Options for application of federal power act standards to transmission rates, terms and conditions of BPA

Note: Bonneville staff prepared this revised draft and is distributing it for discussion at the August 5, 1997 meeting of the Transition Board Transmission Work Group. 8-4-97

OPTIONS FOR

APPLICATION OF FEDERAL POWER ACT STANDARDS

TO TRANSMISSION RATES, TERMS AND CONDITIONS OF THE BONNEVILLE POWER ADMINISTRATION

Note: There are numerous elements, and options for those elements, that are involved in the potential application of Federal Power Act-like standards to the transmission rates, terms and conditions of the Bonneville Power Administration. This paper sets out those elements and options with descriptive notes, comments, and pros and cons. Language in quotes is illustrative only, and not intended to suffice for legislative drafting purposes.

OVERARCHING CRITERIA THAT ELEMENTS MUST SATISFY:

• Must provide meaningful increase in FERC review/decisional authorities over rates and terms and conditions. (Note: Existing law governing BPA results, or could result, in substantive outcomes on many BPA pricing and access issues that are very close to what would be achieved under Federal Power Act standards. At the same time, local decisionmaking (i.e., the section 7(i) process) and discretion provided the Administrator under the substantive provisions of existing law do provide a process and standards that allow for more regional, or local, considerations to be taken into account. Since 1989, parties have drawn on this flexibility to settle all but one of BPA's rate cases, while assuring BPA cost recovery. Some parties would argue, though, that these same standards allow BPA to engage in one-sided or biased decisionmaking so long as the Administrator determines rates as is done under current authorities. In addition, there are forces at the national level that are pushing for national uniformity to the greatest extent practicable, and that call for Federal leadership in this area. Consequently, the tension created by these various competing interests has created a need to re-examine the policies, and the balance of those policies, reflected in provisions of existing law governing BPA transmission pricing and access.)

• Preserve existing ratemaking authorities re total cost recovery. (Note: Under existing statutory authority, the transmission function and the generation function must each ordinarily pay its own way; if necessary to recover total costs, however, one function may be relied upon to cover the costs of the other function. If revenues from one function must be relied upon to cover the costs of another function, the transaction should be treated as a loan. The purpose of this criteria is to ensure the U.S. Treasury is no worse off with this legislation.)

• Preserve existing authorities supporting stranded investment recovery (Note: BPA's authority, if any, to recover stranded costs is found in existing statutory legislation that prescribes how rates for power and transmission shall be established. If that authority is not to be diminished or augmented in this legislation, i.e., stranded investment is to be dealt with as a separate issue, then care must be taken not to supplant the existing statutory cost recovery foundation by wholesale application of the just and reasonable standard.)

• Preserve existing authorities that support or lend security for third-party debt (e.g., Supply System; Trojan). (Note: BPA's statutory priority of payments scheme, its statutory ability to raise rates to recover total costs, and its obligations under the net-billing contracts all might be argued to support or lend security for third-party debt. The purpose of this criteria is to avoid arguments that new legislation results in an impairment of security.)

1. PROCEDURAL ELEMENTS:

1.1 PRIMARY EVIDENTIARY HEARING LOCATION (Note: BPA's rates--whether power or transmission--impact a significant number of regional and extra-regional parties, including customers and "public interest" groups. BPA's transmission rates are standardized, meaning they apply to broadly defined classes of transmission usage. Consequently, BPA's rate proceedings typically involve scores of customer and constituent groups representing a much greater number affected parties. The advent of standardized BPA transmission terms and conditions that assure comparable and nondiscriminatory treatment means that the same level of party interest and involvement can be expected there.)

OPTION A: ALL PORTLAND

pro: This more localized forum is apt to ensure greater customer and third-party involvement.

pro: Cost for BPA and other parties is likely to be significantly less than under the "all in D.C." option.

pro: Due to the preceding items, it is more likely that regional interests and concerns will be represented by parties familiar with and expert in those concerns.

pro: Due to the preceding items, it is more likely that smaller and less well-financed interests are more apt to be heard.

pro: Since 1989, almost all BPA rate proceedings have resulted in settlements; this trend is more apt to continue under a local forum scenario.

pro: The pace and scope of the proceedings would be more apt to be driven by the needs of the participants than the needs of a FERC ALJ that is wrestling with many other cases.

con: There may be occasions involving more private, one-on-one type of disputes where utilizing FERC's existing facilities and ALJ's could be faster and more efficient.

con: National marketers with corporate headquarters and regulatory staff outside the region may find this less convenient.

con: The proceedings might not have the benefit of FERC trial staff participation.

con: This might not alleviate perceptions that the Northwest is trying to carve out unique exceptions for itself.

con: More effort will be needed to secure Hearing Officers who are qualified to hear cases.

OPTION B: ALL D.C.

pro: The cons of the prior option would be avoided.

pro: Possibly speedier resolution of cases due to FERC involvement in the proceeding from beginning to finish.

con: Loss of the "pros" under the first option.

OPTION C: PORTLAND, WITH BPA ABILITY TO GO TO D.C.

pro: The "pros" under the first option could be secured, while the option of going to hearing in D.C. could be used for occasions such as those involving more private, one-on-one type of disputes, where utilizing FERC's existing facilities and ALJ's could be faster and more efficient, or experience proved that the advantages of hearings in D.C. outweighed the costs.

con: Same as the "cons" under the first option, except that more private disputes could go to hearing in D.C.

OPTION D: BPA OPTION PORTLAND OR D.C., BUT HEARING PRESIDED OVER BY FERC ALJ, WITH NO DECISIONAL AUTHORITY BY THE ADMINISTRATOR

pro: While this option would secure for the region the benefits of a local hearing, it would place the Administrator in the same position as any other CEO of a transmitting utility. The Administrator would simply support BPA's proposal, might be called upon as a policy witness in support of that proposal, and might even suggest a revised proposal to the ALJ at the conclusion of the case, but the Administrator would not make a decision at the end of the case.

pro: By taking the Administrator out of the decisional process, this would eliminate the possibility that the Administrator's final proposal might be biased in favor of the power side of the business.

pro: If BPA were the IGO, this would better position it to have an integrated ratesetting process that met the needs of all IGO members. Questions of Administrator bias would be quelled.

con: The Administrator is not in the same position as any other CEO of a transmitting utility. The Administrator is a public official typically chosen for his knowledge of the region, and charged with ensuring BPA's decisions are reflective of both regional and national interests. At the regional level, the Administrator knows BPA's customers and constituencies; understands the complexities, nuances and impacts of his decisions; and is able to respond to the needs and interests of the region in a much more timely and reflective fashion than would occur if decisionmaking were transferred outside the region This option would largely turn decisionmaking over to lawyers and technical experts.

con: Same as the "cons" under the first option, except that more private disputes could go to hearing in D.C.

con: The local character of many BPA decisions may lose out to considerations grounded largely in national precedent.

con: Lose the benefit of the experiential and political judgment that the Administrator typically brings to bear in making a final proposal to FERC.

con: Issues of bias can be dealt with by expanding FERC's review authority.

con: Since the decisional document would now be a product of the ALJ, lose the benefit of the detailed Records of Decision typically presented by BPA to FERC for review.

con: BPA's experience with having a FERC ALJ as a visiting Hearing Officer is that it is very difficult to jive the ALJ's D.C. calendar with the calendar needs of parties to the regional hearing, and that the D.C. calendar typically dictates the regional schedule.

