**ATTACHMENT**

**Slice Methodology**

**(for Ferc approval for 10 years)**

METHODOLOGY TO CALCULATE SLICE RATE

**AND SLICE TRUE-UP ADJUSTMENT CHARGE**

# PURPOSE

The Slice Methodology is designed as a means for providing a consistent
method of calculating the rate for Slice and conducting the annual
true-up for 10 years of the contract. Because there is some uncertainty
regarding the calculation of the Slice rate in a rate period subsequent
to the FY 2002-2006 rate period, the Slice Methodology is intended to
bring some stability to the calculation of the rate. The Slice
Methodology is not intended to predetermine the actual rate a Slice
purchaser will pay in any rate period; rather, the Slice Methodology
proposes a set of cost categories that will make up the Slice Revenue
Requirement and the manner in which such costs may be trued up annually.

# TERM OF THE METHODOLOGY

After FERC approval, this methodology shall take effect on October 1,
2001, and shall terminate on the earlier of midnight September 30, 2011,
or a date established by FERC.

# DEFINITIONS

**Actual Slice Revenue Requirement** means the use of audited actual
financial data in the cost categories comprising the Slice Revenue
Requirement.

**Capital Expenses** means depreciation expense (recovery of the
investment) and net interest expense (recovery of financing costs).
Depreciation standards (*e.g.,* duration of useful life) used for the
recovery of capital investments under the Slice contract will be the
same as those used by BPA to set power rates generally, and will not
change from those used in the development of Table 1, Slice Product
Costing and True-Up Table, unless BPA adopts a new depreciation study.

**Contracted Loads** for each five-year rate period shall be the average
of five Fiscal Year (FY) loads contracted for in annual aMW for the
Public Agency customers, DSI customers to be served with FBS resources,
IOU customers to be served with FBS resources, and the Preexisting
Multiyear Contracts that are known to BPA.

**Forecasted Loads** for each five-year rate period shall be the average
of five forecasted FY loads in annual aMW that was included in the
applicable Final Power Rate Proposal for the Public Agency loads, DSI
loads to be served with FBS resources, IOU loads served with FBS
resources, and Preexisting Multiyear Contracts.

**Initial Implementation Expenses** means the expenses of implementing
the Slice product for which BPA was reimbursed, prior to October 1,
2001, pursuant to the Master Agreement to Enable the Technical
Development of a Slice of System Power Sale (Master Agreement).

**Minimum Required Net Revenues** means the amount by which BPA's
payments to the U.S. Treasury for generation amortization and irrigation
assistance exceed the total non-cash expenses in the Actual Slice
Revenue Requirement.

**Preexisting Multiyear Contracts** means BPA's contracts for power
sales, which have been executed as of June 21, 1999, with a term length
that extends beyond the first year of the FY 2002-2006 rate period.

**Slice Revenue Requirement** means the operating and Capital Expenses
and credits included in the Slice Rate which are established in the
generation Revenue Requirement Study for the applicable rate periods and
are subject to the criteria for inclusion of new costs or credits. The
costs and credit categories included in the Slice Revenue Requirement
are listed in Table 1, Slice Product Costing and True-Up Table.

**Slice System Resources** means the FBS resources identified in the
Slice contract.

**System Obligations** means those operational or contractual
obligations of the FBS that are identified in the Slice contract.

# METHODOLOGY

## Slice Rate Calculation

> The monthly rate for the Slice product will be calculated in the
> following manner:
>
> Monthly rate for the Slice product per 1 percent of the Slice System =
> (Annual Average Slice Revenue Requirement / 12) /100 where the Slice
> Revenue Requirement is calculated as described in section B below.
>
> For the FY 2002-2006 rate period, the Slice Revenue Requirement will
> contain the costs and credits displayed in Table 1, Slice Product
> Costing and True-Up Table.
>
> For the FY 2007-2011 rate period, the Slice Revenue Requirement will
> contain the costs and credits estimated in the FY 2007 rate case for
> the cost and credit categories identified in Table 1, Slice Product
> Costing and True-Up Table, and any other currently unidentified cost
> or credit, as described in section B. 3. below.

