**UNITED STATES OF AMERICA**

**U.S. DEPARTMENT OF ENERGY**

**BEFORE THE**

**BONNEVILLE POWER ADMINISTRATION**

Proposed Safety-Net Cost )

Recovery Adjustment Clause ) BPA Docket SN-03

(SN CRAC) Adjustment to )

2002 Wholesale Power Rates )

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**BRIEF ON EXCEPTIONS**

**OF THE CANBY UTILITY BOARD**

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Dan Seligman

Attorney at Law

209 W. Evergreen Blvd., Suite 605

Vancouver, Washington 98660

Phone: 360-695-7422

FAX: 360-695-7426

E-mail: [danseligman@teleport.com]{.underline}

Attorney for the

CANBY UTILITY BOARD

**TABLE OF CONTENTS**

I. TABLE OF AUTHORITIES 1

II\. INTRODUCTION 2

III\. LEGAL, POLICY AND EVIDENTIARY ERRORS 2

IV\. SUMMARY 20

**I. TABLE OF AUTHORITIES**

Statutes:

Northwest Power Act, 16 U.S.C. \' 839 et seq. 3,19

Administrative Procedure Act, 5 U.S.C. \' 551 et seq. 19

National Environmental Policy Act, 42 U.S.C. \' 4321 et seq. 15,16

Cases:

[Town of Newton v. Rumery]{.underline} 18,19

480 U.S. 386 (1987)

[Davies v. Grossmont Union High School District]{.underline} 18,19

930 F.2d 1390 (9^th^ Cir. 1991)

**II.** **INTRODUCTION**

The Canby Utility Board (ACanby@) files this Brief on Exceptions,
pursuant to Section 1010.13(d) of the Rules of Procedure Governing BPA
Rate Hearings, 51 Fed. Reg. 7611 (1986).

The Brief addresses legal, policy and evidentiary errors in BPA=s draft
Record of Decision (AROD@) for the Safety-Net Cost Recovery Adjustment
Clause (ASN CRAC@).

**III. LEGAL, POLICY AND EVIDENTIARY ERRORS**

> **A. The SN CRAC is unnecessary. With proper management, BPA does not
> need to impose an SN CRAC.**

Canby reiterates and incorporates the arguments that it and virtually
every other customer group made in their Initial Briefs: BPA improperly
triggered the SN CRAC and should not impose it on customers. The draft
ROD is unconvincing and does not adequately make the case for the SN
CRAC. BPA=s financial condition has improved, and BPA has not availed
itself of the financial tools that would make an SN CRAC unnecessary.
Canby supports and hereby incorporates Northwest Requirements Utilities'
critique of BPA's approach. SN-03-R-NR-01.

B. The draft ROD is incomplete. The Northwest Power Act requires that
BPA publish and analyze the rates in question. The final ROD must do so.

The draft ROD contains virtually no information about the proposed rates
that BPA intends to implement on October 1, 2003. The draft ROD, for
example, does not even mention the size of the SN CRAC over the next
three years. Nor does it analyze the relationship between the SN CRAC
and the other CRACs that fluctuate according to their own parameters.
BPA states in one place that the SN CRAC would increase wholesale power
rates by 5-percent after all other CRACs were calculated. But this
reference occurs only in passing on page 2.1-2. The General Rate
Schedule Provisions (AGRSPs@) do not offer details, either.

Instead, BPA published a two-page press release and chart on June 16,
2003. Those documents contained essential information \-- more
information than was in the draft ROD. Formulating rates through press
releases is not what the Northwest Power Act demands of BPA. AOne or
more hearings shall be conducted\...to develop a full and complete
record and to receive public comment\...@. 16 U.S.C. \' 839e(i)(2). AThe
Administrator shall make a final decision establishing a rate or rates
*based on the record*\...@. Emphasis added. 16 U.S.C. \' 839e(i)(5).

