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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF ENERGY

Bonneville Power Administration

[BPA File No. TR-04]

2004 Transmission Rate Case; Public Hearing and Opportunities for Public Review and Comment

AGENCY: Bonneville Power Administration (BPA), Department of Energy (DOE).
ACTION: Notice of 2004 Transmission Rate Case.
SUMMARY: BPA must establish transmission and ancillary service rates to be effective October 1, 2003, when current transmission and ancillary service rates expire. BPA's Transmission Business Line (TBL) held a public workshop in August 2002 to begin discussing with interested parties issues associated with the upcoming 2004 Transmission Rate Case. At the parties' suggestion, TBL and the parties met often over the next two months to negotiate settlement of the rate case. The resulting Settlement Agreement includes transmission and ancillary service rate levels for the Fiscal Years 2004 and 2005 rate period, and addresses a small set of other issues. The Settlement Agreement was sent to TBL customers and interested parties for signature. TBL signed the Settlement Agreement after receiving signed agreements from most TBL customers. TBL's initial rate proposal reflects the terms of the Settlement Agreement.

By this notice, BPA announces its proposed transmission and ancillary service rates to be effective on October 1, 2003, and the commencement of the 2004 Transmission Rate Case.

DATES: The Rate Case will begin with a pre-hearing conference at 9 a.m. on January 13, 2003, in Portland, Oregon.

Written comments by non-party participants must be received by March 21, 2003, to be considered in the Record of Decision (ROD).

ADDRESSES: 2. Written comments by participants should be submitted to the Manager, Corporate Communication--DM-7, Bonneville Power Administration, P.O. Box 12999, Portland, Oregon, 97212. You may also e-mail your comments to:comment@bpa.gov.

3. The pre-hearing conference will be held in the BPA Rates Hearing Room, 2nd floor, 911 NE 11th Ave., Portland, Oregon.

FOR FURTHER INFORMATION CONTACT: Information may also be obtained from Michael Hansen--DM-7, Public Involvement and Information Specialist, Bonneville Power Administration, P.O. Box 3621, Portland, Oregon, 97208-3621; by phone at (503) 230-4328 or toll free at 1-800-622-4519; or via e-mail tomshansen@bpa.gov.

You may also contact Dennis Metcalf, Transmission Rate Case Manager, Bonneville Power Administration, P.O. Box 491, Vancouver, Washington, 98666.

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 Analyses and Summary of Proposal Part V—2004 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 theFederal 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 December 10, 2003.

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. 212(i)(1)(B)(ii) provide guidance regarding BPA's ratemaking. The Northwest Power Act requires BPA to set rates that are sufficient to recover, in accordance with sound business principles, the costs of the acquisition, conservation, and transmission of 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 (Commission) ordered transmission service shall be set to permit the recovery of all costs incurred in connection with the transmission service and necessary associated services. BPA's proposed 2004 Transmission and Ancillary Service Rate Schedules are published in Part V below. The Settlement Agreement, and the rate studies and documentation listed in Part IV will be provided to parties at the pre-hearing conference to be held on January 13, 2003, beginning at 9 a.m., at the BPA Rates Hearing Room, 2nd floor, 911 NE 11th Ave., Portland, Oregon.

To request a copy of the Settlement Agreement or any of the studies by telephone, call BPA's document request line, (503) 230-4328 or call toll-free 1-800-622-4519. Please request the document by its listed title. Also state whether you require the accompanying documentation (these can be quite lengthy); otherwise the study alone will be provided. The Settlement Agreement, studies and documentation will also be available on BPA's Web site athttp://www2.transmission.bpa.gov/ratecase.

A proposed schedule for the formal hearing is provided below. A final schedule will be established by theHearing Officer at the pre-hearing conference.

January 13, 2003—Pre-hearing Conference and Filing of BPA Direct Case January 16, 2003—Clarification January 21, 2003—Objections to Initial Proposal Due January 23, 2003—Scheduling Conference July 28, 2003—Final Record of Decision

If no objections to the TBL's Initial Proposal are filed, it will not be necessary to schedule additional dates for the hearing. In such case, the date for the Final Record of Decision can be adjusted. If any party objects to the Initial Proposal, TBL may continue to defend the InitialProposal or submit a revised proposal. If objections are filed, the TBL proposes to meet with the parties before the scheduling conference to discuss an appropriate schedule that provides sufficient time for parties that have objected to the Initial Proposal to file a direct case, for the TBL to file a revised proposal, if it so chooses, and for all parties to respond to such revised proposal, if any, and to the testimony of the other parties.

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 8881 and 8892 directed public utilities to separate their power merchant functions from their transmission 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, to the extent permitted by law BPA has separated its power and transmission operations and unbundled 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 Transmission Business Line (TBL), which performs BPA's transmission system operations and reliability functions.

1Promoting Wholesale Competition Through Open Access Non-Discriminatory TransmissionServices by Pubic Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, FERC Stats. Regs. para. 31,036 (1996).

2Open Access Same-Time Information System (formerly Real-Time Information Networks) and Standards of Conduct, FERC Stats. Regs. para. 31,035 (1996).

