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HomeMy WebLinkAbout000575 Original ContractCONSULTING SERVICES AGREEMENT EES CONSULTING INC. Billing Address 570 Kirkland Way, Suite 100, Kirkland, Washington 98033 (425) 889 -2700 I. SCOPE, COMPENSATION AND QUALITY OF CONSULTING SERVICES EES CONSULTING INC CITY TANGELES By Gary Saleba 2,-2,-32,-,_ B V Title: President Tile: Cr '1y Ilia n&t3 Cr Date December 5, 2012 Date. 1 J a 13 City of Port Angeles Record #000575 This Consulting Services Agreement (herein Agreement) Is made between EES Consulting, Inc., (hereinafter "EES CONSULTING and the City of Port Angeles, P.O Box 1150, Port Angeles, WA98362, Attn Mr. Phil Lusk (hereinafter "CLIENT EES CONSULTING will provide the services and be compensated for these services as descnbed in Exhibit A, attached hereto EES CONSULTING shall render its services in accordance with generally accepted professional practices. EES CONSULTING shall, to the best of its knowledge and belief, comply with applicable laws, ordinances, codes, rules, regulations, permits and other published requirements in effect on the date this Agreement 5 signed II. TERMS 8 CONDITIONS OF CONSULTING SERVICES AGREEMENT 1. Timing of Work EES CONSULTING shall commence work on or about January 1, 2013 2 Relationship of Parties, No Third -Party Beneficiaries. EES CONSULTING is an independent contractor under this Agreement This Agreement gives no nghts or benefits to anyone not named as a parry to this Agreement, and there are no third party beneficianes to this Agreement 3 Insurance a. Insurance of EES CONSULTING. EES CONSULTING will maintain throughout the performance of this Agreement the following types and amounts of insurance 1 Worker's Compensation and Employer's Liability Insurance as required by applicable state or federal law ii. Comprehensive Vehicle Liability Insurance covenng personal injury and property damage claims ansing from the use of motor vehicles with combined single limits of $1,000,000. 111 Commercial General Liability Insurance doyenne claims for personal injury and property damage weh combined single limits of $1.000.000. iv. Professional Liability (Errors and Omissions. on a claims -made basis) Insurance with limits of $1,000,000 b. Interpretation. Notwithstanding any other provision(s) in this Agreement. nothing shall be construed or enforced so as to void, negate or adversely affect any otherwise applicable insurance held by any party to this Agreement. 4 Mutual Indemnification EES CONSULTING agrees to indemnify and hold handless CLIENT and its employees from and against any and all loss, cost. damage, or expense of any kind and nature (including, without limitation, court costs, expenses, and reasonable attorneys' fees) ansing out of injury to persons or damage to property (including, without limitation, property of CLIENT, EES CONSULTING and their respective employees, agents, licensees, and representatives) in any manner caused by the negligent acts or omissions of EES CONSULTING in the performance of its work pursuant to or in connection wfth this Agreement to the extent of EES CONSULTING's proportionate negligence, if any CLIENT agrees to indemnify and hold harmless EES CONSULTING and its employees from and against any and all loss, cost, damage, or expense of any kind and nature (including without limitation, court costs, expenses and reasonable attorneys' fees) arising out of injury to person(s) or damage to property (including, without limitation, property of CLIENT, EES CONSULTING and their respective employees, agents. licensees and representatives) in any manner caused by the negligent acts or omissions of CLIENT or other(s) with whom CLIENT contracts "CLIENT's agents to perform work pursuant to or in connection with this Agreement, to the extent of CLIENTS or CLIENTS agents proportionate negligence, if any 5 Resolution of Disputes, Attorneys' Fees The law of the State of Washington shall govem the interpretation of and the resolution of disputes under this Agreement If any claim, at law or otherwise, is made by either party to this Agreement, the prevailing party shall be entitled to its costs and reasonable attorneys' fees. 6 Termination of Agreement Either EES CONSULTING or CLIENT may terminate this Agreement upon thirty (30) days wntten notice to the other sent to the addresses listed herein. In the event CLIENT ten this agreement, CLIENT specifically agrees to pay EES CONSULTING for all services rendered through the termination date Note Allocation percentages assume full participation by all membe utilities 1 Customers 8 energy sales values reported for 2011 from NWPPA Directory 2 Investment values as reported for year end 2009, unless noted otherwise Western Public