Slice of the System Product

Product Description

October 8, 1999

**Table of Contents**

I. Introduction [1](#introduction)

II\. Nature of Slice Product [1](#nature-of-slice-product)

A. General Description [1](#general-description)

B. Slice Product as a Requirements Product
[1](#slice-product-as-a-requirements-product)

III\. Term [3](#term)

A. Duration [3](#duration)

B. No Off-Ramps [3](#no-off-ramps)

C. Commencement Date [3](#commencement-date)

IV\. Eligibility [3](#eligibility)

V. Slice Entitlement [3](#slice-entitlement)

A. Composition of the Slice Entitlement
[3](#composition-of-the-slice-entitlement)

B. Amount of Entitlement [4](#amount-of-entitlement)

VI\. Slice Percentage [4](#slice-percentage)

A. Determination of Maximum Percentage
[4](#determination-of-maximum-percentage)

B. Slice Percentage [5](#slice-percentage-1)

C. Process to Select Slice Percentage
[6](#process-to-select-slice-percentage)

VII\. Slice System Capability [6](#slice-system-capability)

A. Slice System Resources [6](#slice-system-resources)

B. Capability of "Slice System" [6](#capability-of-slice-system)

C. System Obligations [6](#system-obligations)

D. Upgrades, Adjustments, Acquisitions, and Replacements
[7](#upgrades-adjustments-acquisitions-and-replacements)

\(1\) Physical Upgrades or Adjustments
[8](#physical-upgrades-or-adjustments)

\(2\) Public Purpose Resource Acquisitions
[8](#public-purpose-resource-acquisitions)

\(3\) Resource Acquisition by BPA [8](#resource-acquisition-by-bpa)

\(4\) Federal Base System Replacement Resources
[8](#federal-base-system-replacement-resources)

\(5\) Protection for "Dry Hole" Risk [9](#protection-for-dry-hole-risk)

E. Economic Displacement of WNP2 [9](#economic-displacement-of-wnp2)

F. Declared Resources [9](#declared-resources)

VIII\. Payments [9](#payments)

A. Components of the Slice Revenue Requirement
[10](#components-of-the-slice-revenue-requirement)

\(1\) Power Business Line's (PBL) Revenue Requirement
[10](#power-business-lines-pbl-revenue-requirement)

\(2\) Depreciation of Costs within the Term of the Slice Contract
[10](#depreciation-of-costs-within-the-term-of-the-slice-contract)

\(3\) Costs Depreciated Beyond the Term of the Slice Contract
[10](#costs-depreciated-beyond-the-term-of-the-slice-contract)

\(4\) Previously Unidentified Costs [10](#previously-unidentified-costs)

\(5\) Inventory Solution [11](#inventory-solution)

\(a\) General [11](#general)

\(b\) Calculation of the Net Cost of the Inventory Solution on a
Projected Basis
[11](#calculation-of-the-net-cost-of-the-inventory-solution-on-a-projected-basis)

\(c\) Inclusion of Net Cost of Inventory Solution in the Slice Revenue
Requirement
[11](#inclusion-of-net-cost-of-inventory-solution-in-the-slice-revenue-requirement)

1\) First Rate Case five-year Period (2002 through 2006)
[11](#first-rate-case-five-year-period-2002-through-2006)

2\) Subsequent Rate-Case Periods [12](#subsequent-rate-case-periods)

\(6\) Physical Upgrades or Adjustments
[12](#physical-upgrades-or-adjustments-1)

\(7\) Public Purpose Resource Acquisitions
[12](#public-purpose-resource-acquisitions-1)

\(8\) Federal Base System Resource Replacements Included in the "Slice
System Resources" upon mutual agreement between BPA and a Participant
[12](#federal-base-system-resource-replacements-included-in-the-slice-system-resources-upon-mutual-agreement-between-bpa-and-a-participant)

\(9\) Credits [12](#credits)

\(10\) Inapplicability of Cost Recovery Adjustment Clause (CRAC)
[13](#inapplicability-of-cost-recovery-adjustment-clause-crac)

B. Additional Payment Obligations [13](#additional-payment-obligations)

\(1\) Slice Administrative Expenses [13](#slice-administrative-expenses)

\(2\) Unauthorized Increased Charge [13](#unauthorized-increased-charge)

\(3\) Transmission Costs [13](#transmission-costs)

C. Payment Obligation [14](#payment-obligation)

D. Payment Schedule [14](#payment-schedule)

\(1\) Periodic Payments [14](#periodic-payments)

\(2\) True-Up for Actual Expenses [14](#true-up-for-actual-expenses)

IX\. Deliveries of Power [14](#deliveries-of-power)

A. Participants\' Acceptance of the Operating Decisions of the Federal
Government
[14](#participants-acceptance-of-the-operating-decisions-of-the-federal-government)

B. Scheduling [15](#scheduling)

X. Load Loss Provisions [15](#load-loss-provisions)

A. Need for Provisions [15](#need-for-provisions)

B. Procedures [16](#procedures)

\(1\) Declaration of the Participant's Net Requirement
[16](#declaration-of-the-participants-net-requirement)

\(2\) Calculation of Participant's Critical Slice Entitlement
[16](#calculation-of-participants-critical-slice-entitlement)

\(3\) Comparison of Net Requirement to Critical Slice
[16](#comparison-of-net-requirement-to-critical-slice)

\(a\) Convert to Surplus [16](#convert-to-surplus)

\(b\) Withheld and Sold [17](#withheld-and-sold)

XI\. General Contract Provisions [17](#general-contract-provisions)

A. Uniform Terms and Conditions [17](#uniform-terms-and-conditions)

B. Contract Implementation Group [17](#contract-implementation-group)

\(1\) General [17](#general-1)

\(2\) Voting Procedures [18](#voting-procedures)

C. Renewal Provision [18](#renewal-provision)

D. Assignment Provisions [18](#assignment-provisions)

E. Conversion [18](#conversion)

XII\. Dispute Resolution [19](#dispute-resolution)

A. Slice Dispute Resolution Process
[19](#slice-dispute-resolution-process)

B. Federal Operational Decisions Not Subject to Arbitration
[19](#federal-operational-decisions-not-subject-to-arbitration)

C. Scope of Dispute Resolution [20](#scope-of-dispute-resolution)

XIII\. Accounting [20](#accounting)

A. Development and Testing of Slice System Storage Accounting (SSA)
Algorithm
[20](#development-and-testing-of-slice-system-storage-accounting-ssa-algorithm)

B. Maintenance of Slice System Storage Account Activity
[21](#maintenance-of-slice-system-storage-account-activity)

\(1\) Account Balance at the Start and Finish of the Contract
[21](#account-balance-at-the-start-and-finish-of-the-contract)

\(2\) Measurements for Account Balance
[21](#measurements-for-account-balance)

\(3\) Maintenance of Slice System Storage Account (SSA) Within Maximum
and Minimum Storage Limit
[21](#maintenance-of-slice-system-storage-account-ssa-within-maximum-and-minimum-storage-limit)

\(4\) Updates of Maximum and Minimum Hourly Entitlements
[21](#updates-of-maximum-and-minimum-hourly-entitlements)

\(5\) Balances Outside of the Maximum and Minimum Bounds
[22](#balances-outside-of-the-maximum-and-minimum-bounds)

\(6\) Slice System Storage Account to Handle Physical Energy
Transactions Associated with "Slice System Resources"
[22](#slice-system-storage-account-to-handle-physical-energy-transactions-associated-with-slice-system-resources)

\(7\) The Slice Participants will be able to store in each other's Slice
accounts.
[22](#the-slice-participants-will-be-able-to-store-in-each-others-slice-accounts.)