Beginning with the 2002 rate case, BPA has held separate rate proceedings to set power and transmission rates. In the 2002 Power RateCase, the PBL established power rates to be effective through September 30, 2006. In the 2002 Transmission Rate Case the TBL established transmission rates to be effective through September 30, 2003. The 2004 TransmissionRate Case proceeding will establish transmission rates for the periodOctober 1, 2003, through September 30, 2005.

2. PBL as a Party to the Rate Case

Because BPA has separated its power and transmission functions and sets its power and transmission rates in separate proceedings, 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.

B. 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 SettlementAgreement provides for a 1.5% increase for most transmission and ancillary service rates, and a 2.6% increase for the Network Integration (NT) rate. The additional increase in the NT rate is intended to recover $1 million of redispatch costs. The Settlement Agreement also includes the following additional provisions: a revised rate structure for the Energy Imbalance and Generation Imbalance rates; a reduced Unauthorized Increase Charge; the TBL's commitment to hold a series of public meetings to address certain TBL business practices; TBL's commitment to implement systems no later thanOctober 1, 2003, that allow Point-to-Point Service customers to redirect firm transmission service; and payment by TBL to PBL of $3 million per year for redispatch services described in a revised Attachment K to BPA's OpenAccess Transmission Tariff (OATT). The Settlement Agreement provides thatTBL 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, 2003. Such filing will not be part of this rate proceeding.

The Settlement Agreement recognizes the possibility that parties to the 2004 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. IfTBL 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.

C. Cost Increases

Over the past few years there has been increasing focus on the reliability and availability of the transmission system. In 1996, a major transmission outage affected the western United States. From 2000 to 2001, California deregulation, drought in California and the Northwest, and bottlenecks in the transmission system all focused the region on system reliability and availability and their effect on energy costs. In order to ensure 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 constraints that limit electricity trading and BPA's ability to maintain the system. The TBL capital program increase of about 10 percent in the FY 2004-2005 period over current levels reflects the need for system additions to remove transmission bottlenecks resulting from load growth and the changing generation patterns and uses, and for replacements of older facilities. On the expense side, increased expenses consist primarily of additional interest and depreciation associated with the increased capital program. TBL will hold increases in operating expenses to less than the rate of inflation as decided by the Administrator in the Programs in Review process. The operating expenses include the $3 million per year that the TBL will pay PBL for redispatch services under the OATT, as provided in the Settlement Agreement.

D. Overview of the Public Process 1. Transmission Rate Case Customer Workshops

In preparation for the 2004 Transmission Rate Case, TBL held a public workshop for customers and interested parties on August 14, 2002. At that workshop, parties recommended that a rate case settlement be explored. During September and October of 2002, the TBL met regularly with customers and interested parties to negotiate a settlement of transmission and ancillary service rate levels and resolution of other key issues.

2. Program in Review Workshops

In summer and fall 2002, TBL provided an opportunity for public participation and input on TBL program cost levels through the Programs InReview (PIR) process. PIR opened on June 19, 2002, with a widespread notification by mail to about 3000 TBL customers and interested parties. Notices were also published on TBL's external Web site. Five public meetings were held around the region during July 2002. 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 2004-2006. A total of 130 entities attended the regional meetings. TBL also provided informational materials through direct mailings, e-mailings, and publication on TBL's external Web site, and through making staff available to answer questions. In response to a request from customers for additional information and discussion of specific program level issues, a technical meeting was held on September 9, 2002.

The PIR workshops 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; and (4) maintaining a skilled and trained workforce. TBL accepted written and oral comments on proposed transmission capital spending and expenses through September 16, 2002.

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.

E. Scope of the Transmission Rate Proceeding

Many of the decisions that determine TBL's costs have been or will be made in public 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 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 final decision on spending levels. That decision serves as the basis for the transmission capital and expense levels that are reflected in the transmission rate proposal. In addition, decisions may be made by Congress during this proceeding regarding spending levels for transmission investments and expenses. 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, including capital and expense budgets reviewed in the Programs in Review public process. If any re-examination of spending levels is necessary, that re-examination will occur outside of the rate proceeding. However, this direction to the Hearing Officer does not cover the following matters: sources of capital for investments, 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 interim approval to the rates on September 28, 2001. 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 Administrator also established costs for the delivery of Federal power over third party transmission systems pursuant to General Transfer Agreements.

The Initial Proposal is consistent with the results of the Administrator's decision on these and all other issues decided in the power rate proceeding 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.

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 a rate proceeding. BPA will be submitting revised Attachment K to the Commission for approval. A party may raise challenges to revised Attachment K to the Commission at that time, unless it has signed the Settlement Agreement and TBL does not revise its Initial Proposal.

F. National Environmental Policy Act Evaluation

BPA is in the process of assessing the potential environmental effects of its initial rate proposal, as required by the National EnvironmentalPolicy Act (NEPA). In the Business Plan Environmental Impact Statement(Business Plan EIS), BPA has previously evaluated the environmental impacts of a range of business structure alternatives that included, among other things, various rate designs for BPA's transmission products and services. In August 1995, the BPA Administrator issued a Record of Decision (Business Plan ROD) that adopted the Market-Driven Alternative from the Business Plan Final EIS completed in June 1995. 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; and (4) continue to meet BPA's legal mandates.