Furthermore, Canby believes that the paucity of information in the draft
ROD is insufficient for review by the Federal Energy Regulatory
Commission, pursuant to 16 U.S.C. \' 839e(a)(2). The Act requires FERC
to find that rates are sufficient to assure repayment of the federal
investment in the Columbia River Power system. On what basis would FERC
make its decision? How large is the SN CRAC? What level of TPP do
different rate levels produce?

BPA therefore needs to publish a draft ROD that contains projected
rates, reserve levels and other supporting information.

Canby specifically requests that BPA address:

> 1\. The size of the proposed SN CRAC in each year.
>
> 2\. The effect of the SN CRAC on wholesale power rates after
> considering the SN CRAC and the other CRACs (e.g., the declining
> LB-CRAC, which offsets a portion of the SN CRAC increase).
>
> 3\. The Treasury Payment Probability (ATPP@) under a variety of
> different scenarios (e.g., SN CRAC amounts).
>
> 4\. The cash reserve levels at the end of each year (depending on the
> scenario adopted).

Without this information, there is no way that Canby or other parties in
this proceeding \-- or FERC \-- can adequately evaluate the proposed
rates. As things stand now, this is a no-numbers rate case. BPA will
unveil the final numbers in August or September 2003, *after* it has
sent the rate case record to FERC. This approach is unacceptable. BPA
must prepare a sufficient administrative record to justify the proposed
SN CRAC rates.

> **C. BPA=s conclusion that it can levy the SN-CRAC on Canby is flawed.
> BPA should exempt Canby from the SN CRAC.**

Canby=s five-year power sales contract does not allow BPA to impose the
SN CRAC on Canby, pursuant to successor General Rate Schedule Provisions
(AGRSPs@).

Canby raised this issue in its briefs in 2001. WP-02-B-CA-02 and
WP-02-R-CA-02. Canby raised this issue again in this proceeding.
SN-03-B-CA-01 at 3-6.

Nonetheless, BPA asserts that Canby is Aprecluded by the scope of this
proceeding from revisiting the appropriateness or reasonableness of
BPA=s decisions in the WP-02 rate hearing.@ Draft ROD at 3-18.

There is, however, good reason for Canby to raise this issue again. Two
years ago, BPA argued that it would not revise or change the GRSPs in
subsequent years, and that it would implement the SN CRAC based on the
2002 GRSPs, as written at the time.

BPA said in 2001:

> The presence or absence of the \>successor GRSPs= language is not
> relevant. *Once submitted and approved by FERC, BPA will have only one
> set of GRSPs for the upcoming rate period.*@ WP-02-A-09 at 9-27.

BPA concluded:

> ACanby=s argument appears to be based upon a faulty understanding of
> how the proposed GRSPs will work. The resulting adjustments from the
> application of the various CRACs will all occur pursuant to the
> provisions contained in the 2002 GRSPs and *not, as Canby contends,
> result from changes to the 2002 GRSPs themselves*.@ Emphasis added.
> WP-02-A-09 at 9-27.

BPA has now proposed amended or changed GRSPs in this proceeding.[^1] It
has done what it said in 2001 it would not do. The amended language is
what BPA will rely on to implement the SN CRAC on October 1, 2003.
Having changed its position, BPA cannot now try to prevent Canby from
responding to revisions adopted by BPA itself.

BPA=s analysis, however, does not stop there. BPA states that,
Anotwithstanding BPA=s objection \[to Canby=s argument\], BPA is neither
revising nor promulgating successor GRSPs in this proceeding, and thus,
may impose the SN CRAC on Canby as provided under Canby=s contract.@
Draft ROD at 3-18.

But BPA is indeed revising the GRSPs in this proceeding. The new,
revised GRSPs are contained in Appendix A.

BPA argues that the GRSPs only implement the decisions made in the rate
case that pertain to the SN CRAC. BPA suggests that the term Asuccessor
GRSPs@ refer to situations where BPA would make Asweeping changes@
(i.e., replacing all existing GRSPs with new GRSPs) \-- something it has
not done. Draft ROD at 3-18.

