**UNITED STATES OF AMERICA**

**BEFORE THE**

**FEDERAL ENERGY REGULATORY COMMISSION**

**Bonneville Power Administration )**

**) Docket No. \_\_\_\_\_\_\_\_\_\_\_\_\_**

> **PacifiCorp )**

**)**

> Idaho Power Company )

PETITION OF BONNEVILLE POWER ADMINISTRATION, PACIFICORP,

AND IDAHO POWER COMPANY FOR DECLARATORY ORDER RELATING TO THE
DEVELOPMENT OF

GRID WEST, A PROPOSED TRANSMISSION PROVIDER

The Bonneville Power Administration ("Bonneville"), PacifiCorp and Idaho
Power Company respectively request a declaratory order on a conceptual
proposal pursuant to Rule 207(a)(2) of the Federal Energy Regulatory
Commission\'s (the "Commission") Rules of Practice and Procedure, 18 CFR
§ 385.207(a)(2) (2004), with respect to certain issues of critical
importance to the further development of Grid West, a proposed
independent transmission provider. Specifically, Petitioners request a
declaratory order with respect to the following questions:

1.  Assuming Grid West seeks approval under Section 205 of the Federal
    Power Act to offer regional transmission service pursuant to an open
    access tariff, but not as an Order 2000 RTO, will the Commission
    treat Grid West's application as one that must satisfy the open
    access requirements of Order 888 (that is, offering services
    consistent with or superior to the *pro forma* OATT requirements)
    rather than the requirements for RTO status?

2.  Does Grid West's governance structure as embodied in its Operational
    Bylaws allow it to satisfy the independence requirements of Order
    2000?

3.  What is the Commission\'s position regarding transmission owners'
    withdrawal rights?

    a.  Will the Commission approve a contract between Grid West and
        Bonneville that allows Bonneville to withdraw as a participating
        transmission owner without Commission approval?

    b.  Will the Commission clarify that a participating transmission
        owner that is a public utility would be able to terminate its
        contractual arrangements with Grid West under conditions that
        the Commission determines are just and reasonable?

4.  If Grid West becomes a public utility that sells transmission
    service but not as an RTO, will the Commission provide assurances
    that it will not thereafter require Grid West to comply with Order
    2000 requirements or Standard Market Design approaches?

5.  As a matter of policy, will the Commission accept a provision in
    Grid West\'s agreements with Bonneville and other transmission
    owners providing that certain terms identified as critical to
    transmission owners\' participation will be protected from
    subsequent Commission-mandated change based on, in Bonneville's
    case, Bonneville's statutory requirements and the doctrine of
    sub-delegation, and for all transmission owners the application of
    the *Mobile-Sierra* standard to certain contract provisions?

> 6\. If Grid West becomes a public utility that sells transmission
> service but not as an RTO, is Commission policy sufficiently flexible
> to accommodate participating transmission owners continuing as
> transmission providers for their pre-existing transmission agreements,
> including OATT service, while new service is made available only
> through Grid West?
>
> 7\. Will the Commission acknowledge that Bonneville's participation in
> Grid West, as a participating transmission owner, does not provide the
> Commission with any authority to modify Bonneville's existing
> transmission agreements?
>
> 8\. Will the Commission support implementation, for an indefinite
> duration, of license plate rates and the application of charges to
> through and out transactions?

Because the Commission\'s guidance on these issues will be critical to
stakeholder consideration of the Grid West proposal in late summer and
to Petitioners\' decisions in September about whether to support further
development of the proposal, Petitioners request the Commission to
respond no later than July 1, 2005.

# I. COMMUNICATIONS

All written communications regarding the petition should be addressed to
the following individuals who should be placed on the official service
list of the proceeding:

[For Bonneville Power Administration]{.underline}: [For
PacifiCorp]{.underline}:

> Stephen R. Larson Pamela L. Jacklin

Bonneville Power Administration Stoel Rives LLP

P.O. Box 3621 900 SW Fifth Avenue, Suite 2600

Routing L-7 Portland, OR 97204

Phone: (503) 230-4999 Phone:  (503) 294-9406

Fax: (503 230-7405 Fax:  (503) 220-2480

<srlarson@bpa.gov> <pljacklin@stoel.com>

[For Idaho Power Company]{.underline}:

Malcolm C. McLellan

Van Ness Feldman, P.C.

719 Second Avenue, Suite 1150

Seattle, WA 98104-1728

Phone: (206) 829-1814

Fax: (206) 623-4986

<mcm@vnf.com>

# 

# II. EXECUTIVE SUMMARY

The development of Grid West is subject to four decision points.
Decision Point 1 occurred on December 9, 2004 when the RTO West board of
directors adopted the Grid West Articles of Incorporation and
Developmental Bylaws and restructured RTO West into Grid West, a
Washington nonprofit membership corporation. The next decision point,
Decision Point 2, relates to seating an independent Grid West
Developmental Board and funding its work. Decision Point 2 is expected
to occur in September 2005. It is critical that Petitioners understand
the Commission's views and intentions on the issues raised in this
Petition prior to determining whether to commit additional funds for
further development of the Grid West proposal.

**A. Non-Order 2000 Public Utility.** If Grid West becomes an operating
entity, it is expected to offer transmission services as an independent
transmission provider pursuant to a transmission tariff that is
identical or superior to the Order 888[^1] *pro forma* open access
transmission tariff ("OATT"). Grid West will not attempt to become
recognized by the Commission as a regional transmission organization
because, among other reasons, the contemplated regional services will
not satisfy all the characteristics and functions of Order 2000.[^2] As
a result, Petitioners seek to confirm their understanding that the
Commission will review Grid West's Section 205 filing to ensure that
Grid West satisfies the general obligations of a transmission provider
and not condition its approval on Grid West becoming an RTO or
subsequently order Grid West to adopt Order 2000 or Standard Market
Design ("SMD") elements.

**B. Governance.** Petitioners request the Commission\'s concurrence
with their belief that Grid West\'s governance structure is independent.
While seeking RTO status is not currently planned for Grid West, the
Grid West Operational Bylaws require a Commission determination that
Grid West\'s governance structure as set forth in the bylaws allows the
corporation to satisfy the independence requirements of Order 2000.[^3]
The governance structure embodied in the Operational Bylaws is
substantially the same as the transparent decision-making process
approved by the Commission in the RTO West proceeding.[^4] The most
significant differences involve new accountability mechanisms provided
to Grid West members, including the ability to require some board
proposals to obtain a supermajority vote of the trustees before they may
be implemented, and a reduction in the number of member
representatives\' votes required to elect and remove trustees.
Petitioners believe that this governance structure will be responsive to
regional stakeholders while maintaining the ability to produce decisions
that reflect the interests of the region as a whole.

**C**. **Contracts Between Grid West and Transmission Providers**. Grid
West will own no transmission facilities, and thus its ability to
provide transmission services is dependent on its ability to contract
for the right to offer transmission services using participating owners'
facilities. Petitioners request the Commission's concurrence that, if
Bonneville contracts with Grid West, it will honor a provision in
Bonneville's contract with Grid West allowing Bonneville to withdraw its
facilities from Grid West without Commission approval. Bonneville must
be mindful that its statutory obligations will continue even after it
becomes a Grid West participating transmission owner. Bonneville cannot
surrender a termination right that may be critical for meeting those
obligations. Since Bonneville is not considered a public utility, as
defined in the Federal Power Act, it is important for the Commission to
confirm that it will not attempt to prevent Bonneville from exercising a
contractual right to terminate its contract with Grid West and withdraw
its facilities.

In addition Petitioners seek guidance on the withdrawal rights of the
transmission owners that are public utilities. These owners and their
state regulators need assurance that a voluntary decision to allow Grid
West to use their transmission facilities for regional service is not an
irrevocable decision. While these public utility owners are mindful that
any service Grid West offers, as well as any post-termination service
provided by the owners, must be provided at rates, and under terms and
conditions, that are just, reasonable and not unduly discriminatory,
they believe that the necessary corollary of voluntary participation in
a regional transmission entity is the ability to withdraw.

Furthermore, Petitioners request the Commission's concurrence that it
will apply the precedent of allowing *Mobile-Sierra* clauses in the
contracts enabling Grid West to utilize transmission facilities. In the
context of RTOs, the Commission has accepted various *Mobile-Sierra*
clauses in the transmission agreements between RTOs and participating
transmission owners. While Grid West will control the tariff by which it
will offer transmission services, transmission owners must be able to
rely on critical aspects of the arrangement between themselves and Grid
West not being changed without their consent, except upon the
extraordinary showing required by the *Mobile-Sierra* standard.

**D. Transmission Tariff.** In the context of RTOs, the Commission has
indicated that transmission providers must take service under the RTO
tariff in order to satisfy pre-existing service obligations. Since Grid
West is not seeking RTO status and because of substantial concerns of
some transmission customers, Grid West's market structure does not
contain this requirement. The transmission provider will continue to
directly serve its pre-existing obligations under their terms, including
the provider\'s own OATT. However, Grid West will receive all
transmission schedules and establish markets for the voluntary resale of
transmission rights. When new transmission service is needed either
because the transmission customer's existing contract expired (without
rollover), existing rights are insufficient to meet demand, or the
customer wishes to participate in new transactions, Grid West will sell
those transmission rights. More specific information about these
concepts is contained on the Grid West website (www.gridwest.com), but
the specific details will not be created until after Decision Point 2.
Petitioners request confirmation that the Commission will be receptive
to the concepts under development within Grid West and will not insist
that Grid West follow the RTO requirements.

In past orders, the Commission has recognized that it does not have
jurisdiction over Bonneville's pre-existing contracts. To mollify fear
that Bonneville's participation in Grid West may establish such
Commission authority over Bonneville\'s contracts, Petitioners request
the Commission to acknowledge that Bonneville participation does not
provide the Commission with any authority to modify Bonneville's
existing transmission agreements.

Petitioners also seek confirmation from the Commission that it will be
receptive to pricing mechanisms that avoid significant cost shifts
within the region. In the context of other RTOs, the Commission has
accepted license plate pricing but allowed its use only during a defined
transition period. In the context of RTO West, the Commission approved
license plate pricing (known within RTO West and Grid West as the
"Company Rate") for an eight-year period.[^5] At the end of that period,
the RTO West board would decide whether to continue Company Rate pricing
or propose something else. In the Grid West context, the Company Rate
concept[^6] would be applied for the first eight years and would
continue unless and until the Operational Board elected to adopt,
through a formalized process with the members, another pricing approach.
Making the Company Rate approach the default gave important comfort to
certain load-serving entities with substantial concerns about
disadvantageous cost shifts. Since the Grid West proposal will not be
filed under Order 2000, Petitioners desire confirmation from the
Commission that license plate pricing or other appropriate mechanism
consistent with the "Company Rate" concept embodied in the Grid West
bylaws is acceptable and that a maximum duration will not be imposed.

Finally, Petitioners seek confirmation that the Commission will be
receptive to a Grid West pricing proposal that would collect a portion
of the embedded cost of the system from throughput and export
transactions. The Grid West working proposal, based on physical rather
than financial transmission rights, does not propose a transition period
after which Grid West charges would cease to be collected from these
transactions.

**III. BACKGROUND.**

**A. Description of the Petitioners.** Bonneville is a self-financed
federal power marketing administration within the United States
Department of Energy. Pursuant to its own statutory framework, it owns
and operates a significant portion of the bulk electric transmission
system in the Pacific Northwest. It is not a public utility under
Section 201(e) of the Federal Power Act, although the Commission does
have limited authority under other law to approve Bonneville\'s
rates[^7] and order the agency on a case-by-case basis to provide
transmission service.[^8] Bonneville has received the Commission\'s
approval of its open access tariff under the "safe harbor" provision of
Order 888.[^9] Bonneville has been an active participant in previous
efforts, described below, to establish a regional transmission
organization in the region, both as an ISO (IndeGO) and as an RTO (RTO
West).

PacifiCorp is an investor-owned utility providing retail electric
service within the states of California, Idaho, Oregon, Utah,
Washington, and Wyoming. PacifiCorp is a public utility under Section
201 of the Federal Power Act, a transmission provider, and a wholesale
marketer of electric power. PacifiCorp also operates more than 15,000
circuit miles of transmission, making it one of the largest
investor-owned open-access transmission systems in the United States.
PacifiCorp is an active participant in the development of Grid West and
also supported previous efforts to establish a regional transmission
organization in the region.

Idaho Power Company is an investor-owned utility providing retail
electric service within the states of Idaho and Oregon. Idaho Power is a
public utility under Section 201 of the Federal Power Act, a
transmission provider, and a wholesale marketer of electric power. Idaho
Power is an active participant in the development of Grid West and also
supported previous efforts to establish a regional transmission entity
in the Northwest.

**B. The Northwest\'s Efforts to Create an ISO and RTO.** For more than
eight years, Petitioners and other transmission owners[^10] in the
Pacific Northwest and adjacent areas have been exploring proposals to
form an independent regional transmission organization. The purpose of
such an organization would be to manage and operate the multiple
transmission systems as a single system in order to gain commercial and
operational efficiency, improved planning and grid expansion, and
increased reliability of the interconnected grid. The Commission has
encouraged the establishment of regional transmission organizations
through its Order 2000, and several have been formed in other parts of
the country.

After the first proposal called IndeGO collapsed for lack of support in
2000, the transmission owners formed and funded RTO West, a nonprofit
Washington corporation that served as a vehicle for the joint effort to
develop an RTO. Each of the funding transmission owners had a
representative on the RTO West board of directors. Initial development
efforts produced a conceptual proposal for an operational entity
intended to conform to the Commission\'s Order 2000 requirements. The
Commission issued declaratory orders approving significant portions of
the RTO West conceptual proposal.[^11] However, this proposal was
criticized by some regional stakeholders as being too FERC-driven,
focused on problems that did not exist in the RTO West region to any
significant degree and divorced from the region\'s operational
characteristics. They argued that some Order 2000 solutions were not
appropriate to the region\'s unique hydro-thermal power system and would
consequently impose unnecessary costs and threaten pre-existing
arrangements that worked. Some stakeholders continued to have strong
reservations about a perceived lack of accountability of an independent
RTO West board to regional interests. Based largely on their experience
with the California energy crisis, they feared the imposition of
problematic market mechanisms and uncontrolled costs by trustees who
lacked any significant connection to the region. Consequently, the
transmission owners decided they lacked the necessary public support to
move forward.

