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###### Department of Energy

###### Bonneville Power Administration 

          - [BPA File No. TR-06] 

# AGENCY:

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

# ACTIONS:

Notice of 2006 Transmission Rate Case. 

# SUMMARY:

BPA File No. TR-06. BPA requests that all comments and documents intended to become part of the Official Records in this proceeding contain the file number designation TR-06. 

BPA's existing transmission and ancillary services rates expire September 30, 2005. BPA will establish transmission and ancillary service rates in this proceeding for the period from October 2005 through September 2007, fiscal years (“FY”) 2006 and 2007 (“2006-2007 Rate Period”). 

BPA's Transmission Business Line (“TBL”) held several public meetings with customers over the period July through September 2004 to discuss transmission costs, revenues, and rate design issues for the 2006-2007 Rate Period. The customers expressed interest in meeting with TBL to develop a settlement for the 2006-2007 Rate Period. Continued meetings between October and early December resulted in a Settlement Agreement. TBL's initial rate proposal (“Initial Proposal”) reflects the terms of the Settlement Agreement. 

# DATES:

Persons wishing to become formal parties to the proceeding must notify BPA in writing of their intention to do so by the requirements stated in this Notice. Petitions to intervene must be received by BPA no later than 4:30 p.m., Pacific Time, on February 14, 2005. 

The rate adjustment proceeding will begin with a pre-hearing conference at 9 a.m., Pacific Time, on February 16, 2005, in Portland, Oregon, at the address stated below. Due to increased security, attendees should allow additional time for entry into the building. Attendees will need a photo ID and will need to sign in at the security desk. 

Written comments by non-party participants must be received by March 16, 2005, to be considered in the Record of Decision (“ROD”). 

# ADDRESSES:

                        1. Petitions to intervene should be directed to Jonathan Shardlow, Hearing Clerk—LT-7, Bonneville Power Administration, 905 NE 11th Ave., Portland, Oregon, 97232. In addition, a copy of the petition must be served concurrently on BPA's General Counsel and directed to Charles H. Combs—LT-7, Office of General Counsel, 905 NE 11th Ave., Portland, Oregon 97232 (                        *see*                         Part III, A for more information).                     

                        2. Written comments by non-party participants should be submitted to Rate Case, TBL Communications—T-Ditt2, Bonneville Power Administration, PO Box 491, Vancouver, WA 98666. You also may e-mail your comments to:                         *tblfeedback@bpa.gov.*

                        3. The pre-hearing conference will be held in the BPA Rates Hearing Room, 2nd floor, 911 NE 11th Ave., Portland, Oregon, at 9 a.m., Pacific Time, on February 16, 2005. Compact discs (“CD”) containing the Initial Proposal documents, in PDF format, will be provided to parties at the pre-hearing conference. The Settlement Agreement, studies and documentation also will be available on BPA's Web site at                         *http://www.transmission.bpa.gov/​Business/​Rates_​and_​Tariff/​2006RateCase.cfm,*                         and may be viewed at BPA's Public Reference Room, 1st floor, 905 NE 11th Ave., Portland, Oregon.                     

# FOR FURTHER INFORMATION CONTACT:

                        Information also may be obtained from Debbie Stout, TBL Communications—T-Ditt2, Bonneville Power Administration, PO Box 491, Vancouver, WA 98666; by phone at (360) 418-8995 or toll free at 1-888-276-7790; or via e-mail to                         *dastout@bpa.gov.*

Responsible Official: Mr. Dennis Metcalf, Transmission Rate Case Manager, is the official responsible for the development of BPA's transmission and ancillary service rates. 

