[Federal Register Volume 65, Number 191 (Monday, October 2, 2000)]
[Notices]
[Pages 58758-58761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25256]


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

DEPARTMENT OF ENERGY

Bonneville Power Administration


Bonneville Power Administration's Proposed Adjustment to the 1996 
Unauthorized Increase Charge, Public Hearing, and Opportunity for 
Public Review and Comment

AGENCY: Bonneville Power Administration, DOE.

ACTION: Notice of proposed adjustment to the 1996 unauthorized increase 
charge. BPA File No: UAI-96R.

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

SUMMARY: The Pacific Northwest Electric Power Planning and Conservation 
Act (Northwest Power Act) provides that Bonneville Power Administration 
(BPA) must establish and periodically review its rates so that they are 
adequate to recover, in accordance with sound business principles, the 
costs associated with the acquisition, conservation, and transmission 
of electric power, and to recover the Federal investment in the Federal 
Columbia River Power System (FCRPS) and other costs incurred by BPA.
    By this notice, BPA announces its proposed adjustment to the 1996 
Unauthorized Increase Charge. The Unauthorized Increase Charge is a 
penalty charge that applies to any purchaser taking demand and/or 
energy in excess of its contractual entitlement. The 1996 Unauthorized 
Increase Charge was set at a level intended to deter customers who had 
their own generation or a contract obligation to supply power to their 
load from exceeding their BPA contractual entitlements to Federal 
power. However, since 1996 a robust wholesale market for power has 
developed which has recently produced high and volatile prices. These 
market changes render the current level of the 1996 Unauthorized 
Increase Charge for energy and demand inadequate to deter customers 
from taking demand and energy in excess of the amount of Federal power 
to which they are contractually entitled. This action is to adjust the 
1996 Unauthorized Increase Charge so that it will operate as intended--
as a penalty charge, rather than as an attractive alternative to 
purchasing power at existing wholesale power market prices.

DATES: Proposed hearing dates are supplied in Supplementary 
Information, Section I.C. Close of public comments is November 15, 
2000.

ADDRESSES: Written comments should be submitted to: Mr. Michael Hansen, 
Public Involvement and Information Specialist; Bonneville Power 
Administration; P.O. Box 12999; Portland, Oregon 97212.

FOR FURTHER INFORMATION CONTACT: Interested persons may also call (503) 
230-4328 or call toll-free 1-800-622-4519. Documents will be available 
for public viewing after October 6, 2000, at BPA's Public Information 
Center, BPA Headquarters Building, 1st Floor; 905 NE. 11th, Portland, 
Oregon, and will be provided to parties at the prehearing conference to 
be held on October 6, 2000, from 9 a.m. to 12 p.m., Room 223, 911 NE. 
11th, Portland, Oregon. The documents will also be available on BPA's 
website at www.bpa.gov/power/ratecase. Ms. Diane Cherry, Power Rates 
Process Manager, is the official responsible for the development of 
BPA's rates. Ms Cherry may be contacted as indicated above.

SUPPLEMENTARY INFORMATION:

[[Page 58759]]

Table of Contents

Part I: Introduction and Procedural Background
    A. Relevant Statutory Provisions Governing This Rate Proceeding
    B. Procedure/Background
    C. Proposed Schedule Concerning This Rate Proceeding
Part II: Purpose and Scope of Hearing
    A. The Circumstances Necessitating Adjustment
    B. Scope
    C. NEPA Evaluation
Part III: Public Participation
    A. Distinguishing Between ``Participants'' and ``Parties'
    B. Petitions for Intervention
    C. Developing the Record
Part IV: Summary of the Proposal

PART I--INTRODUCTION AND PROCEDURAL BACKGROUND

A. Relevant Statutory Provisions Governing This Rate Proceeding

    Section 7 of the Northwest Power Act, 16 U.S.C. 839e, contains a 
number of general directives that the BPA Administrator must consider 
in establishing rates for the sale of electric energy and capacity. In 
particular, section 7(a)(1), 16 U.S.C. 839e(a)(1), provides in part 
that:

    [S]uch rates shall be established and, as appropriate, revised 
to recover, in accordance with sound business principles, the costs 
associated with the acquisition, conservation, and transmission of 
electric power, including the amortization of the Federal investment 
in the Federal Columbia River Power System (including irrigation 
costs required to be repaid out of power revenues) over a reasonable 
period of years and the other costs and expenses incurred by the 
Administrator pursuant to this Act and other provisions of law.