C. Determination of Slice System Energy Capabilities
[22](#determination-of-slice-system-energy-capabilities)

\(1\) Hydro-Energy Capabilities Based on Individual Slice System Storage
Account Balances
[22](#hydro-energy-capabilities-based-on-individual-slice-system-storage-account-balances)

\(2\) For Purposes of this Subsection, Power Business Line (PBL)
Considered Participant
[22](#for-purposes-of-this-subsection-power-business-line-pbl-considered-participant)

\(3\) Calculation of Participant's Slice Entitlement
[23](#calculation-of-participants-slice-entitlement)

\(a\) Use of Slice Entitlement to Be Determined with Reference to "Slice
System"
[23](#use-of-slice-entitlement-to-be-determined-with-reference-to-slice-system)

\(b\) Distribution of Storage [23](#distribution-of-storage)

\(c\) Calibration of Energy Capabilities
[23](#calibration-of-energy-capabilities)

\(d\) Initial Methodology of Calculating Energy Capabilities; Subsequent
Efforts
[23](#initial-methodology-of-calculating-energy-capabilities-subsequent-efforts)

\(4\) Estimation of HLH and LLH Entitlements
[24](#estimation-of-hlh-and-llh-entitlements)

\(5\) Hourly Estimates [24](#hourly-estimates)

XIV\. Scheduling Provisions [24](#scheduling-provisions)

A. Communication of Slice System Capabilities
[24](#communication-of-slice-system-capabilities)

B. Prescheduling/Direct Scheduling [24](#preschedulingdirect-scheduling)

C. Changes to Preschedules [24](#changes-to-preschedules)

D. Permissible Real-Time Changes [25](#permissible-real-time-changes)

\(1\) Outage of a "Slice System Resource" Unit
[25](#outage-of-a-slice-system-resource-unit)

\(2\) Outage of a Participant's Resource or Force Majeure of Firm
Contract
[25](#outage-of-a-participants-resource-or-force-majeure-of-firm-contract)

\(3\) Limits on Real-Time Changes [25](#limits-on-real-time-changes)

E. Reserves for Participants [25](#reserves-for-participants)

F. Transmission Requirements [25](#transmission-requirements)

XV\. Combining Slice With Other Subscription Products
[26](#combining-slice-with-other-subscription-products)

A. Blocks of PF Energy [26](#blocks-of-pf-energy)

B. Slice Cannot be Combined with Actual Partial Service Product
Purchases
[26](#slice-cannot-be-combined-with-actual-partial-service-product-purchases)

C. Limit of the Total Requirements Purchased
[26](#limit-of-the-total-requirements-purchased)

D. Required Purchase of Energy Imbalance Services
[27](#required-purchase-of-energy-imbalance-services)

XVI\. Joint Management of Slice Entitlement
[27](#joint-management-of-slice-entitlement)

XVII\. Stay flexible! [27](#stay-flexible)

# Introduction

The Slice product is defined in more detail than other Subscription
products. This level of detail is necessary because the Slice is a new
product concept and much different from products BPA historically has
offered. Other processes are developing requirements, procedures, and
policies that will further define the Slice product. These processes
include BPA's 2002 Rate Case, the Slice contract negotiation and
development process, and BPA's Section 5(b)/9(c) policy development
process. The Slice product will conform to the eventual outcomes of
these other processes.

The details provided in this product description are, to a great extent,
examples. This Product Description, and the underlying Slice Product,
itself, are works in progress.

# Nature of Slice Product

## General Description

> The Slice of the System Product (Slice) is a power sale that is based
> upon a customer's annual net firm requirements load and mapped to
> provide power in the shape of BPA's generation from Federal System
> Resources over the year. Slice has been developed so as to avoid a
> cost shift to or from other customers.
>
> Although the calculated percentage of a Slice purchase would not
> exceed a customer's net firm load on an annual basis, in certain
> periods of the year and dependent upon water conditions the total
> amount of megawatt hours provided in those periods might exceed the
> customer's planned loads.
>
> Slice has firm and nonfirm components. The firm component is based on
> critical water firm load carrying capability. Because the timing of
> loads and firm output of Federal System Resources do not match
> perfectly within the year, the entire firm component may not be
> available in a shape that can meet the customer's regional consumer
> loads. Likewise, at other times part of the firm component may be
> surplus to the customer's regional consumer loads. The surplus firm
> component is likely to occur in spring months, when water conditions
> are high and far exceed BPA's planned firm requirements loads in the
> region. The nonfirm component is surplus power above critical water
> firm load carrying capability. Nonfirm power is delivered as available
> in other periods of an operating year.

## Slice Product as a Requirements Product

> Eligibility for the Slice Product is limited to Pacific Northwest
> public preference customers who request to place their net firm
> regional load on BPA pursuant to Section 5(b) of the Northwest Power
> Act. These preference customers have the statutory right to request
> that BPA offer a contract for the sale of electric power to serve
> their net firm regional loads that are not served by such customers'
> declared firm resources, regardless of the magnitude or duration of
> such firm loads.
>
> By electing to take service under the Slice Product, these preference
> customers will agree to have BPA serve a portion of their net
> requirements load by the Slice Product, and agree to accept power from
> BPA as it is generated by the Federal System Resources. Under this
> arrangement, Federal power under the Slice Product will not match
> consumer load by occasionally exceeding or being less than the net
> requirement loads of a Slice purchaser. Therefore, the Slice purchaser
> will declare sufficient firm resources to meet its load in those
> periods in which the Slice power delivery is less than an annual
> average net requirement delivered in all months would provide. The
> Slice Product will provide power in excess of load in other periods
> within the year and be an advance sale of planned surplus power.

The advance sale of surplus power on a planning basis, within the region
to preference customers under the Slice Product, is consistent with
BPA's statutory obligations. During any period that BPA is delivering
surplus power to any Slice purchaser, BPA will have met its firm power
obligations on a planning basis to all regional customer loads that it
is obligated to serve. As a consequence, power delivered to a Slice
purchaser in excess of its net requirements load at any point in time
will be in excess of that customer's and other customers' loads. Pacific
Northwest preference customers have a priority in purchasing BPA nonfirm
and surplus firm power when it is available.

> A customer may make periodic sales of excess power from their own
> non-Federal resources when a customer displaces its own resources with
> BPA surplus power purchased under Slice. Power from its non-Federal
> resources excess to a customer's load may be sold within or outside
> the region, under the Slice Product. Such non-Federal hydro power that
> cannot reasonably be conserved or kept available for the utility's use
> can be sold outside the region if such sale does not increase the firm
> energy requirements of the Slice purchaser or any other customers of
> BPA. Sales of such non-Federal power outside the region are not
> anticipated to increase the net firm load requirements of any Slice
> purchaser or other BPA customer under BPA's Section 5 contracts.
>
> The Slice contract will only be offered within the 120-day window
> after the 2002 Rates Record of Decision (ROD) is published. It may or
> may not be offered in future rate periods.

# Term

## Duration

10 to 20 years.

## No Off-Ramps 

There will be no off-ramps to Slice Contracts.

## Commencement Date 

The Slice Contracts will become effective on October 1, 2001.

# Eligibility

> Only BPA Pacific Northwest public preference customers that have a
> Northwest Power Act Section 5(b)(1) Net Requirements regional firm
> load are eligible to purchase Slice ("Eligible Customer"). Slice may
> be purchased only during the Subscription window.

# Slice Entitlement

## Composition of the Slice Entitlement

Slice is a combined requirements and surplus product. That is, the power
a Slice Participant receives is a combination of net firm requirements
service, surplus firm power, and surplus nonfirm energy.

The Slice Entitlement is not a fixed number, but will depend on water
conditions that occur in any given year. The Slice Entitlement is,
however, a fixed percentage of the actual output of the Slice System
Resources. If critical streamflows (currently 1937 water year) were to
reoccur, Slice Entitlement would approximately equal the megawatthours
of a Participant's net firm requirements over the course of an entire
year. However, that amount of firm energy is not guaranteed to be
produced or delivered to the Participant, nor is the timing of power
deliveries likely to match the Participant's actual net firm
requirements over the course of a year. In reality, part of the firm
energy will be produced at times and in amounts that make it surplus to
the Participant's actual net requirements. This portion is surplus firm
power, and is likely to be present during Spring months, when
streamflows and reservoir releases are high and loads are moderate.

