reserve three minutes of my time for rebuttal bonneville power administration concluded that it needed to treat nearly triple the rates for transmission service on its southern intertie because unlike its prior case only two years earlier where it had rejected a proposal to increase the rates by roughly the same amount circumstances it changed and now hourly service had become a cheaper substitute for a long term firm service and that customers given the choice would flock from our least from want current firm service to the cheaper hourly service putting at risk its recovery of what had historically been ninety five percent of its cost being recovered through those long term contracts the principle problem in this case is that the premise for the agency's decision that hourly service had actually become a cheaper substitute for a long term firm service contradicted by admissions by the agency staff and statements by the agency itself that the agency either ignores or glosses over the but we're not finders of fact here our job is to see w substantial evidence supported d for decision which is to say the idea agency decision and maybe there's inconsistent statements and maybe they said some things that they find are fact my credit or not credit but as i read this record in in two thousand and sixteen when this proposal was made the agency said it's not a terrible idea but we don't have enough evidence yet to to implement it will study it and they went out and went out in the field and had hearings and did studies and they came back with what appears to be evidence that the current structure was driving people away from the long term transmission contracts and therefore they wanted to raise the the rate of the hourly one i don't think i don't i want it just assuming that if that's the case would that be sufficient substantial evidence well if it is the case it's enough tell me why it's not the case here well if that was in fact the case that there was that customers were really going to flock to the long term from service that would justify doing something but the agency had an obvious solution to that problem so let me talk about that st law but it's a start up with what i asked yeah let's assume would that be substantial evidence that would support some rate increase will not necessarily you know would be substantial evidence to do something and the agency had according to the age that there's what both parties have described as the scenes issue that at the border between california and the pacific northwest there were differences in the way schedules are made and that it was it least theoretically possible it's been that way since two thousand and eight theoretically possible that someone with an hourly service contract might be able to jump the line and sell power i into california ahead of someone with long term firm service so there was an obvious fix to that problem that's what they said causes this risk they could they required by law to to solve it in a different way they are required by law to set rates that are the lowest possible way and that's good you got me to the question wanted to ask i don't find anything in this record suggesting that you raise that issue to for well we well we didn't rate i think they c sentence of their opinion they said they'd make the determination that our rates are the lowest possible rates consistent with sound business principles both for transmission and power services so they certainly thought they were addressing it they had dressed the standards at the but i do want i would like to know that b p a also states that your client did not participate in the public process regarding the rate making after two thousand and sixteen  true and if so why i didn't you well your honor we didn't typically participate in bonneville proceedings so we were not intimately familiar with the process but that was a pretty rate case workshop there there were six months of proceedings even after that workshop where we did file comments and we were told that it's too late for you to consider those comments about alternatives then even though they hadn't filed their rate case yet so but it is two separate issues here so it's one is whether you preserve the argument that they didn't consider other alternatives but there's a separate question of whether you preserve the argument that that that the rates were to lowest possible ones and did you preserve that or yes i see you normally when you're arguing that rates on are too high you say it should have been lower should have been this number which you basically said was they shouldn't raise rates at all because they should have looked at not there was a way to solve their problem though without if we raising the rates that there was a lower cost alternative we're not dealing here with a an attack on the amount of the raise are we on the mount of the raise your contention is they shouldn't have raised them at all are arguments was that  essentially that's right your honor but we did say and again i want to emphasize that you only get to this lowest reasonable cost argument if you conclude that there was actually substantial evidence that hourly service had become a cheaper substitute for long term firm service and again here i think the you look at what the agency staff said now i don't think you can have substantial evidence when the agency contradicts that one hundred it's in selling out what if what if the agency says some of our people say this i'm not sure that's what this record shows but let me just ask it some of our people say that we believe the people who say that and therefore we didn't say that that they didn't say well we consider this statement and we didn't want to listen but the contradictions can't the mere contradiction and they don't square their decision with a couple of key things including their own findings so one thing the staff was asked is the staff theory he was well when customers have the choice they're going to choose the service that they find most valuable and we pointed out that the customers were continuing to renew in the staff's answer in critical answer was that they conceded that that reflected the fact that even at the lower hourly rate that was then in effect customers continued to think that our least that long term firm service was more valuable that's why they were new in the agency itself in the bottom in the b p sixteen case had said that customers that rely on hourly non farm often cannot attain it during kinds of high demand because because capacities being