The Commission is well aware of the long-standing anxiety in the Pacific
Northwest concerning ISOs and RTOs. Significant customer anxieties
persist concerning (i) mandatory, centralized energy markets and their
potential manipulation; (ii) the use of financial transmission rights in
the Pacific Northwest; (iii) the exposure of existing (often
nonjurisdictional) transmission service to cost-shifting and other
changes ordered by the Commission; (iv) the likelihood of implementation
costs overwhelming any potential benefits; and (v) increased
jurisdictional reach of the Commission over currently nonjurisdictional
facilities and entities.[^12] Based on the experience to date,
Petitioners have chosen to pursue Grid West rather than continuing
efforts to establish an RTO because they expect that any filing of an
Order 2000 compliant RTO proposal would be adamantly opposed by multiple
utility transmission customers.

**C. Creation of Grid West.** For the past 18 months, representatives of
the electric power industry in the four Pacific Northwest states,
British Columbia, Nevada, Utah and Wyoming focused on developing a third
proposal, Grid West, for improved management and planning of the
interconnected electric power transmission system within that area.
These representatives[^13] comprise a stakeholder advisory group
referred to as the Regional Representatives Group ("RRG") and have met
generally on a monthly basis to develop the proposal and assess progress
of various work groups. In the Grid West effort, the RRG focused its
efforts on identifying and addressing the region\'s real transmission
problems rather than attempting to adapt FERC RTO structure to the
region. The characteristics and functions of an RTO set out in Order
2000 were dropped as the necessary measures of an effective proposal.

The RRG assigned a small task force to find common ground among
competing proposals for resolution of agreed-upon regional transmission
problems. This effort led to the development of a scaled-back conceptual
proposal, known as the "RRG Platform Group Regional Proposal."[^14]
Based on the region\'s unique characteristics and needs, the proposal
would make significant progress towards resolving the region\'s
transmission problems. Some of the components of the earlier RTO West
proposal were incorporated to capture the efficiencies and greater
reliability benefits expected from those components while other RTO West
components were not incorporated because of the concerns by some about
their associated risks or their likely cost. Mechanisms for additional
accountability to stakeholders were added to the governance structure,
the use of markets was significantly scaled back, and consolidation of
control areas was made voluntary.

Even though the proposal did not include all required characteristics
and functions of Order 2000, it did contain many of the Day One
characteristics and functions within the voluntary consolidated control
area. The proposal allowed for the independent entity to add additional
mechanisms and features over time, but recommended that procedural
protections be incorporated in the bylaws to establish more board
accountability for, and provide members a significant voice in, those
decisions.

In December 2003, the RRG accepted the task force proposal as worthy of
further development,[^15] and directed the RRG\'s Bylaws Work Group to
produce new bylaws to reflect the revised governance proposals. In
February 2004, a three-year, incremental decision process was developed
to guide the development of the governance, technical and contractual
elements of the proposal.[^16] Four major decision points were
identified, potentially culminating in a decision by the transmission
providers to accept or reject contracts negotiated and offered by the
independent entity. Failure to move forward at any decision point would
terminate the entire process.

After significant interaction with the RRG on its work, the Bylaws Work
Group presented proposals for both Developmental[^17] and
Operational[^18] Bylaws to the RRG on June 30, 2004. The RRG determined
the proposed bylaws were "good enough" to be posted for regional review
and comment. The RRG ultimately received six comments.[^19] On July 14,
2004, Bonneville formally asked for the written views of its customers
and constituent groups on whether the proposed bylaws were workable,
provided for adequate cost control, and assured sufficient
accountability of the independent board to regional interests.
Bonneville received 65 written comments from state public utility
commissions, public power customers, members of the Northwest
congressional delegation, public interest groups and other interested
stakeholders.[^20] Bonneville also sponsored a review of the proposed
bylaws by the National Academy of Public Administration ("NAPA"), an
independent, nonprofit organization chartered by Congress to identify
emerging issues of governance and to help federal, state, and local
governments improve their performance.[^21] Based on public comments and
NAPA's review, on September 23, 2004, Bonneville presented to the RRG a
list of 35 recommended revisions to the draft bylaws to strengthen
regional accountability, cost control and workability. The vast majority
of these recommendations were addressed by the RRG in a manner
acceptable to Bonneville and incorporated in revised bylaws.[^22]

The RRG also formed a technical workgroup known as the Transmission
Services Liaison Group (the "TSLG") which later engaged the services of
the Structure Consulting Group LLC to refine the RRG Platform Group
Regional Proposal. The TSLG is producing a series of technical papers
describing the Grid West structure and services; drafts may be found on
the Grid West website.[^23]

**D. Grid West Decision Path.** The first decision point (Decision
Point 1) occurred on December 9, 2004 when the nine-member RTO West
board of directors restructured RTO West into Grid West through the
adoption of the revised Articles of Incorporation and Developmental
Bylaws developed by the RRG.[^24] The RTO West board of directors became
the Grid West Interim Board, which has the authority to facilitate the
transition to a membership corporation, seek out potential independent
candidates for Developmental Board trustee positions, and continue work
on the initial design for Grid West operations including a cost
estimate. Membership applications began to be processed and various work
groups were established to develop the technical elements of the
proposal in order to facilitate a subsequent, high-level evaluation of
its costs, benefits and workability.

The next decision point (Decision Point 2) is planned to occur in
September 2005. The question to be decided is whether to elect and seat
the five independent Developmental Board trustees who would guide the
non-FERC jurisdictional corporation through the remaining two
developmental decision points, including the negotiation of transmission
agreements with the transmission owners.[^25] A critical factor at
Decision Point 2 will be an assessment of the products of the various
RRG work groups as to whether the Grid West proposal is likely to be
workable and produce net benefits to the area encompassed within the
proposed Grid West footprint.[^26] If, on the basis of this assessment,
Bonneville and at least two investor-owned transmission owners determine
to move forward and fund continued development, the Grid West members
will elect five independent trustees to the Developmental Board to
oversee the remainder of the development process, and the Interim Board
will terminate.

Following Decision Point 2, the independent Developmental Board will
engage in negotiations with the transmission owners to develop
transmission agreements for use of the transmission owners\' systems.
The third decision point (Decision Point 3) involves a decision by the
independent Developmental Board about whether to offer transmission
agreements to the transmission owners. This decision must occur no later
than 12 months from the first meeting of the Developmental Board.[^27]
If the independent Developmental Board elects not to offer contracts,
the board must adopt, and submit to a vote of the members, a resolution
to dissolve the corporation.

If the Developmental Board does offer contracts to the transmission
owners, the final decision point (Decision Point 4) involves two steps.
First, the Grid West members must vote in support of the board\'s
adoption of the Operational Bylaws. Second, Bonneville and at least two
contiguous investor-owned transmission owners must decide to accept the
offer.[^28] After positive action at both steps Grid West will adopt its
operational bylaws and take any remaining steps necessary to enable Grid
West to offer regional transmission services. Decision Point 4 must
occur no later than 12 months from the date of the offer[^29] and is
likely to occur sometime in 2007.

# IV. DESCRIPTION OF GRID WEST

In moving past Decision Point 1, Petitioners and other transmission
owners funding Grid West\'s development determined there was sufficient
regional consensus to support further developmental efforts. However,
Bonneville and others noted that long-standing risks and concerns still
existed that would impede development past Decision Point 2 unless
addressed positively. These concerns included (i) protection and
preservation of pre-existing transmission agreements; (ii) practical
rights to terminate participation as a participating transmission owner;
(iii) application of rate structures that minimize cost shifts; and (iv)
mitigating the risk that the Commission would use its jurisdictional
authority over Grid West to impose subsequent changes to Grid West
contracts or tariffs in the face of regional opposition. In addition,
Bonneville and other transmission owners required an early indication,
prior to committing to significant additional expenditures at Decision
Point 2, about whether the Commission would find that the Grid West
Operational Bylaws, with their accountability mechanisms, satisfied the
independence requirements of Order 2000 and whether the absence of
certain other required components of Order 2000 would be fatal to the
Commission\'s acceptance of the Grid West proposal. Bonneville indicated
it would seek assurances from the Commission that the Commission\'s
jurisdictional framework and approach toward RTO development is
sufficiently flexible to accommodate a regional transmission provider of
the sort envisioned by the RRG. To this end, Petitioners next describe
the regional arrangements that are under consideration, including
governance structure and operational characteristics of Grid West, and
pose a series of questions concerning the Commission\'s commitment to
support key concepts necessary to realize and maintain regional
accountability and control.

**A. Governance Structure.** Grid West\'s operational stage governance
structure is embodied in its Operational Bylaws[^30] that would become
effective only if Grid West moved to the operational stage. This
governance description is provided to permit the Commission to determine
whether the governance structure set forth in the Operational Bylaws
would satisfy the independence requirements for Order 2000. This
determination is a condition precedent for Grid West to begin offering
transmission and related services in the operational stage but is needed
now to determine whether additional funds should be dedicated to
development of Grid West.

The Grid West governance structure is modeled on the RTO West governance
structure previously approved by the Commission.[^31] The changes made
to the RTO West bylaws were the result of a productive collaboration
among the members of the RRG.

**1. Members**. The five-member classes in Grid West are: (a) Major
Transmitting Utilities ("MTU"); (b) Transmission-Dependent Utilities
("TDU"); (c) Generators, Power Marketers, Large Generating End-Use
Consumers, and Others; (d) End-Use Consumers; and (e) State and
Provincial Energy Authority/Tribes/Certain Public Interest Groups. These
classes closely track the class structure previously incorporated into
the RTO West bylaws.

The membership qualification for the MTU Member Class is now based on
the amount of transmission pole miles (minimum of 550) rather than an
owner\'s percentage of aggregate book value.[^32] Transmission pole
miles provide a basis for including the nine RTO West filing utilities
in the MTU class without mandating MTU membership for certain publicly
owned utilities that might otherwise qualify under a book value
criterion. The new definition does allow the MTU membership to include
in the class those TDU members that execute a transmission agreement
with Grid West.

The membership qualifications for the TDU Member Class have been
slightly modified to ensure that the class is populated only by
governmental or consumer-owned entities that provide transmission or
distribution services within the Geographic Area.[^33] This limitation
was important to the publicly owned utility members of the RRG.

The Generators, Power Marketers, Large Generating End-Use Consumers, and
Others Member Class has been modified from the RTO West Nonutility
Entities Member Class to allow Large Generating End-Use Consumers to
elect membership in either this class or in the End-Use Consumers
Class.[^34] RRG representatives of Large Generating End-Use Consumers
insisted that these entities, having significant interests both as
generators and as end-use consumers, have a membership choice driven by
the primary interests of individual members.

The End-Use Consumer Member Class has been modified from the RTO West
Retail Customer class to limit membership of individual retail customers
to bundled and unbundled Large End-Use Consumers, *i.e*., load within
the Geographic Area equal to or greater than five average
megawatts.[^35] Smaller retail consumers would now be represented only
by Consumer Advocates, but their voting power has been increased to
one-half of the class voting power.[^36]

Membership qualifications for the State and Provincial Energy
Authority/Tribes/Certain Public Interest Groups Member Class are much
the same as in the RTO West bylaws, but now it allows for five members
in the State and Provincial Energy Authority Sub-class if there are five
or more members. The Tribes Sub-class has been expanded to include
entities beyond tribal regulatory authorities, and membership in the
Certain Public Interest Group Sub-class (previously the Unaligned
Entities subclass) is now limited to 501(c)(3) environmental or
energy-related organizations.[^37]

Much like with the RTO West governance structure, the member voting
power within Grid West is structured so that, in general, each of the
five member classes in Grid West has the same voting power as the other
member classes. Members of Grid West have two kinds of voting power:
[^38] (a) the power to vote on "yes and no" kinds of questions (such as
whether to amend the Grid West bylaws or dissolve the corporation), and
(b) the power to elect (and remove) class or subclass representatives to
the Members Representative Committee ("MRC"). Notably, Grid West members
are provided significant control over corporate costs because they will
constitute a majority on the Grid West Budget Committee that prepares
and recommends to the Operational Board the proposed annual budget and
forecast of out-year funding and commitments.[^39] Members also
participate in mandatory advisory votes when the Grid West budget
proposed by the Operational Board exceeds prior projections by 15
percent,[^40] other advisory votes called by the Operational Board and
Board Advisory Committee activities.[^41] Section 5.1 of the Operational
Bylaws contains a full listing of members\' rights.

The Grid West bylaws provide members with another board accountability
mechanism. Grid West members may determine that an Operational Board
decision, or proposed decision, constitutes a major change in the scope
of Grid West\'s activities or policies that must be authorized by at
least seven out of the nine trustees, *i.e*., a supermajority, in order
to be implemented.[^42] The members may impose this requirement on the
Operational Board through an affirmative vote at a members\' meeting of
at least 18 of the class votes cast by the member classes and
subclasses. The duration of this process would be approximately 70 days.

Finally, Grid West members are provided a right to dissolve the
corporation if the Commission "orders a change to or issues an order or
rule that preempts or otherwise renders inoperative a provision of the
Articles of Incorporation or these Operational Bylaws" and the members
do not approve the change or do not approve a decision by the
Operational Board to accept the effect of the Commission\'s order.[^43]
The members must approve such changes by the same supermajority vote as
is required for amending the Operational Bylaws, *i.e*., a margin of at
least two-thirds of the class vote in at least four out of the five
member classes. If the members fail to approve the change, they may
require the Operational Board to dissolve the corporation by the same
supermajority of class votes.

**2. Members Representative Committee.** The MRC is a committee of
either 30 or 31[^44] representatives of the member classes. Generally,
each member class may elect six representatives to the MRC. If a member
class is comprised of subclasses, each subclass elects a specified
portion of the class MRC representatives.

The MRC is responsible for nominating, electing and removing Operational
Board trustees. The RTO West bylaws required a minimum of 24 MRC votes
to elect or remove a trustee. To facilitate elections and allow more
qualified candidates to be elected,[^45] the Grid West bylaws now
require at least 20 MRC votes for election (except where a third run-off
vote is required to fill a vacancy, in which case only 16 votes are
required).[^46] To provide greater accountability, the MRC may now
remove a trustee at any time, with or without cause, by the affirmative
vote of 20 members at a duly held meeting of the MRC.