Surplus nonfirm energy will be produced when streamflows are more
abundant than those that would occur with a reoccurrence of critical
streamflows. Nonfirm energy may be produced during any month and its
occurrence is not predictable, from year to year. The production of
nonfirm energy increases the annual megawatthours of Slice Entitlement
above those needed to meet a Participants actual annual net firm
requirements.

## Amount of Entitlement

> The annual amount of firm net load requirements power that a
> Participant is entitled to receive is the "Slice Entitlement." Slice
> Entitlement is a function of applying the Participant's Slice
> Percentage to the Slice System Generation and assuming no change in
> storage. Moreover, the exact amount of a Participant's Slice
> Entitlement on each hour will be influenced by such Participant's
> on-going use of Slice Entitlement, as reflected in the Participant's
> Slice System Storage Account. ([See]{.underline} section XII.
> [Accounting]{.underline} and section XIII. [Scheduling
> Provisions.]{.underline})
>
> The Participant may vary the rate of its Slice Entitlement so long as
> the rate of delivery of Slice is between the maximum and minimum
> bounds established by BPA. BPA will calculate these bounds by
> multiplying the maximum and minimum generation of the Slice System by
> the Participant\'s Slice Percentage. The Participant\'s Slice System
> Storage Account will be used to track the accumulated difference
> between the power received and the Participant\'s Slice Entitlement.
>
> A Participant is not required to take delivery of its full Slice
> Entitlement on any hour. Instead, a Participant has the flexibility to
> schedule within the maximum and minimum operating limits of the Slice
> System, which is indexed to the actual capability of the Federal
> System. When the Participant\'s request of its Slice Entitlement is
> below its maximum Slice Entitlement, BPA may use any portion of the
> unused maximum Slice Entitlement so long as BPA does not restrict the
> Participant's access to such Slice Entitlement if called upon.

# Slice Percentage

## Determination of Maximum Percentage

> The maximum percentage of the Slice System Capability that an Eligible
> Customer may purchase ("Maximum Percentage") shall be determined by
> the following formula:
>
> Max Percent = Net Entitlement / Total Inventory
>
> Where,
>
> Max Percent = The Maximum Percentage of the Slice System Capability
> that an Eligible Customer may purchase
>
> Net Entitlement = The annual average quantity of the Eligible
> Customer's regional net firm load Requirement (measured in average
> megawatts of energy) calculated for such Eligible Customer in the
> Subscription Process (using the same methodology and operating year as
> used to determine entitlements to purchase Partial Block Service)[^1]
> and
>
> Total Inventory = The annual average firm energy load carrying
> capability (measured in average megawatts of energy) calculated in the
> 2002 Rate Case for "PNCA-Identified" Federal System Resources,
> adjusted by System Obligations of the Federal Columbia River Power
> System (FCRPS) as defined below in Section VI. For this purpose
> "PNCA-Identified" Federal System Resources are those FCRPS resources
> identified in BPA's Pacific Northwest Coordination Agreement ("PNCA")
> 1998-99 data submittal.[^2]
>
> Determining an Eligible Customer's Maximum Percentage is a calculation
> made prior to the execution of a Slice Contract, and its sole purpose
> is to set the Maximum Percentage available to such customer.

## Slice Percentage

> An Eligible Customer may purchase a Slice Percentage in an amount up
> to its Maximum Percentage. The percentage will be fixed for the term
> of the Slice Contract regardless of whether the Participant
> subsequently acquires or loses resources or has unexpected temporary
> load increases or decreases during an operating year or years.[^3]
>
> For any Participant, the sum of the net requirements loads used to
> calculate the Slice eligibility and any other Partial Block Service
> product shall not exceed the total net firm load requirements of such
> Participant as determined by BPA under Section 5(b)(1) of the
> Northwest Power Act.

## Process to Select Slice Percentage

> BPA shall identify the Maximum Percentage for an Eligible Customer at
> the time the Slice Contract is executed. A blank \"Selected Slice
> Percentage Exhibit" will be attached to the contract. Within 120 days
> following the publishing of the 2002 Rate Case Record of Decision
> (ROD), the Eligible Customer will notify BPA of whether it wishes to
> purchase its power service as a Slice. The Eligible Customer must also
> state its selected Slice Percentage and there will be a one-time
> revision to the Selected Slice Percentage Exhibit to show the selected
> percentage. If the Eligible Customer states zero percent, the Slice
> Contract will terminate.

# Slice System Capability

> The Slice Product is a power sale and not a sale of Federal System
> Resources. The power sale is indexed to and follows the capabilities
> of an agreed-upon and specific set of Federal System Resources.

## Slice System Resources[^4]

> The Federal system resources that comprise the "Slice System" include
> the Federal System Resources identified by BPA in its 1998-99 Pacific
> Northwest Coordination Agreement data submittal. Those resources are
> reflected on Attachment 1.

## Capability of "Slice System"

> The capability of the "Slice System" is the actual energy capability
> of the "Slice System Resources", after adjusting for all non-power
> requirements and unit outages.
>
> Energy capabilities of the "Slice System" will be monitored by the BPA
> Power Business Line (PBL) and will be updated as necessary.

## System Obligations

> System Obligations are the net power obligations of BPA that support
> the FCRPS and other Federal commitments related to the Federal System.
> Net power obligations, as used in this context, mean the accumulated
> increases and decreases in energy capability as well as generation.
> BPA will adjust the Slice System Capabilities as well as the Slice
> Entitlement for any net power obligations that are energy transactions
> either into or out of the Federal system. For net power obligations
> that do not change the amount of energy production, BPA will adjust
> the Slice System Capabilities but not the Slice Entitlement. For
> example, if a system obligation was an obligation to hold an amount of
> generating capability for reserves the maximum and minimum Slice
> System Capabilities would be adjusted but not the Slice Entitlement.
>
> Some obligations are BPA obligations, only, and not System
> Obligations. The test for determining whether an energy obligation is
> a System Obligation or only an obligation of BPA is whether the system
> would still have the commitment if 100 percent of Federal net firm
> requirements load obligation in the region was served through Slice
> purchases.
>
> System Obligations that are currently known include the net of all
> transactions associated with:

1.  Canadian Entitlement obligations;

2.  Hourly Coordination obligations;

3.  Pacific Northwest Coordination Agreement ("PNCA") obligations[^5];

4.  Non-Treaty Storage obligations;

5.  Biological Opinion obligations; and

6.  System commitments to BPA's Transmission Business Line (TBL),
    including reserves and generation dropping under the remedial action
    scheme ("RAS")[^6]. A complete list of these commitments will be
    developed in the Slice Contract negotiation.

## Upgrades, Adjustments, Acquisitions, and Replacements

> The composition and generating characteristics of the "Slice System
> Resources" shall remain constant over the term of the Slice Contract,
> with the exceptions listed below. Generating characteristics, for this
> purpose, are the physical generating characteristics of a project
> before operational limits are applied. The capabilities of the "Slice
> System Resources" are expected to vary as operating requirements
> change.
>
> The exceptions are:

### Physical Upgrades or Adjustments

> Any physical upgrade or adjustment (increase or decrease) to a "Slice
> System Resource" or to a unit of a "Slice System Resource" will be
> included in the "Slice System" and, as such, the Participants shall be
> responsible for their proportionate share of the associated costs of
> such upgrade or adjustment. Adjustments may also include the removal
> or diminishment of a "Slice System Resource" (for example the removal
> of a dam or a generating unit). BPA shall provide Participants with
> advance notice of the upgrade or adjustment.