This argument makes no sense. Canby never argued that BPA was revising
or amending *all* of the GRSPs. It argued that BPA was publishing
successor GRSPs that allowed it to design and then impose an SN CRAC
rate surcharge. Unlike the contractual provisions of many other public
power utilities, Canby=s power sales contract does not authorize BPA to
impose rate changes, pursuant to successor GRSPs.

Canby therefore believes that BPA must exempt it from the SN CRAC. The
new GRSPs contained in Appendix A of the draft ROD speak for themselves.
They are the successors to what was adopted in 2001 as part of the
Supplemental ROD.

D. BPA has erroneously concluded that the Northwest Power Act does not
require it to conduct a section 7(b)(2) rate test prior to imposing the
SN CRAC.

BPA devotes a considerable amount of space in the draft ROD to the
arguments of Canby and other BPA customers that it should have conducted
a section 7(b)(2) study in this proceeding. Draft ROD at 2.1-36 to 65.

Canby hereby incorporates and reiterates the issues and points it made
in its Initial Brief. BPA=s responses in the draft ROD are summarized
below, followed by Canby=s rebuttal:

1\. The crux of BPA=s argument is that the SN CRAC is only an adjustment
to base rates, adopted in 2000, and that BPA is not legally required to
conduct a 7(b)(2) rate test when it adjusts base rates. Draft ROD at
2.1-41 and 44-45.

But the SN CRAC is not simply an adjustment to existing rates. It is
more than that. The SN CRAC is a new rate, with its own parameters and
trigger points. The proposed GRSPs illustrate the number of new elements
that BPA has adopted in the SN CRAC.

There is, for example, a new Treasury Payment Probability number (80
percent). There is a rebate provision, and there are rate mechanisms for
resetting the CRAC. All of those elements show that BPA=s SN CRAC is not
a simplistic, mechanical adjustment to a formula, adopted in 2000, but a
new rate. Under those circumstances, Canby believes BPA is required to
conduct a 7(b)(2) rate test.

2\. BPA again attempts to justify its failure to do the 7(b)(2) rate
test by citing the tight 40-day deadline for the SN CRAC proceeding. In
order to conduct a rate test, BPA lists a long litany of tasks and
studies it would have to perform. But this list supports Canby=s
assertion that BPA should have started earlier to prepare for the day
when it had to begin its analysis under the Northwest Power Act.

BPA had two years to prepare for the day when it would initiate a SN
CRAC hearing. Furthermore, BPA can avail itself of the provision in the
existing GRSPs which allow for an extension of time beyond the current
40-day limit. BPA has options, even now, to perform the 7(b)(2) study.

3\. Finally, Canby objects strenuously to BPA=s statements that the
Apublic agencies,@ of which Canby is a part, misled the Hearing Officer
by making false or misleading assertions regarding the 7(b)(2) rate
test.[^2]

In order to refute BPA=s assertions, it is necessary to review briefly
the chronology of motions and orders leading up to the draft ROD:

> April 18: The Springfield Utility Board (ASUB@) submitted its direct
> testimony, including a discussion of 7(b)(2) issues. SN-03-E-SP-01.
>
> April 23: BPA filed a motion to strike a portion of SUB=s testimony.
> SN-03-M-03.
>
> April 23: PacifiCorp, Portland General Electric and the Oregon Public
> Utility Commission (Athe Joint Movants@) also filed a motion seeking
> to strike SUB=s 7(b)(2) testimony. SN-03-M-02.
>
> April 29: SUB filed a response to the motions to strike and asked the
> Hearing Officer to deny the motions. SN-03-M-11 and 12.
>
> April 29: The Public Power Council (APPC@) filed a response in support
> of SUB, also asking the Hearing Officer to deny the motions to strike.

SN-03-M-15.