    Rates established by BPA are effective on an interim or final basis 
when approved by FERC. 16 U.S.C. 839e(a)(2). In addition to the 
Northwest Power Act, BPA ratemaking is governed by the Bonneville 
Project Act, 16 U.S.C. 832 et seq., the Federal Columbia River 
Transmission System Act, 16 U.S.C. 838 et seq., and the Flood Control 
Act of 1944, 16 U.S.C. 825 et seq.
    Section 7(i) of the Northwest Power Act, 16 U.S.C. 839e(i), 
requires that BPA's rates be set according to certain procedures. These 
procedures include issuance of a Federal Register notice announcing the 
proposed rates; one or more hearings; the opportunity to submit written 
views, supporting information, questions, or arguments; and a decision 
by the Administrator based on the record developed during the hearing 
process. This proceeding will be governed by BPA's ``Procedures 
Governing Bonneville Power Administration Rate Hearings,'' 51 FR 7611 
(March 5, 1986), which implement and, in most instances, expand these 
statutory requirements. Pursuant to Rule 1010.3(c) of the Procedures 
Governing Bonneville Power Administration Rate Hearings (BPA 
Procedures), this hearing will be conducted under Rule 1010.10, which 
governs Expedited Rate Proceedings. The expedited procedures will be 
used rather than the procedures for General Rate Proceedings conducted 
under Rule 1010.9. The procedures for General Rate Proceedings are 
intended for use when the Administrator proposes to revise all, or 
substantially all, of BPA's wholesale power and transmission rates.
    The proposed adjustment of the 1996 Unauthorized Increase Charge 
(UAI) is a change in the level of the penalty charge which is added to 
other rates. The adjustment includes a change in the applicability of 
the UAI to existing 1996 rate schedules. It will be applicable to any 
customer providing nonfederal power to serve any portion of its 
consumer's load, but in the very limited circumstance of the customer's 
failure to supply or exceedence of its right to take power under its 
BPA contracts. Therefore, the issues in this rate proceeding will be 
fewer and of more limited scope than the issues in a proceeding to 
adjust all BPA rates. BPA believes that the 90-day Expedited Rate 
Proceeding will be adequate to develop a full and complete record and 
to receive public comment and argument related to the proposed 
adjustment. If more time is required, the Hearing Officer may request 
under Rule 1010.10(b) of the BPA Procedures that the BPA Administrator 
grant an extension.

B. Procedure/Background

    On July 17, 1995, BPA filed a notice in the Federal Register 
proposing new wholesale power and transmission rates to be effective on 
October 1, 1996, including the UAI. BPA's initial rate proposal was 
filed on July 10, 1995, and was supported by written testimony and 
studies. Parties to the proceeding filed their rebuttal to BPA's direct 
case and their own direct testimony on September 8, 1995. On December 
8, 1995, litigants filed rebuttal to the Parties' direct cases. BPA 
also filed a supplemental rate proposal on December 8, 1995, which 
consisted of written testimony and studies.
    Parties filed their direct cases in response to BPA's supplemental 
rate proposal on January 26, 1996. Testimony responding to the Parties' 
supplemental cases was filed on February 12, 1996. Surrebuttal 
testimony was filed by all Parties on February 14, 1996. The Parties 
filed their prehearing briefs on February 12, 1996. Cross-examination 
began on February 20, 1996. Parties submitted initial briefs on April 
22, 1996. Oral argument before the BPA Administrator and Deputy 
Administrator was held on April 30, 1996.
    A Draft Record of Decision (ROD) was published and distributed to 
parties on May 14, 1996. Parties filed briefs on exceptions on May 30, 
1996. BPA published its Final ROD on June 17, 1996.
    BPA filed its proposed rates, including the UAI, with the Federal 
Energy Regulatory Commission (FERC) on July 26, 1996. On September 25, 
1996, FERC granted interim approval of the proposed rates effective 
October 1, 1996. On July 30, 1996, FERC issued an order granting final 
confirmation and approval of BPA's rates.

