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Public Exchange Clarification Briefing June 2009

Public Exchange Clarification Briefing June 2009. Discussion Points. Background Summary of Contract Language Next Steps

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Public Exchange Clarification Briefing June 2009

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  1. Public Exchange Clarification Briefing June 2009

  2. Discussion Points • Background • Summary of Contract Language • Next Steps • Caveat: This briefing is a high level summary of the key points of the public exchange clarification language. Please review the actual contract language for due diligence and legal consideration.

  3. Background • In November 2008, BPA adopted the Tiered Rate Methodology (TRM), which is the methodology BPA will use to establish a two-tiered Priority Firm (PF) rate design applicable to firm requirements power service for Consumer-Owned Utilities (COUs) pursuant to the CHWM contracts. • Consistent with the philosophy of tiered rates, the CHWM contract contained a provision that limited a COU’s ability to participate in the Residential Exchange Program (REP): • 12.2 Residential Exchange If «Customer Name» elects to seek residential exchange benefits from BPA pursuant to section 5(c) of the Northwest Power Act, «Customer Name» agrees it will not seek and shall not receive exchange benefits: (1) for Total Retail Load in excess of «Customer Name»’s RHWM load, or (2) based upon the cost of resources in excess of «Customer's Name»’s resource amounts used in calculating its CHWM. The determination of what exchange benefits «Customer Name» shall not receive as a consequence of «Customer Name»’s agreement in the preceding sentence will be made by BPA pursuant to BPA’s then-existing ASC Methodology. • Under this provision, a COU can exchange only the resources (at associated production level) listed in Attachment C, column D of the TRM. However, neither the CHWM contract nor the new Average System Cost Methodology (ASCM) defined how a COU with a CHWM contract would have its REP benefits calculated.

  4. Background, contd. • As a result, BPA initiated a public process in January 2009 to introduce and discuss the methodology for calculating the REP benefits for a COU with CHWM contract post-2012. • BPA introduced two sets of contract language pertaining to two different Regional Dialogue contracts: • RD RPSA template – the language defines how a COUs Exchange Load will be calculated. No RD RSPAs have been signed yet, so the language will be modified in the template. • Load Following and Slice CHWM contracts (optional amendment) – the optional language describes how the three major components of a COU’s ASC are to be calculated and also provides a remedy for the COU if BPA materially changes any of the three major components or does anything else that impacts only COU exchange benefits. • BPA held two workshops to discuss and modify language prior to its release for comment; and, BPA received three comments during the public comment period. After reviewing the comments, BPA issued the ROD on the new contract language in May 2009.

  5. Purpose & Summary of Contract Language • Purpose of the Public Exchange Clarification language: • Define how a COU with a CHWM contract would have its REP benefits calculated. The three major components of REP benefits are: Exchange Load, ASC, and PF Exchange rate. • Provide a remedy to the COU if BPA materially changes the methodology for how REP benefits for COUs are calculated. The remedy is not available if BPA materially and proportionately changes REP benefits for both COUs and IOUs. • Summary: • If BPA takes any of the following Actions (1-4) and such Action meet the criteria specified, then the COU may elect the option described. • See explanations of underlined items in next slides.

  6. Summary: Actions 1-4 • BPA adopts a calculation methodology for the following that is different than described in the contract language: • Action 1: Base Tier 1 PF Exchange rate; the Base rate is the PF Exchange rate before application of the 7(b)(3) Supplemental Rate Charge. The Base Tier 1 PF Exchange rate is the Base PF Exchange rate applicable to the IOUs, modified to remove BPA’s Tier 2 costs and loads. • Action 2: The COU’s ASC for a fiscal year of an exchange period. The COU’s ASC is first calculated using all resource costs and loads, then costs of new resources and Above-RHWM loads are removed. • Action 3: The COUs Exchange Load. (This language is also being added to the RD RPSA template). The language defines exchange load as a percentage of actual eligible residential and small farm loads; the percentage reflects the COU’s mix of Tier 1 and Above-RHWM system loads. • Action 4: BPA adopts any other change that is different than Actions 1-3 that meets the Criteria specified. This protects the COU against a possible BPA administrative action that is not covered by Actions 1-3.

  7. Summary: Criteria • Criteria: • The Action(s) results in a material reduction in the REP benefits for the class of REP participants with CHWM contracts. • If the change applies to all REP participants, rather than just the COU participants, in roughly a pro rata effect, then it does not qualify as an Action, even if the change results in a material reduction in REP benefits. • For example, if a BPA change reduces REP benefits in half for both COUs and IOUs, then there is no available remedy. The COU will be compensated through a lower PF Preference rate. However, if a BPA change reduces REP benefits in half for COUs, but IOU benefits are not affected, then the COU has access to a remedy.

  8. Summary: Option • Option: • If the COU believes an Action(s) that meets the Criteria has occurred and it participated in the public process that resulted in the Action occurring, then: • Within 30 calendar days of alleged Action(s), COU will provide written notice to BPA requesting an Alternative Power Sales Contract (without a CHWM). • Upon receipt of such notice, BPA has 60 days to issue written response regarding whether or not the alleged Action(s) has occurred and meets the Criteria. • If BPA believes the Action(s) has not occurred, or an Action(s) does not meet the Criteria, the dispute will be resolved through dispute resolution provisions in Section 22 of CHWM contract. If dispute resolution concludes an Action has occurred meeting the Criteria, BPA will have 60 days to restore the benefits of the class of customers to the level before the Action occurred or 180 calendar days to offer the Alternative Power Sales Contract to the COU. • If BPA agrees that the Action(s) has occurred and it meets the Criteria, BPA can either restore the benefits of the class of customers to the level before the Action occurred or have 180 calendar days after its written response to offer the Alternative Power Sales Contract to the COU. • Alternative Power Sales Contract – a new net requirements contract will be offered that allows the COU to exchange all of its resources and load at the non-tiered PF Exchange rate. The COU will not be eligible to purchase at Tier 1 rates; rather a melded rate will have to be developed for such sales under the PF Preference rate. The Alternative Power Sales Contract will not allow the COU to switch products, unless such right contemporaneously exists under its CHWM Contract.

  9. Next Steps • For all COUs with a CHWM contract – • All COUs that have signed a CHWM contract can request to include this language in Exhibit D of their CHWM contract. However, only COUs with existing resources, specifically, those resources and amounts as listed in Attachment C of the TRM, are eligible to include non-Federal resource costs in their ASCs. • This language is a one-time offer, coinciding with the Clean Up Amendment Process. • For all COUs requesting an RD RPSA, the template will be updated to include the new Exchange Load definition.

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