# SUPPLEMENTARY INFORMATION:

## Table of Contents 

Part I—Introduction and Procedural Background 

Part II—Purpose and Scope of Hearing 

Part III—Public Participation 

Part IV—Major Studies and Summary of Transmission Rate Proposal 

Part V—2006 Transmission and Ancillary Service 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. These procedures include, among other things, publication of notice of the proposed rates in the                     **Federal Register**                    ; 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 governed by BPA's Procedures Governing Bonneville Power Administration Rate Hearings, 51 FR 7611 (1986) (“Procedures”). These Procedures implement the statutory Section 7(i) requirements. This rate proceeding will be governed by Section 1010.9 of the Procedures providing for a general rate proceeding, as modified by the Hearing Officer at the pre-hearing conference. However, BPA will not hold any field hearings to provide for non-party participant oral comments. Section 1010.7 of the Procedures prohibits ex parte communications. BPA imposed ex parte limitations beginning January 17, 2005.                 

The Bonneville Project Act, 16 U.S.C. 832; the Flood Control Act of 1944, 16 U.S.C. 825s; the Federal Columbia River Transmission System Act, 16 U.S.C. 838; the Northwest Power Act, 16 U.S.C. 839; and the Federal Power Act, 16 U.S.C. 824k(i)(1)(B)(ii) provide guidance regarding BPA's ratemaking. With regard to transmission rates, the Northwest Power Act requires BPA to set rates that are sufficient to recover, in accordance with sound business principles, the cost of transmitting electric power, including amortization of the Federal investment over a reasonable period of years, and the other costs and expenses incurred by the Administrator. The Federal Columbia Transmission System Act requires that the costs of the Federal Columbia River Transmission System be equitably allocated between Federal and non-Federal power utilizing the system. In addition, rates for Federal Energy Regulatory Commission (“FERC” or “Commission”)-ordered transmission service shall be at rates and charges that permit the recovery of all costs incurred in connection with the transmission service and necessary associated services. 

                    A proposed schedule for the formal hearing is stated below. A final schedule                           ( print page 5424)                        will be established by the Hearing Officer at the pre-hearing conference.                

February 14, 2005, Petitions to Intervene 

February 16, 2005, Pre-hearing Conference and Filing of BPA Direct Case 

February 22, 2005, Clarification 

February 24, 2005, Objections to Initial Proposal 

February 28, 2005, Scheduling Conference 

March 16, 2005, Participant Comments Due 

June 20, 2005, Final ROD—Final Studies 

## Part II—Purpose and Scope of Hearing 

### A. Key Components 

#### 1. Overview 

                    BPA is committed to marketing its power and transmission services separately in a manner that is modeled after the regulatory initiatives to promote competition in wholesale power markets that were adopted by the Commission in 1996. The Commission's initiatives in Orders 888 [1]                                          and 889 [2]                                          directed public utilities regulated under the Federal Power Act to separate their power merchant functions from their transmission reliability functions; unbundle transmission and ancillary services from wholesale power services; and set separate rates for wholesale generation, transmission, and ancillary services. Although BPA is not required by statute to follow the Commission's regulatory directives promoting competition and open access transmission service, BPA has elected to separate its power and transmission operations and unbundle its rates in a manner consistent with the directives concerning open access transmission service. Accordingly, in 1996 BPA established separate business lines: BPA's Power Business Line (“PBL”) which performs BPA's wholesale merchant functions, and BPA's TBL which performs BPA's transmission system operations and reliability functions. BPA develops its transmission rates in separate proceedings from its power rates.                 

#### 2. PBL as a Party to the Rate Case 

Because BPA has separated its power and transmission functions, sets its power and transmission rates in separate proceedings, and PBL is a TBL transmission customer, it is appropriate that the PBL be a party to the transmission rate proceeding. Accordingly, PBL will be considered a party to the Transmission Rate Case for all purposes under the BPA Procedures. The PBL may file testimony and briefs as a party and will be entitled to all other procedural rights of a party. In particular, the PBL shall be considered a party for purposes of ex parte communications. 