Agencies Group Preliminary Indicative Budget for 2013 EES Consulting and Marsh Mundorf Pratt Sullivan McKenzie Source: 2012-2013 Northwest Electric Utility Directory NWPPA), 2003 EIA Form 412 S 2004 EIA Form 861, Utility Supplied Total Budget Labor Expenses Total Allocation BPA Rate Case Supplemental Allocation 200,000 40,000 240,000 December 0,2012 75,000 1 75,000 Customers' Energy Sales 1 Net Investment 2 Average of Customers, Energy Sales and Investment Standard Budget Allocation with Cap Supplemental Budget Allocation with Cap Without Cap 18.0% Cap percent of percent of percent of percent of percent of number total Mlowatt -hours total dollars total total total dollars dollars Individual Utilities Benton Electnc REA 15,053 3.5% 544.304251 4,9% 93,440576 7 6% 5 32% 7 02% 16,846 5,264 Clallam County PUD 30533 7.1% 657,526604 5 9% 106,596,449 8 7% 7 20% 9 55% 22,921 7,163 Clark Public ULlbes 184,488 42.7% 4871.980,000 43 6% 347,900,000 28.3% 38 19% 18 00% 43,200 13.500 City of Ellensburg 9,450 2 2% 196,063,028 18 26,419,391 2 1% 2 03% 2 70% 6,474 2,023 Grays Harbor PUD 41,607 96% 1,018,490,172 9 1% 224,895,016 18 3% 12 34% 16 27% 39,058 12,206 Kitties County PUD 4,311 1.0% 89,142,805 0 8% 18,356,529 1 5% 1 10% 1 45% 3,476 1,086 Lewis County PUD No. 1 31,025 7 2% 963,894,871 86 109,236,614 89% 8 23% 10.93 26,242 8,201 Mason County PUD No 1 5,127 12% 72.987,376 0 .7% 13.709,373 11% 098% 1 31 3,136 980 Mason County PUD No 3 32,518 7.5% 666925,701 60% 112,548,253 91% 755% 1000% 24,005 7,502 Pacific County PUD No 2 17,028 39% 296,627,858 27% 38,651,128 31% 3.25% 4 32 10,369 3,240 City of Pod Angeles 10,519 24% 747,350,823 67% 22,618,463 18% 365% 491% 11,785 3,683 Skamania County P00 No 1 5,832 14% 126,024,450 11% 16,602,110 13% 128% 1 ,709° 4,069 1,272 Wahkiakum County PUD No 1 2,413 0,6% 44,103,873 04% 7,363,612 06% 0.52% 069% 1,647 515 Pierce County Cooperative Power Association Alder Mutual Light Company 283 0.1% 4,787.000 00% 409,409 00 0.05% 006% 152 47 Town of Eatonville 1,178 0 3% 27,271,397 02% 1,150,000 0.1% 020% 027% 656 205 Elmhurst Mutual Power and Light Company 13,792 32% 275,120,620 25% 30,050,620 24% 270% 3.60 8,633 2,698 Lakeview Light and Power Company 11,900 2 8% 268,999,017 24% 29.018,475 24% 251% 334% 8,013 2,504 City of Milton 3,392 08% 60,563,159 0 5% 2,378,975 02% 051% 068 1,637 511 Ohop Mutual Light Company 4,192 10% 84,769,464 08% 8,969,611 07% 082% 1 09% 2,621 810 Parkland Light and Water Company 4,950 1 0% 117,892,068 1 1% 18,854,000 1 5% 1.21% 1 60% 3.831 1,197 Town of Steilacoom 2,823 07% 40,239,147 0 4% 1,571,502 01% 0 38 051% 1,229 384 Subtotal Pierce County Cooperative Power Association 42,010 9 7% 879,641,872 79% 92,402,592 75% 84% 1116% 26,773 8,366 Total 431,914 1000% 11,175,063,684 100.0% 1,230,740,106 100 0 54 1000% 10000% 240,000 75,000 Note Allocation percentages assume full participation by all membe utilities 1 Customers 8 energy sales values reported for 2011 from NWPPA Directory 2 Investment values as reported for year end 2009, unless noted otherwise Western Public Agencies Group Preliminary Indicative Budget for 2013 EES Consulting and Marsh Mundorf Pratt Sullivan McKenzie Source: 2012-2013 Northwest Electric Utility Directory NWPPA), 2003 EIA Form 412 S 2004 EIA Form 861, Utility Supplied Total Budget Labor Expenses Total Allocation BPA Rate Case Supplemental Allocation 200,000 40,000 240,000 December 0,2012 75,000 1 75,000 LEGAL SERVICES AGREEMENT THIS AGREEMENT is made between BENTON RURAL ELECTRIC ASSOCIATION, WASHINGTON; CITY OF PORT ANGELES, WASHINGTON; CITY OF ELLENSBURG, WASHINGTON; CITY OF MILTON, WASHINGTON; TOWN OF EATONVILLE, WASHINGTON; TOWN OF STEILACOOM, WASHINGTON; ALDER MUTUAL LIGHT COMPANY, ELMHURST MUTUAL POWER AND LIGHT COMPANY, WASHINGTON; LAKEVIEW LIGHT AND POWER COMPANY, WASHINGTON; OHOP MUTUAL LIGHT COMPANY, WASHINGTON; PARKLAND LIGHT AND WATER COMPANY, WASHINGTON; PUBLIC UTILITY DISTRICT NO. 1 OF CLALLAM COUNTY, WASHINGTON; PUBLIC UTILITY DISTRICT NO. 1 OF CLARK COUNTY, WASHINGTON; PUBLIC UTILITY DISTRICT NO. 1 OF GRAYS HARBOR COUNTY, WASHINGTON; PUBLIC UTILITY DISTRICT OF KITTITAS COUNTY, WASHINGTON; PUBLIC UTILITY DISTRICT NO. 1 OF LEWIS COUNTY, WASHINGTON; PUBLIC UTILITY DISTRICT NO. 1 OF MASON COUNTY, WASHINGTON; PUBLIC UTILITY DISTRICT NO. 3 OF MASON COUNTY, WASHINGTON; PUBLIC UTILITY DISTRICT NO. 2 OF PACIFIC COUNTY, WASHINGTON, PUBLIC UTILITY DISTRICT NO. 1 OF SKAMANIA COUNTY, WASHINGTON; AND PUBLIC UTILITY DISTRICT NO. 1 OF WAHKIAKUM COUNTY, WASHINGTON (Public Utilities); and MARSH MUNDORF PRATT SULLIVAN McKENZIE (Attorney) for the provision of legal services and the payment of compensation as specified herein. WHEREAS, the Public Utilities presently purchase electric power from the Bonneville