Because this initial rate proposal would likely 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, and implementation of this rate proposal thus would not be expected to result in significantly different environmental impacts from those examined for the Market-Driven Alternative 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 Final Business Plan EIS and adopted in the Business Plan ROD. In the Administrator's Record of Decision regarding this rate proposal, therefore, BPA may tier its decision under NEPA to the Business Plan ROD. Alternatively, BPA may 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.

Written comments by participants will be included in the record if they are received by March 21, 2003. Written views, supporting information, questions, and arguments should be submitted to BPA's Manager of Corporate Communications at the address listed in theADDRESSESsection of this Notice.

Persons wishing to become a party to this transmission rate adjustment proceeding must petition 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 January 8, 2003. The petition should be directed to: George Schaaf, Hearing Clerk—LT-7, Bonneville Power Administration, 905 NE., 11th Avenue,Portland, Oregon 97232.

A copy of the petition should be served on BPA's General Counsel and directed to Barry Bennett—LT-7, Office of General Counsel, 905 NE., 11thAve., 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 TBL, 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. The HearingOfficer will rule on all timely applications. Late interventions are strongly disfavored. Opposition to a petition to intervene filed after the pre-hearing conference 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 will review the record and will certify the record to the Administrator for decision.

The Administrator will develop final rates based on the record, information from the PIR, documents prepared pursuant to the NationalEnvironmental 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 Record of Decision on all parties. BPA will file its rates with the Commission for confirmation and approval after issuance of the Record of Decision.

During the rate proceeding, TBL must continue to meet with customers in the ordinary course of business. To comport with the prohibition on ex parte communications, TBL will provide 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.

Part IV—Major Analyses and Summary of Proposal A. Major Analyses in Studies and Testimony 1. Revenue Requirement Study

This Study includes the calculation of transmission revenue requirements for the FY 2004-2005 rate period and demonstration of cost recovery for the transmission function. The RevenueRequirement Study also includes an analysis of financial risks.

2. Revenue Forecast Testimony

This testimony includes the FY 2004 and 2005 revenue forecast at current 2002 transmission and ancillary service rates and at proposed 2004 rate levels based on forecasted loads and sales during the period.

B. Summary of Proposal 1. Transmission Rates

All of the rates are being increased 1.5% unless otherwise noted. TBL is proposing five rate schedules for the use of its Integrated Network. Except for the changes included in the Settlement Agreement, no other changes from the 2002 transmission rates are being proposed. The proposed transmission rate schedules for use of the Integrated Network are as follows:

• Formula Power Transmission (FPT-04.1 and FPT-04.3) 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. Charges for the two required ancillary services, Reactive Supply and Voltage Control from Generation Sources, and Scheduling, System Control and Dispatch, are embedded in the FPT rates. The FPT-04.1 rate is proposed for contracts that allow annual rate adjustments. The FPT-04.3 rate is proposed for contracts that allow a rate change only once every three years. FPT-04.3 customers are given a choice of a 1.5% increase effective October 1, 2003, or a 3% increase effective October 1, 2004.Although TBL is not offering new FPT contracts, a number of FPT contracts continue in place during the rate period.

• Integration of Resources (IR-04) rate—The IR rate is a postage stamp, contract demand rate. Charges for the two required ancillary services, Reactive Supply and Voltage Control from Generation Sources, and Scheduling, System Control and Dispatch, are embedded in 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, a number of IR contracts continue in place during the rate period.

• Network Integration Transmission (NT-04) rate—The NT rate applies to customers taking NT 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 Customer-Served Load, if any. Customer-Served Load is the amount of load that the customer agrees to serve on a firm basis without using its NT service. The NT rate is being increased 2.6%.

Point-to-Point (PTP-04) rate—The PTP rate is a contract demand rate that applies to customers taking PTP Service on BPA's 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. AShort Distance Discount is available for qualified long-term firm service. All short-term PTP rates are downwardly flexible.

In addition to the rates for network use, other proposed transmission rates include:

• Southern Intertie (IS-04) and the Montana Intertie (IM-04) rates are contract demand rates that apply to customers taking PTP Service under the OATT on the Southern Intertie and Montana Intertie. These rates are structured similarly to the PTP rate for service on network facilities.

• The Townsend-Garrison Transmission (TGT-04) rate and the Eastern Intertie rate (IE-02) apply to service under the Montana Intertie agreement.

• The Use-of-Facilities (UFT-04) rate establishes a formula for charging for the use of specific facilities based on the annual cost of those facilities.

• The Advance Funding (AF-04) rate allows TBL to collect the capital and related costs of specific facilities through an advance-funding mechanism.

Because the TGT, UFT, and AF rates are formula rates, the 1.5% increase does not apply to them.

2. Ancillary Services Rates

In addition to the 1.5% rate increase to the Ancillary Services and Control Area Service Rates, 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 clarify that the Billing Factor for each rate is based on all PTP transmission service purchased under TBL's OATT regardless of whether the Transmission Customer actually uses (schedules) the transmission. This change is only a clarification, not a substantive change.

