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

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Bonneville Power Administration, DOE.


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


The Pacific Northwest Electric Power Planning and Conservation Act (Northwest Power Act) provides that Bonneville Power Administration (BPA) must establish and periodically review its rates so that they are adequate to recover, in accordance with sound business principles, the costs associated with the acquisition, conservation, and transmission of electric power, and to recover the Federal investment in the Federal Columbia River Power System (FCRPS) and other costs incurred by BPA.

By this notice, BPA announces its proposed adjustment to the 1996 Unauthorized Increase Charge. The Unauthorized Increase Charge is a penalty charge that applies to any purchaser taking demand and/or energy in excess of its contractual entitlement. The 1996 Unauthorized Increase Charge was set at a level intended to deter customers who had their own generation or a contract obligation to supply power to their load from exceeding their BPA contractual entitlements to Federal power. However, since 1996 a robust wholesale market for power has developed which has recently produced high and volatile prices. These market changes render the current level of the 1996 Unauthorized Increase Charge for energy and demand inadequate to deter customers from taking demand and energy in excess of the amount of Federal power to which they are contractually entitled. This action is to adjust the 1996 Unauthorized Increase Charge so that it will operate as intended—as a penalty charge, rather than as an attractive alternative to purchasing power at existing wholesale power market prices.


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


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

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

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Table of Contents

Part I: Introduction and Procedural Background

A. Relevant Statutory Provisions Governing This Rate Proceeding

B. Procedure/Background

C. Proposed Schedule Concerning This Rate Proceeding

Part II: Purpose and Scope of Hearing

A. The Circumstances Necessitating Adjustment

B. Scope

C. NEPA Evaluation

Part III: Public Participation

A. Distinguishing Between “Participants” and “Parties'

B. Petitions for Intervention

C. Developing the Record

Part IV: Summary of the Proposal


A. Relevant Statutory Provisions Governing This Rate Proceeding

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

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

Rates established by BPA are effective on an interim or final basis when approved by FERC. 16 U.S.C. 839e(a)(2). In addition to the Northwest Power Act, BPA ratemaking is governed by the Bonneville Project Act, 16 U.S.C. 832 et seq., the Federal Columbia River Transmission System Act, 16 U.S.C. 838 et seq., and the Flood Control Act of 1944, 16 U.S.C. 825 et seq.

Section 7(i) of the Northwest Power Act, 16 U.S.C. 839e(i), requires that BPA's rates be set according to certain procedures. These procedures include issuance of a Federal Register notice announcing the proposed rates; one or more hearings; the opportunity to submit written views, supporting information, questions, or arguments; and a decision by the Administrator based on the record developed during the hearing process. This proceeding will be governed by BPA's “Procedures Governing Bonneville Power Administration Rate Hearings,” 51 FR 7611 (March 5, 1986), which implement and, in most instances, expand these statutory requirements. Pursuant to Rule 1010.3(c) of the Procedures Governing Bonneville Power Administration Rate Hearings (BPA Procedures), this hearing will be conducted under Rule 1010.10, which governs Expedited Rate Proceedings. The expedited procedures will be used rather than the procedures for General Rate Proceedings conducted under Rule 1010.9. The procedures for General Rate Proceedings are intended for use when the Administrator proposes to revise all, or substantially all, of BPA's wholesale power and transmission rates.

The proposed adjustment of the 1996 Unauthorized Increase Charge (UAI) is a change in the level of the penalty charge which is added to other rates. The adjustment includes a change in the applicability of the UAI to existing 1996 rate schedules. It will be applicable to any customer providing nonfederal power to serve any portion of its consumer's load, but in the very limited circumstance of the customer's failure to supply or exceedence of its right to take power under its BPA contracts. Therefore, the issues in this rate proceeding will be fewer and of more limited scope than the issues in a proceeding to adjust all BPA rates. BPA believes that the 90-day Expedited Rate Proceeding will be adequate to develop a full and complete record and to receive public comment and argument related to the proposed adjustment. If more time is required, the Hearing Officer may request under Rule 1010.10(b) of the BPA Procedures that the BPA Administrator grant an extension.

B. Procedure/Background

On July 17, 1995, BPA filed a notice in the Federal Register proposing new wholesale power and transmission rates to be effective on October 1, 1996, including the UAI. BPA's initial rate proposal was filed on July 10, 1995, and was supported by written testimony and studies. Parties to the proceeding filed their rebuttal to BPA's direct case and their own direct testimony on September 8, 1995. On December 8, 1995, litigants filed rebuttal to the Parties' direct cases. BPA also filed a supplemental rate proposal on December 8, 1995, which consisted of written testimony and studies.

Parties filed their direct cases in response to BPA's supplemental rate proposal on January 26, 1996. Testimony responding to the Parties' supplemental cases was filed on February 12, 1996. Surrebuttal testimony was filed by all Parties on February 14, 1996. The Parties filed their prehearing briefs on February 12, 1996. Cross-examination began on February 20, 1996. Parties submitted initial briefs on April 22, 1996. Oral argument before the BPA Administrator and Deputy Administrator was held on April 30, 1996.

A Draft Record of Decision (ROD) was published and distributed to parties on May 14, 1996. Parties filed briefs on exceptions on May 30, 1996. BPA published its Final ROD on June 17, 1996.

BPA filed its proposed rates, including the UAI, with the Federal Energy Regulatory Commission (FERC) on July 26, 1996. On September 25, 1996, FERC granted interim approval of the proposed rates effective October 1, 1996. On July 30, 1996, FERC issued an order granting final confirmation and approval of BPA's rates.