#### 3. Two-Year Transmission Rate Period 

The rate period for the rates proposed in this transmission rate adjustment proceeding is two years, the 2006-2007 Rate Period. A two-year rate period balances the need for a short rate period to limit revenue and cost risks with the significant resource and time requirements needed to plan and carry out a rate case. 

#### 4. Settlement Agreement 

TBL and most of its customers are parties to a Settlement Agreement that provides for TBL to submit an initial transmission rate proposal that incorporates the provisions of the Settlement Agreement. The Settlement Agreement specifies rate levels for BPA's transmission and ancillary service rates during the 2006-2007 Rate Period, as provided in Attachment 1 to the Agreement and reflected in the proposed Rate Schedules. Other major provisions of the Settlement Agreement include: 

a. Payment by TBL to PBL of $1.5 million per year for redispatch services described in a revised Attachment K to BPA's Open Access Transmission Tariff (“OATT”). The Settlement Agreement provides that TBL agrees to file with the Commission, and the signatories to the Settlement Agreement agree not to challenge, the revised Attachment K. BPA will file the revised Attachment K as a proposed amendment to BPA's OATT to be effective as of October 1, 2005. Such filing will not be part of this rate proceeding; 

b. Network Integration rate schedule language limiting the amount of Customer-Served Load (“CSL”), and a TBL commitment to work with customers prior to October 2011, the date on which TBL intends to eliminate CSL, to determine whether a transition mechanism is appropriate for NT customers with CSL; 

c. TBL commitment, effective on the date TBL signs the Settlement Agreement, to apply the methodologies in FERC Order 2003-A for determining, funding, and allocating the costs of facilities associated with generator interconnections, and revisions to the Advance Funding (“AF”) rate; 

d. PBL agreement to charge federal power customers that are served over non-federal facilities (“General Transfer Agreement” or “GTA” service), which PBL pays for, the same low-voltage delivery charge applicable to customers served over federal Delivery facilities during the 2006-2007 Rate Period. For the period beginning in FY 2008, the GTA delivery charge will be determined in the power rate case. PBL also agrees to hold a rates workshop or other public forum in advance of the power rate case; 

e. TBL commitment to work with customers in the Business Practice Forum to develop a business practice for self-supply of Generation Supplied Reactive from qualifying non-federal generators; 

f. Failure to Comply Penalty Charge revisions, which include a requirement to curtail actual use; 

g. TBL's expected use of $15 million in each year of the 2006-2007 Rate Period of TBL's financial reserves as a funding source for transmission capital programs, and the reflection of such use in the calculation and presentation of the transmission revenue requirement; 

h. Rate schedule revisions that would bill hourly non-firm transmission service based on reservations instead of on schedules, when TBL has systems in place to do so; 

i. TBL commitment to work to develop a conditional firm transmission product, and to conduct an expedited rate case and make filings if necessary to implement the product; 

j. Formula rates to adjust for (1) FY 2007 PBL generation inputs for Regulation and Frequency Response, Operating Reserves, and Generation-Supplied Reactive ancillary services, as determined in the next BPA power rate case; (2) TBL payments for non-federal generation-supplied reactive made under FERC-approved rates; and (3) self-supply of generation-supplied reactive. The ASC-06 Regulation and Frequency Response Service rate and the Operating Reserve—Spinning Reserve Service and Operating Reserve—Supplemental Reserve Service rates would be adjusted one time, on October 1, 2006. The ASC-06 Reactive Supply and Voltage Control from Generation Sources Service rate, FPT-06.1 Formula Power Transmission rate, and IR-06 Integration of Resources rate would be calculated on a quarterly basis beginning October 2005; and 

                    k. A provision to be added to the Point-to-Point (“PTP”), Southern Intertie (“IS”), and Montana Intertie (“IM”) rate schedules limiting                           ( print page 5425)                        additional charges for redirecting Long-Term service to Short-Term service.                 

