Transfer Service Issues Meeting Bonneville Power Administration (BPA) “Considerations” From Exhibit A, of the 20-Year Contract OTHER ISSUES AS THEY RELATE TO TRANSFER SERVICE Garry Thompson Scott Wiley Connie Howard November 7, 2005 (This is a working document for discussion purposes only, and does not constitute an offer nor a commitment to provide service nor an agreement on cost recovery or allocation)

Transfer Service Meeting, November 7, 2005 Page 2 of 9 A1. Development of Direct Assignment Guidelines for Transfer Service Customers a)Treatment of costs and allocation of responsibilities associated with facilities not included in the definition of Transmission Component Costs. (Low Voltage Service, below 34.5 kV) Current Practice: BPA provides low voltage services to GTA customers pursuant to section 8(f)(2) of the Power Sales Contract. This provision requires BPA to pay for wheeling across third party systems for delivery to existing low voltage POD’s. Currently low voltage is defined as voltage below 34.5 kV. Transfer Customers with low voltage POD’s pay the GTA Delivery Charge, currently $1.119 per kW/month.

Transfer Service Meeting, November 7, 2005 Page 3 of 9 A1. Development of Direct Assignment Guidelines for Transfer Service Customers (Continued) A1(a): Considerations: Bonneville remains open to continue to acquire low voltage service over third party systems. Should BPA maintain the existing cost recovery mechanism, or propose a new method? –Leave cost recovery charge consistent with TBL Delivery Charge? –All Transferor assessed Low Voltage Transfer costs are rolled into a new PBL delivery Charge? –Direct Pass through of individual assigned costs to each customer?

Transfer Service Meeting, November 7, 2005 Page 4 of 9 A1. Development of Direct Assignment Guidelines for Transfer Service Customers (Continued) (b)Treatment of costs and allocation of responsibilities associated with upgrades on facilities not included in the definition of Transmission Component Costs: Current Practice: BPA does not want to expand low voltage service beyond what is currently provided, and therefore, will seek to directly assign costs that are directly charged to BPA that are associated with expansion or upgrade of facilities. This practice is supported by the Principles identified in section 8(b) of the Agreement Regarding Transfer Service. Should Bonneville pass through such costs directly, whether the third party transmission provider directly assigns or rolls it in?

Transfer Service Meeting, November 7, 2005 Page 5 of 9 A1. Development of Direct Assignment Guidelines for Transfer Service Customers (Continued) Considerations: The treatment of existing facilities that are of sufficient capacity to accommodate load growth without upgrades. Existing Facilities that need upgrades or expansions due to Transferor needs. Replacement of existing facilities due to catastrophic failure. New Facilities and New POD’s: –Transferor requires new facility or POD. –Customer, not transferor, requires new facility/POD (load growth on customers System). –BPA’s participation in sharing the costs of improvements on a transferors system.

Transfer Service Meeting, November 7, 2005 Page 6 of 9 A2. Quality of Service [Discussion at a later date]

Transfer Service Meeting, November 7, 2005 Page 7 of 9 A3. Respective roles 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 service. In Section 3 of the 20-year Transfer Service contract BPA has committed to arrange for Transfer Services for the duration of the agreement. However, BPA and the customer may agree to make other arrangements. Considerations: Should Bonneville continue to hold and manage the agreements, with continued input from the customers with regard to cost control? –or– If the customer holds the contract, should Bonneville have a reimbursement mechanism that strictly limits Bonneville’s exposure to incremental or otherwise un-recovered cost, including those for administration and scheduling?

Transfer Service Meeting, November 7, 2005 Page 8 of 9 A4.Treatment of costs, and allocation of responsibility, for ancillary services. Current Practice: In general, PBL pays transferor; customer pays TBL for Scheduling, System Control, Dispatch, Reactive Supply and Voltage Control from generation sources. Contingency reserves (spinning and supplemental) are the customers’ responsibility and choice (purchase from TBL, self supply or third party supply). PBL generally pays transferor for Regulation and Frequency Response, and the customer reimburses the PBL the lesser of TBL’s Regulation rate or the transfer provider’s rate. For Energy Imbalance the PBL pays the transferor for Full and Actual Partial customers who’s contracts contain load-matching provisions. Transfer customers that do not have load matching service provided to them under their Subscription contract (such as those purchasing the Slice product) reimburse PBL.

Transfer Service Meeting, November 7, 2005 Page 9 of 9 A4.Treatment of costs, and allocation of responsibility, for ancillary services. (Continued) Considerations: Should the customer continue to pay for only one of each type of service for ancillary services associated with the delivery of Federal Power?