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[Federal Register: November 18, 2010 (Volume 75, Number 222)]
[Notices]               
[Page 70744-70751]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18no10-92]                         

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DEPARTMENT OF ENERGY

Bonneville Power Administration

[BPA File No.: BP-12]

 
Fiscal Year (FY) 2012-2013 Proposed Power Rate Adjustments Public 
Hearing and Opportunities for Public Review and Comment

AGENCY: Bonneville Power Administration (BPA), Department of Energy 
(DOE).

ACTIONS: Notice of FY 2012-2013 Proposed Power Rate Adjustments.

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SUMMARY: BPA is holding a consolidated rate proceeding, Docket No. BP-
12, to establish power and transmission rates for FY 2012-2013. The 
purpose of this Federal Register Notice is to provide notice of the 
proposed power rates and the rates for control area services and 
certain ancillary services (listed below, Section IV.C.). BPA will 
issue a separate Federal Register Notice to provide notice of the 
proposed transmission rates and the rates for the other ancillary 
services.
    The Pacific Northwest Electric Power Planning and Conservation Act 
(Northwest Power Act) provides that BPA must establish and periodically 
review and revise 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, 
including amortization of the Federal investment in the Federal 
Columbia River Power System (FCRPS) over a reasonable number of years 
and BPA's other costs and expenses. The Northwest Power Act also 
requires that BPA's rates be established based on the record of a 
formal hearing, and for transmission rates only, that the costs of the 
Federal transmission system be equitably allocated between Federal and 
non-Federal power utilizing the system. By this notice, BPA announces 
the commencement of a rate adjustment proceeding for proposed power 
rates, control area services rates, and certain ancillary services 
rates that will be effective on October 1, 2011.
    In the near future, BPA will begin a Residential Exchange Program 
(REP) Settlement Proceeding, Docket No. REP-12. This separate docket 
will provide a forum to review the terms and conditions of a proposed 
17-year settlement of litigation regarding BPA's implementation of the 
REP. Even though the proposed REP settlement involves issues 
interrelated with the establishment of power rates for the FY 2012-2013 
rate period, BPA has chosen to exclude certain issues from the 
development of power rates in the BP-12 rate proceeding and address 
them in the REP-12 proceeding. Specifically, the REP-12 proceeding will 
address whether BPA should adopt the REP settlement, issues regarding 
the terms of the REP settlement, the implementation of the section 
7(b)(2) rate test, the implementation of the section 7(b)(3) 
allocation, the forecast of utilities' Average System Costs (ASC), the 
amount and application of the remaining Lookback balance, and the 
allocation of REP costs to BPA's power rates. The REP-12 proceeding 
will conclude prior to the publication of final studies and the 
issuance of the Record of Decision (ROD) in BP-12. The final decisions 
in REP-12 will be incorporated into the final studies and power rate 
calculations in BP-12. See section II.D.12.

DATES: Anyone wishing to become a party to the BP-12 proceeding must 
provide written notice, via U.S. Mail or electronic mail, which must be 
received by BPA no later than 3 p.m. on November 24, 2010.
    The BP-12 rate adjustment proceeding begins with a prehearing 
conference at 9 a.m. on November 19, 2010, in the BPA Rates Hearing 
Room, 2nd floor, 911 NE 11th Avenue, Portland, Oregon 97232.
    Written comments by non-party participants must be received by 
February 18, 2011, to be considered in the Administrator's ROD.

ADDRESSES: 1. Petitions to intervene should be directed to: Hearing 
Clerk--L-7, Bonneville Power Administration, 905 NE 11th Avenue, 
Portland, Oregon 97232, or may be e-mailed to rateclerk@bpa.gov. In 
addition, copies of the petition must be served concurrently on BPA's 
General Counsel and directed to both Mr. Peter J. Burger, LP-7, and Mr. 
Barry Bennett, LC-7, Office of General Counsel, 905 NE 11th Avenue, 
Portland, Oregon 97232, or via e-mail to pjburger@bpa.gov and 
bbennett@bpa.gov (see section III.A. for more information regarding 
interventions).
    2. Written comments by participants should be submitted to the 
Public Engagement Office, DKE-7, Bonneville Power Administration, P.O. 
Box 14428, Portland, Oregon 97293. Participants may also submit 
comments by e-mail at: http://www.bpa.gov/comment. BPA requests that 
all comments and documents intended to be part of the Official Record 
in this rate proceeding contain the designation BP-12 in the subject 
line.

FOR FURTHER INFORMATION CONTACT: Ms. Heidi Y. Helwig, DKC-7, Public 
Affairs Specialist, Bonneville Power Administration, P.O. Box 3621, 
Portland, Oregon 97208; by phone toll free at 1-800-622-4520; or via e-
mail to hyhelwig@bpa.gov.
    Responsible Officials: Mr. Raymond D. Bliven, Power Rates Manager, 
is the official responsible for the development of BPA's power rates, 
and Ms. Rebecca E. Fredrickson, Transmission Rates Manager, is the 
official responsible for the development of BPA's ancillary and control 
area services (ACS) rates.

SUPPLEMENTARY INFORMATION:

Table of Contents

Part I. Introduction and Procedural Background
Part II. Scope of 2012 Rate Proceeding
Part III. Public Participation in BP-12
Part IV. Summary of Rate Proposals
Part V. Proposed 2012 Rate Schedules

Part I--Introduction and Procedural Background

    Section 7(i) of the Northwest Power Act, 16 U.S.C. 839e(i), 
requires that BPA's rates be established according to certain 
procedures, including publication in the Federal Register of this 
notice of the proposed rates; one or more hearings conducted as 
expeditiously as practicable by a Hearing Officer; opportunity for both 
oral presentation and written submission of views, data, questions, and 
arguments related to the proposed rates; and a decision by the 
Administrator based on the record. BPA's rate proceedings are further 
governed by BPA's Procedures Governing Bonneville Power Administration 
Rate Hearings, 51 FR

[[Page 70745]]

7611 (1986), which implement and expand the statutory requirements.
    This proceeding is being conducted under the rule for general rate 
proceedings, section 1010.4 of BPA's Procedures. The proposed schedule 
below applies to power rates and the ancillary and control area 
services rates that are covered by this Federal Register Notice. A 
final schedule will be established by the Hearing Officer at the 
prehearing conference.