C. Proposed Schedule Concerning This Rate Proceeding

    BPA will release its proposed 1996 Revisions on October 6, 2000, 
and expects to publish a final Record of Decision on December 29, 2000. 
The following proposed schedule is provided for informational purposes. 
A final schedule will be established by the Hearing Officer at the 
prehearing conference.

------------------------------------------------------------------------
                 Date                                Action
------------------------------------------------------------------------
October 4.............................  Deadline for Petitions to
                                         Intervene.
October 6.............................  Prehearing Conference.
October 12............................  Data Requests on BPA's Direct
                                         Case.
October 19............................  Data Responses Due.
October 27............................  Parties' Direct Cases and
                                         Rebuttal to BPA's Direct Case.
November 3............................  Data Requests on Parties' Direct
                                         Cases.
November 10...........................  Data Responses Due.
November 17...........................  Parties' Rebuttal.
November 24...........................  Cross-Examination.
December 1............................  Initial Briefs.
December 15...........................  Draft Record of Decision.
December 22...........................  Briefs on Exceptions.
December 29...........................  Final Record of Decision.
------------------------------------------------------------------------

    The procedural schedule established for Docket No. UAI-96R will 
provide an opportunity for interested persons to review BPA's proposed 
rates, to participate in the rate hearing, and to submit oral and 
written comments. During the development of the final rate proposal, 
BPA will evaluate all written and oral comments received in the rate 
proceeding. Consideration of comments and more current data may result 
in the final rate proposal differing from the rates proposed in this 
Notice.

[[Page 58760]]

Part II--Purpose and Scope of Hearing

    The purpose and scope of the hearing is to correct the 1996 UAI. 
BPA proposes to adjust upward the level of the charge to reflect 
wholesale power market price volatility. Such an adjustment will ensure 
that it operates as intended as a penalty that deters BPA customers 
from taking more Federal power than allowed under the terms of their 
BPA power purchase contracts. Therefore, BPA proposes the use of a 
market price index that will cause adjustments to the 1996 UAI for 
energy and demand to account for market price volatility.

A. The Circumstances Necessitating Adjustment

    Since 1996, a robust wholesale power market has developed in which 
the 1996 UAI simply does not perform as intended. Recent experience in 
the Northwest power market clearly indicates that the 1996 UAI of 100 
mills for energy is no longer an effective deterrent. For example, 
average daily prices for firm Heavy Load Hours (HLH) energy at Mid-
Columbia exceeded 100 mills on 59 days from May 1, 2000 to August 31, 
2000. During this 4-month period average daily HLH energy prices 
exceeded 300 mills on 8 days. And the highest daily HLH price recorded 
during this period was 628 mills on June 27, 2000. This market price 
level has the result of making the UAI charge an attractive price 
rather than a deterrence, contrary to its designed purpose. BPA's 
proposed adjustment to these charges would give BPA the ability to 
assess charges that reflect the volatility of the market in periods in 
which the market price for power exceeds the minimum UAI for energy and 
demand. This penalty rate would then continue to be effective as a 
deterrence. Without this modification, the UAI charge may be an 
attractive alternative price to the market price for some BPA 
customers. If this happens, BPA may face power demands far in excess of 
its planned system capability. This could result in a significant 
erosion of BPA's financial position and an inability to recover its 
costs and repay the U.S. Treasury.