1.2 HEARING OFFICER (Note: These and following procedural options assume a hearing in Portland that results in a proposal to FERC by the Administrator. If it is decided that all hearings will be in D.C. or that a FERC ALJ would preside over a local proceeding, then FERC's trial rules would apply and consideration of many of these options would be unnecessary. Under current statutory ratemaking procedures, the Hearing Officer for a BPA rate case decides the procedural/evidentiary course and conduct of the case, but makes no substantive ratemaking recommendations or decisions. Under the optional local hearing procedures specified by EPA '92 for the Administrator's determination of transmission terms and conditions, the Hearing Officer both decides procedural issues and makes a recommended decision to the Administrator at the close of the hearing.)

OPTION A: PROCEDURAL ONLY

pro: This avoids the time it takes for a Hearing Officer to make a recommended decision as a step in the process before it is up to the Administrator to make the final decisions

pro: This avoids the need to secure a Hearing Officer that is expert in the complex and technical issues involved in these type of proceedings.

con: Even under a statutory regime where FERC enjoys plenary authority to ultimately decide all issues and establish rates, terms and conditions, some parties will still suspect that FERC is affording the Administrator some deference due to his or her position. For those people, interjection of a neutral, third party's opinion into the process makes it less likely that the Administrator will make a biased decision.

OPTION B: RECOMMENDED DECISION TO THE ADMINISTRATOR

pro: Interjection of a neutral, third party's opinion into the process sets a hurdle that the Administrator will have to overcome if he or she wishes to make a different decision; this will alleviate parties' perceptions that the Administrator will make a biased decision.

pro: This will give the Administrator the benefit of how a neutral, third party views the evidence in the case.

pro: If it is decided that FERC should continue to grant the Administrator deference, the Hearing Officer's recommended decision provides parties a basis to argue that the Administrator's decision should nevertheless be more closely scrutinized.

pro: Parties had a favorable reaction to this process in the 1996 transmission terms and conditions proceeding.

con: In a process where FERC will ultimately decide all issues and establish the rates, terms and conditions, introduction of this extra step may be viewed as unnecessary, costly, and an inefficient use of time.

1.3 ADMINISTRATOR DEFERENCE TO HEARING OFFICER (Note: This is only an issue if a decision is made that the Hearing Officer should make proposed findings of fact and conclusions of law.)

OPTION A: NO DEFERENCE

pro: Given enhanced FERC review authority over BPA, the value of having the Hearing Officer make findings and conclusions may be viewed as primarily to obtain a neutral, third-party opinion and to lessen the possibility of Administrator bias. One view would be that a deference requirement serves no useful purpose.

pro: Introduction of a "deference" standard just creates one more procedural vehicle for dissatisfied parties to argue that procedures were flawed and that additional proceedings must be held.

con: This issue is largely one of degree. The value of interjecting a Hearing Officer's decision into the process is likely to be enhanced by requiring deference to that decision.

OPTION B: DEFERENCE TO FACTS ONLY

pro: Hearing Officers are in a unique position to view the witnesses and evaluate their credibility. They are also likely to be most familiar with the evidence. Consequently, that position should earn the Hearing Officer's opinion some deference.

con: This is an unnecessary procedural hurdle in a process where FERC makes the ultimate decisions.

con: This assumes the Hearing Officer has some greater expertise in the area than the Administrator. Issues of credibility are rare in these type of technical cases.

OPTION C: DEFERENCE TO FACTS AND LAW

pro: The law in this area is often the law of reasonableness and equity. Consequently, it is intimately tied in with the facts and often difficult to differentiate law from fact. If it is appropriate to afford the Hearing Officer deference on the facts, the same should be said for the law.

con: The law is the law, and the Hearing Officer should be granted no greater credence on the subject than any other party.

OPTION D: SUBSTANTIAL DEFERENCE TO FACTS ONLY

pro: Same pros as involved in granting deference on the facts, but this is a matter of degree.

con: While Hearing Officers are in a unique position to view the witnesses and evaluate their credibility, credibility is not typically an issue in cases like this that involve highly complex technical issues of fact.

con: This would require the Administrator to point to compelling evidence that the Hearing Officer is wrong. Consequently, it would substantially diminish the value of the Administrator's judgment on these issue.

con: FERC rules don't require that the Commission grant such deference to orders of its ALJ's. Unless FERC is required also to substantially defer to the Hearing Officer, this could result in the odd situation where FERC often reaches different conclusions than the Administrator because it, unlike the Administrator, was not bound to substantially defer to the Hearing Officer's findings.

OPTION E: SUBSTANTIAL DEFERENCE TO FACTS AND LAW

pro: Same pros as involved in the prior two options, but this is a matter of degree.

con: Same cons as involved in the prior two options.

con: The Administrator's role is reduced to one of a watchdog watching out for the grossest of errors.

1.4 ADMINISTRATOR DECISION

OPTION A: JUSTIFY ALL

pro: The existing standard is that the Administrator fully support his or her decisions based on the record at the end of the case. This reinforces the value of the hearing, and ensures that proposals are well thought out and supported.

pro: If FERC will be required to make a de novo decision, it will be necessary for the Administrator to justify all elements of her proposal.

con: This can be costly and time-consuming.

OPTION B: NEED ONLY JUSTIFY EXCEPTIONS TO HO DECISION

pro: This allows the Administrator to focus only on those areas of disagreement with the Hearing Officer's decision or areas where the Administrator believes the Hearing Officer's rationale could be strengthened.

con: None.

1.5 FILING PROCEDURES AT FERC

OPTION A: LIKE NORTHWEST POWER ACT (INTERIM APPROVAL, ETC.)

pro: These are very detailed, and geared to ensuring that FERC obtains information necessary to assure cost recovery and other standards are met.

pro: The existing process for interim approval, and the standards applied, recognize the need for quick action (60 days for interim approval) to assure revenue recovery is timely. Refunds, with interest, are provided for if the rates must be changed.

pro: Given that power rates could be filed at the same time, and subject to the same process and timelines, changes can be efficiently made to the rates if FERC decides that there is an inappropriate functionalization of costs or something else that impacts the other function's rates. This best, and most efficiently, assures cost recovery requirements are met.

pro: FERC's filing procedures for BPA have not been the subject of dissatisfaction, at least that BPA is aware of.

con: National uniformity of matters such as filing procedures should be encouraged.