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

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Prehearing/BPA Direct Case................  November 19
Intervention Deadline.....................  November 24
Clarification.............................  December 6-10
Motions to Strike.........................  December 13
Data Request Deadline.....................  December 13
Answers to Motions to Strike..............  December 20
Data Response Deadline....................  December 20
Parties File Direct Case..................  January 21
Clarification.............................  February 1-4
Motions to Strike.........................  February 7
Data Request Deadline.....................  February 7
Answers to Motions to Strike..............  February 14
Data Response Deadline....................  February 14
Close of Participant Comments.............  February 18
Litigants File Rebuttal...................  March 1
Clarification.............................  March 7-8
Motions to Strike.........................  March 9
Data Request Deadline.....................  March 9
Answers to Motions to Strike..............  March 16
Data Response Deadline....................  March 16
Cross-Examination.........................  March 28-April 1
Initial Briefs Filed......................  May 2
Oral Argument.............................  May 12
Draft ROD Issued..........................  June 14
Briefs on Exceptions......................  June 24
Final ROD--Final Studies..................  July 25
------------------------------------------------------------------------

    Section 1010.7 of BPA's Procedures prohibits ex parte 
communications. The ex parte rule applies to all BPA and DOE employees 
and contractors. Except as provided below, any outside communications 
with BPA and/or DOE personnel regarding the merits of any issue in 
BPA's rate proceeding by other Executive Branch agencies, Congress, 
existing or potential BPA customers (including Tribes), or nonprofit or 
public interest groups are considered outside communications and are 
subject to the ex parte rule. The rule does not apply to communications 
relating to: (1) Matters of procedure only (the status of the rate 
proceeding, for example); (2) exchanges of data in the course of 
business or under the Freedom of Information Act; (3) requests for 
factual information; (4) matters for which BPA is responsible under 
statutes other than the ratemaking provisions; or (5) matters which all 
parties agree may be made on an ex parte basis. The ex parte rule 
remains in effect until the Administrator's Final ROD is issued, which 
is scheduled to occur on or about July 25, 2011.

Part II--Scope of 2012 Rate Proceeding

A. Joint Rate Proceeding

    BPA is holding a wholesale power rate proceeding. As noted above in 
the summary, BPA will issue a separate Federal Register Notice to 
provide notice of the proposed transmission rates and rates for the 
remaining ancillary services (Scheduling, System Control, and Dispatch 
Service and Reactive Supply and Voltage Control from Generation Sources 
Service).

B. 2010 Integrated Program Review

    BPA began its 2010 Integrated Program Review (IPR) process in May 
2010. The IPR process is designed to allow people interested in BPA's 
program levels an opportunity to review and comment on all of BPA's 
expense and capital spending level estimates in the same forum prior to 
the use of those estimates in setting rates. Concurrent with the IPR, 
BPA held regional conversations about risk mitigation and debt 
management practices.
    The 2010 IPR focused on FY 2012 and 2013 program levels for BPA's 
Power Services and Transmission Services as well as a review of FY 2011 
program levels. BPA held 19 technical workshops and two general manager 
meetings at which proposed spending levels were presented for each of 
BPA's programs. BPA carefully reviewed and considered the 26 written 
comments and numerous oral comments on FY 2012 and 2013 program levels 
that were provided during this public process.
    On October 27, 2010, BPA issued the Final Close-Out Letter and 
accompanying final report for the IPR, which summarizes the comments 
received and outlines BPA's responses. The report also summarizes 
comments and BPA's responses on the regional conversations about risk 
mitigation and debt management. In the Final Close-Out Letter and 
report, BPA established the program level cost estimates for both power 
and transmission rates that are used in the Initial Proposal. BPA does 
not anticipate additional public review of proposed spending levels. 
However, an abbreviated IPR process may be held if conditions warrant. 
BPA would conduct this process separately from the rate proceeding to 
share updates and solicit feedback from customers and constituents 
before the final program levels are incorporated into the final rates.

C. Rate Case Workshops

    In preparation for the BP-12 rate proceeding, BPA held several 
public rate case workshops with customers and interested parties from 
March through September 2010. During the workshops, BPA staff presented 
and discussed information about costs, load and resource forecasting, 
generation inputs pricing, segmentation, revenue forecasts, load 
forecasts, risk analysis and mitigation, products, pricing, and rate 
design. Customers and interested parties had extensive opportunity to 
participate, raise issues, present alternative proposals, and comment 
on the information BPA staff presented. The comments and alternatives 
received during these workshops have assisted in the preparation of the 
Initial Proposal.

D. Scope of the Rate Proceeding

    This section provides guidance to the Hearing Officer as to those 
matters that are within the scope of the rate proceeding and those that 
are outside the scope.
1. Program Cost Estimates
    Some of the decisions that determine program costs and spending 
levels have been made in the IPR public review process outside the rate 
proceeding. See section II.B. BPA's spending levels for investments and 
expenses are not determined or subject to review in rate proceedings.
    Pursuant to section 1010.3(f) of BPA's Procedures, the 
Administrator directs the Hearing Officer to exclude from the record 
all argument, testimony, or other evidence that challenges the 
appropriateness or reasonableness of the Administrator's decisions on 
cost and spending levels. If, and to the extent that, any re-
examination of spending levels is necessary, such re-examination will 
occur outside of the rate proceeding. This exclusion does not extend to 
portions of the revenue requirements related to interest rate 
forecasts, interest expense and credit, Treasury repayment schedules, 
forecasts of depreciation, forecasts of system replacements used in 
repayment studies, REP benefits, purchased power expenses, transmission 
acquisition expense incurred by Power Services, generation acquisition 
expense incurred by Transmission Services, minimum required net 
revenue, and the costs of risk mitigation actions resulting from the 
expense and revenue uncertainties