scheduled by customers with long term firm service that fact is unchanged the staff acknowledged in this case that it is during the highest periods of the net demand that customers who seek service using hourly service are most likely to get refused those are the hours that are most important and the ones where the companies make their money the companies have power supplies that they can sell into california when the demand is highest whether it was in the evening hours or some other part of the day when it got hottest that's when demand for electricity is high so when the cost of producing it in california or arizona or nevada is highest and when cheaper hydro can be sold at a high profit that's when they make their money the reason the customers renewal rates for long term from service been persistently high is what the agency itself said what it said in that case and what it what it's said in this case that's when the highest peak hours when the access is most valuable that's also when it's most risky to rely on our early service it appears that b p a of a value weighted the non rate alternatives to raising the hourly rates in the white paper and so my question for you is hearing was that they didn't rank those alternatives and they said we planned to look at non read alternatives after this case is over so if they'd actually done the evaluation a statement like that would have made no sense at all they said we'll look at it after the case is over again we only get to that issue if we conclude that there was a rational reason to think that that the hourly service had now actually become a substitute or you're sensually making an insufficiency of the evidence or argument aren't you well it's e support the notion that they needed higher hourly rates you think there wasn't enough evidence and what your rational finder of fact could find that right i think that's that's right and in fact your honor this case is very similar to case that you decided  village of cake versus the partment of agriculture there we had it situation the risk assessment well clear i remember that case that was a case that dealt with whether an agency could undo a previous regulation one the agency said no no we're going to have this road this road drool and then the new agency came and said no we just change our mind we're just going to change it yet no new record no study in the meantime no evidence no hearings just changed it but the your best case no because critical fact as you said in the in the case of the critical decision rested on this is sesame to risk the critical basis for the agency's rejection of the hourly rate increase in the b p sixteen case was the fact that it was an inferior service that are really not firm arlie customers were were often denied service that fact hasn't changed that's why the service is inferior it's sort of rate making one  overt manifestations of that inferiority the customers continue to renew the long term renewal rate which the agency points to hasn't really changed they offer to in fact conflicting statements their staff characterized speculation they say that that put a halt to nine renewals and then they say well we're still worried about this troubling trend because of this one partial renewal by power xx but the agency dismisses the the only reference they actually make to the inferiority of hourly service is to say well in this case we found that hourly service is available most of the time i don't think if asked today they would good news they got good little rates but one reason they did was they went out to their biggest customers in two thousand and sixteen and said we're going to address this issue yeah and and it was based on that promise to do precisely what they did in two thousand eighteen the agency fines led to that new round of the agency itself describes that as speculation we said we they said we can't know what the customers are thinking their own staff said we can't know what the customers are thinking and what we do know we know that at the time the customers made a decision bonneville it concedes that the customers didn't know what action bonneville would take they also concede that at the time customers executed these multi year contracts they knew they'd be stuck with those contracts for the duration whatever the agency did in the case those are the objective facts the that from which we we know what happened and we again i come back to what the staff itself said the agency staff said that the reason customers were renewing was because hourly service was inferior they valued long term firm service higher and even though the hourly rate was lower than it is now this was before the rate increase what do you do with the agency's finding that this was justified by a decline in the queue well your honor that again that the agencies offered a variety of explanations they point out they said st their staff says that the q because i'm not i'm not interested what their staff said yeah i'm interested in what the the finding in the record yes which is that the the klein in the q was a good reason to do this was the weather a decline in the q yes of course there was a clear decline in the q and there was also an increase toward the end of the case in the queue of about three hundred queue would go on up from the time the the market rules went into effect in california it nearly tripled then it went down then it went slightly up again so they're looking at it when it's they're saying we would like to avoid further declines  hand can't they raise rates for that reason that they if it's one thing to take reasonable precautions it's otherwise to take irrational precautions and that's what they've done here they say the agency itself is described this asset as one of the most valuable assets in the west coast market and they acknowledge that hourly service is still high at that one term from services still highly valuable in those peak hours of the day that's when they make their money it's like the the the good are salesman who makes his money he may have to lease a truck for a year but he makes his money during those those summer months when it when people are buying ice cream it that's why people hang on to long term from service and the agency never really comes to grips with that subscribed and under their rules the way they calculate the q you had customers who held five hundred megawatts of capacity deny the plan to take a mega watch that turned into a five hundred mega decline in the q now we don't know and they don't know because they