• The rates for Energy Imbalance Service, an Ancillary Service, and Generation Imbalance Service, a Control Area Service, establish three Deviation Bands for each rate, and eliminate the 100 mills per kilowatthour penalty charge, except for intentional deviations. In addition, wind resources and new generation resources undergoing testing before commercial operation will be exempt from Deviation Band 3 for Generation Imbalance Service.

• Rates for Operating Reserve—Spinning Reserve Service and Operating Reserve—Supplemental Reserve Service Ancillary Services require generators in the BPA Control Area to pay for or return energy provided by BPA in the event of a contingency involving that generator. The TBL's proposal clarifies that the TBL can direct customers or generators, as applicable, to either purchase operating reserve energy at the applicable market index price, or return the energy at specified times.

• The TBL proposes to revise the definition of Spill Condition to clarify that a Spill Condition, for the purpose of determining a credit or payment for Deviations under the Energy Imbalance orGeneration Imbalance rates, exists when spill physically occurs on the BPA system due to lack of load or markets.

3. Other 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 that delay commencement of long-term firm service, Incremental Rates for transmission requests that require new facilities, and a penalty charge for failure to comply with TBL's curtailment, redispatch or load shedding orders. Except for a 1.5% increase in the Delivery Charge, the TBL is not proposing any changes to these charges.

The TBL is proposing to reduce the Unauthorized Increase Charge to two times the rate applicable to the customer's service, capped at two times the monthly charge for Long-Term Service. The rate proposal also includes a 1.5% increase for the General Transfer Agreement (GTA) Delivery Charge for low-voltage delivery service of Federal power provided under GTA's and other non-Federal transmission service agreements.

C. Issues

The primary issue for the 2004 Transmission Rate Case is whether the Administrator should adopt transmission rates consistent with the Settlement Agreement. Adoption of the Settlement Agreement would avoid a potentially long, expensive, and contentious rate process. It provides certainty to BPA and its customers for two more years, and avoids cost shifts that could result from new cost allocations and rate designs. For TBL, the settlement establishes rates that recover its costs and provide a high probability of making its Treasury payments. For the customers, the transmission rates increase at a pace well below the general rate of inflation.

Part V—2004 Transmission and Ancillary Service Rate Schedules Schedule FPT-04.1 Formula Power Transmission Rate Section I. Availability

This schedule supersedes Schedule FPT-02.1 for all firm transmission agreements which provide for application of FPT rates that may be adjusted not more frequently than once a year. This schedule is applicable only to such transmission agreements executed prior to October 1, 1996. It is available for firm transmission of non-Federal power using the Main Grid and/or Secondary System of the Federal Columbia River Transmission System. This schedule is for full-year and partial-year service and for either continuous or intermittent service when firm transmission service is required. For facilities at voltages lower than the Secondary System, a different rate schedule may be specified. Service under this schedule is subject to BPA-TBL's General Rate Schedule Provisions (GRSPs).

Section II. Rates

The monthly charge per kilowatt shall be one-twelfth of the sum of the Main Grid Charge and the Secondary SystemCharge, as applicable and as specified in the agreement.

A. Main Grid Charge

The Main Grid Charge per kilowatt shall be the sum of one or more of the following annual charges as specified in the agreement:

1. Main Grid Distance: $0.0511 per mile 2. Main Grid Interconnection Terminal: $0.53 3. Main Grid Terminal: $0.59 4. Main Grid Miscellaneous Facilities: $2.91 B. Secondary System Charge

The Secondary System Charge per kilowatt shall be the sum of one or more of the following annual charges as specified in the agreement:

1. Secondary System Distance: $0.5021 per mile 2. Secondary System Transformation: $5.49 3. Secondary System Intermediate Terminal: $2.12 4. Secondary System Interconnection Terminal: $1.50 Section III. Billing Factors

Unless otherwise stated in the agreement, the Billing Factor for the rates specified in section II shall be the largest of:

1. The Transmission Demand; 2. The highest hourly Scheduled Demand for the month; or 3. The Ratchet Demand. Section IV. Adjustments, Charges, and Other Rate Provisions A. Ancillary Services

Ancillary Services that may be required to support FPT transmission service are available under the ACS rate schedule. FPT customers do not pay the ACS charges for Scheduling, System Control and Dispatch Service andReactive Supply and Voltage Control from Generation Sources Service, because these services are included in FPT service.

B. Failure To Comply Penalty

Customers taking service under this rate schedule are subject to the Failure to Comply Penalty Charge specified in section II.B of the GRSPs.

C. Power Factor Penalty

Customers taking service under this rate schedule are subject to the Power Factor Penalty Charge specified in section II.C of the GRSPs.

Schedule FPT-04.3 Formula Power Transmission RATE Section I. Availability

This schedule supersedes Schedule FPT-02.3 for all firm transmission agreements which provide for application of FPT rates that may be adjusted not more frequently than once every three years, except as provided under Section IV.D. This schedule is applicable only to such transmission agreements executed prior to October 1, 1996. It is available for firm transmission of non-Federal power using the Main Grid and/or Secondary System of the Federal Columbia River Transmission System. This schedule is for full-year and partial-year service and for either continuous or intermittent service when firm transmission service is required. For facilities at voltages lower than the Secondary System, a different rate schedule may be specified. Service under this schedule is subject to BPA-TBL's General Rate Schedule Provisions (GRSPs).