In addition, the MRC is responsible for reviewing, consulting with the
Operational Board about, and voting on "Special Issues" which are listed
and defined in the bylaws.[^47] These are authorities of the Operational
Board that have been identified as being so significant to the region
that the Operational Board can only implement them through a special
consultation and interaction process with the MRC, unless the proposed
action is within the scope of a previous authorization. The "Special
Issues List" is comprised of:

> • Authorization for Grid West to exercise backstop measures (authority
> to arrange for transmission construction) with respect to chronic,
> significant, commercial congestion;[^48]
>
> • Departure from using the "Company Rate approach";[^49]
>
> • Authorization to issue financial transmission rights;
>
> • Authorization for Grid West's market monitor to impose penalties or
>
> actively intervene in markets; and

• Authorization to change a transmission owner's loss methodology.

Prior to taking a final action on a proposal to implement an authority
within the ambit of a Special Issue, the Operational Board is required
to consult with the MRC (as well as with the Governmental
Committee[^50]). The MRC is then required to vote on whether it supports
or opposes the Operational Board\'s proposed use of the authority. If
the proposal is supported by the affirmative vote of at least 16 MRC
representatives, the proposal may be immediately approved and
implemented by the Board upon the affirmative vote of a majority of the
trustees. If the proposal fails to obtain at least 16 affirmative votes
of the MRC, it is remanded to the Operational Board for further
consideration. If, after remand by the MRC, the Operational Board still
wishes to implement the Special Issue authority, it must first obtain
the affirmative vote of a *supermajority* of the trustees, *i.e.*, at
least seven of the nine trustees.[^51] The duration of this consultation
process, including a remand by the MRC, would be approximately 145 days.

**3. Board of Trustees**. The Grid West Operational Board will be
comprised of nine independent trustees who, according to the bylaws,
should collectively possess a knowledge of the operational
characteristics of the Pacific Northwest power system; have executive
management experience or board experience with electric utilities; and
have personal abilities and qualities such as integrity, leadership,
problem-solving, facilitation, and consensus-building.[^52] They will
serve staggered three-year terms. A slate of qualified candidates will
be developed by an independent search firm and presented to the MRC for
nomination as candidates. Current trustees whose terms are expiring will
automatically be included among the candidates to be considered by the
MRC for nomination unless they have given notice that they do not wish
to be considered. The requirement in the RTO West bylaws that two-thirds
of the candidates must have senior management experience in at least one
publicly or privately held for-profit or not-for-profit corporation or
government entity of a particular size has been eliminated.[^53]

Individuals are not qualified to serve as a trustee if they (or their
spouse, domestic partner or any legal dependent):

(i) Ha\[ve\] a direct or indirect financial interest in (including the
    ownership of securities of) a Market Participant[^54] or Member (or
    any Affiliate of any of such Persons);[^55] . .

(ii) \[are\] connected (or ha\[ve\] been connected within one (1) year
     prior to the date of the meeting to nominate individuals for
     Trustee) as an owner, director, officer, employee, partner,
     principal, or member of a governing board or council, or in any
     similar capacity, to a Market Participant or Member (or any
     Affiliate of any of such Persons);[^56] or

(iii) ha\[ve\] a Related Person[^57] that is an officer, chief executive
      or general manager, director or trustee or member of a governing
      board or council, or that occupies a position of similar capacity
      of a Market Participant or Member (or any Affiliate of any such
      person).[^58]

The Grid West bylaws eliminate the provision in the RTO West bylaws that
allowed new trustees to retain financial interests in market
participants for six months after election to the board. Additionally,
trustees who leave the Operational Board (and their immediate families)
are restricted, for periods up to one year, from acquiring financial
interests in market participants or members, or entities that receive
significant benefits from Grid West, a market participant or
member.[^59] Former trustees are also prohibited from accepting
employment with or providing consulting services to a market participant
or member for a period of one year. These provisions hold trustees to a
higher standard than required by the RTO West bylaws previously approved
by the Commission.

Operational Board meetings are required to be open to members and the
general public except for sessions that may be closed for discussion of
litigation or potential litigation, personnel matters, vendor or
contractor selection, real estate transactions, commercially sensitive
information, and other matters that are reasonably determined by the
board in good faith to be entitled to confidential treatment.[^60]
Minutes of each board meeting must be made public (except for closed
sessions).

**4. Board Advisory Committee.** The Grid West bylaws retain the Board
Advisory Committee structure previously approved by the Commission in
the RTO West proceeding.[^61] The Board Advisory Committee will not have
a fixed size, and members will neither be elected nor divided into
classes. It will serve a purely advisory function and its members will
not vote on any matter. A new element allows each member, including
state, tribal and provincial regulator members, to have up to three
representatives on the Board Advisory Committee to represent its
interests and those of any affiliates. For a stronger member voice, the
Grid West bylaws require the Operational Board to establish and appoint
member representatives to a Tariff Committee, an Operations Committee,
and a Planning Committee.[^62]

**5. Governmental Committee.** A Governmental Committee has been added
to the Grid West bylaws.[^63] The Governmental Committee is comprised of
Grid West corporate representatives, interested members of the State and
Provincial Energy Authority Sub-class and Tribes Sub-class, and
representatives of electricity regulatory commissions of participating
jurisdictions that are not members of Grid West. The committee\'s
purpose is to consult with the Operational Board and to participate in
activities determined to be appropriate by the Operational Board and
representatives of participating jurisdictions. The Governmental
Committee also has the same rights as the Board Advisory Committee to
advise the Operational Board on those certain matters specifically
identified in the bylaws.[^64]

**B. Operation and Services.** This description of Grid West\'s
operational characteristics and services is based on RRG work to date
and is therefore still in a somewhat preliminary state. As currently
envisioned, the Grid West proposal for initial operations includes
voluntary consolidation of control areas by some transmission owners in
the region and the provision of new regional transmission service over
the larger Grid West footprint, which includes those transmission
facilities in the consolidated control area as well as the facilities of
transmission owners that choose to participate in Grid West but retain
their own control area operations. Grid West will have three key roles:
(i) control area operator for consolidating transmission owners; (ii)
transmission provider with respect to the new regional service(s) for
the larger Grid West footprint; and (iii) central scheduling entity for
the Grid West managed transmission system.

**1. Control Area Operator.** At least three transmission owners --
Bonneville, PacifiCorp and Idaho Power Company − anticipate that they
may consolidate their control areas. By doing so, the vast majority of
the area\'s transmission facilities would be placed into a common
control area operated by Grid West. Other owners may decide to
consolidate as well, but the assumption for Grid West development is
that not all transmission owners will consolidate their control areas.
As control area operator, Grid West would serve as the Balancing
Authority and Reliability Authority for the consolidated control area.
It is possible that Grid West may serve as the Reliability Authority for
the entire Grid West managed transmission system. Grid West would be
responsible for calculating Area Control Error and accepting voluntary
generation offers made available to it to clear congestion and balance
the system; operating Automatic Generation Control; maintaining reserve
margins; monitoring system conditions; directing Balancing Authority
actions; and operating the Remedial Action Schemes. Grid West would
operate a voluntary Day Ahead Reserve Market for supplying regulating,
spinning and non-spinning reserves to the consolidated control area and
a Real Time Balancing Market for balancing energy within the
consolidated control area. The consolidating owners will be required to
have sufficient Interconnected Operations Services to meet the
requirements for their schedules. The consolidating owners and other
entities either inside or outside the consolidated control area could
offer resources into these markets, which could then be used to offset
the obligations of the consolidating owners. The only party purchasing
from these markets would be Grid West for the purpose of meeting the
needs of the consolidated control area. Entities outside the
consolidated control area would have to obtain their requirements from
another source.

2\. Non-Control Area Services. In addition, Grid West would serve as the
exclusive provider of new regional transmission rights over the entire
Grid West managed transmission system, *i.e.*, both inside and outside
the consolidated control area, and would have necessary authority from
participating transmission owners to enable it to provide such services.
Grid West would: (i) retain a physical transmission rights approach but
would implement a system-wide, flow-based method for determining
available flow capacity; (ii) provide for centralized decision making
for access requests, scheduling and determination of available flow
capacity; and (iii) establish a centralized OASIS site. Grid West would
also be the scheduling entity for the entire system. Users would be
required to have physical transmission rights to schedule and must
submit balanced schedules.[^65] Grid West would implement a regional
planning and expansion program with back-up authority for reliability
purposes. Additionally, it would establish an independent market monitor
function. It would not, however, sell ancillary services or operate an
ancillary services market outside of the consolidated control area; in
that case the ancillary services would continue to be provided by the
existing control area (Balancing Authority).

New service would include: (i) auctioned transmission service of one
year or less comprised of a blend of available flow capacity, if any,
and existing transmission rights or scheduling flexibility offered by
customers into a Reconfiguration Market; (ii) long-term rights from
existing capacity (if sufficient) or from capacity made available
through expiration of contracts or added to the system through upgrades
and construction; and (iii) a first come, first served post-Day Ahead
service serving a function similar to nonfirm or secondary service. The
proposal would preserve existing transmission arrangements without
requiring transmission owners to purchase new service from the
independent entity to serve such contracts.[^66] Embedded costs would be
recovered from pre-existing agreements as they are now by the original
service providers. Embedded costs would be recovered from additional
long-term transmission rights provided by Grid West through application
of non-pancaked license plate rates to the extent practicable.

The pricing proposal being evaluated anticipates that each participating
transmission owner would have a license plate rate (Company Rate) for
new transmission service to load on that particular owner\'s system. An
owner\'s Company Rate would be based upon its system revenue requirement
(as included in the transmission owner\'s agreement with Grid
West).[^67] The proposal currently being developed would allow each
owner to elect whether to have Grid West develop and propose its Company
Rate or to develop and propose its own Company Rate.[^68] Because each
transmission owner currently expected to bring facilities to Grid West
must obtain the Commission\'s approval of its transmission rates, the
Commission would continue to maintain the same level of oversight of
wholesale transmission rates as exists today, even if an owner elected
to develop and propose its own Company Rate. Petitioners also envision
Grid West applying a Grid Management Fee to schedules (including
transmission owners\' schedules for pre-existing service they provide)
to recover Grid West\'s operating costs and a Revenue Recovery Rate
Adjustment charge to new services if necessary to make up for
participating transmission owners\' revenue losses resulting from
termination of their own short-term and nonfirm transmission sales. And
the Grid West proposal envisions export transactions, whether under
pre-existing rights or purchased rights, contributing to embedded cost
recovery.[^69]

Allocation of the costs of new transmission facilities in the Grid West
footprint is yet to be resolved. The regional proposal of December 2003
stated, "the expectation is that new projects will be funded by willing
participants (outside of the potential for chronic congestion and
reliability backstop actions of the Independent Entity)."[^70] Where
upgrades are not undertaken voluntarily, and assuming that Grid West
adopts the same approach as had been proposed in the RTO West
proceeding,[^71] costs of construction arranged by Grid West pursuant to
its reliability backstop authority would be allocated by Grid West to
the owner (or owners) that had failed to maintain compliance with
reliability or transmission adequacy standards. If Grid West arranges
for construction to resolve chronic, significant, commercial congestion
(which would require the Operational Board to first obtain authorization
through the Special Issues process), those costs would be allocated to
those loads that benefited from the upgrade or new facility.

Grid West would develop Transmission Adequacy Standards and coordinate
the transmission planning and expansion process within the Grid West
footprint, including development of an annual five-year transmission
plan. It would have backstop authority, consistent with any requirements
at law, to affect an expansion of a participating transmission owner\'s
transmission facilities, and allocate the costs to the owner, where the
owner had failed to comply with reliability criteria or had allowed its
transmission capacity to decline over time.

## V. PETITIONERS\' UNDERSTANDING OF THE LEGAL FRAMEWORK WITHIN WHICH GRID WEST WOULD OPERATE 

Petitioners and the other transmission owners participating in the
development of the Grid West proposal have not determined the form of
the eventual filings they and Grid West must make and the relief sought
before Grid West can sell transmission services. This cannot be
completed until the Grid West design is established by the independent
Developmental Board of Trustees. At a minimum, they anticipate filing
and seeking approval of the Grid West tariff and transmission agreements
with transmission owners. For purposes of this request for a declaratory
order, Petitioners have certain assumptions regarding the legal
framework within which Grid West would operate. These assumptions are
set forth here as an aid to understanding the questions posed by
Petitioners. Petitioners request the Commission to correct any mistaken
assumptions they may have.

**First**, Petitioners assume for purposes of this Petition that Grid
West will be a "public utility" within the meaning of the Federal Power
Act once it provides regional transmission services under its own
tariff.

**Second**, Petitioners assume that, because Commission policy makes RTO
formation voluntary, they may request, and the Commission may grant,
approval for a regional transmission provider that offers transmission
services as a transmission provider according to the terms of an OATT
pursuant to Order 888 (18 CFR 35.28 (2004)) and that does not meet all
of the requirements of Order 2000 (18 CFR 35.34 (2004)).[^72]

**Third**, Petitioners assume that a nonjurisdictional utility, or an
entity over which the Commission has only limited authority, that allows
its facilities to be used by Grid West for the provision of regional
transmission service will not itself become subject to Commission
jurisdiction, or any expansion of the scope of Commission jurisdiction,
over its activities as a consequence of its participation in Grid West.

**Fourth**, Petitioners assume that a nonjurisdictional utility, or an
entity over which the Commission has only limited authority that
acquires transmission only services from Grid West, will not itself
become subject to Commission jurisdiction.

**Fifth**, Petitioners also assume that mere membership in Grid West, a
Washington nonprofit corporation, by nonjurisdictional entities will not
result in any way in their becoming subject to the Commission\'s
jurisdiction.[^73]

**Sixth**, Petitioners assume that if Grid West is a public utility, it
must file its tariff and related protocols with the Commission prior to
commencing service. Based on current Commission policy, Grid West would
need to file a *pro forma* OATT or a tariff that is determined by the
Commission to be comparable or superior to the OATT. Petitioners also
assume Grid West would thereafter be subject to Commission orders that
apply generically to all public utilities with Commission-approved open
access tariffs.

**VI. QUESTIONS POSED AND DECLARATIONS SOUGHT FROM THE COMMISSION**

Petitioners have indicated that guidance on certain issues will be
critical to their determination of whether to continue development of
Grid West beyond Decision Point 2 and, assuming the development
continues, to their ultimate decision on whether to become participating
transmission owners by executing transmission agreements with Grid West.
To assist Petitioners in evaluating the efficacy of continued Grid West
development efforts, Petitioners pose the following questions and seek
guidance on the effect of the Grid West arrangements described above. A
discussion of Petitioners\' views follows each question posed.