OPTION B: LIKE STRAIGHT APPLICATION OF THE FEDERAL POWER ACT

pro This will be less costly to parties, inasmuch as they will not be required to learn "BPA specific" procedures. As such, the transaction costs of doing business with BPA may be less.

pro: BPA will need to learn these procedures due to its participation in transmission filings of other entities. This will develop BPA expertise in the area.

con: Somewhat more detailed and cumbersome.

con: Absence of pro's of Option A.

1.6 FERC RECORD FOR REVIEW

OPTION A: ON BPA RECORD, SUBJECT TO DUE PROCESS EXCEPTION

pro: Provides meaning to local process, while ensuring avenue for redress of procedural irregularities.

con: None.

OPTION B: DE NOVO

pro: None.

con: Renders local hearing process redundant.

con: Adds significantly more time and cost to the process.

1.7 FERC STANDARD OF REVIEW

OPTION A: DEFERENCE

pro: In instances where the issues are particular to BPA--such as in the area of cost recovery--this best ensures that credibility is given to the Administrator's judgment.

pro: In cases where there is clearly established national precedent, a deference standard will not allow the Administrator to escape a very searching review by FERC.

pro: This involves a very fundamental issue of accountability, an issue discussed in connection with the option whether a FERC ALJ should preside over regional hearings. As there stated, the Administrator is a public official typically chosen for his knowledge of the region, and charged with ensuring BPA's decisions are reflective of both regional and national interests. At the regional level, the Administrator knows BPA's customers and constituencies; understands the complexities, nuances and impacts of his decisions; and is able to respond to the needs and interests of the region in a much more timely and reflective fashion than would occur if decisionmaking were transferred outside the region. A "no deference" standard would largely eviscerate the Administrator's role and turn decisionmaking over to experts and decisionmakers in Washington, D.C.

pro: Where cases have settled, the deference standard better ensures that the settlement will find favor at FERC.

con: At FERC, filing utilities bear the burden of proof. This lessens that burden, and provides BPA a benefit not enjoyed by any section 205/206 public utility.

con: Parties will suspect that biased decisions may survive under the guise of deference.

con: Given that FERC is also "federal," parties will question the degree of deference afforded BPA.

OPTION B: SUBSTANTIAL DEFERENCE

pro: Same as pros under the last option, but this ensures the Administrator's decisions are not reversed unless there are compelling reasons to do so.

con: This largely eviscerates the impact of granting FERC a greater scope of review since FERC must abide by the Administrator's decision except in cases where he or she is clearly or patently wrong.

OPTION C: NO DEFERENCE

pro: Accords with the standard applied to the rest of the industry.

pro: Ensures that qualms re continued Administrator presence in the decisional process are alleviated.

con: To the degree that the Administrator's decisions are influenced by cost recovery considerations, there is some risk that a "no deference" standard will result in cost recovery nuances being lost.

con: Essentially ignores giving any benefit of the doubt to the Administrator's judgment in close call situations.

con: The local character of many BPA decisions may lose out to considerations grounded largely in national precedent.

1.8 FERC DECISIONAL AUTHORITY (Note: Currently under the Northwest Power Act, FERC can approve, reject or remand BPA rates; under EPA '92 it can approve, reject, remand to BPA or establish transmission terms and conditions. While some parties have complained about FERC's lack of authority to establish BPA's rates, none have explained why clear directions to BPA on remand to not essentially accomplish the same thing, while once again assuring that local considerations might be taken into account.)

OPTION A: NO CHANGE FROM STATUS QUO

pro: In situations where FERC disagrees with BPA's rate proposal, requiring that it remand the proposal to BPA for further hearings best ensures that local considerations may be brought to bear in the next iteration of the process.

pro: In cases where rates settlements have preceded FERC review, this best assures that the settling parties might again sit down and discuss how a consensus settlement might be reached even in light of FERC's new directions.

con: If FERC disagrees with BPA's proposal, it will spell that disagreement out, and the proposal should simply be conformed to meet the areas of disagreement. FERC's expertise allows it to do that, and to do it in a speedier, less costly fashion than remanding the case to BPA for further proceedings.

con: FERC may believe that remanding the case to BPA will risk politicizing the issue, such that BPA might gain an additional opportunity to end-run FERC's authority.

con: FERC currently has the authority to establish BPA transmission terms and conditions under EPA '92, and this options presents a possible procedural mismatch for rates issues.

OPTION B: CAN ESTABLISH RATES AND TERMS & CONDITIONS ON REVIEW

pro: Brings BPA in line with national practice, and results in a less costly and timely process than currently exists.

pro: Gives FERC the "teeth" it needs to bring BPA in closer alignment with national practice.

con: Runs the risk of unintended consequences, i.e., that FERC may not fully appreciate the consequences of its actions. (On the other hand, rehearing should be able to cure that problem.)

con: BPA's power business line cannot have the same confidence that the transmission rates they've embedded into their bundled price will turn out to be the same rates approved by FERC.

1.9 APPLICATION OF EX PARTE RULES (Note: The Administrative Procedures Act applies ex parte restrictions to on-the-record proceedings, so legislation need not address this topic unless a decision is made that the restrictions should not apply.)

OPTION A: APPLY

pro: This is consistent with FERC rules (18 C.F.R. § 385.2201), which include ex parte strictures.

pro: Ex parte rules ensure a fair and open hearing where all parties have equal opportunity to be heard, and they ensure that FERC and the courts will have access to the full record that the Administrator's decision was based on.

pro: This alleviates extraneous political pressures during the course of the hearing.

pro: In the absence of ex parte rules at the BPA level, it is more apt that there may be a need for receiving additional evidence at FERC.

con: Ex parte rules chill the ability to communicate with customers in a one-on-one, businesslike fashion.

con: Ex parte rules have sometimes proved troublesome in the context of Congressional communications.

OPTION B: DO NOT APPLY

pro: Avoids the "cons" of the prior option.

con: Avoids the "pros" of the prior option.

SUBSTANTIVE ELEMENTS

2. RATES:

2.1 CONDITIONS, IF ANY, ON THE STANDARD THAT ALL TRANSMISSION RATES SHALL NOT BE UNJUST, UNREASONABLE, OR UNDULY DISCRIMINATORY OR PREFERENTIAL

OPTION A: UNCONDITIONAL APPLICATION OF THE JUST AND REASONABLE STANDARD

pro: Promotes greatest national uniformity.

pro: Best assures BPA's ability to be the IGO.

pro: Makes BPA's participation in an IGO easier.

con: Runs significant risk of jeopardy to cost recovery and payment to Treasury, both due to FERC's revenue requirement determination standards and its inflexible rules regarding the situations under which stranded or any other generation costs may be recovered through transmission rates.

con: Would jeopardize the security of BPA's net billing obligations.

con: Would possibly result in greater fish and wildlife cost.

con: Would lead to lengthy litigation over issues of cost causation.

con: Would lead to lengthy litigation over effect of existing contracts.

con: Could result in abrupt, significant cost shifts within the region.

con: Would diminish regional character of decisions.

