Opinion ID: 1292232
Heading Depth: 2
Heading Rank: 2

Heading: The Deferral Agreements and the Failed 2003 Global Settlement

Text: When none of the PUDs or other of BPA's preference customers entered into settlement agreements by the December 1, 2001 deadline, BPA deferred payment of the litigation penalty and entered into renewed settlement talks. In anticipation of a broad settlement, PacifiCorp and PSE executed Conditional Deferral Agreements (CDAs) in June 2002 with BPA. Under the CDAs, PacifiCorp and PSE agreed to defer payment of the $200M beginning October 1, 2002, while settlement discussions progressed. The payments would be automatically deferred for continuing six month periods unless PacifiCorp or PSE elected to terminate the deferral period. BPA agreed to pay the companies 4.46 percent interest on the $200M during the deferral period. In 2003, BPA proposed a global litigation settlement which called for the preference customers to agree to a new formula for IOU benefits for FY 2007-2011; dismiss all their pending Ninth Circuit litigation, including challenges to the 2000 REP Settlement Agreements; and enter covenants not to sue regarding future claims. In exchange, the IOUs would waive payment of the $200M litigation penalty. In a Record of Decision published October 21, 2003 (2003 ROD), BPA made it clear that if the settlement failed, it would raise rates in order to pay the litigation penalty to PacifiCorp and PSE. [4] BPA failed to garner the required unanimous support for its settlement proposal by the January 21, 2004, deadline. A day later, BPA issued a press release announcing that the agreement had failed and giving notice that it was implementing the $200M litigation penalty: [h]ad the proposal succeeded, BPA's wholesale power rates would have dropped by nearly 7 percent, retroactive to Oct. 1, 2003. . . . The proposed rate decrease would have been possible largely due to elimination of the $200 million in payments to investor-owned utilities. . . . In the absence of a settlement, BPA will continue to implement its existing power contracts.