1.  Assuming Grid West seeks approval under Section 205 of the Federal
    Power Act to offer regional transmission service pursuant to an open
    access tariff, but not as an Order 2000 RTO, will the Commission
    treat Grid West's application as one that must satisfy the open
    access requirements of Order 888 (that is, offering services
    consistent with or superior to the *pro forma* OATT requirements)
    rather than the requirements for RTO status?

**[Petitioners\' Views]{.underline}.** Petitioners request the
Commission to commit to reviewing a Grid West filing on its own merits
under Order 888 rather than under the requirements of Order 2000. Grid
West will sell transmission service under an OATT, but the Grid West
proposal is not intended to create an Order 2000 RTO.[^74] While
Petitioners believe the Grid West working proposal would provide
nondiscrimination benefits, economic efficiencies and reliability
improvements superior to those provided under Order 888, they also
acknowledge that the proposal would not meet all the requirements of

Order 2000. Petitioners believe that the working proposal represents the
most change that could be accepted by a significant portion of the
region at this time while providing a platform for potential future
evolution brought about by the region\'s needs and aspirations.

The Commission recently issued a declaratory order providing guidance on
another proposal that represented the boundary of what another region\'s
constituents would accept with respect to Order 2000. In *Entergy
Services, Inc.,*[^75] the Commission conditionally approved an Entergy
proposal that would combine the benefits of Order 888 with the
independent decision-making benefits of Order 2000. Notably, as Entergy
explained in its filing letter, its proposal was developed against the
background of the company\'s long-term inability to form or join an
Order 2000 RTO. The company explained that its proposal to have an
independent coordinator of transmission perform many of the Orders 888
and 2003 functions for the company represented "a new and innovative
attempt to further the Commission\'s goals by establishing significantly
greater independence in the provision of transmission services *now*,
rather than waiting until an RTO is formed in the Southeast."[^76] The
Commission conditionally approved the proposal, finding that it was "a
step beyond" the *pro forma* OATT and Order 888 principles and that it
offered a more independent transmission decision-making process. In its
guidance order, the Commission noted that the independent coordinator of
transmission "must be, both in perception and in reality, entirely
independent from Entergy."[^77] Assuming that Entergy demonstrates that
the independence requirement is met in its upcoming filing, the
Commission found that the proposal was a positive development towards an
independent regional transmission planning and pricing regime.[^78]

Similarly, Grid West proposes to be unambiguously "superior to" the
OATT. The working proposal for Grid West represents an innovative
attempt to provide not only independent transmission decision-making but
also the benefits of centralized operation and planning while respecting
the concerns of regional constituencies concerning

Order 2000 and SMD. The Grid West proposal is much more than a
third-party transmission coordinator for a single company system. The
proposal represents a significant step beyond the Order 888 world in
which transmission providers operate their separate systems under
separate tariffs and separate rates. Grid West would become the
transmission provider that: (i) determines system-wide available flow
capacity; (ii) operates a single OASIS for all participating systems;
(iii) provides services that can reconfigure available flow capacity and
released transmission rights into flow-based injection/withdrawal rights
to enable trading of non-identical transmission rights over all
participating systems; (iv) makes access determinations for all
participating systems; and (v) coordinates transmission planning on a
single-system basis. Grid West\'s Operational Bylaws provide for
decision-making that is both in perception and in reality, entirely
independent from the transmission owners and market participants, while
adding innovative accountability and cost control mechanisms to better
serve the interests of the stakeholders.

Petitioners encourage the Commission to provide a basis for the region
to further develop the proposal and negotiate the transmission
agreements without the fear that Order 2000 requirements will be applied
to the Section 205 filing. As described above, stakeholders will assess
the results of initial development this summer, and the transmission
owners plan to decide at the end of September whether to continue
funding the effort and seat an independent Developmental Board. Before
they make a decision to spend significant additional funds on the
development effort, Petitioners need to know the criteria the Commission
will use to judge the proposal. Without that guidance, Petitioners fear
that waiting for a Commission decision at the end of the process will
render worthless the significant funds and effort they have invested in
developing the proposal by insisting that the Grid West proposal be
filed under Order 2000, where it would likely either be rejected or
accepted conditioned upon compliance with Order 2000 over a specified
timeframe. Since Bonneville's participation is contingent on regional
accountability being a controlling principle regarding the direction and
pace of Grid West's evolution, it is important to know now whether,
under current law, the Commission will assess (and hopefully approve) an
initial proposal under Order 888 rather than condition implementation on
satisfaction of Order 2000 characteristics and functions.

> 2\. Does Grid West's governance structure as embodied in its
> Operational Bylaws allow it to satisfy the independence requirements
> of Order 2000?

**[Petitioners\' Views]{.underline}.** Petitioners request the
Commission to declare that the Grid West governance structure satisfies
the Commission\'s requirements for independence under Order 2000. Grid
West's governance structure was developed recognizing that the
organization must be responsive to regional stakeholders, but at the
same time produce decisions that reflect the best interests of the
region as a whole, as opposed to the narrow interests of particular
stakeholders. To accomplish this, the organization's board of trustees
must be truly independent. Independence meant two equally important
things during the Grid West bylaws development process: first, that no
trustee has a financial interest in any market participant that does
business within Grid West's proposed geographic area, and second, that
no trustee is intended to represent the interests of a particular
stakeholder or class of stakeholders. Recognizing that Grid West during
its operational stage will become a public utility, the Grid West
development process looked to Order 2000 for technical independence
requirements, and imposed as a condition precedent to Grid West's
offering transmission services the need for the Commission to "holding
(without conditions or required changes) that the governance structure
set forth in these Operational Bylaws allows the Corporation to satisfy
the independence requirements of FERC Order No. 2000 and its
amendments."[^79]

The Operational Bylaws provide for broad regional input and require
additional process regarding major decisions, but they require that
decision-making must lie in the hands of decision makers that lack, in
perception and in reality, the narrow interests of particular
stakeholders or classes of stakeholders. Specifically, within the Grid
West governance structure the members and the MRC do not wield actual
authority in policy or operational decisions beyond that which is
already provided in the bylaws. The members and MRC are not independent.
They provide the board of trustees with guidance and advice, but do not
make policy or operational decisions for Grid West. A decision-making
process where the independent board carefully listens to each position,
deliberates in public, and then makes a decision will help to ensure
sound regional outcomes.

The Commission established four requirements for independence from
market participants.[^80] Those four requirements and a description of
how they are addressed by the Grid West governance structure follow:

a.  Grid West, its employees and non-stakeholder directors do not have
    financial interests in any market participant.

Grid West not only meets, but exceeds the Commission's requirement that
neither Grid West, nor any of its employees or non-stakeholder
directors, have financial interests in any market participant. Grid West
is a nonprofit corporation that will own no financial interests in any
other company. The Grid West bylaws further prohibit the corporation
from owning any transmission or distribution facilities, any interest in
generation facilities or generation output (except that which is
appropriate to meet its congestion management and control area operator
responsibilities) or any interest in a power or energy exchange in which
participation by buyers and sellers is mandatory (except for mandatory
rules for entities that voluntarily agree to Grid West\'s operation of
their control areas).[^81]

Grid West\'s non-stakeholder trustees, officers and employees will not
have financial interests in any market participant or member. The Grid
West Operational Board will be comprised of independent, non-stakeholder
trustees who may not have current financial ties to a market participant
or member and may not have worked for or been associated with a market
participant or member in the year preceding their nomination as a
trustee. The same prohibitions apply to anyone in a trustee\'s immediate
family.

Officers, employees, substantially full-time consultants and contractors
will be bound by employee conduct rules that prohibit them from having a
direct or indirect financial interest in market participants, other than
securities through diversified mutual funds. The employee conduct rules
will also prohibit them from: (i) being an owner, director, officer,
employee, attorney, partner or principal, or substantially full-time
consultant or contractor of a market participant; (ii) using (or
appearing to use) their positions for private gain or benefit to
themselves or to others, including Related Persons; and (iii) having a
direct or indirect interest in or relationship with any outside person
or organization that might affect (or be perceived to affect) the
objectivity or independence of their judgment or conduct in carrying out
their duties.[^82]

In the RTO West proceeding, the Commission determined that similar
limitations and prohibitions met the requirement that trustees, officers
and employees of an RTO have no financial interests in market
participants.[^83] The Commission should make the same finding here.

b.  Grid West has a decision-making process that is independent of
    control by any market participant or class of participants.

The Grid West bylaws provide for an independent non-stakeholder board,
balanced member representation, and a Board Advisory Committee open to
all members. Candidates for trustee positions are identified by a
neutral and independent search firm. Member representation and voting on
the MRC is essentially the same as that which was approved by the
Commission in the RTO West proceeding. Trustees are nominated and
elected by the MRC through a voting process that does not allow any one
type of member to control the election of a particular candidate.
Election or removal of a trustee cannot be imposed or vetoed by a single
market participant or a single class of market participants because,
while each member class has only six votes (or, in one case,
seven),[^84] trustees must be elected and removed by at least 20 (of 30
or 31) MRC votes.[^85] Therefore, no single class or any combination of
two or three classes may force the election or removal of trustees, and
no single class may block election or removal of a trustee.[^86] The
Commission should find, as it did in the RTO West proceeding, that this
process ensures fair and non-discriminatory trustee selection.[^87]

While many Grid West stakeholders desire to maintain the benefits they
expect to flow from seating an independent board, others insisted upon
an absolute right of members to block controversial Operational Board
proposals in order to incorporate into the Grid West model a mechanism
to better protect board accountability to Grid West members. In the end,
the bylaws reflect a compromise that Petitioners believe satisfies the
Commission's independence requirement, while also serving the competing
desire for board accountability. This compromise is the "supermajority"
vote concept, described above,[^88] which vests the MRC and members with
authority[^89] to require the Board to reach a supermajority consensus
prior to moving forward with a controversial proposal. This *does not*,
however, prohibit the Board from moving forward -- or refusing to move
forward -- with any proposal, or limit its discretion in doing so
independently. Rather, it requires a slowing of the decision-making
process and a higher degree of consensus by the independent trustees
than would otherwise be required to approve an Operational Board
proposal. Petitioners believe that this compromise, whereby independent
Operational Board decision-making is preserved but members or their
representatives may insist upon higher board consensus for approval of
controversial proposals, achieves an effective balance that reflects
both the need for independence and the demand for accountability. Even
if the Commission determines that these authorities of the MRC and the
members limit the independence of the board, the Commission should still
find that the mechanisms sufficiently comply with the independence
requirement because both authorities are wielded by a balanced
representation of the members.[^90] No one class is able to dominate the
outcome of the MRC or the members\' vote. In fact, in the MRC vote, more
than two classes voting unanimously are required and, in the members\'
vote, at least three classes voting unanimously are required.

The MRC\'s ability to remove trustees without cause is a critical
element of the RRG\'s decision to hold the Operational Board accountable
to the stakeholders for its policy decisions. However, a safeguard
against too easy use of this authority has been built in. Successful
removal of a trustee requires an affirmative vote of a *supermajority*
of the MRC, thereby requiring agreement among multiple member classes
that a trustee\'s action has been sufficiently egregious to warrant
removal. No one market participant or class of participants controls
this process. Not even a majority vote can effect a removal. This
mechanism is not otherwise contrary to any of the Commission\'s stated
requirements for independence. The Commission approved a similar
mechanism in the RTO West proceeding, though that mechanism required 24
votes to remove a trustee without cause.[^91]

The Board Advisory Committee is the same members committee with the same
purpose and rights as that approved in the RTO West proceeding, except
that the affiliates of members may now be granted membership. In the RTO
West proceeding, the Commission found that the

> Board Advisory Committee affords stakeholders an opportunity to bring
> to the attention of the Board of Trustees any issue of importance to
> stakeholders. Notably, participation in the Board Advisory Committee
> is not limited, and any RTO West member may join. Furthermore, the
> proposal allows for dissenting views to be presented to the Board of
> Trustees. We believe these provisions afford ample opportunity for
> stakeholders to participate, within an independent governance
> structure.[^92]

The Commission should find that the Grid West decision-making process
embodied in the Operational Bylaws is independent of control by any
market participant or class of participants.

c.  Grid West is not required to have exclusive and independent
    authority under Federal Power Act Section 205 to propose rates,
    terms and conditions of transmission service provided over the
    facilities it operates.

In *Atlantic City Elec. Co. v. FERC*,[^93] the D.C. Circuit held that,
while public utility transmission owners may cede rate-making authority
to an RTO by contract, the Commission lacked the authority to require
public utility transmission providers participating in an RTO to
surrender their statutory rights under Section 205 of the Federal Power
Act to make filings to initiate rate changes. Therefore, Petitioners
respectfully assume that the Commission will no longer apply the
original requirement of Order 2000 that an RTO have exclusive and
independent authority for all RTO rate filings. Rather, Petitioners
assume the Commission will allow, as it has with PJM,[^94] RTO-NE,[^95]
MISO,[^96] and SPP,[^97] public utility transmission owners and Grid
West to negotiate an allocation of their filing rights under Section 205
of the Federal Power Act. Petitioners also assume the Commission will
allow Bonneville and Grid West to negotiate their respective
responsibilities for rates, terms and conditions for service over the
federal transmission system for approval by the Commission, consistent
with Bonneville\'s statutory authorities. As the Commission has
previously stated, these allocations will be tested against the
Commission\'s requirement that "the interests of the region as a whole
are properly safeguarded."[^98] This determination cannot be made, of
course, unless and until such negotiated allocations are presented to
the Commission for approval under Section 205. However, the Commission
should find that Grid West meets the independence requirements of Order
2000 assuming that the Commission agrees upon subsequent review that the
allocation of filing rights between the transmission owners and Grid
West is in the best interest of the region as a whole.

d.  Grid West does not have to provide a compliance audit of the
    independence of the organization\'s decision-making process to be
    performed two years after its approval.

The Grid West governing structure, though providing for multiple
accountability mechanisms, does not provide for representation of market
participants on the Board of Trustees nor does it provide for any other
mechanism through which market participants may prohibit a board vote or
limit the discretion of the board. Consequently, this requirement is not
applicable. To the extent the Commission finds this requirement to be
applicable because of the rights of the MRC and the members to require a
supermajority vote of the Operational Board in some circumstances, it
should find that the membership voting structure and the membership
representation on the MRC reflect a "balanced proportion of stakeholder
representatives with no one sector having disproportionate control" of
their decisions.[^99] Consequently, the independence of the Grid West
decision-making process is sufficiently protected.