OPTION B: QUALIFICATIONS OF THE JUST AND REASONABLE STANDARD (e.g., "NO TRANSMISSION RATE OR CHARGE OF THE BONNEVILLE POWER ADMINISTRATION SHALL BE UNJUST, UNREASONABLE, OR UNDULY DISCRIMINATORY OR PREFERENTIAL, TAKING INTO CONSIDERATION . . .")

2.1.1. RE COST RECOVERY/REVENUE APPLICATION (Note: The following options subsume technical issues such as assignment of costs between functions; calculation of capital costs; repayment methodology; cost allowance (i.e., prudency, "used and useful); risk and return proxy, if any; etc. These are highly technical issues that should not be decided by legislation, but should be left to the process for implementing the new standards.)

a. SAY NOTHING

pro: Exerts a strong cost discipline on BPA's power and transmission business lines.

pro: Promotes national uniformity, and lessens the risk of FERC decisions politicized because of Federal cost recovery needs.

con: Would jeopardize the security of BPA's net billing obligations. For example, under the net-billing agreements, transmission revenues are required to be credited to the participants. Also, reliance on the single Bonneville fund and priority of payments might be called into question under a straight "just and reasonable" standard.

con: Absent some different standard, the Treasury would run the risk of being unable to recover investments deemed imprudent by FERC, or that were not actually recovered through the depreciation-based model of capital recovery.

b. "BPA’S EXISTING STATUTORY BUDGETARY, COST RECOVERY, REPAYMENT, AND REVENUE APPLICATION OBLIGATIONS"

pro: Most simply preserves existing protections for assuring repayment to the Treasury, recovery of stranded investment, and meeting net billing obligations.

pro: Provides the flexibility to more closely align current cost recovery, repayment, and revenue application obligations with FPA practices.

pro: Revenue financing could be allowable to preserve borrowing authority.

con: The flexibility of this language will lead to continuing debate over what exactly BPA's current cost recovery, repayment, and revenue application obligations are.

con: BPA's obligations and authorities in these areas are fairly arcane, particularly to people versed in Federal Power Act issues. Absent legislation that spells out all of these issues, there will be a lengthy educational process involved in bringing some parties up to speed on these issues.

con: Creates uncertainty for IGO members re BPA costs.

c. "BPA’S OBLIGATION TO ESTABLISH POWER AND TRANSMISSION RATES THAT ARE BASED ON TOTAL SYSTEM COSTS AND ASSURE REPAYMENT TO THE U.S. TREASURY OVER A REASONABLE NUMBER OF YEARS."

pro: This highlights BPA's obligation to recover total costs, and will be seen as a signal that Treasury will be paid.

con: This is what BPA has argued that its current statutory cost recovery standards require. Some customers disagree with BPA's argument. Casting BPA's authorities in this way will be seen as favoring BPA, and signaling that stranded investment and costs must be recovered.

con: This may be perceived as a signal that BPA's transmission system can be counted on to fund whatever additional fish and wildlife and other costs that parties can force on BPA.

con: Creates uncertainty for IGO members re BPA costs.

d. EITHER b OR c ABOVE, BUT WITH THE PROVISO THAT "WITH THE EXCEPTION OF NET-BILLED OBLIGATIONS, COSTS INCURRED AFTER [DATE] AND OTHERWISE PROPERLY ALLOCABLE TO POWER RATES FOR RECOVERY, SHALL NOT BE ELIGIBLE FOR RECOVERY THROUGH TRANSMISSION RATES OR APPLICATION OF TRANSMISSION REVENUES."

pro: This would enjoy the pros of either option b or c above, but alleviate the concerns about BPA lack of cost discipline and uncertainty re the costs that transmission might be called upon to bear.

con: For those parties who do not believe BPA enjoys any rights to recover power costs through the transmission function--even on the basis of an interfunctional loan--this will be taken to imply that net billing and costs incurred before the specified date may be recovered from transmission if necessary.

2.1.2. RE INTERFUNCTIONAL LOANS (Note: Where transmission rates or revenues must be relied upon to cover generation costs, or vice versa, as a temporary cost recovery matter (i.e., this does not involve a permanent allocation of stranded costs), BPA has stated that current law provides authority for treating the transaction as an inter-functional loan.)

a. SAY NOTHING (i.e., use existing authority)

pro: Leaves the issue for determination by FERC.

con: Inconsistent with current law, and provides Treasury greater protection than currently exists.

con: Results in concerns about BPA cost discipline.

b. "THAT PAYMENT OF ONE FUNCTION’S COSTS THROUGH APPLICATION OF THE OTHER FUNCTION’S REVENUES OR NET BILLING SHALL BE TREATED AS A LOAN TO THE OTHER FUNCTION, REPAYABLE BY THE FUNCTION AS SOON AS PRACTICABLE AFTER IT IS ABLE TO MEET ITS OTHER COST RECOVERY OBLIGATIONS ON AN ANNUAL BASIS AND UPON SUCH TERMS AND CONDITIONS AS THE ADMINISTRATOR DETERMINES APPROPRIATE, SUBJECT TO FERC REVIEW AND APPROVAL"

pro: Comports with current law, both in the sense that a loan is provided for and FERC ultimately will determine the terms of the loan (under current law, pursuant to the "equitable allocation" standard.)

pro: Ameliorates concerns about cost discipline.

con: Creates uncertainty re the terms of the loan, since no interest rate is specified, and will result in significant argument.

c. "THAT PAYMENT OF ONE FUNCTION’S COSTS THROUGH APPLICATION OF THE OTHER FUNCTION’S REVENUES OR NET BILLING SHALL BE TREATED AS A LOAN TO THE OTHER FUNCTION, REPAYABLE BY THE POWER FUNCTION AS SOON AS PRACTICABLE AFTER IT IS ABLE TO MEET ITS OTHER COST RECOVERY OBLIGATIONS ON AN ANNUAL BASIS, AND [STATUTORILY SPECIFY LOAN DETAILS]"

pro: Ameliorates concerns about cost discipline.

pro: Creates greater certainty re the terms of the loan.

con: The liability could be significant.

con: Sufficient flexibility should be provided to ensure that the loan mechanics are workable and appropriate for the circumstances.