Section II. Rates

The monthly charge per kilowatt shall be one-twelfth of the sum of the Main Grid Charge and the Secondary System Charge, as applicable and as specified in the agreement. Fiscal Years run from October throughSeptember.

A. Fiscal Year 2004 Charges 1. Main Grid Charge

The Main Grid Charge per kilowatt shall be the sum of one or more of the following annual charges as specified in the agreement:

a. Main Grid Distance: $0.0503 per mile b. Main Grid Interconnection Terminal: $0.52 c. Main Grid Terminal: $0.58 d. Main Grid Miscellaneous Facilities: $2.87 2. Secondary System Charge

The Secondary System Charge per kilowatt shall be the sum of one or more of the following annual charges as specified in the agreement:

a. Secondary System Distance: $0.4947 per mile b. Secondary System Transformation: $5.41 c. Secondary System Intermediate Terminal: $2.09 d. Secondary System Interconnection Terminal: $1.48 B. Fiscal Year 2005 Charges 1. Main Grid Charge

The Main Grid Charge per kilowatt shall be the sum of one or more of the following annual charges as specified in the agreement:

a. Main Grid Distance: $0.0518 per mile b. Main Grid Interconnection Terminal: $0.54 c. Main Grid Terminal: $0.60 d. Main Grid Miscellaneous Facilities: $2.96 2. Secondary System Charge

The Secondary System Charge per kilowatt shall be the sum of one or more of the following annual charges as specified in the agreement:

a. Secondary System Distance: $0.5095 per mile b. Secondary System Transformation: $5.57 c. Secondary System Intermediate Terminal: $2.15 d. Secondary System Interconnection Terminal: $1.52 Section III. Billing Factors

Unless otherwise stated in the agreement, the Billing Factor for the rates specified in section II shall be the largest of:

1. The Transmission Demand; 2. The highest hourly Scheduled Demand for the month; or 3. The Ratchet Demand. Section IV. Adjustments, Charges, and Other Rate Provisions A. Ancillary Services

Ancillary Services that may be required to support FPT transmission service are available under the ACS rate schedule. FPT customers do not pay the ACS charges for Scheduling, System Control and Dispatch Service and Reactive Supply and Voltage Control from Generation Sources Service, because these services are included in FPT service.

B. Failure To Comply Penalty

Customers taking transmission service under FPT agreements are subject to the Failure to Comply Penalty specified in section II.B of the GRSPs.

C. Power Factor Penalty

Customers taking transmission service under FPT agreements are subject to the Power Factor Penalty Charge specified in section II.C of the GRSPs.

D. Customer Election of Rate

Customers may elect to pay the rates specified in the FPT-04.1 rate schedule for the entire FY 2004 and FY 2005 rate period instead of the rates specified in Section II of this FPT-04.3 rate schedule. Customers electing to pay the FPT-04.1 rate must notify BPA-TBL oftheir election in writing prior to August 1, 2003.

Schedule IR-04Integration of Resources Rate Section I. Availability

This schedule supersedes Schedule IR-02 and is available for transmission of non-Federal power for full-year firm transmission service and nonfirm transmission service in amounts not to exceed the customer's total Transmission Demand using Federal Columbia River Transmission SystemNetwork and Delivery facilities. This schedule is applicable only to Integration of Resource (IR) agreements executed prior to October 1, 1996. Service under this schedule is subject to BPA-TBL's General Rate Schedule Provisions (GRSPs).

Section II. Rates

The monthly IR rate shall be A or B.

A. Base Rate

$1.261 per kilowatt.

B. Short Distance Discount (SDD) Rate

For Points of Integration (POI) specified in the IR agreement as being short-distance POIs, for which Network facilities are used for a distance of less than 75 circuit miles, the monthly rate per kilowatt shall be the sum of:

1. $0.233, and 2. (0.6 + (0.4 × transmission distance/75)) × $1.028 Where:

The transmission distance is the circuit miles between a designated POI for a generating resource of the customer and a designated Point of Delivery serving load of the customer. Short-distance POIs are determined by BPA-TBL after considering factors in addition to transmission distance.

Section III. Billing Factors

The Billing Factor for rates specified in section II shall be the largest of:

1. The annual Transmission Demand, or, if defined in the agreement, the annual Total Transmission Demand; 2. The highest hourly Scheduled Demand for the month; or 3. The Ratchet Demand.

To the extent that the agreement provides for the IR customer to be billed for transmission service in excess of the Transmission Demand or Total Transmission Demand, as defined in the agreement, at an hourly nonfirm rate, such excess transmission service shall not contribute to the Billing Factor for the IR rates in section II; provided that the IR customer requests such treatment and BPA-TBL approves such request in accordance with the prescribed provisions in the agreement. The rate for transmission service in excess of the Transmission Demand will be pursuant to the Point-to-Point Rate (PTP-04) for Hourly Non-Firm Service.

