Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Long-Term Transfer Service (GTA and OATT) Customer Kick-Off Meeting Garry Thompson Scott Wiley Connie Howard October 19, 2005

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 2 of 28 Long-Term Transfer Service Ultimate goal To establish a Transfer Service Policy that includes acceptable approaches to issues identified in Exhibit A and Exhibit B

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 3 of 28 How do we get there? We plan to follow a schedule similar to Regional Dialogue. Identify forums for discussing issues and receiving customer views and concerns. Should there be large Portland meetings and/or dispersed customer meetings? Preferred communication approach:  Meeting minutes  Comments  s to or online at  Conference calls  Etc.

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 4 of 28 How do we get there? Agree upon a set of principles to evaluate alternatives. Should participants publish issue papers with proposed alternatives for forums? Release proposed policy with public process schedule. Publish final Record of Decision (ROD) in the same timeframe as the Regional Dialogue ROD. Continued

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 5 of 28 Principles Suggested by PBL Team To Guide Policy Making Policies will build on the 20-year Transfer Service Agreement. Existing BPA Power Sales customers served by transfer should not be subject to the costs of duplicative (pancaked) Transmission Provider services for their load served with BPA energy. To the extent practical, direct assignment policies should mirror those of directly connected customers served by the TBL. Policies will minimize costs of overall Transfer Service, consistent with other principles.

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 6 of 28 Principles Suggested by PBL Team To Guide Policy Making PBL will not own transmission or low voltage facilities. Policies will be published or codified in contract language. Policies need to be realistic and achievable avoiding increase in existing FTE. Policies will not tend to increase BPA’s transfer costs at a rate higher than inflation and load growth. Others: Continued

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 7 of 28 Issues identified in the 20 year contract - Exhibit A A1: Development of Direct Assignment Guidelines for Transfer Service customers including:  Treatment of costs and allocation of responsibilities associated with facilities not included in the definition of Transmission Component Costs (e.g. low voltage service).  Treatment of costs and allocation of responsibilities associated with upgrades on facilities not included in the definition of Transmission Component Costs: ―Expansion of facilities and upgrades to existing facilities ―New facilities (e.g., new substation) A2: Quality of Service.

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 8 of 28 Issues identified in the 20 year contract - Exhibit A A3: Respective role of customers and BPA in management of General Transfer Agreements (GTA), including whether to do periodic evaluations of the costs or benefits of replacing GTA with Open Access Transmission Tariff (OATT) service. A4: Treatment of costs of, and allocation of responsibility, for ancillary services. Continued

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 9 of 28 Issues identified in the 20 year contract - Exhibit B B1: Non-Federal Power Deliveries:  The treatment of costs associated with transmission service provided by third party transmission providers, for delivery of non-federal power to Transfer Customers. B2: Transfer Service for Annexed Load:  Service to load in annexed territories, as defined in the customer’s Power Sales Agreement. B3: Transfer Service for Block and Slice Power Sales Agreements:  Issues as they relate to Block and Slice Power Sales Agreements, including: ―Delivery of surplus energy under Block and Slice Power Sales Agreements to GTA customer load; and, ―Service to customers for hourly generation in excess of hourly load under Block and Slice Power Sales Agreements.

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration ~ Consistent with existing Power Sales Contracts ~ Transfer Service (GTA, OATT) Existing Power Business Line Practices Slide 10 of 28

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 11 of 28 Existing PBL Practices Low Voltage Service: Power delivery at a voltage level that is less than 34.5 kV.  Low Voltage service is to mirror the Transmission Business Line (TBL) low voltage rate definition: ―Currently this is delivery at voltage below 34.5 kV. ―PBL will not cover any additional low voltage facilities beyond what is currently in place (at the commencement of Subscription).  Transfer Customer with low voltage points of delivery pay the GTA Delivery Charge, currently $1.119 per kW/month.

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 12 of 28 Service to existing load at existing PODs within capacity of facilities, including load growth:  PBL pays the Transferor for service to the POD and the Transfer Customer pays BPA’s GTA Delivery Charge. What Does the GTA Delivery Charge Cover? Existing PBL Practices

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 13 of 28 What Costs are the Customers’ Responsibility? Low voltage costs associated with deliveries to new PODs, load growth beyond capacity of existing facilities, and annexed load that was not previously served via Transfer:  Low Voltage costs charged to PBL by the transferor are directly assigned to the Transfer Customer, for loads served through new PODs and annexed load not previously served via Transfer.  Costs associated with expanding or upgrading low voltage facilities are passed through/directly assigned to the Transfer Customer using those facilities. Existing PBL Practices

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 14 of 28 Transfer Customers Outside BPA Control Area ANCILLARY SERVICES Scheduling, system control, and dispatch:  PBL pays Transferor, Customer pays TBL under their BPA transmission contract. Reactive supply and voltage control from generation sources:  PBL pays Transferor, Customer pays TBL under their BPA transmission contract. Contingency Reserves – spinning and supplemental:  Customer responsibility and choice (purchase from TBL, self supply or third party supply). If PBL acquires non bundled (offered under OATT) operating reserves from the Transferor on behalf of the Transfer Customer, the cost would be directly assigned. Existing PBL Practices