> May 5: The Hearing Officer denied BPA=s and the Joint Movants= request
> to strike SUB=s 7(b)(2) testimony. SN-03-O-12.
>
> **May 9: The public agencies (Canby, SUB and PPC) filed a motion to
> compel BPA to do the 7(b)(2) rate test. SN-03-M-19.**
>
> May 13: BPA filed a response to the motion to compel. SN-03-M-22.
>
> May 14: The Hearing Officer denied the public agencies= motion to
> compel. SN-03-O-15.

In the draft ROD, however, BPA makes a number of statements that show
some confusion about which party made which argument. BPA=s criticisms
are addressed below:

**Comment 1.** BPA states that the Hearing Officer=s order on May 5
allowing SUB to submit direct testimony on the 7(b)(2) was based on
Amisstatements of fact by the public agencies.@ Draft ROD at 50.

Specifically, BPA said:

> AFor example, the public agencies told the Hearing Officer that BPA
> had never held a section 7(i) hearing without conducting the section
> 7(b)(2) rate test. See, Order SN-03-O-12, and BPA Response to Motion
> to Compel, SN-03-M-22. This statement is utterly false.@ Draft ROD at
> 50.

But the public agencies, as a group, did not submit direct testimony on
section 7(b)(2), nor did they respond to BPA=s motion to strike SUB=s
testimony. SUB did. The PPC joined SUB in the opposing motion to strike.

Four days *after* the Hearing Officer=s order, Canby joined with SUB and
PPC and filed the Apublic agencies@ motion to compel. *This was Canby=s
first and only motion on 7(b)(2) issues.*

Ironically, the offending sentences \-- the language that BPA finds
misleading \-- first appeared in SUB=s direct testimony, when it said:

> AThe 7(b)(2) Methodology has been used by BPA in every rate case since
> 1985, when the 7(b)(2) rate test was first run, and was used in the
> development of BPA=s 2002 rate case.@ SN-03-E-SP-01 at 9.

But the sentence was taken verbatim from BPA=s own 2000 Record of
Decision on rates, and was placed in quotes to note that BPA itself had
made statement. WP-02-A-02 at

13-7.

SUB later repeated the statement in its response to BPA=s motion to
strike its testimony. SN-03-M-12 at 3. It added another quotation from
the 2000 ROD that read as follows:

ABPA also has conducted the 7(b)(2) rate test in every rate case since
1985, except

in the cases where the rate case was settled and the test was not
performed.@

WP-02-A-02 at 13-60.

Thus, BPA=s objections are more appropriately directed at itself for
making statements that it now finds incomplete.[^3] BPA should not take
umbrage at parties in this proceeding for quoting verbatim from prior
RODs.

**Comment 2.** BPA asserts that the public agencies Afailed to advise
the Hearing Officer that the issue of the conduct of the 7(b)(2) rate
test with regard to the SN CRAC was addressed in the WP-02 record.@
Draft ROD at 50.

But the public agencies, as a group, did not file a motion regarding
SUB=s testimony. When the Hearing Officer ruled against BPA on the issue
of SUB=s direct testimony, he wrote that the issue of the applicability
of the 7(b)(2) rate test to the SN CRAC had *not* been addressed in the
rate 2001 proceeding. See, SN-03-O-12. AI also find that the issue of
the utilization of a section 7(b)(2) rate test in the SN CRAC 7(i) case,
was not a decision directly or indirectly addressed in the WP-02 rate
proceeding.@ SN-03-O-12 at 4.

BPA=s criticism in the draft ROD is therefore nothing more than an
attempt to revisit the Hearing Officer=s ruling on whether SUB should
have been allowed to submit testimony on 7(b)(2) in the first place.
BPA, however, had an opportunity to file a motion of reconsideration at
the time, if it believed that the Hearing Officer=s statements about the
scope of the 2001 proceeding were inaccurate. BPA chose not to do so.

**Comment 3.** BPA quotes liberally from the Hearing Officer=s order of
May 13 denying the public agencies= motion to compel, but it omits a key
phrase. SN-03-O-15. BPA finds the order is Awell reasoned and the motion
was properly denied.@ Draft ROD at 64.