When the Scheduled Demand or Ratchet Demand is the Billing Factor, short-distance POIs shall be charged the Base Rate specified in section II.A for the amount in excess of Transmission Demand.

Section IV. Adjustments, Charges, and Other Rate Provisions A. Ancillary Services

Ancillary Services that may be required to support IR transmission service are available under the ACS rate schedule. IR customers do not pay the ACS charges for Scheduling, System Control and Dispatch Service and Reactive Supply and Voltage Control from Generation Sources Service, because these services are included in IR service.

B. Delivery Charge

Customers taking service over Delivery facilities are subject to the Delivery Charge specified in section II.A of the GRSPs.

C. Failure To Comply Penalty

Customers taking service under this rate schedule are subject to the Failure to Comply Penalty Charge specified in section II.B of the GRSPs.

D. Power Factor Penalty

Customers taking service under this rate schedule are subject to the Power Factor Penalty Charge specified in section II.C of the GRSPs.

E. Ratchet Demand Relief

Under appropriate circumstances, BPA-TBL may waive or reduce the Ratchet Demand. An IR customer seeking a reduction or waiver must demonstrate good cause for relief, including a demonstration that:

1. The event which resulted in the Ratchet Demand

(a) was the result of an equipment failure or outage that could not reasonably have been foreseen by the customer; and

(b) did not result in harm to BPA-TBL's transmission system or transmission services, or to any other Transmission Customer; or

2. The event which resulted in the Ratchet Demand

(a) was inadvertent;

(b) could not have been avoided by the exercise of reasonable care;

(c) did not result in harm to BPA-TBL's transmission system or transmission services, or to any other Transmission Customer; and

(d) was not part of a recurring pattern of conduct by the IR customer.

If the IR customer causes a Ratchet Demand to be established in a series of months during which the IR customer has not received notice from BPA-TBL of such Ratchet Demands by billing or otherwise, and the Ratchet Demand(s) established after the first Ratchet Demand were due to the lack of notice, then BPA-TBL may establish a Ratchet Demand for the IR customer based on the highest Ratchet Demand in the series. This highest Ratchet Demand will be charged in the month it is established and the following 11 months. All other Ratchet Demands based on such a series (including the Ratchet Demand established in the first month if it is not the highest Ratchet Demand) will be waived.

F. Cost Contribution

The cost components and their contribution to the IR rate (section II.A) are:

1. Transmission Service—81.5% 2. Scheduling, System Control and Dispatch Service—13.2% 3. Reactive Supply and Voltage Control from Generation Sources Service—5.3% G. Self-Supply of Reactive Supply and Voltage Control From Generation Sources Service

A credit for self-supply of Reactive Supply and Voltage Control from Generation Sources Service will be available for IR customers on an equivalent basis to the credit for PTP Transmission Customers.

Schedule NT-04 Network Integration Rate Section I. Availability

This schedule supersedes Schedule NT-02. It is available to Transmission Customers taking Network Integration Transmission (NT) Service over Federal Columbia River Transmission System Network and Delivery facilities. Terms and conditions of service are specified in the Open Access Transmission Tariff. This schedule is available also for transmission service of a similar nature that may be ordered by the Federal Energy Regulatory Commission (FERC) pursuant to sections 211 and 212 of the Federal Power Act (16 U.S.C. 824j and 824k). Service under this schedule is subject to BPA-TBL's General Rate Schedule Provisions (GRSPs).

Section II. Rates

The monthly charge will be the sum of A and B.

A. Base Charge

$1.028 per kilowatt per month.

B. Load Shaping Charge

$0.425 per kilowatt per month.

Section III. Billing Factors A. Base Charge

1. If no Declared Customer-Served Load (CSL) is specified in the customer's NT Service Agreement, the monthly Billing Factor for the Base Charge specified in section II.A shall be the customer's Network Load on the hour of the Monthly Transmission Peak Load.

2. If an amount of Declared CSL is specified in the customer's NT Service

Agreement, the monthly Billing Factor for the Base Charge specified in section II.A shall be a or b:

a. For the billing month, if the sum of the Actual CSLs occurring during Heavy Load Hours (HLH) is greater than or equal to 60 percent of the Declared CSL multiplied by the number of HLHs in the billing month, the monthly Billing Factor shall be the customer's Network Load on the hour of the Monthly Transmission Peak Load, less Declared CSL.

b. For the billing month, if the sum of the Actual CSLs occurring during HLH is less than 60 percent of the Declared CSL multiplied by the number of HLHs in the billing month, the monthly Billing Factor shall be the customer's Network Load on the hour of the Monthly Transmission Peak Load. The Billing Factor will be reduced by any megawatts charged the NT Unauthorized Increase Charge under section IV.D. for the month.

Where:

“Declared Customer-Served Load (CSL)” is the monthly amount in megawatts of the Transmission Customer's Network Load that the Transmission Customer elects to serve on a firm basis from sources internal to its system or over non-Federal transmission facilities or pursuant to contracts other than the Network Integration Service Agreement. The customer's Declared CSL is contractually specified for each month.