[[Page 70746]]

included in the risk analysis. The Administrator also directs the 
Hearing Officer to exclude argument and evidence regarding BPA's debt 
management practices and policies. See section II.D.7.
2. Regional Dialogue Policy Decisions
    BPA's Subscription contracts expire September 30, 2011, at the end 
of the current rate period. BPA engaged customers and interested 
stakeholders in an extensive process that led to new power sales 
contracts. BPA issued its Long-Term Regional Dialogue Final Policy and 
ROD on July 19, 2007, its Long-Term Regional Dialogue Contract Policy 
and ROD on October 31, 2008, the Tiered Rate Methodology and ROD on 
November 10, 2008, and the Tiered Rate Methodology Supplemental ROD on 
September 2, 2009. On or about December 1, 2008, BPA and its customers 
signed new power sales contracts under which the customers will 
purchase Federal power for the FY 2012-2028 period. Several aspects of 
the Regional Dialogue process are still ongoing, such as establishing 
customer contract high water marks and contract demand quantities, and 
these processes and decisions are outside the scope of this rate 
proceeding.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record all 
argument, testimony, or other evidence that seeks in any way to revisit 
the appropriateness or reasonableness of BPA's decisions made in the 
Long-Term Regional Dialogue Final Policy ROD, or Long-Term Regional 
Dialogue Contract Policy ROD.
3. Tiered Rate Methodology (TRM)
    Modifications to the TRM are within the scope of this proceeding; 
however, the TRM restricts BPA and customers with Contract High Water 
Mark (CHWM) contracts from proposing changes unless certain procedures 
have been successfully concluded. BPA has concluded these procedures 
regarding five proposed revisions, and these proposed revisions are 
within the scope of this proceeding.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record all 
argument, testimony, or other evidence that seeks in any way to propose 
other proposed revisions to the TRM made by BPA, customers with a CHWM 
contract, their representatives, or representatives of their consumers, 
unless it can be established that the TRM procedures for proposing a 
change to the TRM have been concluded. This restriction does not extend 
to a party or customer that does not have a CHWM contract.
4. Service to the Direct Service Industries (DSIs)
    The manner and method by which BPA could provide service or 
financial payments to its DSI customers were evaluated in Pacific 
Northwest Generating Cooperative, et al., v. Bonneville Power 
Administration, 580 F3d 792 (9th Cir. 2008) (PNGC I) and Pacific 
Northwest Generating Cooperative, et al., v. Bonneville Power 
Administration, 590 F3d 1065 (9th Cir. 2010) (PNGC II). BPA is assuming 
for the Initial Proposal that BPA will continue to serve Alcoa, Inc. 
(Alcoa) as well as Port Townsend Paper Corporation (Port Townsend) 
during FY 2012-2013. BPA's decisions to serve the DSIs, along with the 
method and level of service to be provided DSIs in the FY 2012-2013 
rate period, will not be determined in this proceeding.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
directs the Hearing Officer to exclude from the record all argument, 
testimony, or other evidence that seeks in any way to revisit the 
appropriateness or reasonableness of BPA's decisions regarding the 
service to the DSIs, including BPA's decision to offer a contract and 
the method or level of such service.
5. Generation Inputs
    BPA provides a portion of the available generation from the FCRPS 
to enable Transmission Services to meet its various requirements. 
Transmission Services uses these generation inputs to provide ancillary 
and control area services. To recover the costs associated with 
providing generation inputs, BPA assigns a portion of the FCRPS costs 
to the transmission function. The forecast amount of generation inputs, 
cost allocations BPA is proposing to use to determine the generation 
input costs, and associated Ancillary and Control Area Service rates 
are matters that are included within the scope of the BP-12 proceeding.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
directs the Hearing Officer to exclude from the record all argument, 
testimony, or other evidence that seeks in any way to revisit the 
appropriateness or reasonableness of any other issues related to the 
generation inputs or Ancillary and Control Area Services. This 
exclusion includes, but is not limited to, issues regarding reliability 
of the transmission system, any existing or proposed Transmission 
Services dispatcher standing orders, e-Tag requirements, and business 
practices. These non-rates issues are generally addressed by BPA in 
accordance with industry, reliability, and other compliance standards 
and criteria and are not matters appropriate for the rate proceeding.
6. Proposal for the Post-2011 Conservation Program Structure
    Through the post-2011 workgroup collaboration, customers and 
constituents provided input on the development of BPA's post-2011 
conservation approach.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record all 
argument, testimony, or other evidence that seeks in any way to revisit 
the appropriateness or reasonableness of BPA's conservation program 
established through the Post-2011 Conservation Program dated August 18, 
2010.
7. Federal and Non-Federal Debt Service and Debt Management
    During the 2010 IPR and in other forums, BPA provided the public 
with background information on BPA's internal Federal and non-Federal 
debt management policies and practices. While these policies and 
practices are not decided in the IPR forum, these discussions were 
intended to inform interested parties about these matters so that they 
would better understand BPA's debt structure. Notwithstanding the 
public discussions, BPA's debt management policies and practices remain 
outside the scope of the rate proceeding.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record all 
argument, testimony, or other evidence that seeks in any way to address 
the appropriateness or reasonableness of BPA's debt management policies 
and practices.
8. Potential Environmental Impacts
    Environmental impacts are addressed in a concurrent National 
Environmental Policy Act (NEPA) process. See section II.E.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
directs the Hearing Officer to exclude from the record all argument, 
testimony, or other evidence that seeks in any way to address the 
potential environmental impacts of the rates being developed in this 
rate proceeding.
9. Average System Cost Methodology
    Section 5(c) of the Northwest Power Act established the REP, which 
provides benefits to residential and small-farm consumers of Pacific 
Northwest utilities