Power Administration (BPA) pursuant to wholesale rate schedules determined by BPA after public hearing pursuant to Section 7 of the Pacific Northwest Electric Power Planning and Conservation Act (Act); WHEREAS, BPA is considering adoption of various policies, rate forms and long -term contracts which would have a major impact on the wholesale rates of the Public Utilities, and WHEREAS, BPA is preparing to conduct hearings and public processes to decide issues which will affect Bonneville's wholesale rate schedules and Power Sales Contracts for the Public Utilities; and WHEREAS, the Public Utilities wish to actively participate in these hearings and processes to protect the interests of their ratepayers, and WHEREAS, the Public Utilities may wish to diversify their power supply sources, It is Therefore Agreed That: 1. The Attorney shall advise, assist and appear on behalf of the Public Utilities in hearings and public processes relating to issues set forth Exhibit A referenced herein attached and as directed by the Public Utilities. Page 1 of 2 Public Utilities shall compensate the Attorney for these services at an average hourly rate not to exceed $175.00. Out -of- pocket expenses, such as telephone, telecopy, copying and postage, and reasonable and necessary travel expenses shall be in addition to the hourly rate. The Attorney shall send each of the Public Utilities an itemized statement for legal services rendered and out -of- pocket expenses on a monthly basis. 3. The Attorney fees and out -of- pocket expenses incurred hereunder shall be divided among the Public Utilities according to the formulas attached in Exhibit A. 4. The activities encompassed by this Agreement are set forth in Exhibit A attached hereto. No other activities shall be undertaken without prior authorization of the Public Utilities. It is understood that the length and amount of work necessary in these proceedings is unique and the cost may exceed these estimates. 5. Files of the Attorney relating directly to the foregoing legal services shall be available for examination by the authorized representative of the Public Utilities or their attorneys and shall, upon reasonable request, be turned over the Public Utilities if the Attorney ceases to act as attorney for the Public Utilities. 6. Because the attorney- client relationship is dependent upon mutual trust and full confidence, an individual Public Utility, the Public Utilities collectively, or the Attorney may terminate this Agreement at any time upon written notice. MARSH MUNDORF PRATT SULLIVAN McKENZIE Date: December 5 2012 By: -2-11-7--- X Terence L. Mundorf CITY OF PORT ANGELES Date: a l 1 3 By: Manager Page 2 of 2 Western Public Agencies Group 2013 Scope of Services and Budget EXHIBIT A The Western Public Agencies Group (WPAG) comprises 21 publicly owned utilities in the state of Washington: Benton REA, Clallam County P.U.D. No. 1, Clark Public Utilities, the City of Ellensburg, Grays Harbor P.U.D. No. 1, Kittitas County P.U.D. No. I, Lewis County P.U.D. No. 1, Mason County P.U.D. No. 1, Mason County P.U.D. No. 3, Pacific County P.U.D. No. 2, Skamania County P.U.D. No.1, Wahkiakum County P.U.D. No. 1, the City of Port Angeles, and members of the Pierce County Cooperative Power Association, which includes Alder Mutual Light Company, the Town of Eatonville, Elmhurst Mutual Power and Light Company, Lakeview Light and Power Company, the City of Milton, Ohop Mutual Light Company, Parkland Light and Water Company, and the Town of Steilacoom. Together the WPAG member utilities serve more than one million customers and purchase more than 6 billion kilowatt -hours from the Bonneville Power Administration "Bonneville each year under both Load Following and Slice /Block Contracts. WPAG member utilities also own or receive output from more than 400 megawatts of non Bonneville generation and purchase more than 300 megawatts of power from sources other than Bonneville. WPAG members are generally winter peaking utilities with lower annual load factors. WPAG members' similar characteristics have caused them to join together to represent their interests before Bonneville, and in other regional and national forums since 1980. WPAG has intervened as a group in every major Bonneville rate proceeding since enactment of the Pacific Northwest Electric Power Planning and Conservation Act of 1980. WPAG's interests have also been represented in Congress, before the Northwest Power Planning Council, and in other regional forums. The scope of services presented here includes areas that various other organizations, of which WPAG members might also be members, cannot advocate for WPAG members due to conflicts of interest within those organizations, lack of staff resources