“Actual Customer-Served Load (CSL)” is the actual hourly amount in megawatts of the Network Load that the customer serves on a firm basis from sources internal to its system or over non-Federal transmission facilities or pursuant to contracts other than the Network Integration Service Agreement.

B. Load Shaping Charge

The monthly Billing Factor for the Load Shaping Charge specified in section II.B shall be the Network Load on the hour of the Monthly Transmission Peak Load.

Section IV. Adjustments, Charges, and Other Rate Provisions A. Ancillary Services

Customers taking service under this rate schedule are subject to the ACS Scheduling, System Control and Dispatch Service Rate and the Reactive Supply and Voltage Control from Generation Sources Service Rate. Other Ancillary Services that are required to support NT Service are also available under the ACS rate schedule.

B. Delivery Charge

Customers taking NT Service over Delivery facilities are subject to the Delivery Charge specified in section II.A of the GRSPs.

C. Failure To Comply Penalty

Customers taking NT Service are subject to the Failure to Comply Penalty specified in section II.B of the GRSPs.

D. Metering Adjustment

At those Points of Delivery that do not have meters capable of determining the demand on the hour of the Monthly Transmission Peak Load, the Billing Demand shall be calculated by substituting (1) the sum of the highest hourly demand that occurs during the billing month at all Points of Delivery multiplied by 0.79 for (2) Network Load on the hour of the Monthly Transmission Peak Load.

E. Power Factor Penalty

Customers taking PTP Transmission Service are subject to the Power Factor Penalty Charge specified in section II.C of the GRSPs.

F. Unauthorized Increase Charge

If the Network Customer's Actual CSL is less than its Declared CSL, the Unauthorized Increase Charge specified in section II.G of the GRSPs shall be assessed.

G. Direct Assignment Facilities

BPA-TBL shall collect the capital and related costs of a Direct Assignment Facility under the Advance Funding (AF) rate or the Use-of-Facilities (UFT) rate. Other associated costs, including but not limited to operations, maintenance, and general plant costs, also shall be recovered from the Network Customer under an applicable rate schedule.

H. Incremental Cost Rates

The rates specified in section II are applicable to service over available transmission capacity. Network Customers that integrate new Network Resources, new Member Systems, or new native load customers that would require BPA-TBL to construct Network Upgrades shall be subject to the higher of the rates specified in section II or incremental cost rates for service over such facilities. Incremental cost rates would be developed pursuant to section 7(i) of the Northwest Power Act.

I. Rate Adjustment Due to FERC Order Under FPA Sec. 212

Customers taking service under this rate schedule are subject to the Rate Adjustment Due to FERC Order under FPA sec. 212 specified in section II.D of the GRSPs.

Schedule PTP-04 Point-to-Point Rate Section I. Availability

This schedule supersedes Schedules PTP-02. It is available to Transmission Customers taking Point-to-Point (PTP) Transmission Service over Federal Columbia River Transmission System (FCRTS) Network and Delivery facilities, and for hourly nonfirm service over such FCRTS facilities for customers with Integration of Resources agreements. Terms and conditions of PTP Transmission Service are specified in the Open Access Transmission Tariff. This schedule is available also for transmission service of a similar nature that may be ordered by the Federal Energy Regulatory Commission (FERC) pursuant to sections 211 and 212 of the Federal Power Act (16 U.S.C. 824j and 824k). Service under this schedule is subject to BPA-TBL's General Rate Schedule Provisions (GRSPs).

Section II. Rates A. Long-Term Firm PTP Transmission Service$1.028 per kilowatt per month B. Short-Term Firm and Non-Firm PTP Transmission Service

For each reservation, the rates shall not exceed:

1. Monthly, Weekly, and Daily Firm and Non-Firm Service

a. Days 1 through 5—$0.047 per kilowatt per day

b. Day 6 and beyond—$0.035 per kilowatt per day

2. Hourly Firm and Non-Firm Service—2.96 mills per kilowatthour

Section III. Billing Factors A. All Firm Service and Monthly, Weekly and DailyNon-Firm Service

The Billing Factor for each rate specified in sections II.A and II.B for all service except Hourly Non-Firm Service shall be the ReservedCapacity, which is the greater of:

1. the sum of the capacity reservations at the Point(s) of Receipt, or

2. the sum of the capacity reservations at the Point(s) of Delivery.

B. Hourly Non-Firm Service

The Billing Factor for the rate specified in section II.B.2 for Hourly Non-Firm Service shall be the scheduled kilowatthours.

Section IV. Adjustments, Charges, and Other RateProvisions A. Ancillary Services

Customers taking service under this rate schedule are subject to the ACS-04 Scheduling, System Control and Dispatch Service Rate and the Reactive Supply and Voltage Control from Generation Sources Service Rate.Other Ancillary Services that are required to support PTP TransmissionService on the Network are available under the ACS rate schedule.

B. Delivery Charge

Customers taking PTP Transmission Service over Delivery facilities are subject to the Delivery Charge specified in section II.A of the GRSPs.

C. Failure to Comply Penalty

Customers taking service under this rate schedule are subject to the Failure to Comply Penalty Charge specified in section II.B of the GRSPs.