2.1.3. RE ENVIRONMENTAL OBLIGATIONS

a. SAY NOTHING

pro: Absent a repeal of existing statutes, leaves the issue for future determination. (Given the history of BPA transmission legislation, parties would argue an implied repeal of any requirements that BPA use its transmission authorities to mitigate fish and wildlife impacts.)

pro: Puts the BPA power business on the same basis as other transmission users.

con: Puts the BPA power business on the same basis as other transmission users, and in doing so fails to recognize the significant issues that spill may present to salmon.

b. "BPA’S EXISTING STATUTORY OBLIGATIONS TO USE THE BONNEVILLE FUND AND ADMINISTRATOR’S AUTHORITIES UNDER LAWS TO PROTECT, MITIGATE, AND ENHANCE FISH AND WILDLIFE TO THE EXTENT AFFECTED BY THE DEVELOPMENT AND OPERATION OF ANY HYDROELECTRIC PROJECT OF THE COLUMBIA RIVER AND ITS TRIBUTARIES."

pro: Preserves the environmental status quo in this area, meaning the need to rely upon transmission authorities to protect fish and wildlife can be determined on a case-by-case basis.

con: Leaves the environmental liability issue for future determination, resulting in some uncertainty.

con: Given the possibility for considerable contention in this area, this negatively impacts the possibility of the BPA transmission business ever being an IGO.

con: Creates uncertainty for IGO members re BPA costs.

c. IN ADDITION TO b, PROVIDE "PROVIDED, HOWEVER, THAT NO POWER OR TRANSMISSION RATE SHALL INCLUDE ANNUAL PROGRAM EXPENDITURES FOR FISH AND WILDLIFE IN EXCESS OF $------------- UNLESS SUCH EXPENDITURES SHALL HAVE BEEN APPROVED BY SPECIFIC APPROPRIATION BY CONGRESS." (Note: Other "controls" might exist to govern the potential liability of transmission for F&W costs. For instance, one example would be an after-the-fact review to ensure that the power business line made adequate provision for its reasonably foreseeable needs.)

pro: Pros of prior option, but creates greater cost certainty.

pro: Provides greater discipline on fish and wildlife expenditures.

con Is a lightning rod provision for environmental groups.

con: The nature of the appropriations process may result in needed improvements not taking place on a timely basis or at all.

d. PROVIDE FOR A SET, SPECIFIC AMOUNT OF FISH AND WILDLIFE COSTS TO BE BORNE BY TRANSMISSION USERS

pro: Resolves debate over F&W cost liability of transmission, and provides certainty.

pro: Provides greater funding certainty for F&W costs.

pro: May provide greater discipline on F&W expenditures.

con: Many would view this as inconsistent with status quo (e.g., section 7(g) of the Northwest Power Act).

con: Assumes power function could not bear necessary costs.

con: Inconsistent with desire for national uniformity.

2.1.4. RE EXISTING CONTRACTUAL/TREATY OBLIGATIONS

a. SAY NOTHING

pro: Uncertainty over contractual rights may compel parties to negotiate existing contracts to more closely conform to FPA standards.

con: Will result in significant uncertainty and litigation over existing contractual rights and obligations.

con: Certainty of contract should be affirmed.

con: Parties with favorable contracts will fight for them; parties with unfavorable contracts will fight against them; and BPA will be left in the worst situation.

b. "THAT NOTHING HEREIN SHALL ALTER, DIMINISH, OR ABRIDGE THE ADMINISTRATOR’S OR ANY CUSTOMER’S RIGHTS AND OBLIGATIONS UNDER ANY CONTRACT IN EFFECT AS OF THE EFFECTIVE DATE OF THIS ACT; NOR SHALL THIS ACT BE CONSTRUED TO AFFECT OR MODIFY ANY TREATY OF THE UNITED STATES"

pro: Provides certainty of contract, and avoids litigation over takings claims.

con: Transition to all customers having uniform provisions may take longer, as existing contracts are phased out.

2.1.5. RE AVOIDING COST SHIFTS (Note: Historic BPA segmentation (e.g., interties, network, generation-integration, fringe, delivery) and cost allocation practices impact the rates customers pay. FERC's historic "rolled-in" costing approach, if applied to BPA, word work significant cost shifts among customer classes.)

a. SAY NOTHING

pro: Customers pushing for application of Federal Power Act principles to BPA should not be able to pick and choose.

pro: Will signal that BPA cost allocation should be consistent with national policy of FERC.

con: The just and reasonable standard does not cast rate forms in stone, so there will be considerable litigation over what application of the standard should mean to BPA in terms of segmentation, cost allocation and rate form.

b. "THE NEED TO ASSURE THAT COST SHIFTS OCCASIONED BY APPLICATION OF THE JUST AND REASONABLE STANDARD ARE PHASED IN OVER A REASONABLE NUMBER OF YEARS."

pro: Avoids abrupt shifts in costs.

con: The cost shifts that are likely to result will be beneficial to the BPA power business line, so this delays the impact of those benefits.

2.2 PERIOD THAT BPA'S TRANSMISSION RATES ARE EFFECTIVE FOR (Note: FERC currently approves BPA rates for a limited period (up to 5 years, absent good cause shown for a longer period) in order to ensure BPA cost recovery.)

OPTION A: FERC APPROVES RATES FOR LIMITED DURATION, AND FERC CAN REOPEN ON ITS OWN MOTION OR IN RESPONSE TO CUSTOMER COMPLAINTS

pro: Approval for limited period highlights the emphasis on cost recovery.

pro: Approval for limited period signals to transmission users, and power providers, that they must be careful not to lock transmission prices into their deals, unless they knowingly choose to take that risk.

con: Forces a re-examination and costly re-establishment of rates when that might not be necessary because the rates continue to be adequate.

con: Puts more of a regulatory, cost assurance responsibility on FERC since this highlights FERC's responsibility to periodically assure that transmission rates will be adequate to recover costs.

OPTION B: FERC APPROVES RATES FOR AN INDEFINITE PERIOD OR UNTIL BPA PROPOSES THEIR REVISION, AND IT CAN INVESTIGATE THE CONTINUED REASONABLENESS OF RATES ON ITS OWN MOTION OR IN RESPONSE TO CUSTOMER COMPLAINTS)

pro: Places greater responsibility on BPA to periodically review and, if necessary, revise its transmission rates to assure cost recovery..

pro: In the event FERC has concerns that the rates may need revision, possibly because BPA is approaching the issue with too much concern for making customers happy, it may independently investigate the rates to assure their continued adequacy or for other reasons.

con: Approval for an indefinite period may encourage transmission users, and power providers, to lock transmission prices into their deals, possibly under the erroneous impression that any future change might be insignificant.

OPTION C: FERC APPROVES RATES FOR AN INDEFINITE PERIOD OR UNTIL BPA PROPOSES THEIR REVISION, AND IT CAN INVESTIGATE AND ACT ON CUSTOMER COMPLAINTS ABOUT THE UNREASONABLENESS OF BPA’S RATES)

pro: Places greater responsibility on BPA to periodically review and, if necessary, revise its transmission rates to assure cost recovery..

con: Same "con" as prior option, plus this relieves FERC of any responsibility to follow up on concerns it might have re the continuing adequacy of BPA's rates.