The Settlement Agreement recognizes the possibility that parties to the 2006 Transmission Rate Case that have not signed the Settlement Agreement may object to the TBL's Initial Proposal. If any party objects to the Initial Proposal, TBL may continue to defend the Initial Proposal or submit a revised proposal. If TBL submits a revised proposal, signatories to the Settlement Agreement may contest any aspect of the revised proposal. If TBL does not revise its Initial Proposal, and the Administrator establishes transmission rates consistent with the Initial Proposal, the signatories have agreed not to challenge approval of the rates by FERC or in any judicial forum. 

### B. Cost Increases and Revenue Reductions 

For nearly a decade, BPA has been increasing its focus on the reliability and availability of the federal transmission system. In 1996, two major transmission outages affected the western United States. Over the past few years, industry deregulation, drought in California and the Northwest, changes in use of the transmission system, constraints in the federal transmission system, and the blackout in the Northeastern United States in 2003, all have contributed to an intensified regional focus on transmission system reliability and availability and their effect on energy costs. In order to maintain transmission system reliability and availability, BPA developed an infrastructure plan with objectives to reinforce the transmission system to continue compliance with national reliability standards; maintain and improve the availability of the transmission system, and remove or manage constraints on the system. In addition, BPA also adopted new tools for evaluating how the main grid transmission system is used. 

During the current rate period, TBL has completed and put into service three major components of its infrastructure program, the 500 kV Kangley-Echo Lake line; 500 kV Bell-Grand Coulee line; and modernization of the Celilo Direct Current Terminal. In early FY 2006, a fourth major component, the 500 kV Schultz-Wautoma line, is scheduled to enter service. 

Since the 2004 Transmission Rate Case, transmission revenues declined significantly compared to the forecasts. In response, TBL increased efforts to find efficiencies in its programs, deferred some transmission improvements, reduced operating expenditures, and further cut program costs in an attempt to stay within actual revenues. The drop in revenues for FY 2004 and FY 2005 and the resulting deferred operations and maintenance work, together with an increase in costs due to completion of high-priority capital projects, created tension between reliability and cost recovery. 

TBL is projecting sales during the 2006-2007 Rate Period similar to the reduced level of sales encountered in the current rate period. The increased costs due to infrastructure projects, and the reduced sales experienced during the current rate period which are forecast to continue in the 2006-2007 Rate Period, are the major contributors to the need for increased rates. 

### C. Overview of the Public Process 

#### 1. Program Level Funding Workshops—Programs in Review 

During the spring and summer of 2004, TBL provided an opportunity for public participation and input on TBL program cost levels through the Programs In Review (“PIR”) process. PIR opened on May 3, 2004, with a notification by mail to TBL customers and interested parties. Notices also were published on TBL's external website. Seven public meetings were held around the region during June and July 2004. At these public meetings, TBL discussed issues concerning future capital investments in the transmission system and proposed expense levels for transmission system development, operation, maintenance, and reliability for FY 2006—2007. A total of 147 entities attended the regional meetings. In response to a request from customers for additional information and discussion of specific program level issues, technical meetings were held on August 5 and August 25, 2004. TBL also provided informational materials through direct mailings, written responses to customer letters, e-mailings, and publication of all BPA and customer-generated materials on TBL's external website and through making staff available to answer questions. 

The PIR workshops and technical meetings explored customers' and interested parties' views on: (1) Operating and maintaining an aging transmission system; 

(2) building and maintaining a business framework in a changing energy industry; (3) building a transmission infrastructure to meet load growth, provide stability for existing contracts, ensure transmission system reliability, and integrate new resources; (4) maintaining a skilled and trained workforce; (5) TBL's access to capital; (6) TBL and corporate staffing and related corporate costs; and (7) operating expenses increasing faster than the rate of inflation. TBL accepted written and oral comments on proposed transmission programs, including expense and capital spending levels, through September 15, 2004. A one-week extension was given for comment on the maintenance program for transmission facilities 115 kV and below, until September 24, 2004. 