[[Page 70747]]

based, in part, on a utility's ``average system cost'' (ASC) of 
resources. Section 5(c)(7) of the Act requires the Administrator to 
consult with regional interests to develop an ASC Methodology (ASCM). 
The ASCM prescribes the methodology that the Administrator uses to 
calculate a utility's ASC. On September 4, 2009, the Federal Energy 
Regulatory Commission (Commission) granted final approval of BPA's 2008 
ASCM. The 2008 ASCM is not subject to challenge or review in a section 
7(i) proceeding.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record all 
argument, testimony, or other evidence that seeks in any way to visit 
or revisit the appropriateness or reasonableness of the 2008 ASCM.
10. Average System Cost Review Processes
    To receive REP benefits for FY 2012-2013, utilities must file 
proposed ASCs with BPA pursuant to the terms and conditions of the 2008 
ASCM. These filings are reviewed by BPA staff and other interested 
parties in ASC review processes. The ASC review process is a separate 
administrative proceeding conducted by BPA under the terms of the 2008 
ASCM. In the review process, BPA staff and other parties evaluate the 
ASC filed by a participating utility for conformance with the 
requirements of the 2008 ASCM. At the conclusion of the process, BPA 
issues an ASC Report, which formally establishes the utility's ASC for 
the Exchange Period, which coincides with BPA's rate period.
    On June 1, 2010, ten utilities filed proposed ASCs with BPA for FY 
2012-2013. One utility subsequently withdrew its ASC filing. BPA staff 
and other parties are currently reviewing the remaining nine filings in 
the ASC review processes. Once these ASC review processes are complete, 
and BPA has issued final ASC Reports, BPA will incorporate the final 
ASCs into the administrative record of this proceeding. Although these 
ASC determinations provide important information for setting BPA's 
rates, they are not rate proceeding matters. Parties intending to 
challenge the draft or final ASC determinations for FY 2012-2013 must 
raise such issues in the ASC review process according to the procedures 
established in the 2008 ASCM.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record all 
argument, testimony, or other evidence that seeks in any way to visit 
or revisit the draft or final ASC determinations for FY 2012-2013.
11. Contract High Water Mark (CHWM) Process
    Under the Tiered Rate Methodology (TRM), BPA will establish both 
CHWMs and FY 2012-2013 Rate Period High Water Mark (RHWMs) for Public 
customers that signed contracts for firm requirements power service 
providing for tiered rates, referred to as CHWM contracts. The CHWMs 
and RHWMs will be established in the CHWM Process, which will occur 
mainly in Spring 2011. In this process BPA will establish the maximum 
planned amount of power a customer is eligible to purchase at Tier 1 
rates during the rate period. The CHWM Process provides customers an 
opportunity to review, comment, and, if necessary, challenge BPA's 
determinations regarding certain CHWM and RHWM determinations. To the 
extent they are available, the final RHWM determinations for FY 2012-
2013 from the CHWM Process will be used in the final rates proposal.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record all 
argument, testimony, or other evidence that seeks in any way to visit 
or revisit BPA's determination of a customer's CHWM or FY 2012-2013 
RHWM.
12. Residential Exchange Program Settlement Proceeding (REP-12)
    The REP was established in section 5(c) of the Northwest Power Act 
to provide utilities with high ASCs access to the benefits of the FCRPS 
for their residential and small farm consumers. As discussed in the 
summary above, BPA will commence a separate section 7(i) proceeding, 
Docket No. REP-12, to review the REP settlement. Certain issues will be 
excluded from the BP-12 rate proceeding and addressed in the REP-12 
proceeding. This exclusion is one of efficiency, minimizing the need 
for duplicate argument, testimony, or other evidence in both 
proceedings; it is not meant to limit the opportunity for parties to 
file relevant argument, testimony, or other evidence regarding these 
REP issues. The REP-12 proceeding will conclude prior to the 
publication of final rates and the issuance of the ROD in BP-12. All 
argument, testimony, or other evidence in the REP-12 record will be 
incorporated into BP-12 record and the final decisions in REP-12 will 
be implemented in the final rate development in BP-12.
    Pursuant to Sec.  1010.3(f) of BPA's Procedures, the Administrator 
hereby directs the Hearing Officer to exclude from the record all 
argument, testimony, or other evidence that seeks in any way to visit 
issues related to the issues being addressed in the REP-12 proceeding, 
including, but not limited to, whether BPA should adopt the REP 
settlement, issues regarding the terms of the REP settlement, the 
implementation of the section 7(b)(2) rate test, the implementation of 
the section 7(b)(3) allocation, the forecast of utilities' Average 
System Costs, the amount and application of the remaining Lookback 
balance, and the allocation of REP costs to BPA's power rates.

E. The National Environmental Policy Act

    BPA is in the process of assessing the potential environmental 
effects of its proposed power and transmission rates, consistent with 
the NEPA. The NEPA process is conducted separately from the rate 
proceeding. As discussed in section II.D.8, all evidence and argument 
addressing potential environmental impacts of rates being developed in 
the BP-12 rate proceeding are excluded from the rate proceeding hearing 
record. Rather, comments on environmental effects should be directed to 
the NEPA process.
    Because this proposal involves BPA's ongoing business practices 
related to rates, BPA is reviewing the proposal for consistency with 
BPA's Business Plan Environmental Impact Statement (Business Plan EIS), 
completed in June 1995 (BOE/EIS-0183). This policy-level EIS evaluates 
the environmental impacts of a range of business plan alternatives for 
BPA that could be varied by applying various policy modules, including 
one for rates. Any combination of alternative policy modules should 
allow BPA to balance its costs and revenues. The Business Plan EIS also 
includes response strategies, such as adjustments to rates, that BPA 
could implement if BPA's costs exceed its revenues.
    In August 1995, the BPA Administrator issued a ROD (Business Plan 
ROD) that adopted the Market-Driven Alternative from the Business Plan 
EIS. This alternative was selected because, among other reasons, it 
allows BPA to: (1) Recover costs through rates; (2) competitively 
market BPA's products and services; (3) develop rates that meet 
customer needs for clarity and simplicity; (4) continue to meet BPA's 
legal mandates; and (5) avoid adverse environmental impacts. BPA also 
committed to apply as many response strategies as necessary when BPA's 
costs and revenues do not balance.