## Slice Revenue Requirement

### Uniform Application Throughout the Rate Period

> The Slice Revenue Requirement is a five-year annual average amount for
> the applicable rate period. The Slice Rate will remain constant during
> the applicable rate period.

### Cost and Credit Categories Used to Set the Slice Revenue Requirement

> The cost and credit categories used to set the Slice Revenue
> Requirement and the Actual Slice Revenue Requirement shall be those
> defined in the generation Revenue Requirement Study for the 2002 Final
> Power Rate Proposal and listed in Table 1, Slice Product Costing and
> True-Up Table.
>
> For FY 2002 only, the total of all Initial Implementation Expenses
> that BPA received under the Master Agreements shall be included in the
> Actual Slice Revenue Requirement.

### Inclusion of New Costs or Credits

> PBL costs or credits not otherwise specifically dealt with in the
> Slice Revenue Requirement, or excluded therefrom as specified in
> section B. 4. below, may be included in both the Slice Revenue
> Requirement and the Actual Slice Revenue Requirement, if and to the
> extent that:

#### Such PBL costs or credits could be properly includable in PBL's wholesale power rates; and either {#such-pbl-costs-or-credits-could-be-properly-includable-in-pbls-wholesale-power-rates-and-either .unnumbered}

a)  Such PBL costs or credits are: (1) incurred by PBL to provide
    service to customers other than Slice purchasers; and (2) incurred
    to provide service to or otherwise benefit Slice purchasers;

> OR

b)  Such PBL costs or credits are not incurred to provide service to
    customers other than Slice purchasers, nor to provide service to or
    otherwise benefit Slice purchasers.

### Costs Excluded from the Slice Revenue Requirement

> Excluded costs include, but are not limited to the following:

-   All transmission costs (other than those associated with the
    transmission of System Obligations and GTAs);

-   All power purchase costs (with the exception of net Inventory
    Solution costs);

-   All PNRR and hedging costs, with the exception of those hedging
    costs incurred to implement the forecasted Inventory Solution; and

-   All costs not permitted to be included in the Slice Revenue
    Requirement as specified by section B. 3. above.

### Credits

#### Systemwide Credits

> Systemwide credits are any monetary credits that PBL forecasts to
> receive that are associated with the costs identified in the Slice
> Revenue Requirement. Systemwide credits shall be included in both the
> Slice Revenue Requirement and the Actual Slice Revenue Requirement as
> a credit. The credits include, but are not limited to:

-   Credits from the U.S. Treasury for PBL's settlement payment to the
    Colville Tribe;

-   Credits from the U.S. Treasury for section 4(h)(10)(c) of the
    Northwest Power Act;

-   Credits from the U.S. Treasury for the FCCF; and

-   Revenues BPA receives for meeting System Obligations (including
    revenues received for Congestion Management or PNCA transactions).

#### Transmission Surcharge

> As provided for under separate rate and contract, BPA's TBL may impose
> a transmission surcharge on the Slice purchaser's use of the BPA
> transmission system. Any revenues received by the TBL pursuant to such
> surcharge will be credited to PBL's total Actual Slice Revenue
> Requirement, and will be reflected in the Slice purchaser's True-Up
> Adjustment. Repayment of such funds by the PBL to TBL, if any, shall
> be included in the Actual Slice Revenue Requirement.

#### Purchaser-Specific Credits and Other Contract Related Charges

> All Slice purchaser-specific credits and other Slice
> purchaser-specific charges resulting from the implementation of the
> Slice contract shall be applied as an adjustment to the Slice True-Up
> Adjustment Charge for each specific Slice purchaser. The adjustment
> for credits and charges associated with the implementation of the
> Slice contract will be defined in the Slice contract.

### Inapplicability of Cost Recovery Adjustment Clause and the Dividend Distribution Clause

> Neither the Slice Rate nor the Slice True-up Adjustment Charge paid by
> Slice purchasers will be subject to the CRAC or the DDC identified in
> the GRSPs or any successor thereto.