After consideration of the customer comments, BPA closed out the PIR public process by issuing a decision from the Administrator on transmission spending levels for the proposed rate period. The Initial Proposal is consistent with the results of the Administrator's decision on transmission program spending levels. 

#### 2. Transmission Rate Case Customer Workshops 

                    In preparation for the formal 2006 Transmission Rate Case, TBL held an initial public workshop on July 15, 2004, for customers and other interested parties. Three additional public workshops and meetings were held in August and September, 2004, for customers and interested parties during which TBL presented information about costs, revenue forecasts, transmission products, pricing, and rate design issues.                     *See http://www.transmission.bpa.gov/​Business/​Rates_​and_​Tariff/​2006RateCase.cfm*.                 

#### 3. Settlement Discussions 

During the rate case workshop meetings, the customers approached BPA about settlement of the rate case. The customers and other interested parties met with BPA during October, November, and early December to discuss settlement. The discussions resulted in the Settlement Agreement, which was offered by TBL on December 6, 2004, signed by customers through January 7, 2005, and signed by TBL on January 11, 2005. 

### D. Scope of the Transmission Rate Proceeding 

Many of the decisions that determine TBL's costs have been or will be made in public review processes other than the transmission rate proceeding. This section provides guidance to the Hearing Officer as to those matters that are within the scope of the transmission rate proceeding and those that are outside the scope. 

#### 1. Spending Levels 

                    As described above, Programs In Review workshops were held                           ( print page 5426)                        throughout the region to clarify, discuss, and provide the public the opportunity to comment orally and in writing on BPA's proposed capital expenditures and expenses for transmission. After considering all comments, the Administrator closed out the public process by issuing a decision on spending levels for FY 2006-2007. That decision serves as the basis for the transmission capital and expense levels that are reflected in the transmission rate proposal. Pursuant to section 1010.3(f) of BPA's Procedures, the Administrator directs the Hearing Officer to exclude from the record any evidence or arguments that seek in any way to challenge the appropriateness or reasonableness of the Administrator's decision on transmission spending levels and sources of capital, including capital and expense levels reviewed in the Programs in Review public process. If any re-examination of sources of capital and spending levels is necessary, that re-examination will occur outside of the rate proceeding.                 

However, the foregoing direction to the Hearing Officer does not apply to the following matters: Customer advance capital funding, revenue financing, reserve financing, the proper modeling of financing methods in rate case studies, interest rate forecasts, scheduled amortization, forecast depreciation, forecasts of system replacements for repayment studies, interest expense, expense and revenue uncertainties, and risks included in the risk analysis. 

#### 2. Issues Decided in Power Rate Proceeding 

A number of issues that affect transmission and ancillary service rates have been addressed in BPA's 2002 Power Rate Case. On June 20, 2001, the Administrator established wholesale power rates for the period October 1, 2001, through September 30, 2006. The Commission granted final approval of the rates on July 21, 2003. In the Power Rate Case, the Administrator made decisions regarding the following: A methodology for functionalizing generation and transmission costs, including a methodology for functionalizing corporate overhead costs to the business lines; costs for generation inputs for ancillary services, including operating reserves, regulating reserve, and reactive power and voltage control from generation resources; the generation costs of station service and remedial action schemes; and the allocation of the costs of generation integration and generator step-up transformers to the business lines.

The Initial Proposal for transmission rates in FY 2006 is consistent with the results of the Administrator's decision on these and all other issues decided in the Power Rate Case and will be reflected in all final decisions made in the transmission rate proceeding. The Administrator directs the Hearing Officer to exclude from the record all evidence and argument that seek in any way to address or revisit final decisions that were made in the 2002 Power Rate Case. In addition, the Administrator directs the Hearing Officer to exclude from the record all evidence and testimony that seek in any way to address the same issues for the rates for FY 2007, since those issues will be covered in the next power rate case. However, this direction to the Hearing Officer does not apply to the design of formula rates to recover those costs in FY 2007, nor does it apply to generation costs of station service and remedial action schemes, nor to generation integration costs that are forecasted in the 2006 Transmission Rate Case. 