B. Scope

    Pursuant to Rule 1010.3(f) of BPA's Procedures, the Administrator 
limits the scope of this hearing to issues respecting the 1996 UAI as 
described in Section II hereof.

C. NEPA Evaluation

    BPA has assessed the potential environmental effects of its rate 
proposal, as required by the National Environmental Policy Act (NEPA), 
as part of BPA's Business Plan Environmental Impact Statement (EIS). 
The analysis includes an evaluation of the environmental impacts of a 
range of rate design alternatives for BPA's power services and an 
analysis of the environmental impacts of the rate levels resulting from 
the rates for such services under the business structure alternatives. 
BPA's proposal to revise the 1996 UAI falls within the range of 
alternatives evaluated in the Final Business Plan EIS. Comments on the 
Business Plan EIS were received outside the formal rate hearing 
process, but will be included in the rate case record and considered by 
the Administrator in making a final decision establishing BPA's 
revisions to the 1996 rate schedules. The Business Plan EIS was 
completed in June 1995.

Part III--Public Participation

A. Distinguishing Between ``Participants'' and ``Parties''

    BPA distinguishes between ``participants in'' and ``parties to'' 
the hearings. Apart from the formal hearing process, BPA will receive 
comments, views, opinions, and information from ``participants,'' who 
are defined in the BPA Procedures as persons who may submit comments 
without being subject to the duties of, or having the privileges of, 
parties. Participants' written and oral comments will be made part of 
the official record and considered by the Administrator. Participants 
are not entitled to participate in the prehearing conference; may not 
cross examine parties' witnesses, seek discovery, or serve or be served 
with documents; and are not subject to the same procedural requirements 
as parties.
    Written comments by participants will be included in the record if 
they are submitted on or before November 15, 2000. Participants' 
written views, supporting information, questions, and arguments should 
be submitted to the address noted above. The second category of 
interest is that of a ``party'' as defined in Rules 1010.2 and 1010.4 
of the BPA Procedures. 51 FR 7611 (1986). Parties may participate in 
any aspect of the hearing process.

B. Petitions for Intervention

    Persons wishing to become a party to BPA's rate proceeding must 
notify BPA in writing of their interest. Petitioners may designate no 
more than two representatives upon whom service of documents will be 
made. Petitions to intervene shall state the name and address of the 
person requesting party status and the person's interest in the 
hearing.
    Petitions to intervene as parties in the rate proceeding are due to 
the Hearing Officer by October 4, 2000. The petitions should be 
directed to: Kimberly J. Maki, Hearing Clerk--LP-7, Bonneville Power 
Administration, 905 NE. 11th Ave., P.O. Box 12999 Portland, Oregon 
97232.
    Petitioners must explain their interests in sufficient detail to 
permit the Hearing Officer to determine whether they have a relevant 
interest in the hearing. Pursuant to Rule 1010.1(d) of BPA's 
Procedures, BPA waives the requirement in Rule 1010.4(d) that an 
opposition to an intervention petition be filed and served 24 hours 
before the prehearing conference. Any opposition to an intervention 
petition may instead be made at the prehearing conference. Any party, 
including BPA, may oppose a petition for intervention. Persons who have 
been denied party status in any past BPA rate proceeding shall continue 
to be denied party status unless they establish a significant change of 
circumstances. All timely applications will be ruled on by the Hearing 
Officer. Late interventions are strongly disfavored. Opposition to an 
untimely petition to intervene shall be filed and received by BPA 
within two days after service of the petition.