### Net Cost of the Inventory Solution

> BPA has forecasted firm energy purchases that supplement the
> capability of FBS Resources (Inventory Solution) to meet the
> forecasted loads. The cost of the Inventory Solution shall be included
> in both the Slice Revenue Requirement and the Actual Slice Revenue
> Requirement on a net cost basis. The forecasted net cost of the
> Inventory Solution (NCIS) shall be calculated as: (1) the total
> expenses for the Inventory Solution; less (2) the total revenues for
> the sale of such power; both as projected by BPA. Since Slice
> purchasers bear the responsibility for their proportionate share of
> any loss of FBS resources or capability thereof, the Inventory
> Solution will not include such replacements. The forecasted net cost
> of the Inventory Solution to be included in the Slice Revenue
> Requirement for the FY 2002-2006 rate period is identified in Table 1.
> An additional adjustment is included in the Actual Slice Revenue
> Requirement that is based on the change in the magnitude of the
> Inventory Solution expressed in MW, the calculation of which is
> described in section C. 2. below.

## Slice True-Up Adjustment Charge

> The Slice True-Up Adjustment Charge is a monthly charge applied to the
> Slice product that is expressed in terms of dollars per percent Slice
> selected. The Slice True-Up Adjustment Charge consists of two
> components: (1) an Inventory Solution True-Up Adjustment that is
> calculated once for each rate period and is applied as a constant
> adjustment in each month of the rate period; and (2) the Annual Slice
> True-Up Adjustment that is calculated once each fiscal year and is
> applied to specific months of the fiscal year. The Slice True-Up
> Adjustment Charge for each month shall be calculated in the following
> manner:
>
> STUAC~M~ = (ISTU~R~ + ASTU~M~)
>
> Where:
>
> STUAC~M~ is the Slice True-Up Adjustment Charge for month M of the
> rate period.
>
> ISTU~R~ is the Inventory Solution True-Up Adjustment for rate period
> R.
>
> ASTU~M~ is the portion of the Annual Slice True-Up Adjustment
> applicable for month M.

### Annual Slice True-Up Adjustment

> The Annual Slice True-Up Adjustment shall be calculated for each
> fiscal year as soon as independently audited actual financial data are
> available. As necessary, the Actual Slice Revenue Requirement shall
> include a Minimum Required Net Revenues component to ensure coverage
> of annual cash requirements. The Annual Slice True-Up Adjustment shall
> be calculated to be the annual Slice Revenue Requirement for the FY
> subtracted from the Actual Slice Revenue Requirement for such FY as
> shown in Attachment 1. The Annual Slice True-Up Adjustment shall be
> applied either as a one month credit (if the adjustment is negative)
> or as a three‑month charge (if the adjustment is positive, and spread
> equally across the three months) following the month the Annual Slice
> True‑Up Adjustment is calculated.

### Inventory Solution True-Up Adjustment

> The Inventory Solution True-Up Adjustment (ISTU) is calculated once
> during each rate period and is calculated in the following manner:
>
> ISTU~R~ = (CL~R~ - FL~R~)/ ISMW~R~ \* NCIS~R~/12
>
> Where:
>
> ISTU~R~ is the Inventory Solution True-Up Adjustment for the rate
> period R.
>
> CL~R~ is the annual average Contracted Loads for the rate period R.
>
> FL~R~ is the annual average Forecasted Loads for the rate period R.
>
> (CL~R~-FL~R~) cannot be a value less than zero.
>
> ISMW~R~ is the annual average MW associated with the Inventory
> Solution for the rate period R.
>
> NCIS~R~ is the annual average net cost of the Inventory Solution for
> the rate period R.

**TABLE 1**

> Table 1

![](media/image1.png){width="6.386805555555555in"
height="8.133333333333333in"}

> Table 1 (continued)
>
> ![](media/image2.png){width="6.185416666666667in"
> height="6.081944444444445in"}