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 15 of 28 Transfer Customers Outside BPA Control Area ANCILLARY SERVICES (Continued) Regulation and frequency response service:  PBL pays Transfer Provider; Transfer Customer reimburses PBL the lesser of TBL’s Regulation Rate or the Transfer Provider’s rate. Energy Imbalance:  PBL pays Transfer Provider. Transfer Customers that do not have load variation provided to them under their Subscription Contract reimburse PBL. Full and Actual Partial Customers have load variation, and therefore do not reimburse the PBL for the cost of this service. Continued Existing PBL Practices

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 16 of 28 Power Factor Penalty Charges If PBL determines there are repetitive or excessive power factor penalty charges assessed to the PBL by the transferor, this cost is directly assigned to the Transfer customer by the PBL. Existing PBL Practices

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 17 of 28 Non-Federal Power Deliveries PBL will not pay for non-Federal power deliveries. All costs associated with non-Federal power deliveries are the Transfer customer’s responsibility. Existing PBL Practices

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 18 of 28 New Preference Customers Transfer service was provided to new small utility customers comparable to existing loads for up to 75 MWs during the Subscription contract period. Existing PBL Practices

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Policy Development for Long-Term Transfer Service Transfer Service (GTA, OATT) Issues from Exhibit A and Exhibit B for discussion Slide 19 of 28

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 20 of 28 Policy Development for Long-Term Transfer Service A1: Development of Direct Assigned Guidelines for Transfer Service customers:  PBL has tried to make transfer service comply with TBL Direct Assignment Guidelines.  TBL drew a bright line such that all new facilities below 34.5 kV would be directly assigned.  PBL needs a policy which fairly accommodates the variety of ways transmission providers recover the cost of direct assignment facilities, or facilities not otherwise covered by the Transmission Component costs.

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 21 of 28 Policy Development for Long-Term Transfer Service A1: (Continued) Policies need to be clarified for this issue:  How should BPA treat the costs and allocation of responsibilities associated with low voltage facilities? ―These are the facilities that are not included in the definition of Transmission Component Costs.  How should PBL treat the costs associated with upgrades to low voltage facilities on third party systems used to deliver power to Transfer Customers, such as: ―Expansions of facilities and upgrades to existing facilities ―New facilities (e.g., new substations) Continued

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 22 of 28 Policy Development for Long-Term Transfer Service A2: Quality of Service: The PBL acts on behalf of transfer customers to ensure service is in accordance with established contracts and tariffs. When negotiating new or follow on contracts, PBL ensures customers’ needs are met in the best possible way and that customers are treated as well as the transfer providers’ native loads. The PBL’s ability to make transfer service exceed the quality of service offered by the transfer provider to its native load is limited. Continued

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 23 of 28 Policy Development for Long-Term Transfer Service A3: What are the roles of Customers and BPA in the Management of Transfer Service Agreements?  The PBL negotiates with the transfer providers to ensure customers receive the best service available at a reasonable cost. The PBL must provide transfer providers with annual load forecasts to enable the transfer provider to adequately maintain their transmission systems. It is imperative that customers take an active role in communicating their current and future needs to ensure adequate service to loads. What is the best coordinated approach for the management of transfer agreements? Continued

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 24 of 28 Policy Development for Long-Term Transfer Service A4: How should the treatment of Ancillary Service Costs associated with the Transfer be handled?  Ancillary services are a necessary component to power transmission and reliability services. Should BPA continue with current handling of Ancillary Services for the long-term? Continued

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 25 of 28 Policy Development for Long-Term Transfer Service B1: Should the PBL provide Transfer Service for non-Federal Power Deliveries?  With the direction BPA appears to be taking in Regional Dialogue, and concern regarding future service to load growth, the treatment of non- Federal power delivery over Transfer is a significant issue and an open question. Continued

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 26 of 28 Policy Development for Long-Term Transfer Service B2: Should the PBL provide Transfer Service for Annexed Loads?  Annexation of loads occurs under many different circumstances. Historically, PBL has taken the stance to not provide transfer service for loads that are annexed, unless the load being annexed was already covered under a transfer arrangement, in order to help keep costs at a minimum. There is also concern that PBL not support annexations that occur under hostile conditions. Continued

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 27 of 28 Policy Development for Long-Term Transfer Service B3: Transfer Service for Block and Slice Power Sales Agreements B3a: Delivery of Surplus Energy Under Block and Slice Power Sales Agreements to GTA Customer Load.  Transfer service is usually provided under network agreements, which do not provide for surplus sales. B3b: Service to Customers for Hourly Generation in Excess of Hourly Load Under Block and Slice Power Sales Agreements.  Such excess power would have to meet the definition of a network resource under an OATT, and be otherwise identifiable as originating as excess from the Block and Slice contract. Continued

Transfer Service Meeting, October 19, 2005 Bonneville Power Administration Slide 28 of 28 Policy Development for Long-Term Transfer Service Other issues not previously addressed? Continued