

Parties File Direct Cases.............................. 06/13/08

Clarification.......................................... 06/18-19/08

Motions to Strike...................................... 06/20/08

Data Request Deadline.................................. 06/20/08

Answers to Motions to Strike........................... 06/26/08

Data Response Deadline................................. 06/26/08

Litigants File Rebuttal................................ 07/10/08

Close of Participant Comments.......................... 07/10/08

Clarification.......................................... 07/14-15/08

Motions to Strike...................................... 07/16/08

Data Request Deadline.................................. 07/16/08

Answers to Motions to Strike........................... 07/22/08

Data Response Deadline................................. 07/22/08

Cross-Examination...................................... 07/24-25/08

Initial Briefs Filed................................... 08/04/08

Oral Argument.......................................... 08/07/08

Draft ROD Issued....................................... 09/02/08

Briefs on Exceptions................................... 09/08/08

Final ROD and Final TRM Issued........................ 09/29/08

------------------------------------------------------------------------

Part II--Policy Guidance and Scope of Hearing

A. Overview and Background

The Regional Dialogue process began in April 2002 when a group of

BPA's Pacific Northwest electric utility customers submitted a joint

customer proposal to BPA that addressed both near-term and long-term

contract and rate issues. Since then, BPA, the Northwest Power and

Conservation Council (Council), customers, and other interested parties

have worked on these near- and long-term issues. Considering the depth

and complexity of many of these issues, BPA determined that it would

address the issues in two phases. The first phase of the Regional

Dialogue, referred to as the Near-Term Policy, addressed issues that

had to be resolved in order to replace power rates that expired in

September 2006. See Bonneville Power Administration's Policy for Power

Supply Role for Fiscal Years 2007-2011 (February 2005). The issues in

the second phase were addressed in BPA's Long-Term Regional Dialogue

Final Policy and Record of Decision, which were published on July 19,

2007. The Long-Term Regional Dialogue Final Policy is expected to be

implemented through new power sales contracts and the TRM, which will

be established in this rate case.

This proposed TRM provides for a two-tiered PF rate design

applicable to firm requirements power service for public utility

customers that sign a Regional Dialogue Contract that provides for

tiered rates. The TRM establishes a predictable and durable means by

which to calculate BPA's PF tiered rate, beginning in FY 2012 when

power deliveries commence. Tiered rate design differentiates between

the costs of service associated with Tier 1 System Resources and the

cost associated with additional amounts of power needed to serve any

remaining portion of public utility customers' Net Requirement (Tier

2). Rate Period High Water Marks (RHWM), determined according to this

TRM, are the basis for determining how much of each customer's Net

Requirement purchase from BPA is charged Tier 1 rates and how much may

be charged Tier 2 rates. This TRM specifies how rates will be developed

that ensure to the maximum extent possible that customers purchasing at

Tier 1 rates do not pay any of the costs of serving other public

utility customers' above RHWH load. Each customer may purchase up to

its RHWM, limited by its Net Requirement, at Tier 1 rates. To meet its

above-RHWM load, a customer may purchase Federal power, procure non-

Federal power or a combination of the two. To the extent a customer

purchases Federal power for its above-RHWM load, a PF Tier 2 rate(s)

will be applied to this portion of their Federal power service.

B. Scope of the TRM-12 Proceeding

This section provides guidance to the Hearing Officer as to those

matters that are within the scope of the rate case, and those that are

outside the scope.

1. Regional Dialogue Policy and Contracts

The design and scope of the power products and issues related to

the terms and conditions of the Regional Dialogue contract are not

determined in rate cases nor are they established by the TRM. Pursuant

to section 1010.3(f) of BPA Hearing Procedures, the Administrator

hereby directs the Hearing Officer to exclude from the record any

materials attempted to be submitted or arguments attempted to be made

in the proceeding that seek to address the design and scope of the

power products and terms and conditions of the Regional Dialogue

contracts.