### Public Purpose Resource Acquisitions

> Any Public Purpose Resource Acquisition made by BPA will be included
> in the "Slice System" and, as such, the Participants will be
> responsible for their proportionate share of the associated costs of
> such Public Purpose Resource Acquisition. The capability of the "Slice
> System" will be adjusted to reflect such addition to the "Slice
> System." BPA will provide Participants with advance notice of any
> Public Purpose Resource Acquisition.

### Resource Acquisition by BPA

> BPA will not be obligated by the Slice Contract to acquire resources
> for any reason, including the replacement of resources that are part
> of the Slice System. Nothing in the Slice Product will affect the
> respective rights and obligations of the parties pursuant to section
> 6(m) of the Pacific Northwest Electric Power Planning and Conservation
> Act (NW Power Act). Any BPA offer of participation under section 6(m)
> made to a Slice Participant will be made by a separate purchase
> contract.

### Federal Base System Replacement Resources

> If BPA acquires a resource that it designates as a Federal Base System
> replacement resource, a Slice Participant may elect to participate in
> such resource. If that is the case, the contract governing the new
> resource will set forth the conditions for such purchase and may
> include terms under which the Slice Participant's share of such
> resource may be coordinated with its Slice share.

### Protection for "Dry Hole" Risk

> If the Slice Entitlement drops to zero (the capability of the Slice
> Resources drops to zero), then the Participant may request that BPA
> purchase energy on its behalf to the extent such power is available to
> BPA. The Purchaser will pay for all costs associated with such
> purchase.

## Economic Displacement of WNP2

> Each Slice Participant will decide annually whether to participate in
> economic reductions of WNP2 to levels other than zero. Once the
> decision has been made, the Participant will abide by that decision
> for the year. When BPA reduces the WNP2 generation for economic
> reasons to a level other than zero, the PBL will give the Participant
> notice of such reduction three days before the reduction will begin.
>
> For economic reductions in the plant that take the plant's generation
> to zero, the same 3-day notice will apply. For these reductions,
> Participants will not have to make annual commitments on whether or
> not to participate in the reduction to zero. Rather, Participants will
> make determinations on a case by case basis.
>
> Under either case, if a Participant takes energy based on the full
> output from WNP2 instead of the reduced output, the Participant will
> purchase that additional energy from BPA at the incremental price of
> WNP2.

## Declared Resources

> The Participant's declared resources at the time of the Subscription
> window, as defined by the 5(b)/9(c) policy, will be termed the Initial
> Declared Resources (IDR). The Participant may add to the IDR to
> complement its Slice Entitlement by declaring additional resources. A
> Participant may reduce the IDR only as allowed in the 5(b)/9(c)
> policy.
>
> If the Participant's IDR, Slice share, and PF Block are not sufficient
> to cover its Requirements load for the coming year, the Participant
> shall place market purchases into the Declared Resources to cover the
> deficit. Once declared, such market resources will remain in effect
> for the duration of the rate period. BPA will consent, on an annual
> basis, to reduce the Participant's market resources to the extent the
> current level of market resources cause the sum of the IDR, Slice
> share, PF Block, and market resources exceed the Participant's
> Requirement load.

# Payments

The Slice Revenue Requirement is being decided in the 2002 Rate Case.
The Slice product will be modified to conform to the outcome of the 2002
Rate Case. BPA is proposing that the Federal Energy Regulatory
Commission (FERC) approve the Slice rate for five years and approve the
Slice rate design for 10 years. If the FERC does not grant such
approval, the Slice Participants may convert to another form of
requirements service, and conversion will be the Participants' only
remedy.

## Components of the Slice Revenue Requirement

### Power Business Line's (PBL) Revenue Requirement

> The Slice Revenue Requirement will be comprised of all of the line
> items in PBL's revenue requirement as identified in all of PBL\'s rate
> cases for the years that are within the term of the Participant\'s
> Slice Contract, with the following exceptions:

a.  Transmission costs (other than those associated with the fulfillment
    of System Obligations);

b.  Power purchase costs (with the exception of those net costs incurred
    as part of the Inventory Solution discussed below); and

c.  Net Revenues for Risk

### Depreciation of Costs within the Term of the Slice Contract

> Recovery of capital investments shall be through depreciation expense
> as reflected in PBL revenue requirements. Similarly, if BPA incurs a
> cost that is eligible for inclusion in the PBL revenue requirement and
> chooses to depreciate its payment obligation over a multi-year period,
> BPA will correspondingly depreciate the payment obligation in the
> Slice Revenue Requirement.

### Costs Depreciated Beyond the Term of the Slice Contract

> The Participants shall be treated consistently with other rate-payers.
> If the other rate-payers will be responsible for the depreciation
> costs during the current rate period then Participants also will be
> fully responsible. If other rate-payers will be responsible only for a
> portion of such depreciated costs then the Participants also will be
> only responsible for their proportionate share of such portion.

### Previously Unidentified Costs

> If a BPA cost arises that was not previously identified, it is
> included in the Slice Revenue Requirement in the same manner as in
> PBL's rate case revenue requirements. The cost is included to the
> extent it would exist if 100 percent of Federal net firm requirements
> load obligation were met through Slice or if it is related to a system
> obligation as described in section VI, above.

### Inventory Solution

#### General

> It is anticipated that as a result of BPA's current Subscription
> process, BPA may take steps to supplement the capability of Federal
> System Resources. This supplementation is referred to as the
> "Inventory Solution". The Participants will share in the estimated net
> cost of the Inventory Solution, although the capability of their
> "Slice Systems" will not be adjusted. Although the form of the
> Inventory Solution it is not currently known, the governing Slice
> principle is that whatever is agreed to in Subscription will carry
> over into the Slice Contracts.

#### Calculation of the Net Cost of the Inventory Solution on a Projected Basis

> The estimated net cost of the Inventory Solution will be placed in the
> Slice Revenue Requirement. The 2002 Rate Case will address whether or
> not the Inventory Solution should be trued-up for actual costs of
> inventory augmentation.

#### Inclusion of Net Cost of Inventory Solution in the Slice Revenue Requirement

##### First Rate Case five-year Period (2002 through 2006)

> The estimated net cost for the Inventory Solution identified in the
> 2002 Rate Case (including the Inventory Solution for both short- and
> long-term power sales contracts) will be included in the Slice Revenue
> Requirement on a uniform monthly basis during 2002 through 2006. The
> estimated net cost will be calculated as the projected expense for the
> Inventory Solution less the expected revenues for the sale of such
> inventory enhancement as assumed in the Rate Case. The net cost could
> be a positive or negative number.
>
> For example, if the 2002 Rate Case assumes the Inventory Solution will
> cost \$30 million for power purchases to serve load that will pay \$20
> million for the power, the net cost to be added to the Slice Revenue
> Requirement will be \$10 million.

##### Subsequent Rate-Case Periods

> Prior to publishing the 2002 Rate Case ROD, BPA will hold a public
> process to determine whether to clearly define the amount of Inventory
> Solution that the Slice Participants will be obligated to participate
> in after 2006. There should be reasonably equitable treatment of Slice
> Revenue Requirements and other 10-year (or longer) Subscription
> requirements contracts regarding payment for the net cost of any
> \"Inventory Solution\". Exclusion of the net costs of resources to
> replace FBS resource degradation is an example of adjustments that may
> be needed to achieve such equitable treatment.

### Physical Upgrades or Adjustments

> The costs of any physical upgrade or adjustment (increase or decrease)
> to a "Slice System Resource" or to a unit of a "Slice System Resource"
> will be included in the Slice Revenue Requirement.

### Public Purpose Resource Acquisitions

> The costs of any Public Purpose Resource Acquisition will be included
> in the Slice Revenue Requirement.

### Federal Base System Resource Replacements Included in the "Slice System Resources" upon mutual agreement between BPA and a Participant

> If BPA acquires a resource that it designates as a Federal Base System
> replacement resource, a Slice Participant may elect to participate in
> that resource. The Participant may have the resource included in its
> "Slice System Resources," in which case the contract governing the new
> resource will set forth the terms for inclusion of its costs in the
> Slice Participant's share.