[[Page 70748]]

    In April 2007, BPA completed and issued a Supplement Analysis to 
the Business Plan EIS. This Supplement Analysis found that the Business 
Plan EIS's relationship-based and policy-level analysis of potential 
environmental impacts from BPA's business practices remains valid, and 
that BPA's current business practices remain consistent with BPA's 
Market-Driven Alternative approach. The Business Plan EIS and ROD thus 
continue to provide a sound basis for making determinations under NEPA 
concerning BPA's policy-level decisions, including rates.
    Because the proposed rates likely would assist BPA in accomplishing 
the goals identified in the Business Plan ROD, the proposal appears 
consistent with these aspects of the Market-Driven Alternative. In 
addition, this rate proposal is similar to the type of rate designs 
evaluated in the Business Plan EIS; thus, implementation of this rate 
proposal would not be expected to result in environmental impacts 
significantly different from those examined in the Business Plan EIS. 
Therefore, BPA expects that this rate proposal likely will fall within 
the scope of the Market-Driven Alternative that was evaluated in the 
Business Plan EIS and adopted in the Business Plan ROD.
    As part of the Administrator's ROD that will be prepared for the 
BP-12 rate proceeding, BPA may tier its decision under NEPA to the 
Business Plan ROD. However, depending upon the ongoing environmental 
review, BPA may instead issue another appropriate NEPA document. 
Comments regarding the potential environmental effects of the proposal 
may be submitted to Katherine Pierce, NEPA Compliance Officer, KEC-4, 
Bonneville Power Administration, 905 NE 11th Avenue, Portland, OR 
97232. Any such comments received by the comment deadline for 
Participant Comments identified in section III.A. below will be 
considered by BPA's NEPA compliance staff in the NEPA process that will 
be conducted for this proposal.

Part III--Public Participation in BP-12

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 
written comments, views, opinions, and information from 
``participants,'' who may submit comments without being subject to the 
duties of, or having the privileges of, parties. Participants' written 
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. BPA customers whose rates 
are subject to this proceeding, or their affiliated customer groups, 
may not submit participant comments. Members or employees of 
organizations that have intervened in the rate proceeding may submit 
general comments as participants but may not use the comment procedures 
to address specific issues raised by their intervenor organizations.
    Written comments by participants will be included in the record if 
they are received by February 18, 2011. Written views, supporting 
information, questions, and arguments should be submitted to the 
address listed in the ADDRESSES section of this Notice.
    Entities or people become parties to the proceeding by filing 
petitions to intervene, which must state the name and address of the 
entity or person requesting party status and the entity's or person's 
interest in the hearing. BPA customers and affiliated customer groups 
will be granted intervention based on petitions filed in conformance 
with BPA's Procedures. Other petitioners must explain their interests 
in sufficient detail to permit the Hearing Officer to determine whether 
the petitioners 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. The time limit for 
opposing a timely intervention will be established at the prehearing 
conference. Any party, including BPA, may oppose a petition for 
intervention. All petitions will be ruled on by the Hearing Officer. 
Late interventions are strongly disfavored. Opposition to an untimely 
petition to intervene must be filed and received by BPA within two days 
after service of the petition.

B. Developing the Record

    The hearing record will include, among other things, the 
transcripts of the hearing, written evidence and argument entered into 
the record by BPA and the parties, written comments from participants, 
and other material accepted into the record by the Hearing Officer. The 
Hearing Officer will then review the record and certify the record to 
the Administrator for final decision.
    The Administrator will develop final rates based on the record and 
such other materials and information as may have been submitted to or 
developed by the Administrator. The Administrator will serve copies of 
the Final ROD on all parties. BPA will file its rates with the 
Commission for confirmation and approval after issuance of the Final 
ROD.

Part IV--Summary of Rate Proposals

A. Power Rates

    BPA is proposing five different rates for sales of Federal power or 
use of Federal resources.
    Priority Firm Power Rate (PF-12)--The PF rate schedule applies to 
net requirements power sales to public body, cooperative, and Federal 
agency customers made pursuant to section 5(b) of the Northwest Power 
Act and includes the PF Public rates for the sale of firm requirements 
power under CHWM Contracts and the PF Exchange rates for sales under a 
Residential Purchase and Sale Agreement. The PF Public rate applies to 
customers taking load following or Slice/block service. Consistent with 
the TRM, Tier 1 rates include three customer charges, a demand charge 
and a load shaping charge. The billing determinants to which these 
rates apply are changing significantly from BPA's current PF rate 
structure. In addition, two Tier 2 rates, corresponding to contract 
options, are provided for customers that have chosen to purchase power 
from BPA for their load growth.
    While an exact comparison of the proposed rates to the prior rates 
is difficult because of the transition to the tiered rate construct in 
this proceeding, BPA has developed the Tier 1 Net Average Cost to 
represent a close approximation of the average PF rate under the old 
rate design. The Tier 1 Average Net Cost under the initial proposal is 
$29.05/MWh, which represents about an 8.3 percent increase over the FY 
2010-2011 equivalent of the Tier 1 Average Net Cost. This level of rate 
increase assumes that the proposed settlement of the REP is adopted. In 
the event the settlement is not adopted, the Tier 1 Average Net Cost 
would be an 8.5 percent increase over FY 2010-2011.
    The Base PF Exchange rate and its associated surcharges apply to 
the sale of power to regional utilities that participate in the REP 
established under section 5(c) of the Northwest Power Act. 16 U.S.C. 
839c(c). Because BPA's BP-12 Initial Rate Proposal contains PF Public 
rates based on the proposed REP Settlement, the Initial Rate Proposal's 
PF Exchange rates were established