OPTION D: FERC APPROVES RATES FOR LIMITED PERIOD, AND FERC HAS NO AUTHORITY TO REEXAMINE THE REASONABLENESS OF APPROVED RATES)

pro: Transmission rates are moving in the direction of great uniformity. As such, they will generally be established on a "generic" basis. As such, strong signals should be given that parties must participate in the proceeding to establish the generic rates, and not count on the ability to subsequently seek review from FERC.

con: Same "con" as prior option, plus this relieves FERC of any responsibility to follow up on concerns it might have re the continuing adequacy of BPA's rates.

3. TERMS AND CONDITIONS:

3.1 CONDITIONS, IF ANY, ON THE STANDARD THAT TRANSMISSION TERMS AND CONDITIONS SHALL NOT BE UNJUST, UNREASONABLE, OR UNDULY DISCRIMINATORY OR PREFERENTIAL (Note: This assumes repeal of the special EPA '92 provision for the Federal Columbia River Transmission System, and possible changes to access provisions in BPA-specific legislation. Even with those changes, all transmitting

utilities--including BPA and public utilities subject to section 205 and 206 of the FPA--enjoy the protections built into sections 211 and 212 of the FPA. These include the requirement that transmission access be in the public interest; access must not unreasonably impair the continued reliability of affected electric system; recovery of "legitimate, verifiable and economic costs" is allowed; and costs incurred to provide service should be recovered from the applicant to the extent practicable and not from a transmitting utility's existing wholesale, retail and transmission customers.)

OPTION A: UNCONDITIONAL APPLICATION OF THE JUST AND REASONABLE STANDARD

pro: Promotes greatest national uniformity, and is consistent with .

pro: So long as cost recovery issues are dealt with through rates provisions, it is unnecessary to rely upon access restraints (a´ la the Long-term Intertie Access Policy) as a means of assuring cost recovery.

pro: Best assures BPA's ability to be the IGO.

pro: Makes BPA's participation in an IGO easier.

con: Would possibly result in greater fish and wildlife cost. PBL would have to conservatively reserve (and pay for) whatever transmission capacity might be necessary to avoid nitrogen supersaturation problems for salmon.

con: Would lead to lengthy litigation over effect of existing contracts, absent a grandfather clause.

con: Litigation over the meaning of the requirement in section 212 of the FPA that costs incurred to provide new service should be recovered from the applicant to the extent practicable and not from a transmitting utility's existing wholesale, retail and transmission customers

OPTION B: QUALIFICATIONS OF THE JUST AND REASONABLE STANDARD (e.g., "NO TRANSMISSION TERM OR CONDITION OF THE BONNEVILLE POWER ADMINISTRATION SHALL BE UNJUST, UNREASONABLE, OR UNDULY DISCRIMINATORY OR PREFERENTIAL, TAKING INTO CONSIDERATION . . .")

3.1.1. RE COST RECOVERY

a. SAY NOTHING

pro: Same pros as under Option A above.

con: None, provided (a) cost recovery issues are dealt with through rates provisions, and (b) the effective date of the new provisions is October 1, 2001. Absent dealing with the cost recovery issues through special rates provisions, transmission access could be necessary to assure cost recovery. If this provision were effective prior to October 1, 2001, BPA would likely face many more cases like the TOSCO wheeling request case.

b. "BPA’S EXISTING STATUTORY COST RECOVERY OBLIGATIONS" (Note: This would allow BPA to deny transmission in the situation where BPA could demonstrate that transmission access would preclude BPA cost recovery.)

pro: This might arguable allow BPA to reserve transmission capacity for itself in the situation of a capacity shortage, or where BPA otherwise needed to restrain transmission access to assure cost recovery.

con: The cons are the same as the pros, meaning this is an option that would engender substantial acrimony.

c. SUB-OPTION b ABOVE, BUT WITH THE PROVISO THAT "LIMITED HOWEVER, TO NET-BILLED OBLIGATIONS AND COSTS INCURRED PRIOR TO [DATE]."

pro: This alleviate the concerns about BPA lack of cost discipline and uncertainty re the costs that transmission might be called upon to bear.

con: This would be particularly difficult to police since it would have to be demonstrated that a restriction on access is tied to a particular cost.

con: This would cause substantial acrimony.

3.1.2. RE ENVIRONMENTAL OBLIGATIONS

a. SAY NOTHING

pro: The "public interest" standard of section 211 could be sufficient to use the transmission system in an instance where it could be demonstrated that doing otherwise would have adverse impacts on fish and wildlife.

pro: This would invite close scrutiny of the necessity of actions called for in the name of protecting protect fish and wildlife.

pro: This would place PBL in the same position as any other customer, i.e., if it has a legitimate need for capacity, it must pay to reserve it.

con: As indicated above, the "public interest" standard of section 211 could be called into play to avoid adverse impacts on fish and wildlife. However, this would require that make the judgmental determination of whether the benefits of access outweigh protection of fish in a particular instance. Congress should make the determination in the first instance, and provide that guidance to the affected agencies.

pro: This would be taken as expressing Congress's determination that in a case where the benefits of access are being weighed in relation to the benefits of protecting fish, protection of fish is more important.

pro: Legislation with this provision would be more likely to garner the support of the environmental community.

con: Leaves open the debate of denying transmission access as a means of protecting fish and wildlife.

3.1.3. RE EXISTING CONTRACTUAL/TREATY OBLIGATIONS

a. SAY NOTHING

pro: Uncertainty over contractual rights may compel parties to negotiate existing contracts to more closely conform to FPA standards.

con: Will result in significant uncertainty and litigation over existing contractual rights and obligations.

con: Certainty of contract should be affirmed.

con: Parties with favorable contracts will fight for them; parties with unfavorable contracts will fight against them; and BPA will be left in the worst situation.

pro: Provides certainty of contract, and avoids litigation over takings claims.

con: Transition to all customers having uniform provisions may take longer, as existing contracts are phased out.

3.2 STATUTORY PRIORITIES OF TRANSMISSION SERVICE

OPTION A: DELETE EXISTING PROVISIONS RE PRIORITIES

pro/con: Same pros and cons of unconditional application of the just and reasonable standard.

con: Absent these provisions, and given the emphasis on affording access to all transmission users, focus would be on who should pay the incremental costs of new service. Under FPA section 212, those costs should not, if practicable, be recovered from a transmitting utility's existing wholesale, retail and transmission customers, but from the applicant for new services. Deletion of the existing transmission priority provisions of BPA-specific legislation could lead to debates over the place of Federal and Northwest transmission priorities in the scheme of section 212.

OPTION B: MAINTAIN FEDERAL PRIORITY

pro: The Federal priority would be for the purpose of securing BPA's costs, and protecting fish and wildlife. As such, it has the same pros and cons as the options on these outlined above. Maintaining just the Federal priority, however, does serve to bring BPA closer to national practice than does maintaining Federal and Pacific Northwest load priority.

con: Same as the cons outlined above in relation to conditioning access decisions on protecting BPA cost recovery and fish and wildlife.