### Credits

> Any monetary credits that the PBL receives for items in the Slice
> Revenue Requirement will be credited to such Revenue Requirement. Such
> credits include Treasury credit for the PBL's settlement payment to
> the Colville Tribe, credits under NW Power Act section 4(h)(10)(c),
> and Fish Cost Contingency Fund (FCCF) credits. The effect of crediting
> the Slice Revenue Requirement will be that the benefits of such credit
> are shared proportionately by BPA and all Participants.
>
> If BPA receives revenues in payment for fulfilling System Obligations,
> the revenues that are attributable to the sale of capability included
> in the "Slice System" will be credited to the Slice Revenue
> Requirement. Any revenues attributable to a Federal Base System
> Resource replacement that the Participant chose not to participate in
> will not be credited back to that Participant's Slice Revenue
> Requirement. Any revenues BPA receives from remarketing power under a
> Slice Contract will be credited back to the Participant's Slice
> Revenue Requirement.
>
> Since the Participant will be entitled to its share of the
> conservation funds provided by BPA, it will also be responsible to pay
> its appropriate share of such funds.

### Inapplicability of Cost Recovery Adjustment Clause (CRAC)

> Participants will pay a percent of the Slice System's actual, as
> opposed to forecast, costs through the Slice true-up mechanism.
> Therefore, Participants will not be subject to application of the CRAC
> on their Slice purchases. If a Participant also purchases a flat block
> under Partial Requirements, that block will be subject to application
> of the CRAC.

## Additional Payment Obligations

### Slice Administrative Expenses

> The Participants will pay all overhead costs incurred by BPA that are
> attributable to implementing Slice. The detailed costs, enhancement
> costs, and line items will be noted in an exhibit prior to a final
> Slice Contract being offered for execution. These costs will be
> categorized into general costs (payable by all Participants in
> proportion to their Slice Percentages) and specific costs
> (attributable to individual Participants as incurred specifically for
> the benefit of such Participants.) An example of specific costs is the
> cost of direct signaling.

### Unauthorized Increased Charge

> A Participant that takes energy from BPA in excess of the sum of its
> Slice Entitlement and all other contracts with BPA, will be charged
> for such excess at the Unauthorized Increase Charge under the Priority
> Firm Power Rate.

### Transmission Costs

> The Participant is responsible for acquiring and paying for all
> transmission services required for its Slice Entitlement.

## Payment Obligation

> A Participant will pay its annual share of the costs of its "Slice
> System." The amount of a Participant's annual obligation will be
> calculated by multiplying the sum of all the costs described in
> subsection A., above, by the Participant's Slice Percentage. In
> addition, each Participant will pay its share of the Slice
> administrative expenses as described in subsection B.(1) above.

## Payment Schedule

### Periodic Payments

> A Participant will pay its annual Slice payment in 12 equal monthly
> payments.

### True-Up for Actual Expenses

> By March of each year, BPA will calculate the difference between the
> forecasted Slice Revenue Requirement and actual expenses for Slice
> Revenue Requirement Items, to the extent they are known at that time,
> for the previous fiscal year. . The April payment then will be
> adjusted by the difference. If a previously unidentified cost arises
> during the year, it will be included in the true-up costs. Slice
> administrative costs also will be included in the true-up costs.
>
> The estimated net cost of the Inventory Solution will not be subject
> to the true-up mechanism. Such costs will be paid by the Participants
> on an estimated basis.
>
> The true up payment may be spread over more months. Cost data for the
> previous fiscal year will be reviewed as it is available in November
> and an estimated true up calculated. Payments of this estimate would
> be spread evenly over the months of January, February and March. A
> final true up payment based on the actual costs and adjusted for true
> up payments made over those three months would be due in April.

# Deliveries of Power

## Participants\' Acceptance of the Operating Decisions of the Federal Government 

> The Participants are obtaining a right to purchase power mapped to the
> Federal system's generating resource capability. The Participants are
> not buying any right to operate or control the Federal system
> resources by purchasing Slice. Participants' "Slice System" does not
> convey any right in the Federal system other than the right to take
> power from the Federal system in specified amounts at various times as
> calculated by the principles stated herein. Participants will agree to
> accept and not contest, challenge or litigate the results of the
> operating decisions of the Federal government (acting through relevant
> Federal agencies and other entities) regarding the Federal system,
> including decisions relating to any non-power requirement being added
> to or deleted from the Federal System obligations. Examples of
> non-power constraints on the Federal System could include: (i) the
> Biological Opinion ("BO"), (ii) maximum and minimum rates of change on
> a forebay, tailwater, or discharge at a project, or (iii) BPA's
> decision to operate conservatively in January and February to ensure
> that the Federal System will meet the flood control requirements in
> April under the BO.

## Scheduling

> Power will be scheduled hourly within the (pro rata) limits of the
> energy capabilities of the "Slice System," calculated for each
> Participant. ([See]{.underline} Section XIII. [Scheduling
> Provisions]{.underline} below for daily scheduling details.) When
> everyone is satisfied that the algorithm developed to determine "Slice
> System Capability" is satisfactory, interested Participants will be
> able to work with the PBL to develop a strategy for sending a dynamic
> schedule to schedule their Slice Entitlement. The ability to dynamic
> schedule is subject to the final approval of the BPA Transmission
> Business Line (TBL). All costs to do this will be borne solely by
> those Participants wanting to schedule by dynamic schedule. It is
> recognized that there will be special issues for Participants in BPA's
> load control area that schedule Slice and who purchase dynamic load
> service from BPA. This will be one of the items worked out in
> developing a strategy for sending a dynamic schedule. For example,
> with appropriate metering and communications facilities, it is
> technically feasible to treat such a customer as a nested control
> area. The PBL is not committing to this approach since the final
> decision would rest with TBL*.*

# Load Loss Provisions

## Need for Provisions

> In the event that, on a prospective (annual planning) basis, the
> requirements portion of the Participant's Slice Entitlement exceeds
> the Participant's net annual firm load requirement, BPA may need to
> take corrective action. The treatment for Slice should parallel the
> treatment of a customer facing similar net annual firm load reduction
> circumstances with a Block requirements product. However, the
> treatment cannot be exactly the same since the Slice Product has
> unique characteristics. Slice is a combined requirement and surplus
> product, and the firm energy portion is not guaranteed to be
> delivered.

## Procedures[^7]

> Upon the Participant's notice to BPA that its firm consumer load is
> expected to fall below the level assumed in the determination of the
> Maximum Slice Percentage, the Participant and BPA shall take the
> following actions:

### Declaration of the Participant's Net Requirement

> On an annual basis, the Participant shall submit a forecast of its
> annual[^8] net firm load requirement using a revised load forecast and
> the updated Declared Resources Exhibit. The Participant also shall
> submit monthly consumer load, as adjusted by power exchanges with
> other entities to provide service to the Participant's consumer load.
> From these submittals BPA will estimate the requirement portion of the
> customer's Slice for the next operating year.

### Calculation of Participant's Critical Slice Entitlement

> BPA will calculate the Participant's annual Slice Entitlement using
> the critical water condition that was used for the previous Rate Case.

### Comparison of Net Requirement to Critical Slice

> BPA shall subtract the Participant's annual average Critical Slice
> Entitlement from the Participant's annual average Net Requirement. If
> greater than or equal to zero, no action is required. If negative, the
> Participant shall reduce the market purchases in its Declared
> Resources Exhibit as needed to bring the difference to zero. If the
> difference is still negative, BPA shall take the following actions:

#### Convert to Surplus

> If BPA is able to meet its total firm load obligations on a critical
> water basis, (including the Participant's Critical Slice Entitlement)
> then BPA shall deem that portion of the difference between the
> Critical Slice Entitlement and the Participant's net firm load
> requirement as being converted to surplus power. The portion will be
> deemed to be offered at the Slice price, under the contract, with no
> further action or adjustment in price needed (for that portion). Since
> the Slice payment is for the total of the requirements and surplus
> power portions of the product, any adjustment that increases one by
> decreasing the other would not affect the total price.

