**D R A F T**

**GRID WEST UPDATE**

**PNUCC Board Meeting**

**July 9, 2004**

I.  **OVERVIEW**

    -   **There has been an intensive development process over the past
        year (June 25, 2003 -- June 30, 2004) to develop a Regional
        Proposal, responsive to problems and opportunities identified by
        regional stakeholders, with the following basic features:**

        i.  **Create a new independent entity with provisions for
            regional accountability and responsive governance**

        ii. **Use a staged implementation, phasing in features over
            time:**

            1.  **Beginning state -- Initial features to meet immediate
                needs**

            2.  **Interim state -- Functions added as ready for
                implementation**

            3.  **Advanced target state -- Region manages transmission
                system using financial methods** **(adoption of features
                of** **advanced** **target** **state subject to enhanced
                regional accountability requirements)**

        iii. **Voluntary control area consolidation; consolidated
             control area would be operated by the independent entity on
             behalf of the consolidating parties, expected to be Idaho
             Power Company, BPA and PacifiCorp early in Beginning
             State**

II. **BASIC PRINCIPLES OF REGIONAL PROPOSAL**

    -   **All existing contracts, legal settlements, and other relevant
        obligations are expected to be honored according to their
        terms**

    -   **Transmission owners are still in charge of their identifying
        company revenue requirements, subject to applicable regulatory
        authority**

    -   **Cost shifts should be minimized**

III. **TRANSITION PRINCIPLES**

     -   **Each change must be clear improvement over current approaches
         to managing and using the regional transmission system**

     -   **Each stage of evolution is fully workable as it stands**

     -   **Proposed transition does not foreclose ability to evolve to
         the advanced target state (adapted as needed to changing
         circumstances)**

IV. **TECHNICAL WORK**

-   **The Regional Representative Group's (RRG)Transmission Services
    Liaison Group (TSLG) contracted for services of The Structure Group
    to help develop beginning state definition.**

-   **Initial focus of TSLG will be on cost drivers for other ISO
    efforts around the country, quickly moving to** **developing
    technical details of beginning state**

    -   **The RRG** **Risk and Reward Study Group formed to** **prepare
        a high-level** **risk/reward analysis with a regional
        perspective before seating the Development Board**

    -   **Data collection for pricing work will proceed in the next few
        months**

    -   **Work will also continue over next few months by entities
        interested in** **consolidating** **their control areas under
        Grid West in Beginning State**

V.  **GOVERNANCE**

    -   **Bylaws work group prepared proposed forms of developmental and
        operational bylaws with goal of striking balance between
        regional accountability and independence embodied in the
        Regional Proposal**

    -   **Bylaws work group's focus was on workability and meeting a "Do
        No Harm" test with respect to the Regional Proposal**

VI. **STATUS OF REGIONAL PROCESS**

    -   **RRG on June 30 agreed that the bylaws are "good enough" for
        further review because they are not inconsistent with Regional
        Proposal and sufficiently complete and stable for review**

    -   **During the summer, BPA will evaluate whether to support
        adoption of the developmental &** **operational** **bylaws**
        **at decision point #1 this fall**

VII. **SCHEDULE**

     -   **Summer review by BPA includes having the National Academy of
         Public Administration review the bylaws for workability and
         consulting with customers and regional parties. Other outreach
         activities by RRG stakeholders to inform regional entities of
         nature of proposal**

     -   **September 23 and 24: RRG meeting, BPA report, and progress
         reports on work**

     -   **October 1: RRG meeting, review open issues, response to BPA**

     -   **October 14: RRG meeting, RRG assessment, Decision Point #1 --
         adopt bylaws**

     -   **After Decision Point #1 (decision whether to adopt the
         developmental bylaws and fund next stage of development
         process) -- if positive -- proceed with executive search firm
         for Board candidate search, membership enrollment process,
         outline of tariff, transmission agreement contours, better
         beginning state definition, etc.**

     -   **Early 2005:** **work completed**

     -   **Then 4 -- 6 weeks BPA review**

     -   **Spring 2005: Anticipated Decision Point #2 -- hold elections
         to seat Developmental Board**

     -   **Developmental Board's primary focus will be to negotiate
         transmission agreements** **(TA's)** **with filing utilities
         and ultimately** **to** **achieve the signing of TA's by BPA
         and two contiguous IOUs**

     -   **If successful, the Operational Board is seated and Grid West
         is implemented**