didn't ask why customers left the queue but the way they structured that you leads to a decline related to only eight megawatts of five hundred dollars megawatts without any knowledge of whether those customers might still be my name is courtney olive representing respondent bonneville power administration this case concerns a bonneville transmission rate increase that was broadly supported bondable thoroughly explained its decision in the link the record of o we recognize it was not a nominal increase certainly not i plan to talk about three things today st the substantial evidence that you're honest the fine in the record to support this rate increase nd the reasons why bonneville acted in two thousand and eighteen and not in the prior rape case and finally the lowest possible rates argument the petitioners are now raising but was not raised below maybe you could just start with that because i think it's  one device so i understand that what they said below was you didn't sufficiently consider nine re don't turn it is that's correct and they preserve that argument that was a policy argument that we like these non rate alternatives better than raising the right but that's not but that's not an argument  being made to us is it that non rate alternative should have been well as i as i understand the argument and that is because i thought the argument was this one what the change wasn't supported by substantial evidence number one number two you didn't suffici well no bonneville rate cases are about setting rates so we had to we had to have a starting point somewhere so after as your honor recognized we were presented with these issues in two thousand and sixteen in that rate case we we said exactly as your honor described well this might be a good idea these are serious issues and they must be addressed we launched the public process in which we considered the non rate alternatives as well as possible right solutions and then we said ok as a starting point for the rate case which is where greats are  non rate you know anything out of the sun alternatives as our rate case starting point this will be our initial proposal we we will and that's why i'm trying to figure out how this plays into our review of a rate setting case it doesn't no there is much a ume that you had considered no nine re daughter tiffs you just said that when do you think we would be fine we are we often we were go years to consider not rate altered we often go through rate adjustment proceedings without consent launching into a public process that considers that puts on sort of a menu of different options and not right alternatives and i know i'm taking you off track but that's why i'm interested in that because i thought i didn't think so question of whether you'd sufficiently consider non rated alternatives was an they filed over two hundred dollars pages of legal briefing not once did they fire the phrase lowest possible rates consistent with sound business principles much less cite the statutory provision much less say that this non rate alternative because you didn't choose that you've incurred some non necessary expense which they still don't identify what that might be and therefore you violated those possible rights of course it is a general standard that applies to our rights and of course our rod established that the rates were set under that required effectively the hourly rate to be made less of a level we would have to we'd have to make fewer sales under the hourly rate we would have to hold it back and making making the right less available bottle decided was worse than increasing the substantial increase that we had increasing the rate so bottles said well rather than that let's try the right alternative yes we said in the white paper that a bundle of non rights alternatives and the right alternative would be i mean if you had to do a brute force you know absolute most effective you know sledgehammer solution to this it would be non of great alternatives plus the right alternative but let's try the rate alternative for now and that way we can have a singular focus on how that is working and see how it is working but mind you the non right alternatives carried with them their own costs and their own implications that were in the tune and tabled effectively that the non serious alternatives and so on so then go back to the lowest possible rate if we were to consider this argument i guess and how do you respond i mean why was  hundred and seventy percent appropriate versus one hundred percent that's that's where we get into the fact that there's really no law to apply on the standard it's it's not it's not something where we can say well one hundred and seventy is ok maybe a one hundred and twenty percent would have been ok if the cases that we have cited to you specifically the california energy case and the two district court cases that came shortly after the northwest power act came about say that in this specific type of context where you are allocating costs between rates as we were doing between the hourly rate and the long term rate and the customers that buy under each of those rates lowest possible rates consistent with sound business principles provides the court no law to apply and that cost exactly what you want to with one hundred also believe if they i mean the problem here is that there's nobody has contended that some other rate would be the lowest possible it exactly and nor has anyone contended what the so called non necessary expense think made a determination one way or the other that the other rate proposed is not the lowest possible rate because we could review that for substantial for us for substantial evidence a problem here is that there is no other alternative proposed rate their alternative is i yes and that's a just and it was to keep the old rate yes and well what makes this it's not a weighing of two different rate possibilities to determine which one is the lowest possible i mean if that were all there were to it of course bottom would lose every time it never picked the lower number it simply had an administrator's business discretion judgment call that the statute sets forth you know this is not like the a contractual obligation to pay out money to a customer and by paying out that thirty two million dollars it's other rates had to be increased to make up for it so that was a the court found non necessary expensive bottle energy is not what we have here all we have here are the typical cost allocations between rates and in that setting california energy