Rating Agency Meetings

1. Rating Agency Meetings October 16/18, 2001 Confidential – Sensitive Material

2. Summary of Fiscal Year 2001 Confidential – Sensitive Material

3. The Water Situation Confidential – Sensitive Material

4. FY 2001 Market Prices Confidential – Sensitive Material

5. Managed Hydro System Under Crisis Conditions Plan: • Develop criteria based on reliability and financial considerations to trigger a different operation of the river Actual: • Triggering of power system emergency resulted in reducing spill by 4,700 MW-mo and saved BPA approximately $780 million. Confidential – Sensitive Material

6. FY 2002-06 Power Rate Case Plan: • Manage power rate increase to acceptable level with increased flexibility for the future. Actual: • February 2001: BPA reached a partial settlement with many of its utility customers based upon their suggestion for flexible rates rather than fixed rates. • February-June 2001: BPA was expecting a first year rate increase of 250-300%, but due to an unprecedented load reduction effort by utilities and industries, it was cut to 46%. • The Region responded very positively and collectively to reach this goal for the common good of the Region, with little opposition. • It is estimated that 25,000 people will still be working who otherwise would have lost their jobs and this effort also saved ratepayers about $4 billion for the current fiscal year. Confidential – Sensitive Material

7. FY 2002-06 Power Rate Case • Load-Based CRAC:. It allows an adjustment in rates every six months, based on costs to buy power to serve the BPA load, which is then corrected after each six-month period for over- or under-collections, based on actual augmentation costs (loads and prices). The adjustment was set at 46% for October-March. The next review will be in February 2002, and at this time the rate level for the second six-month period is expected to change little from the current six-month period. • Financial-Based CRAC: This allows a temporary, one-year adjustment in the base rate in addition to the LB CRAC, if PBL’s accumulated net revenues fall below a preset threshold. The FB CRAC did not trigger for FY 2002. The decision for FY 2003 will be based upon BPA’s 3rd Quarter Review next August. • The Safety-Net CRAC: It triggers if BPA forecasts a 50 percent or greater probability that it will miss a payment to Treasury or other creditor or if BPA actually misses a payment. The SNCRAC review is ongoing, but it is too early to tell if it will trigger in FY 2002. • The Dividend Distribution Clause: The DDC allows BPA to distribute rebates to customers if accumulated net revenues at the end of the prior year exceed a pre-set threshold. Confidential – Sensitive Material

8. Successful Negotiation with Treasury and OMB • In FY 2001, significantly higher 4(h)(10)(c) credits were claimed than in previous years. • In FY2001, FCCF credits were claimed for the first time. • BPA will be engaging DOE in discussions to clarify the procedures for accessing these credits in the future. Confidential – Sensitive Material

9. Court Decision Regarding Listed Fish • September 10, 2001 – In the Alsea Valley Alliance v. Evans case, the US District Court for the District of Oregon issued an order finding that NMFS exceeded its authority in listing only the wild-salmon portion of the Pacific Coastal Coho salmon as endangered or threatened. • The Court found that because NMFS did not include the entire “distinct population segment” which also includes hatchery fish, it acted arbitrarily and capriciously. • The court delisted the Pacific Coastal Coho salmon as endangered or threatened. • NMFS listings of other fish populations may have to be reconsidered if appeals of the decision are unsuccessful. • Other groups have commenced litigation to remove several species of salmon and steelhead located in the Snake and Columbia River basins from the endangered species list. • Federal appeal period ends November 9, 2001. Confidential – Sensitive Material

10. Outlook for Fiscal Year 2002 Confidential – Sensitive Material

11. Hydro Conditions and Uncertainty • Potential scenarios for FY 2002 must consider the fact that the Region is starting from both a significant soil moisture and river flow deficit. • BPA is applying a conservative approach, giving heavier weighting to some of the below normal years for modeling purposes • Currently projecting about 90 maf runoff at The Dalles (January-July 2002), with a 95% confidence range of 65-120 maf • Would take roughly 115% of a normal water year to get the region back to “normal conditions” • Bottom line: It’s too early to draw conclusions. Confidential – Sensitive Material

12. Forward Price Curve Confidential – Sensitive Material

13. System Augmentation Plan: • With about a 3,700 aMW projected shortage in FY 2002, BPA pursued conservation measures, load buy-downs, and up to 5-year power purchases. Actual: FY2002-FY2006Price Range Conservation and Load Buy-Downs 2,400 700 aMW $30-40/MWh Up to 5-Year Purchases 1,300 aMW $20-35/MWh Short-Term Market 0 1,400 aMW Market Price Confidential – Sensitive Material

14. Current Agenda for FY 2002 • Implement new rate and contract systems • Recover hydro system • Obtain additional borrowing authority or utilize the Debt Optimization program to fund infrastructure Confidential – Sensitive Material

15. BPA is Moving Forward With aRenewed Sense of Mission • BPA is investing in infrastructure for the Region in both the Transmission and Power business lines. • BPA will engage the Region in a discussion of BPA’s obligation to serve load beyond FY 2006. • BPA will continue to be an active participant in a Northwest and possibly West Coast RTO. • BPA will continue to work with states, tribes, environmental interest, and others to reach agreement on a sustainable fish funding agreement. Confidential – Sensitive Material