#### Withheld and Sold

> That portion of the excess Critical Slice Entitlement that is not
> excess to BPA's regional firm load and cannot be converted to surplus
> shall not be supplied to the Participant but will be withheld and will
> be used by BPA to meet its other firm load. The annual quantity
> withheld shall be calculated as monthly quantities shaped to the same
> monthly distribution as the Critical Slice Entitlement. The reduction
> shall be uniform within each month (100 percent load factor) and shall
> reduce the Participant's Slice Entitlement, Maximum Slice Entitlement,
> and Minimum Slice Entitlement. The Participant's Slice payment shall
> be credited with the amount received by BPA's Power Business Line
> resulting from the sale of the energy, less any BPA re-marketing fees.

# General Contract Provisions

## Uniform Terms and Conditions

All Slice Contracts will have the same basic terms and conditions for
each Participant with some exceptions. Exceptions will include: the
selected Slice Percentage, the combination of Slice and other BPA
products, the election to participate or not in a Federal Base System
(FBS) Resource replacements, elections as to the type of scheduling, the
type and detail of system information and other administrative choices
made or negotiated between BPA and the customer, appropriate billing
based on the choices made, and information pertaining to the
Participant. Over time, if a Participant elects to purchase power from
resources that BPA acquires as replacements for the FBS, the Federal
System Resources considered as part of a Purchaser\'s "Slice System
Resources" and included in its "Slice System" may vary.

## Contract Implementation Group

### General

> BPA and each Participant shall designate a representative to a
> Contract Implementation Group ("CIG"), which will meet on an as-needed
> basis. The CIG will be responsible for formulating and establishing
> implementation details not defined by the Slice Contracts. The CIG
> will be the main forum for Participants to discuss their concerns and
> issues. The CIG will not have the authority to make binding decisions
> or amend any Slice Contract provisions.

### Voting Procedures

> Changes or additions to implementation details proposed to the CIG
> will be adopted when approved by BPA and a two-thirds majority of the
> Participant representatives. Any modification of contract terms will
> require mutual consent between BPA and the Slice Purchaser.

## Renewal Provision

> There will be no renewal provision in the Slice Contracts.

## Assignment Provisions

> The Slice Contracts will contain an assignment provision similar to
> current BPA contracts that allow assignments to Federal Agencies and,
> subject to the consent of BPA, to qualified purchasers.

## Conversion

> Upon the occurrence of any of the following events, a Slice
> Participant may request and receive other power products from BPA to
> serve its net requirements load. These products would be under the
> same rates, terms, and conditions as other preference customer
> requirements loads that had continuously received service from BPA
> commencing on October 1, 2001.
>
> \(1\) If, by the action of a party that is not a Participant, the
> Slice Contract, or the performance of such contract, is held to be
> invalid or unenforceable, or enjoined by a final order of a court, and
> such order is not stayed, pending any appeals, then the Slice
> Participant may terminate and request replacement of the Slice
> Contract upon 30 days\' written notice to BPA;
>
> \(2\) The Slice Contract expires according to its terms; or

(3) If, at the conclusion of a transmission rate case, there is no
    transmission service available for the Slice Product, then the Slice
    Participant may terminate and request replacement of the Slice
    Contract upon 30 days\' written notice to BPA[^9].

(4) If the Federal Energy Regulatory Commission (FERC) does not approve
    the Slice rate design through 2011, the Slice Participant may
    terminate and request replacement of the Slice Contract upon 30
    days\' written notice to BPA.

If a Participant needs to convert to another Subscription product based
on (1), (3), or (4) above, the Participant must either take the entire
amount of megawatts signed up under Slice, or add enough firm resources
to its Declared Resources Exhibit to cover the entire amount of
megawatts signed up under Slice.

# Dispute Resolution

## Slice Dispute Resolution Process

> Any Participant wishing to invoke dispute resolution shall first bring
> the matter in dispute to the CIG. The CIG shall take prompt steps to
> seek a mutually agreeable resolution of the dispute. Such steps may
> include the appointment of a technical panel to help resolve the
> dispute. The actions of the CIG regarding any dispute shall not be
> introduced as evidence in any subsequent dispute resolution process.
>
> The dispute resolution provisions for Participants will be different
> than the general dispute resolution provision for other Subscription
> Contracts since the Slice Product is indexed to Slice System
> Capabilities and is not load dependent. For purposes of dispute
> resolution, BPA will agree to mediation of any dispute. BPA will agree
> to a one-time election by the Slice customer of either litigation or
> binding arbitration. If binding arbitration is selected, the
> arbitration provision will limit the arbitration to specific topics
> such as mistakes in the provision of information to the Participant,
> errors in the billing or true up charges, as stated below. It will
> also specify the manner, timing, initiation, and recourse for the
> arbitration. Litigation will be in federal court having jurisdiction.

## Federal Operational Decisions Not Subject to Arbitration

> Federal agencies' decisions and actions relating to any matter
> described in section VIII.A. or relating to the operations of Federal
> System Resources that are also Slice System Resources are not subject
> to dispute resolution and are not topics to be discussed by the
> CIG.[^10]

## Scope of Dispute Resolution

> The Participants may only address the following matters in dispute
> resolution: (i) what items were or were not included in the true-up,
> (ii) Slice System Storage Account errors, and (iii) errors in the
> amount of power that was scheduled (including whether there was
> intentional misrepresentation of operating requirements that resulted
> in unnecessary limitation in power deliveries). A Participant may not
> raise errors in forecasts of Federal generation or of customer load as
> a subject for dispute resolution.

# Accounting

## Development and Testing of Slice System Storage Accounting (SSA) Algorithm

> *(The following subsections set forth a method for implementing the
> technical aspects of the Slice Product. BPA and the parties will
> continue their efforts during the Subscription process and set-up
> phase to streamline and simplify the methodology for implementing the
> Slice Product. Flexibility will be provided in the contract to allow
> BPA and the Participants to alter the algorithms for computing Slice
> Entitlements and the accounting of the Slice System Storage Account
> ("SSA").)*
>
> BPA will establish and maintain for each Participant a SSA in order to
> determine if each Participant is staying within the limits of the
> "Slice System Capability" to store energy and later release stored
> energy. Given the unique nature and application of this storage
> account, BPA will work with the Participants to determine the best
> approach and application of a storage accounting system. Given that,
> BPA proposes, as a starting point the following methodology.
>
> The SSA, unlike a normal storage account, will not be measured in
> absolute terms (from full or empty). Instead, the SSA will be measured
> in terms of the energy (megawatt-days) deviation from the Federal
> System operation on each day. A megawatt-day is the amount of energy
> equal to delivery of one megawatt of energy during each hour of a
> 24-hour period. Therefore, if a Participant requests (and receives)
> its percent share of the energy produced by the Federal System during
> a day, there is no change to its SSA.
>
> The algorithm for the SSA will be developed and tested prior to
> October 1, 2001. The Participants will participate in this process.
> The cost of developing the algorithm for the SSA will be an
> administrative cost of Slice to be borne by the Participants.
> Accordingly, the algorithm may be as complex or as simple as desired
> by the Participants. In any event, the algorithm cannot produce
> results that indicate Participants should receive more than their
> percentage share of the Slice System. BPA will correct the algorithm
> if it produces such results.

## Maintenance of Slice System Storage Account Activity

> BPA will maintain each Participant's SSA and update it each normal
> weekday. BPA will send the update to the Participants each time the
> account is updated. The following paragraphs describe the maintenance
> and updating procedures.