is very very clear that there's that there's simply no law to apply  bit about substantial evidence because i think it's important here as a court of course knows this is only more than a mere scintilla and when you're engaged in a highly technical matter as this the court of said many times that we give substantial deference to bottles findings and you really to be quite candid you don't even while that standard applies all these so called conflicts in the in the record the petitioners of res if you look at those sites and you read the words that the witnesses say each and every single time there is no conflict that there is no agency changing a position there's no broad speculation every last site that they have raised to you if you look at it in context in the record of decision where it appears or in the witness's testimony will see that they were making either a generalized statement for instance mr right or talks about oh well they they they admitted that the the the long term rate is this is a highly valuable product you know the only statement there is a statement from a bottom a witness saying yeah as a general matter when a customer chooses to buy the long term rate rather than the hourly rate they're making a choice under their their business practices and what's important to them is to as to what they value as a general matter sure yet here we have pages and pages of briefing based can't say exactly what customers might do but we've just given you two pages of discussion why we think the renewal rates are not reflective of what may happen in this upcoming rate case and and the massive amount of written contracts that are up for renewal more than twice as many and then we're up for renewal two years prior and we have half as many people waiting in this queue line so we have an enormous risk that the agency is facing and we can't sit around and wait for that risk to materialize before before we do something about me bottles one of its most fundamental statutory directive this is you must recover your costs and so like any prudent business we were taking actions before the the risk actually i understand mr rogers argument correctly some of it goes like this you may have had all these appropriate concerns but the ok all right so so i was kind to mr writer considers rational or irrational is not the test it's the administrators business judgement and explain as explained in the record that we  have we have twice as many contracts up for renewal in this rape case half as many people waiting in line we have customers who have told us through the public process that we just that we just finished that long term isn't as valuable as it used to be and due to these seams issues and the increase in solar power in california we can use hourly instead the peak hour at and judge her words to your to your point about well it wasn't really the right number yes it was it was exactly the right number because these rates are set under a formula that links the to the hourly rate and the long term right together and that's where the peak hour number comes in so the principle is this in the hour in the long term rate if you are using that that if you buy that service you are allowed to transmit power twenty four hours a day seven days a week as much as much as you want subject to some curtailment limitations that's the benefit have been buying that benefit from your end is you've got a steady customer words so exactly at the beginning of the contract how much you're going to get the exactly which is critical to our agency and that's why we recover ninety five percent of the cost under that long term right we must have that that stable predictable cost recovery that those one dollar typically five year contracts provide us whereas hourly comes and goes with the vagaries of the market and supply and demand whether they want it or not so but back to my point of how the rates are related so the the principle is that all right hourly is long term is priced at a certain amount because you can use it all the time hourly if you're using it for the most valuable times the so called peak hours you should be paying as much because that's that's the most precious time to use that transmission you should be paying as much as a long term customer so for generations in the utility industry the rates have been set in that way not just bottles virtually all utility providers so that if you're using it for those peak hours which had been eighty hours a week which is easy to figure out ok six am to ten pm people are awake they're using power that's the peak if you using it for that those full eighty hours a week the rates is set at a level that it will cost you just as much as if you had gotten long term service because we don't want you any reduced that we have reduced your number of hours we reduce that to a fewer number our hours to reflect the realities of the california market that these transmission lines serve where the peak had dropped to around twenty five hours a week and that was because of solar power all of a sudden the sun comes up you have no more peak in the middle of the day because you have all these solar it's not that it's that that that peak hour number gets plugged in right you need to make more money out of that because yes or if you were charging under the old set up a customer who was being charged an hourly rate which said well if you're using it up to eighty hours it's going to end up costing you as much as long term all of a sudden they say i don't care i only need it for twenty five hours to serve this california market because of the seams issues ok so we needed to change the r reflect the fact that oh my gosh customers are able to now use the hourly rate for just those twenty five hours and it's not costing them nearly as much as it would for long term service so we're now going to recognize that change in peak which was well established not only our studies but the california i s o studies recognize that twenty five hour peak change our number from the traditional eighty hour peak to the twenty five hour peak and simply plug it into the formula that's right but that's our  was one of the hourly customers was only going to buy non peak hours with their rates have gone up if if they had bought less than twenty five dollars hours worth of hourly right their rates would not go up it depends on how many hours worth of hourly they buy once they buy up to twenty five hours worth they're going to hit that increase exactly but if they were buying less they would not be correct