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Date: Tue, 10 Apr 2001 10:02:00 -0700 (PDT)
From: sawestenberg@bpa.gov
To: abuckley@wutc.wa.gov, alan@epud.org, ali.rodol@ci.seattle.wa.us, 
	archive-power-ratecase@bpa.gov, aw_turner@pgn.com, bassl@sce.com, 
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	rachel@rnp.org, ratecase@pngc.com, rates@ppcpdx.org, 
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Subject: WP-02 Data Response
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X-From: Sarah Westenberg <sawestenberg@bpa.gov>
X-To: abuckley@wutc.wa.gov, alan@epud.org, ali.rodol@ci.seattle.wa.us, archive-power-ratecase@bpa.gov, aw_turner@pgn.com, BASSL@sce.com, bessex@cowlitzpud.org, bferranti@mbllp.com, bpadiscovery@merkellaw.com, ccopatrny@e-z.net, crow@millernash.com, cub@teleport.com, cwagers@dcpud.org, dan.meek@usa.net, darcy@tonkon.com, darkills@popud.com, dbkinnard@pplmt.com, dfaulk@puget.com, discoveryparalegal@bpa.gov, dldorrell@stoel.com, dmacgregor@morganlewis.com, doney@doneylaw.com, doug_brawley@pngc.com, dparrish@prmllp.com, dws@keywaycorp.com, eauverde@hotmail.com, eboyd@ppcpdx.org, efinklea@energyadvocates.com, elisaCKF@aol.com, EnerGlaw@aol.com, Eric.Larson@oremetwahchang.com, erick_johnson@pngc.com, ghuhta@cowlitzpud.org, huse@eesconsulting.com, ias@dvclaw.com, jack.speer@alcoa.com, jacksonc@ida.net, janet.prewitt@state.or.us, jdeason@chbh.com, jeffn@subutil.com, jhartso@enron.com, JLH@mc-power.com, johk@critfc.org, john.yanov@eweb.eugene.or.us, johncameron@dwt.com, jolynnr@mresearch.com, jpw@duncanallen.com, jrb_ora@televar.com, jsaven@pacifier.com, jschlect@avistacorp.com, kevin.clark@ci.seattle.wa.us, kknitte@gcpud.org, kmoxness@cencoast.com, kpom@mail.pacifier.com, kyle@ppcpdx.org, lawyer@teleport.com, Lhamilton@avistaenergy.com, lpeters@pacifier.com, lwolv@worldaccessnet.com, lyn_williams@pgn.com, marc.hellman@state.or.us, marss@perkinscoie.com, matts1@atg.wa.gov, mershanlaw@aol.com, mhain@ect.enron.com, michaelearly@earthlink.net, mike.macdougall@powerex.com, mmetzler@ci.tacoma.wa.us, mschaff@worldnet.att.net, mthomas@mtpower.com, Paul@KinergyLLC.com, pete.forsyth@kaiseral.com, pete@ashland.or.us, peter@richardsonandoleary.com, pfox@bracepatt.com, pljacklin@stoel.com, pmurphy@mbllp.com, pnichols@idahopower.com, pobenchain@idahopower.com, pspi@dynegy.com, pvickery@tpud.org, rachel@rnp.org, ratecase@pngc.com, rates@ppcpdx.org, rbstrong@painehamblen.com, rdb@keywaycorp.com, rfoiani@gcpud.org, rkindley@schwabe.com, rle@givenspursley.com, rpierce@avistaenergy.com, scott.brattebo@pacificorp.com, seligman@teleport.com, simonf@atg.wa.gov, sjohnsto@wutc.wa.gov, skaravit@ci.tacoma.wa.us, stephens@eslerstephens.com, steve@nwenergy.org, tdeboer@painehamblen.com, terrym@millcreeklaw.com, tgrim@chbh.com, townsend@chbh.com, tracigrundon@dwt.com, tstevenson@ci.burbank.ca.us, weavertr@yakima-wa.com, wmgt3@montana.com
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request_number:  PG-BPA: 134
firstname:  Sarah
lastname:  Westenberg
e-mail:  sawestenberg@bpa.gov
exhibit_wp-02-e-:  BPA-77
page_numbers:  Attachment A, pages 14-15
request_text:  Please state and explain the rationale for the proposal to u=
se=20
revenues to effectively allocate net augmentation costs between Slice and=
=20
non-Slice rates, rather than (a) the approach used to reflect other BPA cos=
ts=20
in the calculation of the Slice Rate, which was determined in BPA's Record =
of=20
Decision published in May 2000, or (b) the approach to this issue proposed =
by=20
BPA in the December 2000 Amended Proposal."