For the reasons set forth above, the Commission should declare that the
proposed governance structure established by the Grid West Operational
Bylaws complies with the independence requirements of 18 CFR §
35.34(j)(1), subject to a later determination that the allocation of
Section 205 filing rights and ratemaking responsibilities safeguards the
interests of the region as a whole.

> 3\. What is the Commission\'s position regarding transmission owners'
> withdrawal rights?

[Petitioners' Views]{.underline}. To facilitate transmission owners'
continued development of Grid West, Petitioners would significantly
benefit from clarification by the Commission with regard to the
withdrawal rights of transmission owners. Petitioners seek guidance on
this issue because certain Commission pronouncements in the ISO/RTO
context have created uncertainty about the Commission's position on this
matter. Although the Commission has acknowledged that transmission
owners can withdraw from voluntary regional transmission organizations,
it has indicated that regulatory approval is necessary under Section 205
of the FPA.[^100] In its 2003 "Guidance on Regional Transmission
Organization and Independent System Operator Filing Requirements under
the Federal Power Act,"[^101] the Commission clarified that public
utilities withdrawing from an RTO would not be required to make a filing
under Section 203 of the Federal Power Act, where the withdrawal did not
involve a transfer of an ownership or proprietary interest in
facilities. Instead, the Commission provided that arrangements to exit
an RTO would be reviewed in the context of filings made under Section
205. Likewise, since Grid West will not be an RTO, contractual rights to
exit should be reviewed in the context of a contract filings made under
Section 205.

a.  Will the Commission approve a contract between Grid West and
    Bonneville that allows Bonneville to withdraw as a participating
    transmission owner without Commission approval?

Plainly, Bonneville is not a public utility subject to the Commission's
Section 205 rate authority.[^102] Thus, Bonneville has no Section 205
filing obligation. Even assuming that Grid West would have to file
Bonneville's notice of termination of its transmission agreement with
Grid West, this filing would not create Commission jurisdiction over
Bonneville's decision to withdraw.

Bonneville\'s statutory scheme authorizes and directs the Administrator
to discharge the functions of that office in accordance with the policy
established by the Bonneville Project Act and in "a sound and business
like manner.**^"^** [^103] The Bonneville Project Act directs and
authorizes "the administrator . . . to provide, construct, operate,
maintain, and improve such electric transmission lines and substations,
and facilities and structures appurtenant thereto, *as he finds
necessary, desirable, or appropriate for the purpose of transmitting
electric energy* . . . ." (emphasis added).[^104] Bonneville believes
that these and other authorities permit the Administrator to contract
with Grid West to provide transmission services over its transmission
facilities,[^105] but the Administrator must also remain free under this
statutory scheme to make a future determination that it is no longer
"necessary, desirable, or appropriate" to continue to allow Grid West
the use of the federal system. Bonneville will not participate in Grid
West if Bonneville does not have the ability to withdraw from Grid West
without the Commission's permission as Bonneville believes that such a
restriction would infringe on the Administrator's discretion to carry
out his duties under Bonneville's statutes and would not comport with
Bonneville\'s statutory requirement to operate in a sound and
business-like manner. Consequently, Bonneville does not have the
authority to grant the Commission the power to determine whether
Bonneville may terminate its contract with Grid West.

The Commission has acknowledged the limited nature of its jurisdiction
over federal power marketing agencies in a recent case involving the
Western Area Power Administration ("Western") and the California
Independent System Operator ("CAISO"). There, the Commission stated that
Commission approval is not needed for a decision by a federal power
marketing agency to withdraw from the control area of a public
utility.[^106]

Petitioners anticipate that Grid West will desire contractual provisions
governing a withdrawal by Bonneville, including a requirement to support
any pre-withdrawal contracts executed by Grid West that use the federal
system. For purposes of this request, Petitioners ask the Commission to
assume that Bonneville\'s transmission agreement with Grid West contains
negotiated termination provisions agreeable to Bonneville and Grid West
allowing Bonneville to withdraw from Grid West.

For all of the above reasons, Petitioners believe that the Commission
lacks authority to prevent Bonneville from withdrawing from Grid West.
As such, Petitioners request the Commission's acknowledgement that
Commission approval is not needed for Bonneville to withdraw from Grid
West.

b.  Will the Commission clarify that a participating transmission owner
    that is a public utility would be able to terminate its contractual
    arrangements with Grid West under conditions that the Commission
    determines are just and reasonable?

Petitioners contemplate Grid West serving as an independent transmission
provider with a FERC-approved open access tariff that allows it to offer
regional transmission services. It will own no transmission facilities;
thus, its ability to provide transmission services is dependent on its
ability to contract with transmission owners for use of their
facilities. In determining whether to proceed with Grid West, each
public utility funding Grid West's development and its state regulators
will consider whether voluntarily allowing Grid West to use its
transmission facilities to offer regional service is in the ratepayers'
and shareholders' interest. Each public utility has statutory and
fiduciary obligations to consider in reaching its decision. If a public
utility or its state regulator determines that any decision to
participate in Grid West is an irrevocable decision, the standard for a
positive decision to participate is likely to be extremely high, and
perhaps unattainable. But participation is more likely if a public
utility and its state regulators know that withdrawal (and a return to
OATT service as then defined by the Commission) is an option that can be
exercised.[^107] Petitioners, therefore, seek clarification that,
assuming the transmission owner's exit rights proposed by Grid West are
found to be just, reasonable and not unduly discriminatory at the outset
before Grid West becomes operational,[^108] the Commission's review of
any specific proposed withdrawal will focus on consistency with the
approved exit rights and whether the time and manner of withdrawal are
consistent with the contract and applicable law.[^109] Such assurance
will aid Petitioners in their Grid West development efforts in that
public utilities and their state regulators will be assured that
participation in Grid West will remain voluntary.

As noted above, Petitioners anticipate that Grid West will desire
contractual provisions governing any withdrawal including commitments by
transmission owners to support any pre-withdrawal contracts executed by
Grid West that use an transmission owner's system to provide services to
third parties. Assuming Grid West development continues, the independent
trustees appointed to the Grid West Developmental Board and the
transmission owners will negotiate provisions relating to withdrawal
rights. These negotiations are expected to commence shortly after the
Board is seated, which is scheduled for fall 2005. The Petitioners
contemplate filings of these agreements and the Grid West tariff under
Section 205 prior to Grid West's commencement of operations. For
purposes of this request, Petitioners ask the Commission to assume that
transmission agreements between Grid West and the transmission owners
have been successfully negotiated and the Commission has reviewed and
approved the contractual arrangements and concluded that the provisions,
including withdrawal provisions for the public utilities transmission
owners, are just, reasonable and not unduly discriminatory. Such a
determination necessarily requires that the withdrawal provisions permit
Grid West to fulfill any contractual obligations it has undertaken that
require use of the withdrawing transmission owner's transmission system
on terms that are just and reasonable and not unduly discriminatory. The
parties will also negotiate the grounds for withdrawal, notice and
timing of withdrawal, and any other provisions related to mitigating the
effects of withdrawal on customers.[^110]

Public utility Petitioners do not seek to evade any Section 205 filings
that may be required at the time of any withdrawal in connection with
revisions to tariff protocols or agreements not previously approved or
accepted for filing without suspension by the Commission. For example,
if implementation of a transmission owner's withdrawal requires revision
of existing operating agreements or tariff protocols, Petitioners
anticipate such revised or new agreements or tariff protocols would be
filed under Section 205 by Grid West or the public utility transmission
owner(s) involved. However, they seek clarification that the owners'
contractual right to withdraw under certain terms and conditions
previously approved by the Commission need not be the subject of a
Section 205 proceeding at the time of any such withdrawal.[^111] The
Commission could, of course, require a compliance filing by a public
utility to insure that any proposed withdrawal is consistent with
approved exit rights. In addition, if the Commission were to determine
that the unanticipated effect of a withdrawal is to render the rates,
terms or conditions of Grid West's transmission service unjust,
unreasonable or unduly discriminatory, the Commission retains authority
under Section 206 to investigate and remedy any such problem.
Furthermore, upon a public utility\'s withdrawal from Grid West, Grid
West may be required to make a filing under Section 205 to reflect any
tariff changes necessitated by the withdrawal. This assures the
Commission that it can address the impacts of a withdrawal on rates,
terms and conditions of Grid West's service.

> 4\. If Grid West becomes a public utility that sells transmission
> service but not as an RTO, will the Commission provide assurances that
> it will not thereafter require Grid West to comply with Order 2000
> requirements or Standard Market Design approaches?

[Petitioners\' Views]{.underline}. The most significant obstacle to
broader regional support for the Grid West proposal is the fear of many
stakeholders that either the Grid West Operational Board or the
Commission will in the future impose inappropriate, costly, damaging or
inequitable changes on the region regardless of regional views.[^112]
The RRG has addressed the first fear by incorporating effective
accountability mechanisms into the Grid West bylaws that, although not
prohibiting the Operational Board from taking specified actions, require
it to slow its decision-making process, consult with members\'
representatives about the proposal, and obtain an affirmative vote of a
supermajority of the trustees to implement a specified proposal if it
fails to garner majority support from the members or their
representatives. Members may also remove trustees from office. There
are, however, no similar limitations that the RRG can place on the
Commission, although the Operational Bylaws authorize members to
dissolve the corporation if the Commission preempts or renders
inoperative a provision of the bylaws, including the requirement that
specified changes obtain approval of a majority of the MRC or,
alternately, a supermajority of the Operational Board before becoming
effective.[^113]

Petitioners are aware of limitations that restrict the ability of
members of a regulatory body to make commitments for future members.
Nevertheless, it is unlikely that the Grid West proposal could move
forward at Decision Point 2 if the Commission is unable to ease the
stakeholders\' fears that this Commission or a future Commission may
order Grid West to implement significant changes seen as adverse to
stakeholder interests. The Commission should declare that it has no
authority to require a public utility whose tariff has been approved
under one rule (Order 888) to subsequently comply with the requirements
of another rule (Order 2000) that applies only to organizations that
have voluntarily applied for RTO status. The Commission should also
restate its assertion that transmission solutions for the Grid West
footprint must be "appropriate to the unique needs of the Pacific
Northwest"[^114] and that the Commission will defer to Grid West and its
stakeholders to determine the best solutions to any problems the
Commission may discover.

As is discussed in the next section, the Commission has shown increasing
willingness to apply the *Mobile-Sierra* public interest standard to its
future considerations of any contract modifications proposed by itself
or third parties under Section 206 of the Federal Power Act. This
standard restricts the Commission from requiring modifications unless
the public interest "imperatively demands" the change.[^115] The
Commission has even agreed to apply the public interest standard to
tariff language.[^116] Petitioners request the Commission to declare its
willingness and intent to apply the *Mobile-Sierra* public interest
standard to changes to Grid West\'s scope or functions that are proposed
by third parties or by the Commission *sua sponte*.

Commitments such as these would provide important comfort to state
regulatory commissions concerned about their regulatory jurisdiction and
the financial well-being of their jurisdictional utilities, the
Northwest congressional delegation concerned about loss of regional
control over the federal transmission system, and Bonneville\'s public
power constituents worried about the insertion of complex and
potentially expensive pricing and market mechanisms into a system that
works today without these market mechanisms. Petitioners request the
Commission to make these commitments.

> **5. As a matter of policy, will the Commission accept a provision in
> Grid West\'s agreements with Bonneville and other transmission owners
> providing that certain terms identified as critical to transmission
> owners\' participation will be protected from subsequent
> Commission-mandated change based on, in Bonneville's case,
> Bonneville's statutory requirements and the doctrine of
> sub-delegation, and for all transmission owners the application of the
> *Mobile-Sierra* standard to certain contract provisions?**

**[Petitioners\' Views]{.underline}.** As was the case in the RTO West
proposal, certain provisions of the agreement between the transmission
owners and Grid West for use of the owners\' facilities will address
arrangements determined by the owners to be necessary for their
participation, such as restrictions on Grid West\'s use of their
facilities in order to protect their capital investment, the integrity
of their facilities, the safety of their employees, and the reliability
of their system. Other arrangements may be necessary to meet the
owners\' legal obligations, such as required protection of their
pre-existing contracts, Grid West compliance with laws, treaties,
standards, licenses and non-power requirements applicable to an owner\'s
facilities, and the method of collection and allocation of Grid West
revenues to the owners. Still other provisions would be incorporated to
avoid illegal sub-delegation of Bonneville\'s statutory
responsibilities,[^117] such as performance standards that define Grid
West\'s range of freedom in its use of federal facilities, mechanisms
that provide meaningful oversight over Grid West\'s use of federal
facilities and effective dispute resolution, and a Bonneville right to
terminate its participation in Grid West. And there may be provisions
that various owners believe are necessary to win support for the
proposal from shareholders and state or provincial authorities.
Consequently, the transmission agreement between Grid West and the
transmission owners may be replete with provisions that reflect
fundamental compromises necessary to permit one or more of the owners to
participate in Grid West.