### Account Balance at the Start and Finish of the Contract

> At the start of the Slice Contracts, BPA will initialize each
> Participant's SSA to zero. Each Participant will be responsible for
> returning its account balance to zero by the end of the Contract
> unless actual system requirements (non-power requirements) force a
> deviation from zero.

### Measurements for Account Balance

> BPA will maintain for each Participant (including the PBL) and the
> aggregate "Slice System" a SSA in terms of megawatt-days. The
> aggregate system shall be used to calculate the storage limits that
> will then be imposed on each Participant\'s SSA. BPA will start each
> Participant\'s SSA at zero and calculate a change in each
> Participant's SSA for each day based on the difference between the
> generation from the Federal System and the Participant\'s requested
> energy. The SSA is subject to adjustments for water-to-energy
> conversion efficiencies, spill, and other operational considerations.

### Maintenance of Slice System Storage Account (SSA) Within Maximum and Minimum Storage Limit

> The SSA must always be within the maximum and minimum storage limits
> that BPA will continually update. Each Participant\'s SSA maximum and
> minimum storage limits will be the product of the Federal System's
> limits and the Participant's Slice Percentage.

### Updates of Maximum and Minimum Hourly Entitlements

> BPA will update each Participant's hourly maximum and minimum
> entitlement for the next preschedule day(s). The average Heavy Load
> Hour (HLH) and Light Load Hour (LLH) entitlement will be projected out
> for 7 days and will be based on the then-known power and non-power
> requirements.

### Balances Outside of the Maximum and Minimum Bounds

> If a Participant's SSA goes above the maximum bounds on a day, BPA
> will keep the account at the maximum limit and any excess will be
> considered spilled (even if no physical spill takes place). If the SSA
> goes below the minimum bounds, the Participant will pay an
> Unauthorized Increase Charge (to be developed in the relevant rate
> case). If a Participant's SSA is out of bounds as a result of a BPA
> forecasting error, there will be a grace period allowing the
> Participant to manage its account and get it back within bounds
> without penalty.

### Slice System Storage Account to Handle Physical Energy Transactions Associated with "Slice System Resources"

> The SSA is based only on the Federal hydro resources. All other energy
> from other Federal resources (including PNCA, Non-treaty storage, and
> WNP2) will be handled by adjusting the maximum and the minimum hourly
> and daily entitlements by the Participants share of the energy
> production.

### The Slice Participants will be able to store in each other's Slice accounts.

> Participants will need to notify BPA prior to the storage transaction
> taking place. Such storage will be with the stipulation that the
> Participant receiving the storage will not generate energy from the
> storage, but will, instead, hold it until the original Participant
> requests it back. In this way, the Participants will not be pooling
> their Slice shares.

## Determination of Slice System Energy Capabilities

### Hydro-Energy Capabilities Based on Individual Slice System Storage Account Balances

> For purposes of taking delivery of energy, the "Slice System's"
> hydro-energy capability for each Participant will be based on the
> Federal System's capability at that time.

### For Purposes of this Subsection, Power Business Line (PBL) Considered Participant

> For purposes of determining "Slice System" energy capabilities, BPA's
> PBL will be considered a Participant.

### Calculation of Participant's Slice Entitlement

> For each hour, BPA will calculate for each Participant its Slice
> Entitlement, based upon a percentage of the total "Slice System"
> energy capability less all System Obligations.

#### Use of Slice Entitlement to Be Determined with Reference to "Slice System"

> BPA shall set the "Slice System" initial storage condition equal to
> where the Federal System is at that time. The capabilities of the
> "Slice System" shall be ratably reduced to reflect the Participant\'s
> percent share. This means that if a Participant with a 10 percent
> share wants to increase the next hour's schedule by 50 megawatts, then
> the Federal System will need to be able to increase by 500 megawatts
> for the next hour to accommodate the change. The hourly rates of
> change will also be based on the hourly ability of the Federal System
> to increase or decrease.

#### Distribution of Storage

> The Slice Participant receives energy as a share of the Federal
> System, not a share of any individual project. Therefore, the SSA will
> be based on conditions of the Federal System, not on those of
> individual projects.

####  Calibration of Energy Capabilities

> BPA will calibrate the forecasts of energy capabilities so that the
> sum of the parts equals the whole. BPA will ratably adjust the
> forecast of each Participant's Slice energy capabilities (generation
> from natural flows, maximum generation, minimum generation, maximum
> and minimum rate of generation change) so that the sum of all of the
> Participant's Slice capabilities equals the forecasted actual
> capabilities of the "Slice System."

#### Initial Methodology of Calculating Energy Capabilities; Subsequent Efforts

> In the initial stages of implementing Slice, BPA will calculate "Slice
> System" energy capabilities on a conservative basis, with a minimum of
> effort, in a manner agreed to by all Participants. The non-BPA
> Participants will decide jointly if additional effort and expense will
> be expended to get more precise forecasts of capabilities. Since the
> Participants pay for implementation costs, they will determine the
> degree of additional precision they desire. Never-the-less, BPA must
> agree that whatever methodology is ultimately used results in sound
> forecasts for the "Slice System" Capabilities.

### Estimation of HLH and LLH Entitlements

> BPA will estimate the average HLH and LLH entitlements for the 7-day
> projections in 8-hour blocks using a hydro-regulation simulation that
> BPA uses to create 30-day Forecasts or their replacements.

### Hourly Estimates

> BPA will use the 30-day model in combination with an hourly
> hydroregulation model known as SH-1, or its replacement, to determine
> hourly estimates for the preschedule day(s).

# Scheduling Provisions

## Communication of Slice System Capabilities

> The PBL will keep the Participants updated via E-mail on current
> non-power constraints on the "Slice System Resources". BPA's real-time
> scheduler will also notify the Participants of anything that impacts
> their rights on real-time and it will be up to the Participant to
> change their preschedule if needed to stay within the new maximum and
> minimum bounds.
>
> The specific data that BPA will provide to the Participant will be
> specified in an exhibit to the contract. The data will include
> information that the Participant needs to manage the Slice Product.
> BPA may make additional useful data available to the Participant so
> long as BPA does not consider the information market sensitive. The
> list of data will be established as soon as possible after the method
> of computing the Slice Entitlement and the method for maintaining the
> SSA is established. The contract will have provisions that will allow
> BPA and the Participants to revise the exhibit as changes to the
> methodology come about.

## Prescheduling/Direct Scheduling

> The Participant is limited to prescheduling its Slice Entitlement
> until such time as all parties are satisfied that the algorithm is
> running properly. At that point, those Participants that want to have
> their Slice Entitlement delivered by a direct schedule will work with
> PBL to set that up. Using a direct schedule will be solely at the
> direct scheduling Participants' cost.

## Changes to Preschedules

> A Participant may change its Slice Entitlement preschedule for any
> reason up to 30 minutes prior to delivery of such Entitlement.
> However, the changed preschedule must stay within the "Slice System"
> limits (rate of change, maximum and minimum bounds) established for
> that hour.

## Permissible Real-Time Changes

> A Participant may make real-time changes to its Slice Entitlement
> preschedule less than 30 minutes before the hour for the following
> limited reasons:

### Outage of a "Slice System Resource" Unit

> A "Slice System Resource" unit that was actually generating energy has
> an outage;

### Outage of a Participant's Resource or Force Majeure of Firm Contract

> A nonfederal Participant's system unit that was actually generating
> energy has an outage or a Participant is not able to take energy
> pursuant to a firm contract given a force majeure situation;

### Limits on Real-Time Changes

> The outage of a resource on either the "Slice System" or an individual
> Participant's system is not intended to allow carte blanche changes to
> the preschedule. The maximum change allowed in the hour will be the
> Participant's share of the "Slice System" outage or the magnitude of
> the outage on the Participant's system that the Participant was
> actually getting generation from at the time of the outage. Such
> change must also stay within the maximum and minimum bounds (as
> adjusted for any unit changes on the "Slice System") available to the
> Participant.