But BPA omits the portion of the order in which the Hearing Officer
ruled that he was not deciding the issue on the merits. AIn light of the
foregoing circumstances, no consideration of the merits, if any, of the
Motion is necessary.@ SN-03-O-15 at 2.

BPA also omits the portion of its own response to the motion to compel
in which

it argued that the Hearing Officer had no authority to grant the motion,
anyway. AThe Hearing Officer is precluded from providing the requested
relief.@ SN-03-M-22 at 7.

Instead, BPA seeks to convert a procedural denial into a substantive one
\-- as if the Hearing Officer had the power to decide the merits and had
done so.

This approach is disingenuous and turns the Hearing Officer=s order into
something it was not.

**Comment 4.** In the draft ROD, BPA responds to SUB=s Initial Brief
requesting an additional hearing on section 7(b)(2) with the following
statement:

> "In essence, SUB and Canby seek review of the Hearing Officer=s order
> denying SUB=s motion to compel BPA to conduct a section 7(b)(2) rate
> test in the SN-03 rate proceeding.@ Draft ROD at 63.

But SUB and Canby submitted their own Initial Briefs, and Canby made no
request for an additional hearing. If BPA has comments regarding SUB=s
brief, it should address those to SUB, not Canby.

In conclusion, Canby believes it has properly and accurately framed the
7(b)(2) issue. Canby reiterates its request that BPA perform a 7(b)(2)
rate test in this proceeding. Canby believes that BPA is obligated by
statute and by its prior administrative practices to conduct the study
prior to implementing the SN CRAC.

Finally, Canby requests that BPA delete its allegations of misleading
statements by Canby and the public agencies. They made no such
statements.

**E. BPA=s analysis of NEPA-related issues is inadequate.**

In the draft ROD, BPA argues that compliance with the National
Environmental Policy Act (ANEPA@), 5 U.S.C. \' 4321 et seq., is Aoutside
the scope of the issues to be litigated in this proceeding.@ Draft ROD
at 2.1-65.

This is an odd statement for BPA to make because it was BPA, in the
first place, that said in the Federal Register Notice for this
proceeding that its proposed SN CRAC rates were consistent with the 1995
Business Plan and the Environmental Impact Statement (AEIS@) prepared
pursuant to NEPA.

Furthermore, BPA asserted that it had conducted an initial review of the
SN CRAC proposal and found that the SN CRAC rates were consistent with
the AMarket-Driven Alternative,@ adopted as the preferred alternative in
the 1995 Business Plan and EIS. 68 Fed. Reg. 12052 (March 13, 2003).

Canby pointed out in its Initial Brief that BPA had not performed an
environmental review of the rate impacts, nor had it conducted any other
analysis. SN-03-B-CA-01 at 20-22.

As a result, Canby said that BPA was obligated to evaluate the proposed
rates under the SN CRAC for consistency with the 1995 Business Plan and
EIS. Canby said that BPA must either prepare a new EIS or reduce the SN
CRAC to comply with the Business Plan and EIS.

In the draft ROD, BPA did not respond directly to Canby=s arguments.
Instead, BPA responded to the issues raised in the Initial Brief of the
Public Generating Pool (APGP@). SN-03-B-GP-01. BPA said it would
evaluate NEPA issues outside of the rate case. Draft ROD at 3-23.

Canby reiterates the issues it raised in its Initial Brief. BPA cannot
rely on the Business Plan and its EIS, as written, for support for the
proposed SN CRAC. Canby believes BPA must therefore revise its Business
Plan EIS or reduce rates to conform to the EIS.[^4]

> **F. BPA should not put the \$200 million Alitigation penalty@ in
> rates. The contract provisions are void because they violate public
> policy. As a result, BPA has no need to include a proposed
> recalculation or calibration process in the SN CRAC rate case.**

BPA in the draft ROD proposes for the first time proposes a contingency
mechanism to deal with a possible settlement of litigation between
public power and investor-owned utilities (AIOUs@). BPA calls this
mechanism the Acontingent recalculation or calibration of SN CRAC
parameters." SN-03-A-01 at 17-18.