It is necessary and appropriate to protect these critical arrangements
from direct modification by the Commission or indirect modification
through implementation of conflicting tariff provisions. In the RTO West
Order on Rehearing, responding to the applicants\' request to reconsider
its earlier rejection of a proposal providing that transmission
agreement provisions would govern in the event of a conflict with the
RTO West tariff, the Commission stated that "we must balance the need to
ensure independence of the RTO and operation of an efficient
non-discriminatory transmission grid with the legal obligations and
interests of the parties joining the RTO." [^118] The Commission
indicated its willingness to consider granting supremacy to those
transmission agreement provisions "that are essential to meeting
members\' legal obligations or affect their ability to participate in
the RTO."[^119] The Commission should issue a clear statement that it
will allow the protection of provisions essential to the participation
of transmission owners from being modified by changes to the Grid West
tariff.[^120]

The Commission should also state that: (i) Grid West and a transmission
owner may agree that they may not amend their contract unless the
amendment is signed by both parties; (ii) neither party alone may
petition the Commission under Sections 205 or 206 of the Federal Power
Act to modify specified provisions; and (iii) absent the parties\'
agreement, the standard of review for amendments to those specified
provisions proposed under Section 206 by a non-party, or by the
Commission acting *sua sponte*, is the *Mobile-Sierra* "public interest"
standard. In a recent RTO-NE proceeding, the Commission approved
*Mobile-Sierra* protection for a number of provisions of the
Transmission Operating Agreement ("TOA") between the participating
transmission owners and RTO-NE.[^121]

> \[T\]he TOA sets forth the terms and conditions pursuant to which the
> Transmission Owners participating in RTO-NE will voluntarily transfer
> the operational authority over their transmission facilities to
> RTO-NE. Under these circumstances, we generally think it reasonable,
> subject to the conditions discussed below, that the Filing Parties be
> permitted in return for their commitment to rely on the terms of their
> agreement with the contractual protection afforded by the
> *Mobile-Sierra* public interest standard of review. . . . \[However,\]
> we are required to balance the needs of the Transmission Owners for
> contractual certainty with the interests properly represented by an
> RTO . . . These provisions \[granted protection\] generally address
> the division of responsibility as between RTO-NE and the Transmission
> Owners . . . or interests that affect, predominantly, the contracting
> parties alone. We view these provisions as necessary and appropriate
> to defining the terms of the agreement between RTO-NE and the
> Transmission Owners.[^122]

In two more recent decisions regarding the Midwest Independent System
Operator ("MISO"), the Commission agreed to allow parties to a contract
implementing seminal RTO components to impose the *Mobile-Sierra* public
interest standard on certain future Commission actions. In a February
18, 2005, Order Approving Contested Settlement, the Commission approved
a negotiated provision in a MISO Balancing Authority Agreement that
"would subject future changes -- whether initiated by a party to the
Agreement, a non-party, or the Commission -- to the \'public interest\'
standard of review."[^123] The Commission rejected intervener arguments
that allowing the *Mobile-Sierra* standard to govern the Commission\'s
actions was an abrogation of its responsibility under the Federal Power
Act to ensure just and reasonable rates and terms of service. Agreeing
that the restriction would make it difficult to effect any changes, the
Commission nevertheless approved it with the statement that it did "not
agree that the restriction is unacceptable."[^124] In a March 16, 2005,
order accepting a proposed Seams Operating Agreement between MISO and
the Mid-Continent Area Power Pool ("MAPP"), the Commission approved,
without discussion, a provision that: (i) prohibited the parties from
amending the agreement unless signed by both parties; (ii) prohibited
either party from petitioning the Commission under Sections 205 and 206
to order changes to the agreement; and (iii) imposed the *Mobile-Sierra*
public interest standard of review for amendments proposed by
non-parties or *sua sponte* by the Commission itself.[^125]

Petitioners acknowledge the limitation on *Mobile-Sierra* protection
enunciated by the Commission in *ISO-New England* referenced above,
i.e., that *Mobile-Sierra* protection may be granted where contractual
provisions primarily affect the rights and interests of the contracting
parties and not those of third-party market participants. Petitioners
believe that the provisions for which they will seek *Mobile-Sierra*
protection will meet this test. The Commission would also have to
recognize that, regardless of *Mobile-Sierra* protection, a required
contractual change to Grid West\'s authority to use nonjurisdictional
facilities, such as Bonneville\'s, would either be ineffective or would
terminate Grid West\'s permission to use the facilities if the change
does not have the owner\'s agreement.

Petitioners request the Commission to affirm its intent to allow
protections for those contractual provisions identified as critical to
transmission owners\' participation, such as those specified above.

> 6\. If Grid West becomes a public utility that sells transmission
> service, but not as an RTO, is Commission policy sufficiently flexible
> to accommodate participating transmission owners continuing as
> transmission providers for their pre-existing transmission agreements,
> including OATT service, while new service is made available only
> through Grid West?

[Petitioners\' Views]{.underline}. The Grid West working proposal
envisions a new, region-wide transmission service offered by Grid West
while participating transmission owners continue to provide service to
their pre-existing transmission arrangements under their own contract
terms and tariffs. While establishment of a new and independent entity
to be responsible for all new service is important to efficient
nondiscriminatory operation, preservation of the responsibilities of
individual transmission owners to their customers under pre-existing
transmission arrangements is not only legally required,[^126] but also
politically necessary. The Grid West working proposal would meet both of
these objectives by maintaining the transmission owners\' role as
transmission provider for their pre-existing transmission arrangements
while establishing a new, region-wide transmission provider responsible
for all new transmission service.[^127]

The transmission owners will determine the amount of transmission
capacity required to serve the pre-existing contracts, including
capacity to be reserved for post-Day Ahead schedule changes when allowed
by the contracts. Grid West would then determine the amount of flow
capacity on the entire Grid West system available for additional
transactions under its new flow-based, multi-system service. All
day-ahead schedules would be submitted to Grid West to provide a clear
picture of anticipated flows. Grid West would have responsibility for
all decisions about new access requests to the Grid West system. It
would establish tariffs for the new services envisioned in the working
proposal. Grid West would gradually become responsible for more
transmission capacity as additional capacity is added and pre-existing
contracts expire. Grid West would also be responsible for determining
the amount of rights associated with new transmission construction.
Participating transmission owners would be limited to serving
pre-existing contracts and obligations.

A critical component of the working proposal is the Grid West
Reconfiguration Market. The reconfiguration market is intended to
address two of the problems with regional transmission services that
were identified by regional stakeholders: (i) rules and practices that
prevent full utilization of transmission infrastructure; and (ii)
absence of organized market structures that produce efficient use of the
system.[^128] The Reconfiguration Market will provide an opportunity and
incentive for holders of physical transmission rights, whether under
pre-existing agreements or new service arrangements, to bid their unused
rights[^129] into an auction, for periods no longer than one year, to be
available to others seeking additional transmission service.
Reconfiguring these offers into flow-based injection and withdrawal
points and combining them with available flow capacity, Grid West will
determine the amount and location of capacity which it can provide to
those bidding into the Reconfiguration Market for new
injection/withdrawal rights. Offers of unused rights that are accepted
would receive the market clearing price. Though it would not prohibit
bilateral trades, this centralized Reconfiguration Market should
facilitate and encourage the trading of unused transmission rights in
the region. In addition, capacity made available by failure to schedule
transmission rights at pre-schedule will be made available in the
post-Day Ahead market. Petitioners believe these two mechanisms will
discourage hoarding of transmission rights.

Of course, the Commission has often indicated its support for preserving
existing transmission arrangements, even in the RTO context.[^130]
Continuation of the transmission owner\'s role as transmission provider
to existing arrangements while a different entity is responsible for new
service should be allowed in the context of Order 888. The continuing
responsibility of transmission owners to carry out their contractual
responsibilities to existing customers is a critical component of the
working proposal\'s acceptability to many customers and simplifies the
proposal\'s implementation. This approach also avoids the time-intensive
task of analyzing the components of each pre-existing agreement,
converting them to a new service, and working through the disputes that
will inevitably arise.

The working proposal, in essence, creates a region-wide, fully
independent transmission provider that will take increasing transmission
provider responsibility from the existing transmission providers.
Petitioners assert that the working proposal would allow for a moderated
and cautious development of Grid West\'s responsibilities as existing
contracts expire and customers increasingly turn to Grid West for
service. Petitioners request the Commission to declare that retention of
participating transmission owners\' obligations to serve their existing
transmission agreements and limiting Grid West\'s responsibilities to
the provision of new service is not itself a basis for rejecting the
proposal.

7\. Will the Commission acknowledge that Bonneville's participation in
Grid West, as a participating transmission owner does not provide the
Commission with any authority to modify Bonneville's existing
transmission agreements?

[Petitioners\' Views]{.underline}. There is significant concern among
stakeholders, particularly public power stakeholders, that an election
by Bonneville to become a participating transmission owner in the Grid
West system will grant authority over Bonneville to the Commission that
it lacks in the absence of such participation. A topic of particular
concern is maintenance of the benefits of pre-existing Bonneville
transmission agreements. The Commission has been clear about its lack of
authority over pre-existing transmission agreements of nonjurisdictional
transmission owners even when the transmission owners elect to
participate in a FERC-jurisdictional RTO. In the SMD White Paper,[^131]
the Commission stated that "\[w\]hile \[FERC\] has limited jurisdiction
over Bonneville\'s rates under the Pacific Northwest Electric Power
Planning and Conservation Act, the contracts between Bonneville and its
customers do not require \[FERC\] review or approval." In a recent MISO
order,[^132] FERC acknowledged its lack of authority over transmission
agreements with non-jurisdictional transmission providers:

Finally, we will require the Midwest ISO to carve out of the Energy
Markets the 30 GFAs, representing 2,198 MW, for which the transmission
provider is not a public utility as defined in section 201 of the FPA.
The Commission has no authority to make any modifications to these
contracts. . . .

While Bonneville could lose its reciprocity benefits conferred by the
Commission if Bonneville failed to offer services to jurisdictional
transmission owners comparable to the services offered by these
utilities under their Order 888 OATTs, the Commission does not have
jurisdiction to directly order changes to Bonneville\'s OATT or to any
of its transmission agreements.[^133] Petitioners request the Commission
to confirm its lack of authority to order changes to Bonneville\'s OATT
or to any of its transmission agreements even if Bonneville is a full
participant in Grid West.

8.  Will the Commission support implementation, for an indefinite
    duration, of license plate rates and charges to through and out
    transactions?

**[Petitioners\' Views]{.underline}.** Order 2000 concluded "it is
appropriate to allow RTOs to propose the use of license plate rates for
a fixed term of the RTO\'s choosing."[^134] However, the order continued
that an RTO must make clear how the costs of expansion will be priced
and how such pricing affects incentives for efficient expansion.

In a recent PJM-MISO order, the Commission stated the reason for its
support of license plate rates:

> \[T\]he Commission has been careful to prevent undue cost shifting
> among various transmission owners and customers that make up the ISO
> or RTO. For instance, the Commission has rejected proposals to adopt
> regional postage stamp pricing for RTOs and ISOs, as this rate design
> spreads the cost of transmission facilities throughout the region on a
> regional average basis, resulting in significant cost shifts from
> higher to lower cost regions.[^135]

The Commission explained that it has generally limited the initial term
of license plate rates and has required the RTO and its transmission
owners, before the end of the fixed term, "to reevaluate fixed cost
recovery policies based on the factual situation of the particular
RTO."[^136]

> The Commission\'s policy does not require abandonment of license plate
> rates at the end of the initial fixed term, but does require the RTO
> and its transmission owners to justify their choice to continue or
> discontinue using license plate rates, or otherwise change the method
> for fixed cost recovery.[^137]

In the RTO West proceeding, the Commission approved in concept a license
plate pricing proposal (known within RTO West and Grid West as the
"Company Rate") for a minimum period of eight years.[^138] The
Commission found that the eight-year period would minimize cost shifts
and loss of revenues and fostered participation in RTO West. The
Commission did not require the Company Rate to be terminated at the end
of the eight-year period as the proposal provided for the RTO West
board, after eight years, to decide whether to continue Company Rate
pricing or propose an alternative pricing mechanism.

Thus, the Commission has adopted a flexible policy regarding the period
of application of license plate rates in the RTO context. The Grid West
Section 205 filing, however, will not be an RTO filing. Consequently,
the requirement to submit a filing at the end of the Company Rate period
justifying Grid West\'s decision about whether to retain or change the
license plate approach should not apply to Grid West. In non-RTO
circumstances like those of Grid West, the Commission accepted the
Southwest Power Pool\'s proposal for zonal rates because it was
voluntarily eliminating rate pancaking and charging a single rate. The
Commission stated:

> While the Commission has required public utilities forming Independent
> System Operators (ISOs) to adopt single system rates (after a
> transition period), SPP is not now seeking approval as an ISO (or
> Regional Transmission Organization (RTO)). If SPP seeks such approval
> in the future, SPP will have to comply with any applicable
> requirements for single-system rates.[^139]

In the Grid West context, the Petitioners expect that the Company Rate
concept would be applied for the first eight years and would continue
unless and until the Operational Board elected to adopt, through a
formalized process with the members, another pricing approach. Making
the Company Rate approach the default gave important comfort to certain
load-serving entities with substantial concerns about disadvantageous
cost shifts. Since the Grid West proposal will not be filed under

Order 2000, Petitioners desire confirmation from the Commission that
license plate pricing, or a pricing methodology consistent with the
Company Rate principle is acceptable and that a maximum duration will
not be imposed.

The Grid West working proposal envisions embedded costs being collected
from transactions leaving the Grid West footprint or moving through and
out of it. In the RTO West proceeding, the Commission stated:

> Absent the imposition of an export fee or some other mechanism to
> recover the cost of transmission, customers outside the RTO West
> footprint would not contribute in the recovery of the cost of the
> transmission system. . . . In an attempt to avoid cost shifts,
> Applicants provide the opportunity for users with existing contracts
> to retain such rights; all new users will be subject to the same rules
> for exporting power from the RTO West footprint.[^140]

The Grid West proposal is also intended to avoid cost shifts. However,
as opposed to the RTO West proceeding in which an export rate was
approved in concept on a transitional basis,[^141] Grid West would use a
physical rights system, not a financial rights system. Consequently,
customers with pre-existing rights to schedule exports or throughput
would continue to pay their share of embedded costs through the rates
applicable to those contracts, and customers desiring to schedule new
export and throughput transactions would need to purchase the necessary
physical transmission rights. Those rights could be obtained either
through the Reconfiguration Market (for service of one year or less) or
through purchase of long-term rights from available flow capacity (if
any) or from expansion projects. Rights holders who offer transmission
rights in the Reconfiguration Market would continue to pay the
applicable rates, including embedded costs, even after the rights have
been traded to others. Rates for new long-term export and throughput
service would also collect their share of embedded costs, though it is
not yet known whether those rates would be the Company Rate of the
particular owner whose facilities are used at the boundary or a blended
average of all the Company Rates applicable to border facilities. [^142]

As stated above, the Grid West Section 205 filing will not request
approval under Order 2000. Thus, the Commission\'s RTO requirement that
rates for exports and throughputs apply only for a transitional period
should not apply. A more applicable model is that of the recent Entergy
proposal,[^143] and the Southwest Power Pool prior to becoming an
RTO.[^144] In the latter case, the Commission approved, without raising
the issue of pancaked charges or imposing a transitional requirement, a
proposal to apply an embedded cost rate on service out of the Southwest
Power Pool area. Petitioners request the Commission to clarify that Grid
West rates for exports or throughput would not be limited to a
transition period.