OPTION C: MAINTAIN PACIFIC NORTHWEST LOAD PRIORITY

pro: Affirms the historic priority given to Northwest load.

con: Inconsistent with national practice.

con: Affirming this priority, but not also the Federal priority, is illogical. The transmission facilities were built initially to market Federal power. Later, with the enactment of the 1974 Transmission System Act, BPA's transmission responsibilities expanded. In delineating the purposes of the Administrator's authority to construct, operate and maintain transmission lines, the first purpose listed by the Transmission System Act was to "[i]ntegrate and transmit the electric power from existing or additional Federal or non-Federal generating units." The second purpose was to "provide service to the Administrator's customers." See 16 U.S.C. § 838b. Priority for Northwest load, but not the resources that were built to serve that load, ignores the history of the transmission system's development, is illogical and denigrates the interest of the U.S. Treasury in ensuring Federal power is marketed.

OPTION D: MAINTAIN FEDERAL AND PACIFIC NORTHWEST LOAD PRIORITY

pro/con: The pros and cons of the prior 2 options, while avoiding the illogic of providing a Pacific Northwest, but not a Federal, priority.

3.3 MAY BPA DISCONTINUE ANY CLASS OF SERVICE WITHOUT FERC APPROVAL (Note: This, for instance, would involve matters such as whether BPA is to continue to provide service over lower voltage facilities.)

OPTION A: NO

pro: Consistent with FERC practice, and reflects possible public interest in continuity of service.

pro: This reflects the possible public interest in continuity of service and accords with FERC's enhanced role vis a vis BPA as the final, regulatory arbiter of the public interest.

con: Imposes a hurdle BPA does not now face.

OPTION B: YES

pro: More efficient; treats service as an economic matter.

con: Inconsistent with FPA practice.

4. OTHER:

4.1 APPLICATION OF FERC RULEMAKING TO BPA (Note: Many of the options outlined above recognize that there is or may be unique Federal and public interest considerations in FCRTS rates and access issues. BPA's experience with Orders 888 and 889 indicates that those considerations may be overlooked by, or subservient to, FERC's focus on developing rules of broad national uniformity.)

OPTION A: NOT AT ALL

pro: Requires that FERC focus more singularly on the narrow issues applicable to the FCRTS.

con: Forces inefficient and costly re-examination of issues that may have been considered in the other rulemaking.

con: Delays reforms that may be needed of the FCRTS as well.

con: May lead BPA and FCRTS transmission users to essentially "sit out" FERC's primary rulemaking, with the consequence that the Northwest focus remains too insular.

OPTION B: UNCONDITIONALLY

pro: May cause FERC to be more attentive to FCRTS-specific issues.

pro: Forces all parties to actively participate in FERC's rulemaking.

con: FERC's national focus may not recognize the need for solutions specific to the FCRTS, with the consequence that financial or environmental problems are caused.

OPTION C: SUBJECT TO EXCEPTION BY ADMINISTRATOR VIA OASIS (Note: This option, and the various sub-elements of it, requires that FERC's rule applies, unless the Administrator notices a specific exception to the rule within some specified period of time. The Administrator would then be required to develop and propose an alternative to FERC, which would then decide whether the original rule, the proposed alternative, or some other alternative should apply to the FCRTS.)

4.1.1. SCOPE OF EXCEPTION

a. UNLIMITED

pro: Gives Administrator greatest opportunity to except the FCRTS from application of FERC's rules.

con: Goes too far beyond the unique needs of the FCRTS.

con: May cause inattentiveness on the part of BPA and FCRTS users.

b. LIMITED TO COST RECOVERY

pro: Provides a narrow, though obviously significant, basis for excepting the FCRTS in whole or in part from FERC's rule. For instance, BPA could have excepted itself from the stranded investment provisions of Order 888.

pro: Narrowness of exception puts great focus on repayment to Treasury, and assuring net-billing and other third-party obligations are met.

pro: By not including an exception for environmental issues, this causes parties to focus on the economies of fish and wildlife mitigation issues.

con: From a perspective of "it's all about money," a "cost recovery" exception could be argued to cover almost any issue.

c LIMITED TO COST RECOVERY/F&W PROTECTION

pro: The pros of the prior option, plus ensures focus on fish and wildlife issues unique to the Pacific Northwest.

con: Same as prior con, plus hold potential for introducing more fish politics into access decisions.

4.1.2. TIMING OF EXCEPTION

a. ANY TIME

pro: Provides the Administrator the greatest flexibility.

con Creates lack of certainty for transmission users.

con: May provide the Administrator an inappropriate leverage over transmission users.

con: May cause inattentiveness to what FERC is doing, and an attitude that we can always except ourselves from the rule.

b. AUTOMATIC IF WITHIN SET PERIOD (Note: Under this option, the Administrator would notice a specific exception to the FERC rule, and that excepted portion would then automatically not apply to BPA. The Administrator would then be required to develop and propose an alternative to FERC, which would then decide whether the original rule, the proposed alternative, or some other alternative should apply to the FCRTS.)

pro: Forces close examination of the FERC rule within set period.

pro: Ensures deleterious consequences don't occur due to application of FERC's rule pending FERC determination of another alternative.

pro: Provides greater customer certainty.

pro: FERC's rules often have a proviso for exceptions on "good cause" shown, so unanticipated consequences may still be able to be addressed.

pro: It is unlikely that the Administrator will use this exception lightly, so gravity of the situation likely warrants staying the troublesome part of FERC's rule.

con All problems with the FERC rule may not be anticipated.

con: Given the seriousness of the areas (cost recovery/fish and wildlife protection) that provide a basis for exception, the exception period should not be limited.

c. CONDITION PRECEDENT OF FERC REVIEW PRIOR TO DIFFERENT RULE APPLYING (Note: Under this option, the Administrator would notice a specific exception to the FERC rule, but the excepted portion would still apply to BPA until FERC had been presented with, and approved, an alternative by the Administrator. This option could be used in conjunction with the prior option, providing that this approach applies when an exception is made after a set period of time. Alternatively, this could be used to modify the prior option, such that FERC's original rule applies until FERC determines whether an exception is warranted.)

pro: Provides greatest onus on BPA to quickly propose alternatives to FERC.

con: Rulemaking is not a quick process, so this holds that danger that damage may be done during the period that FERC's rule applies.

4.2 MAY BPA TRANSFER FACILITIES OUTSIDE OF FEDERAL OWNERSHIP OR CONTROL WITHOUT FERC REVIEW AND APPROVAL (Note: This is not required of BPA now. This would entail a review by FERC of the price, terms and conditions of the disposition, as well as the basic issue whether BPA could dispose of the facilities. This option is stated so as to exclude from FERC review any property transfers within the Federal government.)