#### 3. Revised Attachment K 

The Administrator directs the Hearing Officer to exclude from the record all evidence and argument that seek in any way to address revised Attachment K to BPA's OATT. BPA is not required by law to, and does not, amend its OATT in this rate proceeding. BPA will be submitting a revised Attachment K to the Commission for approval. A party may raise challenges to revised Attachment K to the Commission at that time, unless the party has signed the Settlement Agreement and TBL does not revise its Initial Proposal. 

#### 4. The National Environmental Policy Act 

BPA is in the process of assessing the potential environmental effects of its Initial Proposal, as required by the National Environmental Policy Act (“NEPA”). The Administrator directs the Hearing Officer to exclude from the record all evidence and argument that seek in any way to address the potential environmental impacts of the rates being developed in the 2006 Transmission Rate Case. BPA's Business Plan Environmental Impact Statement (“Business Plan EIS”), completed June 1995, evaluated the environmental impacts of a range of business plan alternatives that could be varied by applying policy modules, including one for rates. Any combination of alternative policy modules should allow BPA to balance its costs and revenues. However, the EIS also addressed response strategies BPA could pursue if BPA's costs exceeded its revenues. 

In August 1995, the BPA Administrator issued a Record of Decision (“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. 

Because the Initial Proposal likely would assist BPA in accomplishing these goals, 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 and resulting rate levels evaluated in the Business Plan EIS; thus implementation of this rate proposal would not be expected to result in significantly different environmental impacts from those examined in the Business Plan EIS. Therefore, BPA expects that this rate proposal 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 Record of Decision that will be prepared regarding this 2006 Transmission Rate Case, 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. 

## 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 written 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 comments will be made part of the official record and considered by the Administrator. Participants are not entitled to participate in the pre-hearing 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.                           ( print page 5427)    

                    Written comments by participants will be included in the record if they are received by March 16, 2005. Written views, supporting information, questions, and arguments should be submitted to Rate Case, TBL Communications, at the address listed in the                     **ADDRESSES**                     section of this Notice, or may be e-mailed to                     *tblfeedback@bpa.gov.*

Persons wishing to become a party to this transmission rate adjustment proceeding must notify BPA in writing. Petitioners may designate no more than two (2) 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 4:30 p.m., Pacific Time, on February 14, 2005. The petition should be directed to: Jonathan Shardlow, Hearing Clerk—LT-7, Bonneville Power Administration, 905 NE 11th Avenue, Portland, ORregon 97232. 

A copy of the petition should be served on BPA's General Counsel and directed to Charles H. Combs—LT-7, Office of General Counsel, 905 NE 11th Ave., 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 pre-hearing conference. Any opposition to an intervention petition may instead be made at the pre-hearing 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 a petition to intervene filed after the pre-hearing conference shall be filed, and must be received by BPA, within two (2) days after service of the petition. 

### B. Developing the Record 

The hearing record will include, among other things, the transcripts of the hearing, written material entered into the record by TBL and the parties, written comments from participants and other material accepted into the record by the Hearing Officer. The Hearing Officer then will review the record and will certify the record to the Administrator for decision. 

The Administrator will develop final proposed rates based on the record, information from the PIR, documents prepared pursuant to the National Environmental Policy Act and other environmental statutes, and such other material or information as may have been submitted to or developed by the Administrator. The Administrator will serve copies of the Final Record of Decision on all parties. BPA will file its rates with the Commission for confirmation and approval after issuance of the Final Record of Decision. 

                    During the rate proceeding, TBL must continue to meet with customers in the ordinary course of business. To comport with the rate case procedural rule prohibiting                     *ex parte*                     communications, TBL will provide necessary notice of meetings involving rate proceeding issues to provide an opportunity for participation by all rate proceeding parties. Parties should be aware, however, that such meetings may be held on very short notice and should be prepared to devote the necessary resources to participate fully in every aspect of the rate proceeding.                 