D. Interruption of Non-Firm PTP Transmission Service

If daily, weekly or monthly Non-Firm PTP Transmission Service is interrupted, the rates charged under section II.B.1 shall be prorated over the total hours in the day to give credit for the hours of such interruption.

E. Power Factor Penalty

Customers taking service under this rate schedule are subject to the Power Factor Penalty Charge specified in section II.C of the GRSPs.

F. Reservation Fee

Customers who postpone the commencement of Long-Term Firm Point-To-Point Transmission Service by reserving deferred service, or by requesting an extension of the Service Commencement Date, will be subject to the Reservation Fee specified in section II.E of the GRSPs.

G. Short-Distance Discount (SDD)

When a Point of Receipt (POR) and Point of Delivery (POD) use FCRTS facilities for a distance of less than 75 circuit miles and are designated as being short distance in the PTP Service Agreement, the monthly capacity reservations for the relevant POR and POD shall be adjusted, for the purpose of computing the monthly bill for annual service, by the following factor:

0.6 (0.4 × transmission distance/75)

Such adjusted monthly POR and POD reservations shall be used to compute the billing factors in section III.A to calculate the monthly bill for Long-Term Firm PTP Transmission Service. The POD capacity reservation eligible for the SDD may be no larger than the POR capacity reservation. The distance used to calculate the SDD will be contractually specified and based upon path(s) identified in power flow studies. If a set of contiguous PODs qualifies for an SDD, the transmission distance used in the calculation of the SDD shall be between the POR and the POD farthest from the POR.

If the customer requests secondary PORs or PODs that use SDD-adjusted capacity reservations for any period of time during a month, the SDD shall not be applied that month.

H. Unauthorized Increase Charge

Customers who exceed their capacity reservations at any Point of Receipt (POR) or Point of Delivery (POD) shall be subject to the Unauthorized Increase Charge specified in section II.G of the GRSPs.

I. Direct Assignment Facilities

BPA-TBL shall collect the capital and related costs of a DirectAssignment Facility under the Advance Funding (AF) rate or the Use-of-Facilities (UFT) rate. Other associated costs, including but not limited to operations, maintenance, and general plant costs, also shall be recovered from the PTP Transmission Customer under an applicable rate schedule.

J. Incremental Cost Rates

The rates specified in section II are applicable to service over available transmission capacity. Customers requesting new or increased firm service that would require BPA-TBL to construct Network Upgrades to alleviate a capacity constraint may be subject to incremental cost rates for such service if incremental cost is higher than embedded cost. Incremental cost rates would be developed pursuant to section 7(i) of the Northwest Power Act.

K. Rate Adjustment Due to FERC Order Under FPA § 212

Customers taking service under this rate schedule are subject to the Rate Adjustment Due to FERC Order under FPA sec. 212 specified in section II.D of the GRSPs.

Schedule IS-04Southern Intertie Rate Section I. Availability

This schedule supersedes Schedule IS-02. It is available to Transmission Customers taking Point-to-Point Transmission Service overFederal Columbia River Transmission System (FCRTS) Southern Intertie facilities. Terms and conditions of service are specified in the OpenAccess Transmission Tariff or, for customers who executed Southern Intertie agreements with BPA before October 1, 1996, will be as provided in the customer's agreement with BPA. This schedule is available also for transmission service of a similar nature that may be ordered by the FederalEnergy Regulatory Commission (FERC) pursuant to sections 211 and 212 of the Federal Power Act (16 U.S.C. 824j and 824k). Service under this schedule is subject to BPA-TBL's General Rate Schedule Provisions (GRSPs).

Section II. Rates A. Long-Term Firm PTP Transmission Service

$1.176 per kilowatt per month

B. Short-Term Firm and Non-Firm PTP Transmission Service

For each reservation, the rates shall not exceed:

1. Monthly, Weekly, and Daily Firm and Non-Firm Service

a. Days 1 through 5—$0.054 per kilowatt per day

b. Day 6 and beyond—$0.040 per kilowatt per day

2. Hourly Firm and Non-Firm Service—3.39 mills per kilowatthour

Section III. Billing Factors A. All Firm Service and Monthly, Weekly andDaily Non-Firm Service

The Billing Factor for each rate specified in sections II.A and II.B for all service except Hourly Non-Firm Service shall be the ReservedCapacity, which is the greater of:

1. the sum of the capacity reservations at the Point(s) of Receipt, or

2. the sum of the capacity reservations at the Point(s) of Delivery.

For Southern Intertie transmission agreements executed prior to October 1,1996, the Billing Factor shall be as specified in the agreement.

B. Hourly Non-Firm Service

The Billing Factor for the rate specified in section II.B.2 for Hourly Non-Firm Service shall be the scheduled kilowatthours.

Section IV. Adjustments, Charges, and Other Rate Provisions A. Ancillary Services

Customers taking service under this rate schedule are subject to the ACS-04 Scheduling, System Control and Dispatch Service Rate and the Reactive Supply and Voltage Control from Generation Sources Service Rate.Other Ancillary Services that are required to support PTP TransmissionService on the Southern Intertie are available under the ACS rate