response_text:  First, regarding the specific requests contained in this da=
ta=20
request, neither the ROD in May 2000 nor the December 2000 Amended Proposal=
=20
contained a methodology to adjust both Slice and non-Slice power rates=20
multiple times each year during the rate period for changes in BPA=01,s=20
augmentation costs. In fact, the issue now is not a Slice vs. non-Slice=20
issue.  Rather, it is an issue of which power products subject to LB CRAC=
=20
recover what amount of the additional net augmentation costs.

The approaches to recovering net augmentation costs in May ROD and December=
=20
2000 Amended Proposal are different than that proposed in the Supplemental=
=20
Proposal.  It simply is not possible to explain some distinction that is=20
alleged to be introduced in this Supplemental Proposal when neither the May=
=20
2000 or December 2000 proposals contained no method for calculating and the=
n=20
apportioning these costs in one way between individual power products.  No=
=20
such segmentation was required in either of those two prior proposals.

In the May ROD, there was only one CRAC, which allocated the amount of=20
revenues to be raised by non-Slicer power products  based on revenues=20
(WP-02-FS-BPA-02A, p. 283).  However, that one CRAC did not attempt to=20
collect BPA=01,s net augmentation costs as the currently proposed LB CRAC=
=20
attempted to do.

In the December Amended Proposal, BPA proposed two very different methods f=
or=20
collecting net augmentation costs from customers.  Slice share of=20
augmentation costs was determined based on share of the FBS.  Non-Slice pow=
er=20
products=01, share of net augmentation costs was determined using loads. =
=20
Together, these two approaches collected more than 100% of BPA=01,s net=20
augmentation costs.
So, the Supplemental Proposal contains a new methodology to recover net=20
augmentation costs using twice-annual rate adjustments to all power product=
s=20
subject to LB CRAC.  This new approach required a new methodology, and, as =
a=20
result, this new methodology cannot be directly compared to methodologies i=
n=20
the earlier proposals.

Second, turning to the broader question of the justification for using=20
revenues, there are several reasons why BPA considers this to be the correc=
t=20
approach.

The first policy objective driving the Amended Proposal and Supplemental=20
Proposal is that =01&It should be as simple as possible.=018 (WP-02-E-BPA-7=
0, pg.=20
6, line 4).  One principle underlying settlement discussions was that the L=
B=20
CRAC method ought to assure that each power product subject to the LB CRAC =
is=20
charged with recovering the same percentage increase in revenue.

The approach to determining the equal percentage increases in revenue=20
required from each power product subject to LB CRAC is to use revenues in t=
he=20
determination of the LB CRAC%.  In this calculation, net augmentation cost=
=20
are spread across the sum of all expected revenues from all power products=
=20
subject to LB CRAC for the entire 6-month duration of the LB CRAC.  The=20
resulting percentage, referred to as LB CRAC%, is then applied equally to=
=20
each power product subject to the LB CRAC.  This approach assures that each=
=20
separate power product, subject to the LB CRAC, will then have a revised ra=
te=20
that is determined using the same percentage increase in required revenue.

Additionally, the problem BPA is grappling with is one of sufficient=20
revenues.  Net augmentation costs are expressed in dollars.  Revenues from=
=20
power products without the LB CRAC is expressed in dollars. By spreading th=
e=20
former dollars over the latter dollars, and applying the resulting percenta=
ge=20
to revenues without the LB CRAC, results in incremental dollars required fr=
om=20
each separate power product that is subject to the LB CRAC.   This appears =
to=20
BPA to be a very fair and equitable approach to recover net augmentation=20
costs.


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