2. DSI Service

The decision regarding whether BPA will provide service and/or

benefits to its Direct Service Industry (DSI) customers beginning in FY

2012 will be made in a supplemental process as outlined in the Long-

Term Regional Dialogue Final Policy. It should be noted that while the

decision on DSI service and the manner, if any of such service will be

determined in a separate process, the allocation of any cost associated

with any DSI service under the TRM is a proper issue in this

proceeding. Pursuant to section 1010.3(f) of the BPA Hearing

Procedures, the Administrator directs the Hearing Officer to exclude

from the record any materials attempted to be submitted or arguments

attempted to be made in the proceeding that seek to in any way address

the decision to serve the DSIs and the nature and manner of such

service, except as any such material is relevant to the issue of the

appropriate allocation of any cost associated with any DSI service

under the TRM.

C. The National Environmental Policy Act

1. Potential Environmental Impacts

As discussed in this section, potential environmental impacts of

BPA's proposed actions are assessed through appropriate analysis and

documentation under the NEPA. The NEPA process is conducted separately

from BPA's formal rate proceedings. Therefore, pursuant to

[[Page 24963]]

section 1010.3(f) of the BPA Hearing Procedures, the Administrator

directs the Hearing Officer to exclude from the record all evidence and

argument that seek in any way to address the potential environmental

impacts of the proposed TRM.

2. The National Environmental Policy Act

BPA is in the process of assessing the potential environmental

effects that could result from implementation of its proposed TRM,

consistent with the National Environmental Policy Act (NEPA). Because

this proposal implicates BPA's ongoing business practices, BPA is

reviewing the proposal in light of BPA's Business Plan Environmental

Impact Statement (Business Plan EIS), completed in June 1995 (DOE/EIS-

0183), as refreshed April 2007. This EIS evaluates environmental

impacts potentially resulting from a range of business plan

alternatives that can be varied by applying policy modules, including

modules specifically designed for varying tiered rate methodologies.

Any combination of alternative policy modules should allow BPA to

balance its costs and revenues.

In August 1995, the BPA Administrator issued a Record of Decision

(Business Plan ROD) that adopted the Market-Driven Alternative from the

Business Plan EIS. This alternative was selected because, among other

reasons, it allows BPA to: (1) Recover costs through rates; (2)

competitively market BPA's products and services; (3) develop rates

that meet customer needs for clarity and simplicity; (4) continue to

meet BPA's legal mandates; and (5) avoid adverse environmental impacts.

In April 2007, BPA completed and issued a Supplement Analysis to

the Business Plan EIS. The Supplement Analysis found that the Business

Plan EIS's relationship-based and policy-level analysis of potential

environmental impacts from BPA's business practices remains valid, and

that BPA's current business practices are still consistent with BPA's

Market-Driven approach. The Business Plan EIS and ROD thus continue to

provide a sound basis for making determinations under NEPA concerning

BPA's business-related decisions.

Because the proposed TRM likely would assist BPA in accomplishing

the goals identified in the Business Plan ROD, the proposal appears

consistent with these aspects of the Market-Driven Alternative. In

addition, the proposed TRM is similar to the types of tiered rate

constructs identified and considered in the Business Plan EIS; thus,

implementation of this proposal would not be expected to result in

significantly different environmental impacts from those examined in

the Business Plan EIS. Therefore, BPA expects that the proposed TRM

likely will fall within the scope of the Market-Driven Alternative that

was evaluated in the Business Plan EIS and adopted in the Business Plan

ROD.

As part of the Administrator's ROD that will be prepared for the

proposed TRM, BPA may tier its decision under NEPA to the Business Plan

ROD. However, depending upon the ongoing environmental review, BPA may,

instead, issue another appropriate NEPA document. During the public

review and comment period for the TRM, persons interested in submitting

comments regarding its potential environmental effects may do so by

submitting comments to Katherine Pierce, NEPA Compliance Officer, KEC-

4, Bonneville Power Administration, 905 NE 11th Avenue, Portland, OR

97232. Any such comments received by July 10, 2008, will be considered

by BPA's NEPA compliance staff in the NEPA process that will be

conducted for the proposed TRM.