## Reserves for Participants

> Providing reserves and Remedial Action Scheme (RAS) for the Federal
> System out of its Slice share will be a System Obligation for the
> Participants. The Participant will receive a share of the revenue PBL
> receives for providing energy to the BPA Transmission Business Line
> (TBL) for reserves and will pay a share of the reserve expenses in the
> revenue requirement. The Participant's share of access to the FCRPS
> capability will be reduced by the amount of reserves provided.

## Transmission Requirements

The Slice Participant must take the requirement portion of its Slice
energy to its load. If the Participant does not schedule at least this
amount of energy, penalties (that are yet to be determined) will be
applied.

# Combining Slice With Other Subscription Products

## Blocks of PF Energy 

> In combination with Slice, the Participant can purchase an annual flat
> or shaped block of PF energy from BPA at 100 percent monthly load
> factor. The Participant also may negotiate for monthly blocks of
> energy under the Firm Power Products and Services rate. The
> Participant may not purchase, in combination with Slice, inclined
> blocks, Factoring, Capacity, or any other staple-on product that
> shapes the Slice or Block products. These products may, however, be
> purchased at market prices from the PBL outside of Subscription.

## Slice Cannot be Combined with Actual Partial Service Product Purchases

> A Participant may not combine a Slice purchase with an actual partial
> service product purchase.

## Limit of the Total Requirements Purchased

> For any Slice purchaser, the sum of the net requirements loads used to
> calculate the Slice eligibility and eligibility for any other block
> requirements product shall not exceed the total net requirements of
> such Participant.
>
> Participants may experience load growth over the term of the Slice
> Contract. Load growth is not covered by the Slice Product. The
> Participant may supplement Slice with a PF Block product in a future
> Subscription process to cover load growth. The PF block product can be
> flat or a shaped block where the delivery rates vary by month, but
> with each month's delivery at a 100percent load factor. Factoring,
> Capacity, or any other staple-on product that shapes the block product
> will not be allowed in combination with Slice. There is no guarantee
> that the Participant will be entitled to the lowest PF rate for block
> purchases to serve load growth.
>
> The Participant may not buy a PF Block product to cover the loss of
> Federal System capability during the term of the contract. This loss
> is one of the risks that the Participant takes on through Slice.

## Required Purchase of Energy Imbalance Services

> Since the Slice Contract does not guarantee to follow a Participant's
> load, a Participant in BPA's load control area must insure that energy
> imbalance services, or equivalent products, are provided for the
> duration of the Slice Contract.

# Joint Management of Slice Entitlement 

The Slice Product is a sale of firm power to meet a customer's net firm
consumer load on an annual planning basis. Therefore, BPA will apply the
same sale policy to the Slice Product as BPA has applied to its other
firm requirements products. BPA will understand its net firm load
obligation to a customer, whether sold as Slice or not, as individual to
that customer and sold for use in meeting that customer's load. Net firm
load requirement power is intended to meet the Participant's consumer
load and it must be used by the customer to meet that load. It is not
power to be resold at wholesale on the market, although it may be
exchanged and later taken into load.

# Stay flexible!

> BPA Transmission Business Line requirements, or actions by other
> parties such as the FERC, could result in requiring Slice accounting
> to be reservoir specific, and could require generation to be delivered
> to the Participant from each "Slice System Resource" instead of the
> "Slice System". We do not know what may happen in the next 13 years,
> so we must build the accounting system to handle the various
> possibilities.
>
> Other processes are developing requirements, procedures, and policies
> that will further define the Slice product. These processes include,
> the 2002 BPA Rate Case, the Slice contract negotiation and development
> process, and BPA's Section 5(b)/9(c) policy development process. The
> Slice product will conform to the eventual outcomes of these other
> processes.

**Resources Under Slice**

All units of the resources listed below will be assumed to be included
in Slice unless otherwise noted. The actual hour to hour capability of
the resources listed below will be a function of a number of factors
such as nonpower constraints, streamflows and unit capability. Such
capability will be calculated as described in the body of this
agreement.

**[Hydro Resources]{.underline}**

  ----------------------- ----------------------- -----------------------
  Detroit                 Lookout Point           Hill Creek

  Cougar                  Green Peter             Foster

  Lost Creek              Black Canyon            Boise Diversion

  Minidoka                Palisades               Anderson Ranch

  Roza                    Chandler                Big Cliff

  Dexter                  Hungry Horse            Albeni Falls

  Libby                   Grand Coulee            Chief Joseph

                                                  Dworshak

  Lower Granite           Little Goose            Lower Monumental

  Ice Harbor              McNary                  John Day

  The Dalles              Bonneville              Cowlitz Falls

  Idaho Falls             Chief Joseph            Mica (only the Treaty
                          Encroachment            storage rights, no
                                                  energy)

  Arrow (only the Treaty  Duncan (only the Treaty Non-Treaty Storage
  storage rights, no      storage rights, no      
  energy)                 energy)                 
  ----------------------- ----------------------- -----------------------

**[Thermal and Miscellaneous]{.underline}**

  ----------------------- ----------------------- -----------------------
  WNP2                    (Wyoming Wind Project)  Wauna

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

[^1]: To the extent possible, Slice should be consistent with decisions
    coming out of the Subscription process.

[^2]: The energy associated with BPA's Inventory Solution is not
    included in the Total Inventory; Participants pay their
    proportionate share of the net cost of the Inventory Solution but do
    not receive any of the increased capability resulting from the
    Inventory Solution.

[^3]: The provisions that consider a Participant's loss, on a planning
    basis, of net firm load requirement are contained in section IX.
    [Load Loss Provisions]{.underline}.

[^4]: BPA has used the term Slice System Resources to denote those
    Federal resources upon which BPA will base the Slice Product. This
    is done to recognize the fact that during the contract BPA may add
    by purchase or acquisition new resources to the Federal System
    Resources which, except as provided under section VI.D. [Upgrades,
    Adjustments, Acquisitions and Replacements]{.underline}, may not be
    included as a part of the Federal System Resources upon which the
    Slice is based.

[^5]: All PNCA energy transactions will be accommodated prior to BPA
    calculating the Slice System Capabilities. BPA will not adjust its
    resource declarations under the PNCA for Slice. Other Participants
    will reflect their Slice Entitlement as a firm transfer in PNCA firm
    planning. Parties to the current PNCA at the time of execution of
    the Slice Contract will be required to execute the 1997 PNCA.

[^6]: At this time, PBL will treat the obligations it owes to TBL as
    System Obligations. For example, a Participant will be affected the
    same as PBL when a RAS is put in place (generation capability will
    be dropped). To the extent PBL receives revenues for these System
    Obligations, it will credit such revenues to the Slice Revenue
    Requirement. Notwithstanding this, PBL expressly reserves the right
    to choose to supply these System Obligations out of its "Slice".
    Such determination shall be made before the Slice Contract is
    finalized.

[^7]: This procedure would be modified to conform the treatment of load
    loss under Slice to that applied to the Block product.

[^8]: The scope of the examination of a Participant's net requirement
    would be adjusted to match the procedure used in the Block product.
    An annual determination was assumed for illustrative purposes only.

[^9]: The Slice Product is different from other products being offered
    by BPA in that the power delivered to the purchaser is indexed to
    the generation of the Federal System Resources. Due to the nature of
    the Slice Product, the Participant will not be able to predict with
    certainty either the quantity of power that may be delivered, nor
    the Federal resources actually used to generate such power. The
    delivery of the Slice Product presents transmission issues that are
    currently unresolved. To deal with this uncertainty, the contract
    for the Slice Product will include a provision that allows the
    Participants to convert to other subscription products in the
    above-described situations.

[^10]: The Corps of Engineers and the Bureau of Reclamation are in
    charge of operating the reservoirs and they are not interested in
    having arbitrations based on reservoir operations.