The proposal was not part of BPA=s direct case. The parties in this
proceeding learned of it for the first time in the draft ROD.[^5] The
proposal appears to assume that BPA will, after an unspecified date,
make the \$200-million in litigation contingency payments to two IOUs:
Puget Sound Energy and PacifiCorp.

The two contracts, though slightly different in terms and conditions,
require BPA to pay the companies a certain amount (based on MWH) to
reduce their loads between 2002-2006. If, however, the two companies
agree to drop litigation against BPA *and* to settle litigation with
public power utilities, BPA said it would pay them *less* money. At
stake was approximately \$50 million per year (or \$200 million over the
4-year rate period ending on September 30, 2006).

The premise of the agreements is that the two companies would be willing
to accept less money from BPA if they could have the assurances that
litigation challenging their contracts and BPA rates were settled. With
such a settlement, there was less risk to them (and to BPA).

The result of the contracts, however, is to place a bounty on public
power, and thus to discourage public power utilities from pursuing
litigation against BPA.

If the public power utilities continue to pursue the litigation, BPA
would put the \$200 million in LB CRAC rates. The \$200-million amount
was \-- and is, to this day \-- a club over the heads of public power,
and it can best be described as a form of economic duress. In order to
pursue litigation against BPA, the public power utilities now face \$200
million in higher power bills. To avoid this increase, they would have
to abandon or withdraw legal challenges. Either way, public power loses.

Unfortunately, the contracts between BPA and the two IOUs were signed in
2001, *after* BPA published the ROD for the base rates and only weeks
before BPA published the Supplemental ROD. As a result, the two
contracts have not been analyzed in any rate proceeding, including this
one, until BPA announced the contingency mechanism in the draft ROD.

The mechanism *assumes* that BPA intends to recover the \$200 million
expense in the LB-CRAC sometime in fiscal 2004. The draft ROD, however,
does not give details.[^6]

For the reasons explained below, Canby believes that the contract
provisions regarding the \$200-million payment violate public policy,
and are therefore void and unenforceable.

The U.S. Supreme Court has held that a promise is unenforceable if the
interest in its enforcement is outweighed by a public policy that is
harmed by enforcement of the agreement. [Town of Newton v.
Rumery]{.underline}, 480 U.S. 386, 392 (1987). In [Rumery]{.underline},
the surrender of a statutory right was at issue. In [Davies v. Grossmont
Union High School District]{.underline}, 930 F.2d 1390 (9^th^ Cir.
1991), the court applied [Rumery]{.underline} to the surrender of a
constitutional right. The court in [Davies]{.underline} distinguished
the facts with those of [Rumery]{.underline}.

The defendant, Rumery, was charged with witness tampering. He entered
into an agreement with the prosecution to drop criminal charges in
exchange for his waiver of rights to bring a civil action against the
state. [Rumery]{.underline} at 389-340. The Supreme Court held the
agreement was enforceable because ARumery had no public duty to
institute \[a civil action\] to further the public=s interest.@ The
Court noted that Rumery=s civil suit would mainly serve him, not a
collective or public interest. [Id]{.underline}. at 395.

In [Davies]{.underline}, however, the plaintiff challenged the
enforceability of a contract provision that restricted his right to run
for public office. The government had the burden to demonstrate that the
agreement served the public interest, the [Davies]{.underline} court
concluded.

The court analyzed: 1) if a right that affects the public interest was
waived; 2) if the enforcement of the agreement would impair the public
interest; and 3) if there were reasons, apart from the public interest,
to support the agreement. [Davies]{.underline} at 1399. The court voided
the agreement.