Part III--Public Participation

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

BPA distinguishes between ``participants in'' and ``parties to''

the section 7(i) hearing process. Apart from the formal hearing

process, BPA will accept comments, views, opinions, and information

from ``participants,'' who are defined in the BPA Hearing Procedures as

persons who may submit comments without being subject to the duties of,

or having the privileges of, parties. Participants' written and oral

comments will be made a part of the official record and considered by

the Administrator when making his decision. Participants are not

entitled to participate in the prehearing conference; may not cross-

examine parties' witnesses, seek discovery, or serve or be served with

documents; and are not subject to the same procedural requirements as

parties.

The views of participants are important to BPA. Written comments by

participants will be included in the record if they are received by 5

p.m., PDT, on July 10, 2008. Written views, supporting information,

questions, and arguments should be submitted to BPA Public Affairs at

the address listed in the Addresses section.

Persons wishing to become a party to BPA's rate proceeding must

notify BPA in writing and file a Petition to Intervene with the Hearing

Officer. Petitioners may designate no more than two representatives

upon whom service of documents will be made. Petitions to Intervene

must state the name and address of the person requesting party status

and the person's interest in the hearing. Petitions to Intervene as

parties in the rate proceeding are due to the Hearing Officer by 5

p.m., PDT, on May 7, 2008, and should be directed as stated in

Addresses section above.

Petitioners must explain their interests in sufficient detail to

permit the Hearing Officer to determine whether they have a relevant

interest in the proceeding. Pursuant to section 1010.1(d) of BPA

Hearing Procedures, BPA waives the requirement in section 1010.4(d)

that an opposition to an intervention petition must be filed and served

24 hours before the prehearing conference. Any opposition to an

intervention petition may instead be made at the prehearing conference.

Any party, including BPA, may oppose a petition for intervention.

Persons who have been denied party status in any past BPA rate

proceeding shall continue to be denied party status unless they

establish a significant change of circumstances. All timely

applications will be ruled on by the Hearing Officer. Late

interventions are strongly disfavored.

B. Developing the Record

The record will comprise, among other things, verbal and written

comments made by participants, including the transcripts of all

hearings, any written materials submitted by the parties, documents

developed by BPA staff, and other materials accepted into the record by

the Hearing Officer. Written comments by participants will be included

in the record if they are received by 5 p.m., PDT, on July 10, 2008.

The Hearing Officer will then review the record, supplement it if

necessary, and will certify the record to the Administrator for

decision.

The Administrator will adopt the final TRM based on the entire

record, which includes the record certified by the Hearing Officer, as

described above. The basis for the final TRM first will be expressed in

the Administrator's Draft ROD. Parties will have an opportunity to

respond to the Draft ROD as provided in the BPA Hearing Procedures. The

Administrator will serve copies of the Final ROD on all parties. The

ROD will also be publicly available at http://www.bpa.gov/corporate/ratecase.

BPA must continue to meet with customers in the ordinary course of

business during the rate case. To

[[Page 24964]]

comport with the rate case procedural rule prohibiting ex parte

communications, BPA will provide the prescribed notice of meetings

involving rate case issues in order to permit the opportunity for

participation by all rate case parties. These meetings may be held on

very short notice. Consequently, parties should be prepared to devote

the necessary resources to participate fully in every aspect of the

rate proceeding and attend meetings any day during the course of the

rate case.

Part IV--The Tiered Rate Methodology

The TRM establishes a predictable and durable means by which to

tier and calculate BPA's Priority Firm (PF) power rate. Specific

determinations of rate levels will be made in each general rate case in

a manner consistent with the TRM in the respective section 7(i)

proceedings applicable during the term of this TRM. Tiered PF rates

will be implemented beginning in FY 2012 when power deliveries under

new contracts commence. The TRM provides for a two-tiered PF rate

design applicable to requirements firm power service for those

customers that participate in the contracts that provide for tiered

rate service. Tiered rate design differentiates between the costs of

service associated with the existing Federal system (Tier 1) and the

cost associated with additional amounts of power needed to serve the

remaining portion of customers' net requirements (Tier 2). This TRM

specifies how rates will be developed that assure to the extent

possible that customers will be able to purchase Tier 1 power that does

not include the costs of serving other customers' load growth.