## Part IV—Major Studies and Summary of Transmission Rate Proposal 

### A. Major Studies 

                    1.                     *Revenue Requirement Study*                    —This Study includes the calculation of transmission revenue requirements for the 2006-2007 Rate Period and demonstration of cost recovery for the transmission function. The Revenue Requirement Study also includes an analysis of financial risks.                 

                    2.                     *Revenue Forecast Testimony*                    —This testimony includes the FY 2006 and 2007 revenue forecast at current 2004 transmission and ancillary service rates and at proposed 2006 rate levels based on forecasted loads and sales during the period.                 

### B. Summary of Proposal 

                    1.                     *Transmission rates*                    —TBL is proposing five rate schedules for the use of its Integrated Network segment:                 
    -  Formula Power Transmission (FPT-06.1 and FPT-06.3) rates                     —The two FPT rates are based on the cost of specific types of facilities including a distance component for the use of transmission lines, and are charged on a contract demand basis. Included in the FPT rates are the costs of the two required ancillary services: Scheduling, System Control and Dispatch Service and Reactive Supply and Voltage Control from Generation Sources Service. The FPT-06.1 rate is proposed for contracts that allow annual rate adjustments. The FPT-06.1 rate is a formula rate that is calculated quarterly to reflect the quarterly change in the Reactive Supply and Voltage Control from Generation Sources Service rate, a small component of the cost basis of the FPT rate. The FPT-06.3 rate is proposed for contracts that allow a rate change only once every three years. The FPT-06.3 rate is fixed for the rate period at the level of the FPT-04.3 rate for FY 2005. Although TBL has not offered new FPT wheeling contracts since the OATT was adopted, a number of FPT contracts continue in place during the rate period.                 
    -  Integration of Resources (IR-06) rate                     —The IR rate is a postage stamp, contract demand rate for the use of the Integrated Network, similar to the PTP service. Charges for the two required ancillary services: Scheduling, System Control and Dispatch Service, and Reactive Supply and Voltage Control from Generation Sources Service, are embedded in the IR rate. The proposed IR-06 rate is a formula rate that is calculated quarterly to reflect the quarterly change in the Reactive Supply and Voltage Control from Generation Sources Service rate, a small component of the cost basis of the IR rate. A Short Distance discount is available when resources are 75 miles or less from load. Although TBL is not offering new IR contracts, some IR contracts remain in place during the rate period.                 
    -  Network Integration Transmission (NT-06) rate                     —The NT rate applies to customers taking Network Integration Transmission Service under the OATT. The NT rate schedule includes a Load Shaping Charge applied to the customer's total load on the hour of the Monthly Transmission Peak Load, and a Base Charge applied to the customer's total load less CSL, if any. CSL is the amount of load that the customer agrees to serve without using its NT service. Beginning October 2005, CSL is being limited to the annual amount and resources specified in NT service agreements at that time. TBL intends to eliminate CSL October 1, 2011.                 
    -  Point-to-Point (PTP-06) rate                     —The PTP rate is a contract demand rate that applies to customers taking PTP Transmission Service on BPA's Integrated Network facilities under the OATT. There are separate PTP rates for long-term firm service; short-term firm and non-firm service; and hourly firm and non-firm service. The rate for long-term firm service contains a Short Distance discount. All short-term and hourly PTP rates are downwardly flexible. The billing factor for Hourly Nonfirm Service will change from                            ( print page 5428)                          scheduled amounts to Reserved Capacity on 60 day notice when changes to TBL systems and business practices have been made that will accommodate the Reserved Capacity billing factor. In addition, the rate schedule is revised to reflect the Settlement Agreement provision to limit additional charges for redirecting long-term service to short-term service.                 