[[Page 70749]]

consistent with the terms of the proposed REP Settlement. These rates 
would likely change if the proposed REP Settlement is not adopted by 
BPA. Utility-specific REP Surcharges are developed consistent with the 
expected terms of the REP settlement. If the REP settlement is not 
adopted, BPA would develop final rates consistent with the results of 
the section 7(b)(2) rate test and reallocations of rate protection 
costs pursuant to section 7(b)(3) of the Northwest Power Act, as those 
procedures are determined in the REP-12 proceeding.
    In addition, the proposed PF-12 rate schedule includes rates for 
customers with non-Federal resources that have elected to take Diurnal 
Flattening Service or Secondary Crediting Service and a melded PF rate 
for Public customers should any elect a power sales contract other than 
a CHWM Contract for firm requirements service.
    New Resource Firm Power Rate (NR-12)--The NR-12 rate applies to net 
requirements power sales to Investor-Owned Utilities (IOUs) made 
pursuant to section 5(b) of the Northwest Power Act, for direct 
consumption, for construction, test and start-up, and station service. 
The NR-12 rate is also applied to sales of firm power to Public 
customers serving new large single loads. BPA is forecasting no sales 
at the NR rate in the Initial Proposal. As with the PF rate, the NR-12 
rate has been calculated in a manner consistent with the expected terms 
of the REP settlement. The proposed average NR-12 rate is $68.62/MWh, a 
decrease of 0.1 percent from the NR-10 rate.
    Industrial Firm Power Rate (IP-12)--The IP rate is applicable to 
firm power sales to DSI customers authorized by section (5)(d)(1)(A) of 
the Northwest Power Act. 16 U.S.C 839c(d)(1)(A). BPA is forecasting 
annual sales of 340 average megawatts (aMW) to DSIs in the Initial 
Proposal. See section IV.B.3. As with the PF rate, the Initial Proposal 
IP-12 rate has been calculated in a manner consistent with the expected 
terms of the REP settlement. The proposed average IP-12 rate is $36.46/
MWh, an increase of 5.4 percent over the IP-10 rate. In the event the 
settlement is not adopted, the IP-12 rate would be $38.71/MWh, which 
would represent an 11.9 percent increase over FY 2010-2011.
    Firm Power Products and Services Rate (FPS-12)--The FPS rate 
schedule is applicable to purchasers of Firm Power, Capacity Without 
Energy, Supplemental Control Area Services, Shaping Services, 
Reservation and Rights to Change Services, and Reassignment or 
Remarketing of Surplus Transmission Capacity, for use inside and 
outside the Pacific Northwest. The rates for these products are 
negotiated between BPA and the purchaser. In addition, the FPS rate 
schedule includes rates for customers with non-Federal resources that 
have elected to take Resource Support Services or Resource Shaping 
Services or Transmission Scheduling Service/Transmission Curtailment 
Management Service and Forced Outage Reserve Service.
    General Transfer Agreement Service Rate (GTA-12)--The GTA rate 
schedule includes the GTA Delivery Charge and Transfer Service 
Operating Reserve Charge. The GTA Delivery Charge applies to customers 
that purchase Federal power that is delivered over non-Federal low-
voltage transmission facilities. For FY 2012-2013, BPA is proposing to 
continue the GTA Delivery Charge at the same level as the GTA-10 rate. 
In addition, BPA is proposing to continue an Operating Reserves rate 
for transfer service customers that will become effective when proposed 
changes to Western Electricity Coordinating Council (WECC) Operating 
Reserve Requirements become effective.

B. Significant Changes in the BP-12 Initial Rate Proposal for Power 
Rates and Ancillary Service and Control Area Service Rates

1. Tiered PF Rate
    In this BP-12 rate proceeding, Power Services is implementing the 
TRM for the first time to coincide with the commencement of power 
deliveries under new CHWM power sales contracts. The TRM provides for a 
two-tiered PF rate design applicable to firm requirements power service 
for those customers that signed new CHWM contracts that provide for 
service under tiered rates. Tiered rate design differentiates between 
the costs of service associated with the existing Federal system 
resources (Tier 1) and the cost associated with additional amounts of 
power needed to serve the remaining portion of customers' net 
requirements (Tier 2). This rate design assures, to the extent 
possible, that customers will be able to purchase power at a Tier 1 
rate that does not include the costs of serving other customers' load 
growth.
    Among other things, the TRM addresses how costs will be allocated 
to the PF Tier 1 and Tier 2 rate pools and how rates for Tier 1 and 
Tier 2 sales and resource support services will be designed. These cost 
allocation and rate design methods are being implemented for the first 
time in the BP-12 rate proceeding. The TRM also addresses the rate 
design for Tier 1 rates, including the form of the rates and the 
billing determinants to which the rates are applied. Specifically, the 
TRM provides for three customer charge rates, a set of load shaping 
rates, and a new determination and application of demand rates.
    BPA is proposing to make five revisions to the TRM in this rate 
proceeding. Procedures set forth in the TRM, Chapter 13, were followed 
prior to this initial rate proposal to enable BPA to propose the 
changes. The five proposed revisions are assumed to be in effect in the 
development of the initial power rate proposal.
2. Generation Inputs; Ancillary and Control Area Services
    BPA's proposed allocation of generation input costs and associated 
ancillary and control area services rates are similar to the generation 
input cost allocations and rates in the 2010 BPA rates, with a few 
significant differences. First, BPA is proposing to change the name of 
the ``Wind Balancing Service'' rate to Variable Energy Resource 
Balancing Service (VERBS) rate to reflect the broader application of 
the rate to solar as well as wind resources. VERBS provides the 
generation capability (ability to both increase and decrease 
generation) to follow within-hour variations of variable energy 
resources in the BPA Balancing Authority Area.
    The proposed VERBS rate recovers the cost of regulating reserves, 
following reserves, and imbalance reserves that provide balancing 
reserve capacity. BPA is proposing to directly assign certain costs 
associated with providing VERBS. BPA is also proposing two formula rate 
adjustments under the VERBS rate to recover the costs associated with: 
(1) The Administrator's decision to replace, if necessary, FCRPS 
balancing reserve capacity that becomes unavailable during the rate 
period with reserve acquisitions from non-Federal sources in order to 
continue providing VERBS; and (2) the Administrator's decision to make 
any acquisitions of non-Federal balancing reserve capacity to provide 
VERBS for the rate period.
    Also included in the proposed VERBS rate schedule is the rate for 
the proposed Provisional Variable Energy Resource Balancing Service 
(``Provisional Balancing Service''), a new Control Area Service that 
would be offered to generating customers that: (1) Have elected to 
self-supply, but are unable to continue to do so; or (2) accelerate 
their interconnection date into the FY 2012-2013 rate period from a 
future rate period. The billing factor