C. Developing the Record

    Cross-examination will be scheduled by the Hearing Officer as 
necessary following completion of the filing of all parties' and BPA's 
direct cases, rebuttal testimony, and discovery. Parties will have the 
opportunity to file initial briefs at the close of any cross-
examination. After the close of the hearings, and following submission 
of initial briefs, BPA will issue a Draft ROD that states the 
Administrator's tentative decision(s). Parties may file briefs on 
exceptions, or when all parties have previously agreed, oral argument 
may be substituted for briefs on exceptions. When oral argument has 
been scheduled in lieu of briefs on exceptions, the argument will be 
transcribed and made part of the record. The record will include, among 
other things, the transcripts of any hearings, written material 
submitted by the participants, and evidence accepted into the record by 
the Hearing Officer. The Hearing Officer then will review the record, 
supplement it if necessary, and certify the record to the Administrator 
for decision.
    The Administrator will develop the final adjusted 1996 UAI based on 
the entire record. The basis for the final adjustment will be expressed 
in the Administrator's Final ROD. The Administrator will serve copies 
of the

[[Page 58761]]

ROD on all parties and will file the final proposed rate adjustment, 
together with the record, with FERC for confirmation and approval. See 
generally, 18 CFR Part 300.

Part IV--Summary of the Proposal

    BPA proposes to adjust the 1996 UAI to reflect changes in the 
market rate for power by adoption of a market-index basis for the 
charge. The UAI is intended as a penalty rate to deter a customer from 
taking more Federal power than it is entitled to purchase from BPA 
under its contracts. The charge will apply to all customers supplying 
power from generation resources or power purchases from the market. The 
modification will prevent the charge, now a fixed charge, from becoming 
an attractive price alternative when the market price is higher.
    Below is the revised 1996 Unauthorized Increase Charge.
    Delete Section II.R of the GRSPs in the 1996 Wholesale Power and 
Transmission Rate Schedules, and replace with the following:
1. Charge for Unauthorized Increase in Demand
    The amount of Measured Demand during a billing hour that exceeds 
the amount of demand the purchaser is contractually entitled to take 
during that hour shall be billed at the greater of:
    a. Three (3) times the applicable monthly demand charge;
    b. The sum of hourly California ISO Spinning Reserve Capacity 
prices for all HLHs in the month, at path NW1 (COB); or
    c. The sum of hourly California ISO Spinning Reserve Capacity 
prices for all HLHs in the month, at path NW3 Nevada-Oregon Border 
(NOB).
2. Charge for Unauthorized Increase in Energy
    The amount of Measured Energy during a diurnal period of a billing 
month, day, or hour that exceeds the amount of energy the purchaser is 
contractually entitled to take during that period shall be billed the 
greater of:
    a. One hundred (100) mills/kWh; or
    b. For the month in question, the greater of:
    (1) The highest diurnal DJ Mid-C Index price for firm power; or
    (2) The highest hourly ISO California Supplemental Energy price 
(NP15).
    The DJ Mid-C Index definitions for HLH's (or peak) and LLH's (or 
off-peak) will be adjusted, as necessary, to be consistent with 
(comport with) BPA's definitions for HLH and LLH periods.
    In the event that either the ISO California Supplemental Energy 
price index or the DJ Mid-C Index expires, the index will be replaced 
for purposes of the Unauthorized Increase Charge for energy by:
    (1) The highest price experienced for the month at the CalPX, NW1 
(COB);
    (2) The highest price experienced for the month at the CalPX, NW3 
(NOB).
    Add the following to Section II.A.6.1, Section II.B.6.1, Section 
II.C.3.1, and Section II.E.7.1 of the 1996 Priority Firm Rate Schedule; 
Section II.A.5.1, Section II.B.6.1, and Section II.D.7.1 of the 1996 
New Resource Firm Power Rate Schedule; and Section II.C.7.1 of the 1996 
Industrial Firm Power Rate Schedule:

------------------------------------------------------------------------
               Rate adjustment                          Section
------------------------------------------------------------------------
Unauthorized Increase Charge................  II.R
------------------------------------------------------------------------


    Issued in Portland, Oregon, on September 19, 2000.
Judith A. Johansen,
Administrator and Chief Executive Officer.
[FR Doc. 00-25256 Filed 9-29-00; 8:45 am]
BILLING CODE 6450-01-U