**VII. REQUEST FOR RELIEF**

Petitioners request the Commission to issue a declaratory order to the
effect that:

> 1\. Assuming Grid West seeks approval under Section 205 of the Federal
> Power Act to offer regional transmission service pursuant to an open
> access tariff, but not as an Order 2000 RTO, the Commission will treat
> Grid West's application as one that must satisfy the open access
> requirements of Order 888 (that is, offering services consistent with
> or superior to the *pro forma* OATT requirements) rather than the
> requirements for RTO status.
>
> 2\. Grid West's governance structure as embodied in its Operational
> Bylaws satisfies the independence requirements of Order No. 2000.
>
> 3\. Regarding withdrawal rights:

a.  The Commission will approve a contract between Grid West and
    Bonneville that allows Bonneville to withdraw as a participating
    transmission owner without Commission approval.

b.  A participating transmission owner that is a public utility will be
    able to terminate its contractual arrangements with Grid West under
    conditions that the Commission determines are just and reasonable.

> 4\. If Grid West becomes a public utility that sells transmission
> service but not as an RTO, Grid West will not thereafter be required
> to comply with Order 2000 requirements or Standard Market Design
> approaches.
>
> 5\. The Commission, as a matter of policy, will accept a provision in
> Grid West\'s agreements with Bonneville and other transmission owners
> providing that certain terms identified as critical to transmission
> owners\' participation will be protected from subsequent
> Commission-mandated change based on, in Bonneville's case,
> Bonneville's statutory requirements and the doctrine of
> sub-delegation, and for all transmission owners the application of the
> *Mobile-Sierra* standard to certain contract provisions.
>
> 6\. If Grid West becomes a public utility that sells transmission
> service but not as an RTO, Commission policy is sufficiently flexible
> to accommodate participating transmission owners continuing as
> transmission providers for their pre-existing transmission agreements,
> including OATT service, while new service is made available only
> through Grid West.
>
> 7\. The Commission acknowledges that Bonneville's participation in
> Grid West, as a participating transmission owner, does not provide the
> Commission with any authority to modify Bonneville's existing
> transmission agreements.
>
> 8\. The Commission does support implementation, for an indefinite
> duration, of license plate rates and the application of embedded cost
> charges to through and out transactions.
>
> DATED this 28th day of April, 2005

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

> Stephen R. Larson
>
> Bonneville Power Administration
>
> P.O. Box 3621
>
> Telephone: (503) 230-4999
>
> Fax: (503) 230-7405
>
> Email: srlarson@bpa.gov
>
> Attorney for Bonneville Power Administration
>
> */s/ Pamela L. Jacklin*
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> Pamela L. Jacklin
>
> Stoel Rives LLP
>
> 900 SW Fifth Avenue, Suite 2600
>
> Portland, OR 97204
>
> Telephone:  (503) 294-9406
>
> Fax:  (503) 220-2480
>
> Email: <pljacklin@stoel.com>
>
> Attorney for PacifiCorp

*/s/ Malcolm C. McLellan*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

Malcolm C. McLellan

> Van Ness Feldman, P.C.
>
> 719 Second Avenue, Suite 1150
>
> Seattle, WA 98104-1728
>
> Telephone: (206) 829-1814
>
> Fax: (206) 623-4986
>
> Email: mcm@vnf.com
>
> Attorney for Idaho Power Company

[^1]: *Promoting Wholesale Competition Through Open Access
    Non-discriminatory Transmission Services by Public Utilities and
    Recovery of Stranded Costs by Public Utilities and Transmitting
    Utilities, Order No. 888*, 61 Fed. Reg. 21,540 (May 10, 1996), FERC
    Stats. & Regs. ¶ 31,036 (1996), *order on reh\'g*, Order No. 888-A,
    62 Fed. Reg. 12,274 (March 14, 1997), FERC Stats. & Regs. ¶ 31,048
    (1997), *order on reh\'g*, Order No. 888-B, 81 FERC ¶ 61,248 (1997),
    *order on reh\'g*, Order No. 888-C, 82 FERC ¶ 61,046 (1998), *aff\'d
    in relevant part*, *Transmission Access Policy Study Group, et al v.
    FERC*, 225 F.3d 667 (D.C. Cir. 2000), *cert. granted*, 69 U.S.L.W.
    3574 (No. 00-568 (in part) and 00-809) and *cert. denied, id.* (No.
    00-800) (U.S. Feb. 26, 2001).

[^2]: *Regional Transmission Organizations, Order No. 2000*, 65 Fed.
    Reg. 809 (January 6, 2000), FERC Stats. & Regs., Regulations
    Preambles July 1996-December 2000 ¶ 31,089 at 31,226-27 (1999),
    *order on reh'g*, *Order No. 2000-A*, 65 Fed. Reg. 12,088 (March 8,
    2000), FERC Stats. & Regs., Regulations Preambles July 1996-December
    2000 & 31,092 (2000), *affirmed sub nom. Public Utility District No.
    1 of Snohomish County, Washington v. FERC*, 272 F.3d 607 (D.C. Cir.
    2001).

[^3]: Because it is possible, though not planned, that transmission
    owners may decide to request a declaratory order seeking RTO status
    at some future point, and stakeholders desired certainty that such a
    request would not require a change in the governance structure.

[^4]: *Avista Corp. et al*, 100 FERC ¶ 61,274 at P 36 (2002).

[^5]: *Id*. at P 133 (2002).

[^6]: The Grid West pricing group is still working on how the Company
    Rate approach can be implemented in a physical rights model.

[^7]: *See* 16 USC § 839e (2000).

[^8]: *See* 16 USC § 824k(i) (2000).

[^9]: *See* *United States Dept. of Energy---Bonneville Power Admin*.,
    80 FERC ¶ 61,119 (1997), *order on reh'g*, 81 FERC ¶ 61,165 (1997);
    *United States Dept. of Energy---Bonneville Power Admin*., 86 FERC ¶
    61,278 (1999); *United States Dept. of Energy---Bonneville Power
    Admin.*, 106 FERC ¶ 61,125 (2004).

[^10]: Avista Corporation, British Columbia Transmission Corporation,
    NorthWestern Energy, Portland General Electric Company, Puget Sound
    Energy, Inc., and Sierra Pacific/Nevada Power Company.

[^11]: *Avista Corp. et al*, 100 FERC ¶ 61,274 (2002).

[^12]: Different transmission owners have different perspectives about
    the concerns raised by regional parties. However, Petitioners agree
    that their ability to move forward with an independent transmission
    entity has been substantially affected by these concerns.

[^13]: Transmission owners, transmission-dependent utilities,
    generators, power marketers, end-use customers, state and provincial
    regulators, and environmental and energy conservation groups. *See*
    http://www.gridwest.org/Doc/RRGList_UpdatedDec72004.pdf.

[^14]: *See* Grid West website,
    http://www.gridwest.org/RRG_PlatformInput.htm

[^15]: *See*
    http://www.gridwest.org/Doc/MessageDocument_RegionalProposal_Feb32004.pdf.

[^16]: See attached developmental timeline, Attachment A.

[^17]: The Developmental Bylaws govern Grid West activities during its
    developmental phase prior to offering transmission services.

[^18]: The Operational Bylaws govern Grid West activities once the
    corporation transitions to the operational stage in which it has the
    authority to offer transmission services.

[^19]: The posted bylaws and the comments are available at
    http://www.gridwest.org/RRG_GridWestBylaws.htm.

[^20]: All comments are posted at the Bonneville website at
    http://www.bpa.gov/corporate/business/restructuring.

[^21]: *See* [www.napawash.org](http://www.napawash.org/). NAPA\'s
    report, "Grid West: An Assessment of the Proposed Governance
    Structure" is posted at the Bonneville website referenced in
    footnote 20.

[^22]: *See* list of examples in Bonneville\'s "Close Out on Grid West
    Bylaws" at the Bonneville website referenced in footnote 20.

[^23]: *See* Grid West website for TSLG materials,
    <http://www.gridwest.org/TSLG_Main.htm>. These papers should be
    available after May 2, 2005, and will be presented during workshops
    currently scheduled for May 25 and 26, 2005 at the Sheraton Portland
    Airport Hotel in Portland, Oregon.

[^24]: *See* adopted Developmental Bylaws at
    http://www.gridwest.org/Doc/GWDevBylaws_SignedDec102004.pdf.
    Adoption of the Developmental Bylaws also "locked down" the
    Operational Bylaws from being amended until after the Operational
    Board is seated. Developmental Bylaws, Section 3.2(vii).

[^25]: Developmental Bylaws, Sections 7.1.13(iii)-(v) and 7.2.7.

[^26]: The Grid West footprint ("Geographic Area") is comprised of the
    portions of Alberta and British Columbia and of the states of Idaho,
    Montana, Nevada, Oregon, Utah, Washington, and Wyoming that are
    electrically within the Western Interconnection, together with any
    additional geographic territory within the state of California that
    is encompassed by the control areas of the Bonneville Power
    Administration, PacifiCorp, and Sierra Pacific Company as of the
    effective date of the Operational Bylaws. Operational Bylaws,
    Section 1.1.17.

[^27]: Developmental Bylaws, Section 13.1.

[^28]: Developmental Bylaws, Section 7.2.5.

[^29]: Developmental Bylaws, Section 13.2.

[^30]: *See* Attachment B.

[^31]: *Avista et al,* 100 FERC ¶ 61,274 at P. 36

[^32]: Operational Bylaws, Section 1.1.26.

[^33]: Operational Bylaws, Section 1.1.44.

[^34]: Operational Bylaws, Section 5.2.2(iii)(a).

[^35]: Operational Bylaws, Section 1.1.12.

[^36]: Operational Bylaws, Sections 1.1.6 and 5.14.3(iv)(c).

[^37]: Operational Bylaws, Sections 1.1.46 and 1.1.5.

[^38]: These two different kinds of voting power are described in
    different parts of the Grid West bylaws. The power to vote on "yes
    and no" kinds of questions is covered in Article V of the bylaws.
    The power to elect MRC members is covered in Article VI of the
    bylaws.

[^39]: Operational Bylaws, Section 8.4.1.

[^40]: Operational Bylaws, Section 5.15.2.

[^41]: Operational Bylaws, Section 8.2.

[^42]: Operational Bylaws, Section 7.17. Certain types of Operational
    Board decisions are excluded from this member authority, including
    proposed budgets and bylaw amendments. Operational Bylaws, Section
    7.17.5.

[^43]: Operational Bylaws, Section 12.4.3

[^44]: The State and Provincial Energy Authority Sub-class of the State
    and Provincial Energy Authority/Tribes/Certain Public Interest
    Groups class may elect five instead of four MRC representatives if
    the Sub-class has five or more members, thus resulting in a total of
    seven class representatives for this Class.

[^45]: *See* footnote 20, NAPA report *supra* note 21 at page 36.

[^46]: Operational Bylaws, Sections 7.2.4(ii) and (iii)(c).

[^47]: Operational Bylaws, Section 7.16.

[^48]: Grid West would be authorized, without using this process, to
    exercise backstop measures with respect to reliability needs.

[^49]: The Operational Board may not seek this authorization until at
    least eight years from the date Grid West begins to offer
    transmission services. Operational Bylaws, Section 7.16.8(ii).

[^50]: *See supra* at page 27

[^51]: Operational Bylaws, Section 7.16.7.

[^52]: The search for trustees will further seek individuals with
    relevant experience in commodities markets (including commodities
    trading risk management), electric bulk power transmission in the
    Western Interconnection, utilities law, finance, economics,
    accounting, information technology, engineering, regulation, and
    public policy, and will also seek to achieve racial, ethnic, age,
    and gender diversity.

[^53]: However, executive management experience or board experience with
    electric utilities has been retained as a desired candidate
    characteristic.

[^54]: The Grid West bylaws now define "market participant" rather than
    refer to the Commission\'s regulations for the definition. Market
    participant is defined as "any entity that, either directly or
    through an Affiliate, sells or brokers electric energy, is the owner
    or operator of transmission facilities, or provides transmission
    services within the Geographic Area."

[^55]: An exception exists for ownership through diversified mutual
    funds. Operational Bylaws, Section 7.10.1(i).

[^56]: An exception exists for persons who served as an employee or an
    elected or appointed public official of a participating
    jurisdiction. Operational Bylaws, Section 7.10.1(ii).

[^57]: A "related person" is "an individual\'s spouse, domestic partner,
    parents (including stepparents and in-laws), children (including
    stepchildren and in-laws), and siblings (including stepsiblings and
    in-laws)." Operational Bylaws, Section 1.1.41.

[^58]: An exception exists for a related person who commits to retire or
    otherwise leave the position prior to the date of the first meeting
    of trustees after the nominee is elected. Operational Bylaws,
    Section 7.10.1(iii).

[^59]: Operational Bylaws, Section 7.11.

[^60]: Operational Bylaws, Section 7.6.

[^61]: Operational Bylaws, Section 8.5.

[^62]: Operational Bylaws, Section 8.2.1.

[^63]: Operational Bylaws, Section 8.6. The Commission urged the RTO
    West filing utilities to incorporate a state representatives
    committee in the RTO West governance structure. *Avista et al.*, 100
    FERC ¶ 61,274 at P 36.

[^64]: Operational Bylaws, Section 8.5.3

[^65]: The working proposal requires balanced schedules in order to
    avoid reliance on real-time energy markets.

[^66]: Grid West is expected to schedule all service over the
    participating owners' combined systems, but unlike the RTO West
    proposal, transmission owners will not purchase a service from Grid
    West to serve pre-existing obligations. The owners will continue to
    serve as the transmission providers for service to their existing
    customers under existing contracts. This design is one attribute of
    Grid West that is distinctly different from the design of
    Commission-approved RTOs.

[^67]: An owner would also have an embedded cost rate for service over
    its system for pre-existing agreements. If a Company Rate, or the
    owner\'s embedded cost rate for pre-existing service, is already
    being paid for service to a load, another access charge would not be
    imposed for new service from Grid West to that load. If, for
    example, a transmission customer serving load and paying the
    embedded cost rate under a pre-existing agreement successfully bids
    in the Reconfiguration Market for short-term service from a
    different point of receipt *i.e.*, not provided in its contract, in
    order to purchase cheaper power for that load, it would only have to
    pay the auction price and other administrative charges described
    above. (Some Petitioners believe that the reconfiguration charges
    will not apply if a customer has a right to request alternate PORs
    without additional charges.) It would not have to pay another
    embedded cost rate to serve that load beyond the charges it pays to
    acquire the additional transmission rights through the
    Reconfiguration Market.

