Grid West Developmental and Operational Bylaws Review

Bonneville Power Administration

**Q&A July 12, 2004**

# 1. What am I commenting on and when does the comment period open and close?

# BPA is soliciting comments on the proposed Developmental and Operational Grid West Bylaws. We ask that you focus your comments on the following key points:

-   Have the draft bylaws addressed the governance concerns expressed
    earlier?

-   Do the draft bylaws appropriately balance regional accountability
    with independence and workability?

-   Are there other matters BPA should consider in making this decision?

The full set of bylaws can be found at:

# Developmental Bylaws

> http://www.rtowest.com/Doc/DevBylaws_Clean_July72004.pdf

##### Operational Bylaws

> http://www.rtowest.com/Doc/OpBylawsClean_July72004.pdf

The comment period opens July 14, 2004 and closes September 3, 2004.

# 2. How do I submit comments?

The preferred way is to submit your comment on-line at:
[www.bpa.gov/comment](http://www.bpa.gov/comment). At this site, you
will also find hotlinks to the
[developmental](http://www.rtowest.com/Doc/DevBylaws_Clean_July72004.pdf)
and
[operational](http://www.rtowest.com/Doc/OpBylawsClean_July72004.pdf)
Bylaws as well as a PowerPoint presentation giving an overview of the
bylaws.

You may also mail your comments to:

> Bonneville Power Administration
>
> Attn: Communications - DM-7
>
> P.O. Box 14428
>
> Portland, OR 97293-4428

Or fax comments to 503-230-3285

Should you have any questions about the process, please contact your
Account Executive or Constituent Account Executive. Or you may contact
Tara Exe, Project Coordinator at 503-230-4169.

# 3. Why is BPA interested in developing Grid West, including an independent board?

BPA is interested in developing Grid West because there are problems and
opportunities faced by the NW transmission system that are not being
addressed adequately and could effectively be resolved through action of
a region--wide independent entity. A regional stakeholder group
identified the following problems and opportunities and developed a
Regional Proposal to deal with them:

-   System-Wide Planning and Expansion

-   Better Use of Existing Transmission System

-   Maintaining and Enhancing Reliability

-   Better Use of Existing Generation

-   More Efficient Provision of Ancillary Services

BPA believes an independent entity is needed to solve many of the
problems identified because past attempts in other forums to address
these problems on a multilateral basis have met with only limited-to-no
success. For example, the region has not produced an effective mechanism
to create a single regional transmission plan and BPA is the only entity
in the region engaged in substantial transmission building activity.
While we support ongoing work on multilateral solutions to try to solve
some of the identified problems in the region, we feel the Grid West
stakeholder process needs to further develop the Regional Proposal to
determine whether it can really provide significant benefits to the
region at low cost.

BPA also believes an independent board is necessary to ensure decisions
are made based on synergies visible from a region-wide perspective and
not influenced by market participants. "Independent" means that the
corporation's directors may not own a financial interest in a market
participant or member of the non-profit corporation. It does not mean
lack of regional accountability.

4\. There doesn't appear to be any RTO/ISO success stories (costs out of
control, efficiencies promised didn't materialize) so why does BPA think
Grid West will be different?

BPA is aware of the problems other RTOs/ISOs have faced and has worked
with stakeholders to create a proposal that takes a phased-in approach
to implementation that allows time to test each stage before evolving
further. BPA will test each stage of development with simple criteria -
each stage must be workable for BPA ratepayers, increase regional
benefits, and be sustainable over time before BPA will support it.

BPA is engaged in the work of the RRG's Transmission Service Liaison
Group which has hired a firm to more fully develop the Beginning State
of the proposal and, amongst other things, look at the costs associated
with other RTO/ISOs and what the drivers of those costs are. The hope is
to learn from the costly lessons of others so safeguards can be built
into the Grid West Proposal as it develops.

BPA has also worked with a sub-group of the RRG to develop bylaws for
the Independent Entity to ensure safeguards are workable, and that the
entity will consider the best interests of the region in proposing
changes, including avoidance of significant, unmitigated cost shifts,
protection of existing contracts and linking changes to improvements
over existing practices.

5\. How does review of the draft Developmental and Operational Bylaws
fit into the overall RRG Decision Point timeline?

It is now anticipated that Decision Point 1 (whether to accept the
Developmental and Operational Bylaws) will occur around the middle of
October 2004 and, if approved, Decision Point 2 (whether to elect the
developmental board) would likely occur in spring 2005. It is important
to note that an affirmative decision to move forward at Decision Point 1
**will not commit BPA to anything other than to continue its
participation in the discussions and work groups to further develop the
Regional Proposal.** It is also not a decision to activate seating the
independent developmental board. It only establishes Grid West primarily
for the purpose of establishing a membership roster and enables further
technical development of the Regional Proposal to occur. The
Developmental Stage Decision Point Diagram is attached for reference.

6\. What was the approach the RRG Bylaws Work Group took while
developing the Developmental and Operational Bylaws?

1.  

The RRG Bylaws Work Group set out to develop bylaws that incorporated
the Regional Proposal's new governance and phased implementation
approach. In doing so, they tried to protect the region from the dangers
of an independent entity not being responsive to the region's needs. The
bylaws now contain various mechanisms addressing cost control, enhanced
attention to regional interests and limitations on the corporation.

# 7. Why are there two sets of proposed bylaws?

A separate set of bylaws was determined by the RRG to be appropriate for
the Grid West Developmental Phase so as to limit both the life and
authority of the initial corporation. The Developmental Bylaws prohibit
the corporation from offering transmission services and establish
deadlines for completing its work. Failure to meet these deadlines
requires a membership vote on dissolution of the corporation. If the
decision is made to move to the Operational Stage, the Operational
Bylaws will go into effect and govern the corporation as a transmission
provider.

# 8. What is the status of the Developmental Bylaws?

The governance framework for the Developmental Stage is well developed
but there are some key issues open with decisions deferred until the end
of September:

-   Major Transmitting Utilities (MTU) and Transmission Dependent
    Utilities (TDU) Member Class definitions, thresholds and voting
    rights

-   Trigger for adoption of the Operational Bylaws, i.e., should there
    be a member vote and, if so, should it be advisory or binding?

-   Naming the Membership Admission Committee and Membership Dispute
    Resolution Committee

# 9. What is the status of the Operational Bylaws?

The governance framework for the Operational Stage is well developed but
there are some key issues open with decisions deferred until the end of
September:

-   MTU and TDU Member Class definitions, thresholds and voting rights

-   Some limited work will continue to evaluate cost control issues,
    evaluate excessive process concerns and clarify the Special Issues
    List descriptions.

**10. Is this public involvement/comment period strictly a BPA process
(vs. Filing Utilities or RRG process)?**

Yes. BPA felt it was important to consult with others in the region
before it reaches its Decision Point 1 conclusion. We are interested in
your views about whether the proposed governance structure is workable,
appropriately phased and strikes an appropriate balance between
maintaining board flexibility and regional accountability.