OPTION A: NO, BUT ENSURE CURRENT SALE AND LEASE ACTIVITIES ARE PRESERVED, AND RELIEVE BPA OF OTHER APPLICABLE REQUIREMENTS FOR PROPERTY TRANSFERS

pro: Consistent with FERC practice, and reflects possible public interest in continuity of service.

pro: This reflects the possible public interest in continuity of service and accords with FERC's enhanced role vis a vis BPA as the final, regulatory arbiter of the public interest.

con: Imposes a hurdle BPA does not now face.

OPTION B: YES

pro: More efficient; treats service as an economic matter.

con: Inconsistent with FPA practice.

4.3 FERC JURISDICTION OVER BPA TRANSMISSION BUSINESS LINE TRANSMISSION CONTRACTS (Note: Prior "grandfather clause" options dealt with contracts in existence prior to enactment of new legislation. This option deals with FERC review and approval of new contracts by the BPA transmission business line. As such, resale or similar repackaging of transmission purchased or otherwise acquired by the BPA power business line would not be subject to FERC jurisdiction. For example, if the BPA power business line purchases transmission from, say, PacifiCorp or the transmission business line, its repackaging of that transmission in its secondary sales contracts would not be subject to FERC jurisdiction.)

OPTION A: YES, FERC CAN REVIEW AND INTERPRET NEW CONTRACTS (E.G., WHEELING, O&M, INTERCONNECTION, JOINT OWNERSHIP) FOR REASONABLENESS PRIOR TO THE EFFECTIVENESS, CAN INVALIDATE EFFECTIVE NEW CONTRACTS IN CERTAIN CIRCUMSTANCES (E.G., MANIFESTLY INCONSISTENT WITH THE PUBLIC INTEREST, AND CAN ACT ON COMPLAINTS FROM CUSTOMERS REGARDING INTERPRETATION OF OR DISPUTES ARISING OUT OF THOSE CONTRACTS

pro: Consistent with FPA practice.

pro Provides certainty of contract, once the contract is approved.

pro: Best ensures no discriminatory deals are allowed.

pro: Providing FERC the role of contract arbiter may make it more likely that disputes are settled since the transmission provider will not enjoy less leverage over the user.

con: Provides one more regulatory avenue for delay.

con: Providing FERC the role of contract arbiter may make it less likely that disputes are settled since customers may feel they can get a better deal at FERC.

OPTION B: NO

pro: Current approach of BPA action, and then 9th Circuit review, is less costly and more efficient in some circumstances..

pro: Current approach places more "local" focus on disputes.

con: Absence of the pros of the prior option.

4.4 STANDARDS OF CONDUCT (Note: The Standards of Conduct essentially regulate the conflicts of interest between the power marketing and transmission functions.)

OPTION A: APPLY WITHOUT EXCEPTION

pro: Best ensures BPA is subject to the same rules as other transmission providers.

pro: Creates greatest confidence in the integrity of BPA's transmission decisions.

con: Ignores the statutory role of the Administrator to ensure total cost recovery and protect fish and wildlife.

pro: Ignores the responsibilities of the Administrator to speak to all issues vis a vis the Administration and Congress.

OPTION B: APPLY AS NOW, TAKING INTO CONSIDERATION FACT OF SINGLE ADMINISTRATOR

pro: Recognizes reality of Administrator's statutory cost recovery and fish and wildlife responsibilities, as well as his political responsibilities within the Administration.

con: Less confidence that Administrator will act impartially.

4.5 RIGHT OF APPEAL BY BPA (Note: The deference currently accorded by BPA by FERC makes it unlikely that BPA will be put in a position of needing to appeal a FERC decision. Application of a "no deference" standard would put BPA in the same position as any other applicant at FERC, i.e., one where causes for appeal are greater.)

OPTION A: STATE NOTHING IN LEGISLATION RE BPA APPEAL RIGHTS

pro: Places greater focus on regulatory channels.

con: May more greatly politicize FERC/BPA differences since OMB, DOE and others may be more apt to be brought into the decisionmaking process regarding whether BPA may appeal a FERC decision.

OPTION B: STATE THAT THE ADMINISTRATOR MAY, AS HE DETERMINES APPROPRIATE, APPEAL ANY FERC DECISION

pro: Places BPA in the same position as other petitioners, and treats issues more as economic decisions, as opposed to political matters.

pro: Clarifies that the decision to appeal may be made exclusively by the Administrator.

pro: Best ensures FERC pays attention to FCRTS issues

con: FERC may be less apt to treat BPA as a member of the Federal family.

4.6 APPELLATE JURISDICTION (Note: Section 9(e) of the Northwest Power Act provides for 9th Circuit Court of Appeals jurisdiction over many BPA final actions, including final rate decisions. The Federal Columbia River Transmission System section of the Energy Policy Act of 1992 provides that any party seeking review of a FERC order in a proceeding to obtain transmission services from the Administrator shall seek review in the 9th Circuit. Under 16 U.S.C. § 825l of the Federal Power Act, aggrieved parties may seek review in the Circuit Court of Appeals for any circuit wherein the licensee or public utility to which the order relates is located or has its principal place of business, or in the United States Court of Appeals for the District of Columbia.)

OPTION A: PROVIDE FOR 9TH CIRCUIT JURISDICTION

pro: Consistent with existing practice.

pro: Ensures appeals of power and transmission rate issues are decided by the same court.

pro: Consistent with "local" decisionmaking, if that is viewed as a positive factor.

pro: Best ensures consistency of interpretation of BPA's organic authorities.

con: Inconsistent with scheme otherwise governing appeals of FERC decisions.

OPTION B: RELY UPON 16 U.S.C. § 825l OF THE FEDERAL POWER ACT

pro: Consistent with practice governing other appeals of FERC decisions.

pro: D.C. Court of Appeals has greater knowledge of FPA standards.

con: Absence of "pros" of Option A.

con: Potentially greater cost and inconvenience to Regional parties.

4.7 EFFECTIVE DATE

OPTION A: OCTOBER 1, 2001 (Note: This would be for actions effective on or after this date.)

pro: Consistent with terms of BPA's existing power sales contract, and the duration of its 1996 transmission rates, terms and conditions.

pro Provides adequate time to plan ahead and make orderly transition to new standards.

pro: Better assures necessary accounting and financial reporting systems are in place.

pro: Allows need for stranded investment protection to be more fully assessed and, if necessary, to be put in place at a time roughly concurrent to implementation of the new statutory FPA-like standards.

con: Although BPA has 5-year rates and terms and conditions that parties almost universally settled upon, this approach still subjects BPA to claims that it is outside the mainstream and somehow unduly protecting itself.

OPTION B: JULY 1, 1999

pro: Consistent with Regional Review recommendations.

pro: Grandfather clause could cover existing 5-year rates and terms and conditions, so this would bring BPA more closely into compliance with national standards in those areas not covered by the rates and terms and conditions settlement.

con: Absence of Option A's pros.