The TRM addresses: (1) How to determine a customer's eligibility to

purchase power at Tier 1 rates; (2) how to determine the amount of

power to be charged at Tier 1 rates; (3) how costs will be allocated to

the PF Tier 1 and Tier 2 rate pools; (4) how rates for Tier 1 and Tier

2 sales will be designed; and (5) how rates for resource support

services will be designed.

The cost allocation and rate design methods will be implemented in

each BPA power rate case during the term of the Regional Dialogue

contracts, except under limited circumstances. Power rates will be

calculated on a two-year cycle under the TRM.

Rate Period High Water Marks (RHWM), determined according to this

TRM, are the basis for separating which portion of each customer's net

requirements purchase from BPA is charged Tier 1 rates and which is

charged Tier 2 rates. Each customer may purchase up to its RHWM,

limited by its net requirement, at Tier 1 rates. To meet its above-RHWM

load, a customer may purchase Federal power, procure non-Federal power

or both. To the extent a customer purchases Federal power to meet its

above RHWH load, a PF Tier 2 rate will be applied to the Federal power

service.

BPA will limit the sum of all RHWMs to the planned firm power

output of the existing Federal system as it is currently defined, plus

a limited amount of augmentation.

For purposes of the TRM, BPA will calculate the projected amounts

of Federal system resource output, contract purchases, and contract

obligations necessary for developing tiered rates for each rate period.

The projected output of resources assigned to each rate tier will be

used in the determination of RHWMs, which will be incorporated in the

ratemaking process.

In each applicable rate proposal, BPA will allocate all of its

costs into three cost pools for determining Tier 1 rates and a number

of Tier 2 cost pools corresponding to the Tier 2 rate alternatives that

customers have selected.

In each rate case, BPA will define risk mitigation mechanisms and

set rates to support BPA's then-current Agency financial risk

standard(s). The Agency financial risk standard(s) is (are) set in

BPA's 10-Year Financial Plan, or its successor, subject to any required

review in a 7(i) rate proceeding.

The proposed TRM includes a rate design for Tier 1 rates that

includes three components: Customer charges, demand rates and load

shaping rates. However, there are significant changes in the billing

determinants to which these rates apply from BPA's current rate

structure. There will be three customer charges, only two of which will

be applicable to any particular product selected by the customer. The

Composite Customer Charge and the Non-Slice Customer Charge will be

applicable to purchasers of the Load Following and Block products,

including the block portion of the Slice/Block product. The Composite

Customer Charge and the Slice Customer Charge will be applicable to

purchasers of the Slice portion of the Slice/Block product. The Demand

Charge will apply to Load Following and Block with Shaping Capacity

purchasers and will be charged to a portion of each customer's maximum

hourly load in each month. The Load Shaping Charge will apply to Load

Following and Block purchasers and will be charged to a portion of each

customer's energy load during each diurnal period of each month.

BPA's proposed TRM is available for viewing and downloading on

BPA's Web site at http://www.bpa.gov/corporate/ratecase. Copies will

also be available for viewing at BPA's Public Information Center, BPA

Headquarters Building, 1st Floor, 905 NE 11th Avenue, Portland, Oregon.

Issued this 24th day of April, 2008.

Stephen J. Wright,

Administrator and Chief Executive Officer.

[FR Doc. E8-9572 Filed 4-30-08; 8:45 am]

Editorial Note: FR Doc. E8-9572 was originally published at

page 24059 in the issue of May 1, 2008. That document was

inadvertently published prior to the requested publication date, as

stated in an Office of the Federal Register correction notice

published at 73 FR 24496, May 2, 2008. FR Doc. E8-9572 is being

republished in its entirety in this issue of the Federal Register.

[FR Doc. E8-9953 Filed 5-5-08; 8:45 am]

BILLING CODE 1505-02-P