i thought that was in the record i wasn't sure correct john and i need to clear up several mis statements and misconceptions from the opening presentation right out of the gate the notion that the increase in the eighteen rate case was quote roughly the same amount of the increase absolutely not it was a nine dollars and i believe fifty cent fifty six dollars cent increase the one proposed before would have been about a thirteen dollars increase that's a significant difference from the from that was one that was not adopt that was one that was not adopted correct your honor this this notion that we had a public process and these petitioners tried to comment on the process ran some six months long no no the process has ended with the white paper and they came in six months later and and tried to submit comments so there was no unfair cutting off of comments here mr ryder repeatedly says the circumstances haven't changed about hourly rate being  unavailable and therefore not a viable substitute wrong his own witness is the one that that testified at the agency level that hourly is available most of the time and bonneville vince then studied that and says you know his witness is actually probably underestimating how much hourly is available because he hasn't considered the fact that a customer can ask for hourly for twenty five hours and if that was denied they could make another request for twenty four hours and then twenty three dollars until they got their request granted she hasn't even considered that factor so it's probably even more available than he says and we know that that customers weren't have problem getting hourly because if they had been the long term customers who are allowed to resell long term transmission would have been some reselling long term to them and they weren't doing that only happened one time are you required under the statutes to provide our lease or other which could could the agency opt only to have long term contracts we will has discretion as to what type of services are provided on the right so there are several there hourly there are multi day i understand and you geishas is simply to recover the costs of our transmission that's the one statutory rate setting obligation at play here there is one that says it's the same cost to federal nonfederal users but that's not at issue oh another perfect example of petitioners taking generalized statements out of context is mr ryder says well the reason they renewed long term is because they valued it is a highly valuable thing highly but we don't contest that the line itself the southern and southern or ties highly valuable the question is how to price the tuesday services that we're dealing with your long term versus versus hourly rate and where he says our witnesses said it was highly valuable and that customers purchasing decisions prove it well sure they said that as a general matter that you know if you value long term you're going to buy that so i see that i'm over time i'll simply summarized by saying bonneville had ample substantial evidence both under the cost allocation argument between our lean long firm and the and the peak number that drove that and under the the rate setting  well of a couple of brief points on a council for bonneville i said that we testified that hourly services available most of the time and of course that's true that's not the point hourly service is available in the middle of the night it's a bailable in the in the winter when when demand is lower the point is that it may not be available during the peak periods when it's highly valuable and that's why customers chose to renew their contracts and have for years and continue to renew their long term for a contract the agency in its in its decision to e r one hundred and fifty seven says that seems issues have made it feasible custom work for customers to switch hourly service for long term from service but it was the increased solar's effect that peak hours that made it economical the problem with that statement is they had a fix if they thought that was the case then they could have made it more difficult for customers to purchase hourly service they expressed a sudden solicitude in their final order for these customers they said well if we actually restricted the availability of hourly service which would in fact have fixed the seams problem that caused people to why i asked your friend the question is the is there failure to adopt on rate alternatives in front of us in this rate case yes i think it is your honor while on a bill says that they they acknowledged that sisyphus well i think that the non rate alternatives that would have void the need for the rate increase are similar to incurring unnecessary expenses and we've cited the this court's decision affirming saying is look but they're not saying and i'm saying there are door non rated alternatives we might have considered but we can make more money if we don't use them here but they're not and you know if that's true let's assume that's just imperative other than their internal policy yes and statute that they consider non rate alternatives in a rate increase case tell me tell me where that comes from i think that comes implicitly from the notion that  rate using sound business judgment and one of those would be to adopt a rate alternative a non rate alternative that fixes the problem you're trying to solve and you don't do that you're not using sound business judgment you had a way to avoid the problem and you  it and you and the result was higher rates than were necessary i think that's implicit in what they mean by lowest possible rates consistent with sound business judgment that judgment includes taking into account what he has that's the lowest possible r meet you find just your glass question here did you find where in the record you raise that most possible rate argument yes i think well i think they are they're briefing page fifty one points out that we said that we preferred the nine rate alternatives to the rate increase bonneville ultimately adopted and i think that there they've acknowledged that that's exactly what we you know if that's the question i tried to ask you for you really never went in and said there's a lower rate increase that you might we're speaking over each other so i'm sorry let me just a my question is you never said where you could have there's a rate increase that might work but it's not this one what you said was you're not entitled to increase your rates at all right when we said was it unnecessary to raise your