[^68]: While Grid West will establish a Grid Management Fee, Bonneville
    plans to continue to establish its own transmission revenue
    requirement and transmission rates, including the Company Rate,
    subject to FERC review under the applicable standards contained in
    Bonneville's statutes.

[^69]: Those wishing to obtain new rights to facilitate exports could
    purchase them either on a short-term basis through the
    Reconfiguration Market or on a long-term basis by requesting new
    long-term transmission rights through the general Grid West process
    for obtaining new long-term service.

[^70]: Regional Proposal at 10,
    <http://www.gridwest.org/Doc/FinalNarrative_Regional>[Proposal_Dec242003.pdf]{.underline}.

[^71]: *Id.* at 23. "The Platform Group\'s sense is that most regional
    parties support the general approach to planning and expansion set
    forth in the RTO West Stage 2 filing."

[^72]: Order 2000 recognized that barriers to RTO formation might
    prevent all public utilities from participation in FERC-recognized
    RTOs. 18 CFR §35.34(g) (2004). For purposes of this request for
    guidance, Petitioners ask the Commission to assume that no
    application for ISO or RTO status will accompany the initial Grid
    West filings. Petitioners note, however, that they do seek
    confirmation that the governance structure of Grid West satisfies
    the independence standard of Order 2000. See Section VI.2 below.

[^73]: Under the Grid West bylaws membership is completely separate from
    signing a transmission agreement and in no way commits a utility to
    provide its facilities for Grid West's use.

[^74]: "Every public utility that owns, controls or operates facilities
    used for the transmission of electric energy in interstate commerce
    must have on file with the Commission a tariff of general
    applicability for transmission services, including ancillary
    services, over such facilities. Such tariff must be the open access
    pro forma tariff contained in Order No. 888, FERC Stats. & Regs.
    ¶31,036 (Final Rule on Open Access and Stranded Costs) or such other
    open access tariff as may be approved by the Commission consistent
    with Order No. 888, FERC Stats. & Regs. ¶31,036." 18 CFR §35.28(c)
    (2004).

[^75]: *Entergy Services, Inc.*, 110 FERC ¶ 61,295 (2005)

[^76]: Petition for Declaratory Order, Docket No. EL05-52-000 at 3 (Jan.
    3, 2005).

[^77]: 110 FERC ¶ 61,295 at P 35 (2005).

[^78]: *Id*. at P 65. As Commissioner Brownell stated in her concurring
    opinion, "While divesting assets or converting operational control
    to a third-party is optimal in eliminating transmission market
    power, this Commission is willing to test third-party transmission
    coordination."

[^79]: Operational Bylaws, Section 7.1.1(v)(c).

[^80]: 18 CFR § 35.34(j)(1) (2004).

[^81]: Operational Bylaws, Section 3.2.

[^82]: See Attachment B (Employees Conduct Rules--Exhibit A to
    Developmental Bylaws). These developmental stage rules are
    incorporated into the Operational Bylaws when the latter become
    effective. Operational Bylaws, Section 9.13. The Interim Board of
    Directors has recently supplemented the employee conduct rules to
    incorporate all of the restrictions described above. *See* Interim
    Board Resolution, Attachment C.

[^83]: *Avista Corp. et al,* 96 FERC ¶ 61,058 at 61,175(2001).

[^84]: *Infra*, footnote 46.

[^85]: The Commission has approved various RTO trustee election
    mechanisms ranging from a majority vote requirement (*Arizona Public
    Service Company, et al.,* 101 FERC ¶ 61,033 at P 53-54 (2002)) to
    RTO West\'s 24 vote minimum requirement. The 20 vote minimum
    requirement in the Grid West bylaws meets all of the Commission\'s
    independent voting requirements and lies half way between a majority
    requirement and the 24 vote requirement of RTO West.

[^86]: At least 11 MRC members, or 12 if the MRC has 31 total members,
    must choose not to vote for a candidate\'s election or for a
    trustee\'s removal in order to block the candidate\'s election or
    the trustee\'s removal.

[^87]: In finding that the RTO West proposal met the Order 2000
    independence standard, the Commission stated that "\[n\]o single
    class of owners can exercise control over the selection of the
    directors so as to threaten independence, and the Trustees Selection
    Committee \[now the MRC in Grid West\], which chooses among Trustee
    candidates, reflects the diversity among stakeholder groups."
    *Avista Corp. et al.*, 95 FERC ¶ 61,114 at 61,328 (2001).
    Petitioners assert that the same reasoning and analysis applies to
    Grid West, as it did to its predecessor, RTO West.

[^88]: See *infra* at 20-21.

[^89]: Because the ability of the MRC and the members to force a
    supermajority Operational Board vote on particular issues requires
    at least 15 (or 16 if there are 31) MRC votes and 18 member class
    votes, respectively, no single class of market participants can
    control the outcome of the votes.

[^90]: "Where there are stakeholder committees that advise or share
    authority with a non-stakeholder board, it is important that there
    be balanced representation on the stakeholder committees so no one
    class dominates its recommendations or its decisions." 65 Fed. Reg.
    810, 857 (Jan. 2000).

[^91]: *Avista Corp. et al.,* 95 FERC ¶ 61,114 at 61,326 (2001).

[^92]: *Id.* at 61,329.

[^93]: *Atlantic City Elec. Co. v. FERC,* 295 F.3d 1 (D.C. Cir 2002),
    *mandate enforced by,* 329 F.3d 856 (D.C. Cir. 2003)*.*

[^94]: *Pennsylvania-New Jersey-Maryland Interconnection*, 105 FERC ¶
    61,294 at P 30-32 (2003).

[^95]: *ISO-New England, Inc.*, 106 FERC ¶ 61,280 at P 71-74 (2004).

[^96]: *Midwest Independent Transmission System Operator, Inc.*, 110
    FERC ¶ 61,380 at P 18-19 (2005).

[^97]: *Southwest Power Pool, Inc.*, 106 FERC ¶ 61,110 at P 93-98
    (2004).

[^98]: *ISO-New England, Inc.*, 106 FERC ¶ 61,280 at P 72 (2004).

[^99]: *Southwest Power Pool, Inc.*, 106 FERC ¶ 61,110 at P 38-43
    (2004).

[^100]: *NE-ISO* New England et al,109 FERC ¶ 61,147 at P 39 (2004).

[^101]: 104 FERC ¶ 61, 248 (2003).

[^102]: Federal Power Act Section 201(f), 16 USC § 824(f). The same is
    true for any other public utility district or municipal transmission
    owners who elect to execute participation agreements with Grid West.

[^103]: 16 USC § 839f(b).

[^104]: 16 USC § 832a(b). *See also* 16 USC § 838b.

[^105]: Bonneville acknowledges that concerns raised about delegation
    (or sub-delegation) of its authorities should and will be addressed
    in the transmission agreement negotiations with Grid West and in
    Bonneville\'s record of decision prior to execution of any such
    agreement with Grid West.

[^106]: *California Independent System Operator Corporation*, 109 FERC ¶
    61, 225 at P 120(2004).

[^107]: Petitioners recognize that any intervening change to the
    Commission's policy or authority to compel public utilities to
    participate in a regional transmission entity, ISO or RTO could
    change this result and authorize the Commission to determine whether
    continued participation in a regional transmission entity, ISO or
    RTO is required. However, to the extent that a public utility can
    comply with the Federal Power Act by maintaining an Order 888 *[pro
    forma]{.underline}* tariff, then a utility should be entitled to
    return to that option if it determines it should terminate its
    voluntary participation in a regional transmission entity. The Order
    888-compliant service offered by the withdrawing public utility is
    by definition just, reasonable and not unduly discriminatory. The
    effects of withdrawal on the regional transmission entity are
    discussed below.

[^108]: Such a determination could be accomplished either through a
    pre-operational Section 205 filing or alternately, a petition for
    declaratory order.

[^109]: Petitioners are also aware that the Commission has required PJM,
    a Commission-approved RTO, to modify its transmission owners'
    agreement to provide for Section 205 filings before any proposed
    withdrawals may become effective. *Pennsylvania-New Jersey-Maryland
    Interconnection*, 105 FERC ¶ 61,294 (2003). The rationale in that
    case was that prior Commission approval to withdraw is necessary "in
    order to determine whether all of the elements contained in the
    filed arrangements meet the principles of Order No. 2000 and are
    just and reasonable pursuant to Section 205 of the FPA." *Id.* at P
    36. Petitioners, however, assume for purposes of this request for
    guidance that they will not seek RTO status initially and ask the
    Commission to assume for purposes of this declaratory order that
    they have not done so. Thus, the inquiry as to whether all elements
    in a withdrawal proposal meet the principles of Order 2000 would not
    be applicable to the Grid West conceptual proposal.

[^110]: Examples of withdrawal provisions contemplated by the parties in
    the RTO West development process can be found in the RTO West Stage
    2 filing. *See* "Stage 2 Filing and Request for Declaratory Order,"
    Attachment A (RTO West Operating Agreement), Section 2.3, Docket No.
    RT01-35-000.

[^111]: Of course, any withdrawing public utility would be required by
    law to offer open access transmission services meeting the
    Commission's then-applicable standards. Therefore, the Commission
    also retains the authority to insure that a withdrawing public
    utility complies with the Federal Power Act standards for service.

[^112]: The Petitioners are concerned about the Commission taking action
    to force a unique evolution of Grid West simply because Grid West is
    a public utility subject to the Commission's jurisdiction.

[^113]: Operational Bylaws, Section 12.4.3.

[^114]: Remedying Undue Discrimination through Open Access Transmission
    Service and Standard Electricity Market Design, Docket No.
    RM01-12-000, White Paper (April 28, 2003) at 4 available at
    [http://www.ferc.gov/industries/electric/indus-act/smd/white-paper.pdf]{.underline}.

[^115]: *Midwest Independent Transmission System Operator, Inc*, 110
    FERC ¶ 61,177 (2005) (*Commissioner Kelly dissenting*).

[^116]: *See* Commissioner Kelly\'s dissent, *supra* note 118.

[^117]: In a February 26, 1998 memorandum entitled "Bonneville Power
    Administration Authority to

    Participate in an Independent System Operator \[("ISO")\]," the
    Department of Energy's Office of General

    Counsel concluded that, in order for Bonneville to legally
    participate in an ISO, "the ISO agreement should

    . . . include performance standards sufficient to enable BPA to
    assure itself that the ISO is implementing

    \[Bonneville's statutory responsibilities and its contractual and
    treaty obligations\] in a manner consistent

    with the terms to which BPA has agreed . . . ."

[^118]: *Avista Corp. et al.,* 101 FERC ¶ 61,346 at P 15 (2002).

[^119]: *Id.*

[^120]: Petitioners understand that the Commission cannot eliminate
    third-party rights under Section 206.

[^121]: *ISO New England, Inc., et al. v. New England Power Pool,* 106
    FERC ¶ 61,280, *order accepting partial settlement and on reh'g,*
    109 FERC ¶ 61,147 (2004).

[^122]: 106 FERC ¶ 61,280 at P 127-128, 130 (2004).

[^123]: *Midwest Indep. Transmission Sys. Operator, Inc.*, 110 FERC ¶
    61,177 (*Commissioner Kelly dissenting*) (2005).

[^124]: *Id.*

[^125]: Midwest Independent Transmission Operator, *Order Accepting
    Seams Operating Agreement, Granting Rehearing in Part and Denying
    Rehearing in Part*, 110 FERC ¶ 61,290 (2005) at P 25 (*Commissioner
    Kelly* *dissenting)* (2005)*.*

[^126]: Particularly for non-public utility transmission owners such as
    Bonneville.

[^127]: This dynamic is certainly in play in the Northwest; stated
    simply, a regional transmission entity proposal for the Northwest is
    viable only if it allows transmission owners to maintain existing
    contracts. Grid West is being developed under the assumption
    that the Commission will allow transmission owners to maintain
    existing contracts since the Commission has refused to modify
    existing contracts outside the " 'just and reasonable' standard of
    review or a *Mobile-Sierra* 'public interest' standard of review."
    *Midwest Indep. Sys. Operator, Inc*. 111 FERC 61,042 at P 17 (2005).

[^128]: *See*
    [http://www.gridwest.org/Doc/Reference_Document_Sept52003.pdf]{.underline}.

[^129]: Assuming the underlying contracts allow the rights to be
    assigned.

[^130]: Order 2000, Remedying Undue Discrimination through Open Access
    Transmission Service and Standard Electricity Market Design, Docket
    No. RM01-12-000, White Paper (April 28, 2003), 108 FERC ¶ 61,236 at
    P 150 (2004).

[^131]: Remedying Undue Discrimination through Open Access Transmission
    Service and Standard Electricity Market Design, Docket No.
    RM01-12-000, White Paper (April 28, 2003) at 4.

[^132]: *Midwest Independent System Operator,* 108 FERC ¶ 61,236 at P
    150 (2004).

[^133]: The Commission has refused to modify contracts where the
    transmission provider is not a public utility. Specifically, the
    Commission "acknowledged that it has no authority to make any
    modifications to the \[Grandfathered Agreements\] for which the
    transmission provider is not a public utility as defined in section
    201 of the FPA." *Midwest Indep. Sys. Operator, Inc*. 111 FERC
    61,042 at P 92 (2005).

[^134]: Order 2000, FERC SR ¶ 31,089 at 31,117 (2000).

[^135]: *Midwest Independent Transmission System Operator, Inc*., 109
    FERC ¶ 61,168 at P 56 (2004)

[^136]: *Id.* at P 57.

[^137]: *Id.*

[^138]: *Avista Corp. et al.,* 100 FERC ¶ 61,274 at P 133, *order on
    reh'g,* 101 FERC ¶ 61,346 (2002).

[^139]: *Southwest Power Pool Inc.,* 89 FERC ¶ 61,284 at 61,889 (1999).

[^140]: *Avista Corp et al.,* 100 FERC ¶ 61,274 at P 136 (2002).

[^141]: *Id.*

[^142]: The Grid West Pricing Work Group is currently developing
    proposals to address this and other issues related to the pricing of
    Grid West services, given the proposed physical rights construct. In
    particular, the Pricing Work Group is evaluating the appropriateness
    of export fees. The resulting proposals will be vetted within the
    RRG and within the region sometime this summer.

[^143]: *Entergy Services, Inc.*, 110 FERC ¶ 61,295 (2005).

[^144]: *Southwest Power Pool, Inc.,* 89 FERC ¶ 61,284 at 61,889 (1999).