[[Page 70750]]

and rate for Provisional Balancing Service is the same as the VERBS 
rate.
    BPA is proposing a rate for the new Dispatchable Energy Resource 
Balancing Service (DERBS), a new Control Area Service for all thermal 
generators in the BPA Balancing Authority Area. This service is 
necessary to support the within-hour deviations of thermal generation 
from the hourly generation estimate (i.e., schedule). A thermal 
generator in the BPA Balancing Authority Area is charged for DERBS 
based on its monthly use of balancing reserve capacity. BPA is also 
proposing a penalty charge under DERBS that will apply to any thermal 
generator's excessive use of balancing reserve capacity.
    In addition to hourly settlement of energy and generation imbalance 
service charges, BPA is proposing to settle generation and energy 
imbalance service charges for half-hour schedules on an integrated 
half-hour basis upon 30 days' notice that BPA has completed the 
technical and operational modifications that are necessary to implement 
intra-hour scheduling. BPA is also proposing to exempt solar resources 
from Deviation Band 3 penalty charges under the Energy and Generation 
Imbalance rates.
    Furthermore, BPA is proposing to add certain criteria to clarify 
the definition of ``Persistent Deviation'' for Imbalance Services. If 
BPA determines that a customer's scheduling accuracy performs at 30-
minute persistence scheduling accuracy, or better, in one or more hours 
of a Persistent Deviation event, BPA is proposing to exempt that hour 
from Persistent Deviation penalty charge, but not the adjacent hours 
that would otherwise qualify for a Persistent Deviation penalty charge.
    BPA is proposing to replace the four-hour standard for Persistent 
Deviation with a three-hour standard to measure schedule deviations 
once BPA implements intra-hour scheduling on a permanent basis. BPA 
will provide 30 days notice before implementing the three-hour 
standard.
    BPA is also proposing to update the language in Part C of the 
definition of Persistent Deviation to clarify that a pattern of under- 
or over-delivery or over- or under-use of energy that occurs generally 
or at specific times of the day constitutes a Persistent Deviation.
    Finally, BPA is proposing to subject the following ACS rates to 
BPA's Cost Recovery Adjustment Clause, Dividend Distribution Clause and 
NFB Mechanisms: Regulation and Frequency Response Service, Operating 
Reserve--Spinning Reserve Service, Operating Reserve--Supplemental 
Reserve Service, VERBS, Provisional Balancing Service, and DERBS rates.
3. DSI Service for FY 2012-2013
    For the Initial Proposal, BPA is forecasting sales of 340 aMW to 
Alcoa and Port Townsend for the FY 2012-2013 rate period. Uncertainty 
exists regarding the level of service to the DSIs during the upcoming 
rate period. Following the Ninth Circuit's decisions in PNGC I and PNGC 
II, BPA and Alcoa signed a power sales contract terminating in 2016 but 
with periodic service decision points during its term; service under 
this contract was recently extended through May 2012. It is not known 
at this point whether or not Port Townsend will extend its current 
contract, which expires at the end of May 2011. In addition, even 
though Columbia Falls Aluminum Company is currently not operating, it 
could begin operation and request service at some point during the FY 
2012-2013 rate period. Uncertainty associated with the amount and cost 
of service is accounted for in the Power Risk and Market Price Study.
4. Risk Mitigation Tools
    The main financial risk mitigation tool BPA relies upon is 
financial liquidity, comprising cash, other investments in the 
Bonneville Fund at the U.S. Treasury, and a short-term liquidity 
facility with the U.S. Treasury. BPA proposes to include provisions for 
two rate adjustments: The Cost Recovery Adjustment Clause (CRAC), which 
can generate additional cash within the rate period, and the Dividend 
Distribution Clause (DDC), which can return cash to customers when 
BPA's financial reserves are larger than needed to meet its Treasury 
Payment Probability (TPP) standard. When available liquidity and the 
CRAC are insufficient to meet the TPP standard, BPA includes Planned 
Net Revenues for Risk (PNRR) in its rates. In the Initial Proposal, BPA 
proposes to include no PNRR and to cap the maximum revenue recoverable 
through the CRAC at $300 million. BPA will also rely on $150 million of 
reserves attributed to transmission as part of its risk mitigation 
package.
    BPA is proposing some changes to the risk mitigation tools in the 
BP-12 Initial Proposal, including a minor revision to the metric used 
to determine whether a CRAC or DDC triggers. In the past, this metric 
has been Accumulated Modified Net Revenues. In this proceeding, BPA is 
proposing to use Accumulated Net Revenue. The thresholds for triggering 
the CRAC and DDC remain unchanged from WP-10 equivalent reserve levels 
($0.00 and $750 million respectively). BPA anticipates discussing in 
the rate case whether the current threshold levels are sufficient to 
protect against future risks. BPA also proposes to continue the 
National Marine Fisheries Service FCRPS Biological Opinion Adjustment 
(NFB Adjustment) and the Emergency NFB Surcharge, given that litigation 
regarding the Biological Opinion continues.
5. Settlement of the Residential Exchange Program Disputes
    To establish rates and determine REP benefits for exchanging 
utilities for FY 2012-2013, BPA is assuming in the BP-12 Initial 
Proposal that the REP settlement will be adopted. This assumption is 
intended to be a placeholder while BPA evaluates the proposed REP 
settlement in the related REP-12 proceeding. Whether BPA establishes 
final rates based on the terms and conditions in the REP settlement 
will depend on the Administrator's final decision in the REP-12 
proceeding. Once a final decision is reached, it will be reflected in 
the final studies. BPA will incorporate all relevant material from the 
REP-12 proceeding into the record of the BP-12 rate proceeding.
6. Rate Schedules
    Implementing the TRM rate design required significant reworking of 
the PF rate schedule. In addition, the changes to the way the demand 
charges will be calculated under the IP and NR rates also led to 
changes in those rate schedules. These proposed changes to rate 
schedules will be available for examination by parties during the rate 
proceeding.
7. Other Changes to Power General Rate Schedule Provisions
    BPA proposes to modify the UAI, LDD (consistent with the TRM), an 
irrigation rate discount (also consistent with the TRM), and an 
Unanticipated Load Charge (to replace the current Targeted Adjustment 
Clause).