In this instance, the public power utilities have a clear, public duty
to further the interests of their customers \-- the ratepayers whom they
serve. That interest cannot be characterized as a private interest.
Their duty, as utilities, includes making sure that BPA properly and
fairly sets rates, and that it complies with its statutory obligations
under the Northwest Power Act and Administrative Procedure Act, 5 U.S.C.
\' 551 et seq., as well as the constitutional due process protections
that apply to section 7(i) hearings.

The \$200-million penalty would clearly impair their interest. To avoid
the penalty, public power utilities and their representatives must
abandon their legal challenges. Putting a price tag on their pursuit of
legal claims does not meet the [Rumery]{.underline} or
[Davies]{.underline} tests. The \$200-million penalty, in Canby=s
opinion, is unenforceable.

Canby therefore believes that BPA cannot include the sum in future LB
CRACs and that the SN CRAC contingency mechanism is unnecessary.

**IV.** **SUMMARY**

Canby requests that the Administrator take the following steps and make
the following conclusions in the final Record of Decision:

A. Find that an SN CRAC is not needed and therefore not impose it on
customers on October 1, 2003.

B. Publish a detailed analysis in the final ROD that clearly states what
rates will go into effect and why.

C. Recognize the limiting language in Canby=s five-year power sales
contract and exempt Canby from the SN-CRAC;

D. Perform a section 7(b)(2) rate test in this proceeding, pursuant to
the Northwest Power Act;

E. Evaluate the proposed SN CRAC rates for consistency with BPA=s 1995
Business Plan and its EIS, and prepare a new EIS or lower the SN CRAC to
conform with those documents; and

F. Conclude that the \$200-million litigation payments are unenforceable
and violate public policy, and therefore there is no need to design a
contingency mechanism in the SN CRAC;

DATED this 20^th^ day of June, 2003.

Respectfully Submitted:

Dan Seligman

[/s/ Dan Seligman]{.underline}

Attorney for Canby Utility Board

[^1]: See, Federal Register Notice with the AAmended 2002 GRSPs,@ 68
    Fed. Reg. 12053-54 (March 13, 2003). See, also, SN-03-E-BPA-03.

[^2]: The term Apublic agencies@ refers to the Springfield Utility
    Board, the Canby Utility Board and the Public Power Council, which
    filed a motion to compel BPA to conduct a 7(b)(2) rate test on May
    9, 2003. SN-03-M-19. This motion was the only cooperative effort
    that the agencies took together regarding 7(b)(2) issues.

[^3]: In BPA=s response to the public agencies= motion to compel, BPA
    cited seven instances where it had conducted a section 7(i) hearing
    without performing a 7(b)(2) rate test. SN-03-M-22 at 9-10. Canby
    responded in its Initial Brief. SN-03-B-CA-01 at 9-12.

[^4]: Canby cited several reasons for this requirement: 1) the Business
    Plan and EIS analysis did not extend beyond 2002; 2) the EIS assumed
    BPA would adopt tiered rates (which BPA has not done); and 3) BPA=s
    projected rates under the SN CRAC exceed the projected rates under
    review in the EIS. See SN-03-B-CA-01 at 21-22.

[^5]: Because BPA=s rules require parties to raise objections in the
    Brief on Exception or waive them, Canby is raising the issue of the
    \$200 million in its Brief. Canby objects to the process used by BPA
    in developing this mechanism, which was not proposed by any of the
    parties and was not vetted in the normal procedures (e.g., direct
    case, data requests, cross examination, etc.).

[^6]: In June 2002, PacifiCorp and Puget Sound Energy agreed to defer
    the \$200 million payments pending negotiations with public power
    regarding the settlement of litigation as well as future payments to
    the IOUs after 2006. Negotiations have been underway for months. As
    a result of these deferrals, the \$200 million is not now in rates.
    BPA produced the deferral agreements (and the contracts with the
    \$200-million penalty provisions) in response to Canby data request,
    CA-BPA-006. The contracts are referred to in passing in BPA's direct
    testimony, SN-03-BPA-10 at 8.