or subject area expertise. WPAG thus fills a need that is unmet by membership in the Public Power Council, the Northwest Public Power Association, the Pacific Northwest Utilities Conference Committee and other similar groups. A -1 Scope of Services The 2013 scope of services for WPAG is proposed as follows: General WPAG Activities and Meetings During 2013, EES Consulting and MMPS &M will monitor and comment on regional and federal activities of specific interest to WPAG members not covered adequately by other public power organizations of mutual interest and relevance. Monthly meetings will be held to brief WPAG members on these activities. Regional Activities BP -I4 Rate Proceedings and Related Processes BPA will conduct transmission, power and over supply rate cases in 2013. WPAG participated actively in the workshop processes leading up to these rate cases, and has intervened in all of these cases. These cases will set power and transmission rates for the next two years, and will establish the treatment of over supply costs during such period. WPAG will participate in both planning workshops and public processes during 2013 to monitor the proceeding that will set rates for the next two year rate period. These will present issues as described below. Issues Identified for Workshops EXHIBIT A Montana Intertie During the last rate case, Montana wind interests made a concerted effort to have the Montana Intertie rolled into the BPA main grid. The long term impacts of adding another area of substantial wind resource development to the Federal transmission system are more troubling. This action will stimulate requests for BPA to use Federal base system resources to integrate these resources, further straining the Federal base system and its ability to serve preference customer loads. It will also likely increase the costs of resolving over- supply events. In the initial rate proposal, BPA declined to roll in the Montana Intertie. WPAG will oppose any treatment of the Montana Intertie that will result in any increase in the use of Federal base system resources for purposes other than serving preference customer load. This will be staffed primarily by MMPS &M. Cost Allocation To NT and PTP Transmission Rates In the last rate case, Snohomish PUD asserted that BPA's allocation of costs between NT and PTP rates did not recognize the full costs of services provided to NT customers, to the detriment of PTP customers. Snohomish has been joined by Seattle and Tacoma and has continued to pursue this issue. BPA has held a number of rate case workshops on this matter. In the initial rate proposal, BPA declined to implement the approach advocated by Snohomish. The Snohomish proposal seeks to shift costs from the PTP rate to the NT rate in a manner that is not cost justified. Snohomish is a PTP customer. WPAG will oppose efforts to shift costs between transmission rates in a manner that is not cost justified and will A -2 EXHIBIT A support efforts to fairly allocate costs between NT and PTP rates. This will be staffed by EES Consulting and MMPS &M. TRvI Issues Because of load loss and decreased economic activity, BPA has over purchased power needed to serve the Load Growth pool. BPA has suggested that it will allocate the costs of these over purchases to members of that pool, even though they will not be taking service from BPA under that pool during the rate period. A number of our smaller members will be adversely impacted by this proposal. WPAG will oppose the imposition of purchased power costs on Load Growth pool members who will not take power from Load Growth service from BPA during the rate period. Delivery Charge BPA is proposing a 25% increase to the Delivery Charge, which charge is levied on WPAG members still taking service from BPA facilities. This is a much larger than the general rate increase, and will have an adverse impact on some WPAG members. We will work with these members to find a way to mitigate this proposed increase. Generation Inputs One of the major areas of controversy in the rate cases is the pricing and provision of generation inputs by BPA Power to BPA Transmission for the integration generating resources, including wind generation. The majority of WPAG members have some degree of involvement in wind generation, including purchase power arrangements, REC purchases and ownership interests. Further, all WPAG members buy the bulk of their power supply from BPA. WPAG will attempt to promote rates and policies by BPA that preserve for load serve as much of the Federal base system as possible, which reflect the true costs of providing generation inputs, and which give those receiving service the incentive and means to manage generation integration costs. This