C. Proposed Schedule Concerning This Rate Proceeding

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

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

The procedural schedule established for Docket No. UAI-96R will provide an opportunity for interested persons to review BPA's proposed rates, to participate in the rate hearing, and to submit oral and written comments. During the development of the final rate proposal, BPA will evaluate all written and oral comments received in the rate proceeding. Consideration of comments and more current data may result in the final rate proposal differing from the rates proposed in this Notice. Start Printed Page 58760

Part II—Purpose and Scope of Hearing

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

A. The Circumstances Necessitating Adjustment

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

B. Scope

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

C. NEPA Evaluation

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

Part III—Public Participation

A. Distinguishing Between “Participants” and “Parties”

BPA distinguishes between “participants in” and “parties to” the hearings. Apart from the formal hearing process, BPA will receive comments, views, opinions, and information from “participants,” who are defined in the BPA Procedures as persons who may submit comments without being subject to the duties of, or having the privileges of, parties. Participants' written and oral comments will be made part of the official record and considered by the Administrator. Participants are not entitled to participate in the prehearing conference; may not cross examine parties' witnesses, seek discovery, or serve or be served with documents; and are not subject to the same procedural requirements as parties.

Written comments by participants will be included in the record if they are submitted on or before November 15, 2000. Participants' written views, supporting information, questions, and arguments should be submitted to the address noted above. The second category of interest is that of a “party” as defined in Rules 1010.2 and 1010.4 of the BPA Procedures. 51 FR 7611 (1986). Parties may participate in any aspect of the hearing process.

B. Petitions for Intervention

Persons wishing to become a party to BPA's rate proceeding must notify BPA in writing of their interest. Petitioners may designate no more than two representatives upon whom service of documents will be made. Petitions to intervene shall state the name and address of the person requesting party status and the person's interest in the hearing.

Petitions to intervene as parties in the rate proceeding are due to the Hearing Officer by October 4, 2000. The petitions should be directed to: Kimberly J. Maki, Hearing Clerk—LP-7, Bonneville Power Administration, 905 NE. 11th Ave., P.O. Box 12999 Portland, Oregon 97232.

Petitioners must explain their interests in sufficient detail to permit the Hearing Officer to determine whether they have a relevant interest in the hearing. Pursuant to Rule 1010.1(d) of BPA's Procedures, BPA waives the requirement in Rule 1010.4(d) that an opposition to an intervention petition be filed and served 24 hours before the prehearing conference. Any opposition to an intervention petition may instead be made at the prehearing conference. Any party, including BPA, may oppose a petition for intervention. Persons who have been denied party status in any past BPA rate proceeding shall continue to be denied party status unless they establish a significant change of circumstances. All timely applications will be ruled on by the Hearing Officer. Late interventions are strongly disfavored. Opposition to an untimely petition to intervene shall be filed and received by BPA within two days after service of the petition.

C. Developing the Record

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

The Administrator will develop the final adjusted 1996 UAI based on the entire record. The basis for the final adjustment will be expressed in the Administrator's Final ROD. The Administrator will serve copies of the Start Printed Page 58761ROD on all parties and will file the final proposed rate adjustment, together with the record, with FERC for confirmation and approval. See generally, 18 CFR Part 300.

Part IV—Summary of the Proposal

BPA proposes to adjust the 1996 UAI to reflect changes in the market rate for power by adoption of a market-index basis for the charge. The UAI is intended as a penalty rate to deter a customer from taking more Federal power than it is entitled to purchase from BPA under its contracts. The charge will apply to all customers supplying power from generation resources or power purchases from the market. The modification will prevent the charge, now a fixed charge, from becoming an attractive price alternative when the market price is higher.

Below is the revised 1996 Unauthorized Increase Charge.

Delete Section II.R of the GRSPs in the 1996 Wholesale Power and Transmission Rate Schedules, and replace with the following:

1. Charge for Unauthorized Increase in Demand

The amount of Measured Demand during a billing hour that exceeds the amount of demand the purchaser is contractually entitled to take during that hour shall be billed at the greater of:

a. Three (3) times the applicable monthly demand charge;

b. The sum of hourly California ISO Spinning Reserve Capacity prices for all HLHs in the month, at path NW1 (COB); or

c. The sum of hourly California ISO Spinning Reserve Capacity prices for all HLHs in the month, at path NW3 Nevada-Oregon Border (NOB).

2. Charge for Unauthorized Increase in Energy

The amount of Measured Energy during a diurnal period of a billing month, day, or hour that exceeds the amount of energy the purchaser is contractually entitled to take during that period shall be billed the greater of:

a. One hundred (100) mills/kWh; or

b. For the month in question, the greater of:

(1) The highest diurnal DJ Mid-C Index price for firm power; or

(2) The highest hourly ISO California Supplemental Energy price (NP15).

The DJ Mid-C Index definitions for HLH's (or peak) and LLH's (or off-peak) will be adjusted, as necessary, to be consistent with (comport with) BPA's definitions for HLH and LLH periods.

In the event that either the ISO California Supplemental Energy price index or the DJ Mid-C Index expires, the index will be replaced for purposes of the Unauthorized Increase Charge for energy by:

(1) The highest price experienced for the month at the CalPX, NW1 (COB);

(2) The highest price experienced for the month at the CalPX, NW3 (NOB).

Add the following to Section II.A.6.1, Section II.B.6.1, Section II.C.3.1, and Section II.E.7.1 of the 1996 Priority Firm Rate Schedule; Section II.A.5.1, Section II.B.6.1, and Section II.D.7.1 of the 1996 New Resource Firm Power Rate Schedule; and Section II.C.7.1 of the 1996 Industrial Firm Power Rate Schedule:

Rate adjustmentSection
Unauthorized Increase ChargeII.R
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Issued in Portland, Oregon, on September 19, 2000.

Judith A. Johansen,

Administrator and Chief Executive Officer.

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[FR Doc. 00-25256 Filed 9-29-00; 8:45 am]