C. Ancillary and Control Area Services Rates

    BPA is proposing rates for four ancillary services: Regulation and 
Frequency Response Service; Energy Imbalance Service; Operating 
Reserve--Spinning Reserve Service; and Operating Reserve--Supplemental 
Reserve Service. In addition to the rates for Ancillary Services, BPA 
is proposing rates for six control area services: Regulation and 
Frequency Response Service; Generation Imbalance Service; Operating 
Reserve--Spinning Reserve Service; Operating Reserve--

[[Page 70751]]

Supplemental Reserve Service; Variable Energy Resource Balancing 
Service; and Dispatchable Energy Resource Balancing Service.

D. Overview of Studies

    The initial rate proposal for power rates and ancillary service and 
control area service rates is explained and documented in the following 
studies.
1. Power Rates Study
    The Power Rates Study (formerly the Wholesale Power Rate 
Development Study) explains and documents the development of power 
rates and billing determinants for BPA's power products and services. 
The new Priority Firm rate design, as set forth in the Tiered Rate 
Methodology, is implemented with this proposal for the first time. The 
TRM provides for a two-tiered PF rate design applicable to firm 
requirements power service for Public customers that signed a CHWM 
contract providing for tiered rates. The TRM also addresses other rate 
design changes, particularly for power sold at Tier 1 rates. As 
explained in section IV.A. of this notice, the Power Rates Study 
reflects the assumption of a specific REP settlement outcome to model 
the rates. The results of the study are reflected in the proposed power 
rate schedules.
2. Power Loads and Resources Study
    The Power Loads and Resources Study explains and documents the 
compilation of the load and resource data and forecasts necessary for 
developing BPA's wholesale power rates. The Study has three major 
interrelated components: The Federal system load forecast; The Federal 
system resource forecast; and the Federal system loads and resources 
balance.
3. Power Revenue Requirement Study
    The Power Revenue Requirement Study explains and documents the 
level of revenues from power rates necessary to recover, in accordance 
with sound business principles, the FCRPS costs associated with the 
production, acquisition, marketing, and conservation of electric power. 
Cost estimates in the Power Revenue Requirement Study are based on the 
results of the IPR, as presented in the Final Close-Out Letter dated 
October 27, 2010. The repayment studies reflect actual and projected 
repayment obligations and transactions related to BPA's Debt 
Optimization program. All new capital investments are assumed to be 
financed from debt or appropriations. The adequacy of projected 
revenues to recover the rate test period revenue requirement and to 
recover the Federal investment over the prescribed repayment period is 
tested and demonstrated for the generation function.
4. Power Risk and Market Price Study
    The Power Risk and Market Price Study has three major components: 
Quantification of the risks accounted for in setting power rates; the 
electricity market price forecast used in setting power rates; and the 
set of risk mitigation measures to include in rates that ensure that 
power rates meet the established TPP. The TPP is a measure of the 
probability that BPA will make its Treasury payments on time and in 
full during the rate period. If the TPP is below BPA's two-year 95 
percent standard, a combination of risk mitigation tools is proposed to 
meet the TPP standard.
    The electricity market price forecast portion of the study explains 
and documents forecasts of the variable cost of the marginal resource 
for transactions in the wholesale energy market. The specific market 
used in this analysis is the Mid-Columbia trading hub in the State of 
Washington, although this forecast is influenced by conditions in other 
regions within the Western Interconnection. The Power Risk and Market 
Price Study also explains and documents the natural gas price forecast 
used in setting rates.
5. Generation Inputs Study
    The Generation Inputs Study includes the study and documentation 
for generation inputs costs and other inter-business line costs. The 
study also includes the development and design of the proposed ACS-12 
Ancillary and Control Area Services rate schedule, which had been 
issued in a separate study starting with the 2010 rate proceeding. The 
forecasts for balancing reserve capacity to provide regulation and 
frequency response, variable energy resource balancing service, 
dispatchable energy resource balancing service, operating reserve, and 
load following are explained and documented in the Generation Inputs 
Study. The Study explains and documents the embedded and variable cost 
methodologies for these balancing reserve capacity obligations and the 
resulting revenue credits reflected in the power rates. The proposed 
design for rates under the ACS-12 rate schedule is also described.
6. Related Studies in the REP-12 Proceeding
    The following studies will be described in the REP-12 notice in the 
Federal Register and will be included as part of the initial proposal 
in that proceeding.
    REP Settlement Evaluation and Analysis Study.
    Section 7(b)(2) Rate Test Study.
    Lookback Recovery and Return.

Part V--Proposed 2012 Rate Schedules

    BPA's proposed 2012 Power Rate Schedules are a part of this notice 
and are available for viewing and downloading on BPA's Web site at 
http://www.bpa.gov/corporate/ratecase/2012/. Copies of the proposed 
rate schedules also are available for viewing in BPA's Public Reference 
Room at the BPA Headquarters, 1st Floor, 905 NE. 11th Avenue, Portland, 
OR 97232.

    Issued this 12th day of November, 2010.
David J. Armstrong,
Acting Deputy Administrator.
[FR Doc. 2010-29090 Filed 11-17-10; 8:45 am]
BILLING CODE 6450-01-P
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