In addition to the four rates for network use, other proposed transmission rates include: 
    -  The Southern Intertie (IS-06) and Montana Intertie (IM-06) rates                      are contract demand rates that apply to customers taking PTP Transmission Service under the OATT on the Southern Intertie and Montana Intertie, respectively. These rates are structured similarly, and are revised similarly, to the PTP rate for service on network facilities.                 
    -  The Townsend-Garrison Transmission (TGT-06) rate and the Eastern Intertie rate (IE-06)                      are developed pursuant to the Montana Intertie agreement.                 
    -  The Use-of-Facilities (UFT-06) rate                      establishes a formula for charging for the use of a specific facility based on the annual cost of that facility.                 
    -  The Advance Funding (AF-06) rate                      allows TBL to collect the capital and related costs of specific facilities through an advance-funding mechanism. Revisions are proposed to the rate schedule to clarify its availability to implement FERC Order 2003-A. [3]  

                    2.                     *Ancillary Services rates.*                     In addition to the rate level changes specified in Attachment 1 to the Settlement Agreement, TBL proposes to revise other aspects of its Ancillary Services and Control Area Services rates as follows:                 
    - The rates for Scheduling, System Control, and Dispatch Service                      and                      Reactive Supply and Voltage Control from Generation Sources Service                      reflect the eventual change in the Hourly Nonfirm billing factor to Reserved Capacity.                 
    -  The Reactive Supply and Voltage Control from Generation Sources Service                      rate is a formula rate that is determined quarterly beginning October 1, 2005, to reflect the cost of non-federal reactive rates and self-supply, and to reflect the reactive cost of federal system resources for FY 2007 determined in a BPA power rate case.                 
    - The rates for Regulation and Frequency Response Service and Operating Reserves—Spinning and Supplemental                      are formula rates that adjust once on October 1, 2006, to reflect the generation input costs associated with federal system resources for FY 2007 determined in a BPA power rate case.                 

                    3.                     *Other Rates and Charges.*                     Other charges that may apply to a customer's transmission service include a Delivery Charge for the use of low-voltage delivery substations, a Power Factor Penalty Charge, a Reservation Fee for customers who delay commencement of long-term firm service, Incremental Cost Rates for transmission requests that require new facilities, and an Unauthorized Increase Charge for customers who exceed their contracted amounts.                 

The proposed Failure to Comply Penalty Charge for failure to comply with TBL's curtailment, redispatch or load shedding orders is revised to clarify that a customer must curtail, or redispatch actual use of the transmission system. Finally, the rate proposal includes the GTA Delivery Charge, set at the same level as the Delivery Charge for federal facilities, for low-voltage delivery service of federal power provided under GTAs and other non-federal transmission service agreements. 

## Part V—2006 Transmission and Ancillary Service Rate Schedules 

                    BPA's proposed 2006 Transmission Rate Schedules are available for viewing and downloading on TBL's website at                     *http://www.transmission.bpa.gov/​Business/​Rates_​ and_Tariff/2006RateCase.cfm.*                     A copy of the proposed rate schedules also is available for viewing in BPA's Public Reference Room at the BPA Headquarters, 1st floor, 905 NE 11th Avenue, Portland, Oregon.                 

Issued in Portland, Oregon, on January 24, 2005. 

Stephen J. Wright, 

Administrator and Chief Executive Officer. 

# Footnotes

1.                             Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Pubic Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Reg-Preamble, FERC Stats & Regs 1991-96, para. 31,036 (1996).                    
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2.                             Open Access Same-Time Information System (formerly Real-Time Information Networks) and Standards of Conduct, Reg-Preamble, FERC Stats & Regs 1991-96, para. 31,035 (1996).                     
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3.                             Standardization of Generator Interconnection Agreements and Procedures, Reg-Preamble, FERC Stats & Regs para. 31,160 (2004).                    
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[FR Doc. 05-1890 Filed 2-1-05; 8:45 am] 

BILLING CODE 6450-01-P