will be staffed by EESC and MMPS &M. Rate Case Workshops WPAG had substantial success in the pre -rate case workshops, particularly in the area of NT cost allocation and Montana Intertie. It will be the objective of WPAG during the rate proceedings to protect these gains, and to expand the areas where BPA adopts positions advanced by WPAG. This will be staffed by EES Consulting and MMPS &M. Oversupply Cost Allocation BPA is proposing to allocate one -half of the costs of implementing its Over supply Protocol, which includes paying wind interests costs of PTC, RECs, and penalties for non delivery, when their production is curtailed due to high wind/high water. WPAG will challenge this allocation based on cost causation. WPAG in addition will set the stage to challenge legally whether BPA has the right to charge preference customers such costs when we cannot review them, and whether there is statutory authority to pay such costs. This will be staffed by EES Consulting and MMPS &M. A -3 Other BPA 2013 Proceedings EXHIBIT A BPA has already commenced a number of proceedings, and will commence some additional ones during 2013, that will have long -term impacts on preference customers. WPAG will participate in the following BPA processes. Capital Spending BPA has determined that it will run out of borrowing authority well before it expected to when it received its last allocation of borrowing authority. BPA has initiated a pre payment program to access the credit of its customers in order to fund some of its capital needs. It is unclear how much capital BPA will obtain through this program. In a situation where going to DC for additional borrowing authority is ill- advised, even if the pre payment program is successful this issue will continue to pose challenges for BPA and its customers. WPAG will remain involved in this issue where ever it appears, and will advocate that BPA husband its remaining borrowing authority and use it for the needs of its preference customers. WPAG will advocate the use of reasonable approaches that extend the existing borrowing authority as long as possible to forestall going to Congress for additional borrowing authority. WPAG will also urge BPA to give priority access to available capital to projects that provide service to preference customers, and to establish an ongoing process involving customers to ensure that the remaining borrowing authority is wisely and appropriately used in the future. This will be staffed by MMPS &M. Environmental Redispatch Wind generation interests filed a petition with the FERC alleging, inter alia, that the application of BPA's Environmental Redispatch ROD did not provide comparable service, and also filed petitions for review in the 9 Circuit seeking legal review of BPA's Environmental Redispatch ROD. WPAG filed comments with the FERC defending BPA's Environmental Redispatch ROD, and also filed its own petition in the 9 Circuit. The petitions in the 9th Circuit are still pending. The FERC has ruled in favor the petitioning wind interests, finding that BPA's Environmental Redispatch ROD does not provide comparable service, and gave BPA 90 days to formulate a new policy. BPA responded with the Over supply Management Protocol under which it pays wind generators for PTCs, RECs and delivery penalties when they are displaced. Throughout this process, BPA had been attempting to forge a settlement with the wind interests, the IOUs and certain preference customers. WPAG will participate actively in this process to ensure that the FBS resources are reserved for preference customer use, and that all customers (including wind customers) pay the costs that BPA incurs to serve them. We will also be vigilant that BPA does not take, or agree to take, actions that exceed its statutory authority. This will be staffed by EES Consulting and MMPS &M. BOATT Process BPA recently concluded a second BOATT process. The first BOATT process was to merely update the BPA OATT. However, the objective of this process recently changed to the formulation of a BPA OATT that would be sufficiently compliant with FERC policies to qualify as a reciprocity tariff. At the conclusion of this first BOATT process, BPA started a second BOATT process to find a way to eliminate DSO 216, apparently in an effort to implement what BPA perceived as the consensus of A -4 EXHIBIT A its settlement discussions with the wind interests. This second BOATT process did not result in a single proposal, so BPA has carried into the rate case a number of options which it would implement in lieu of relying on DSO 216. It is expected that these discussions will continue into 2013 as BPA seeks to placate the wind interests. WPAG will participate in this process to ensure that BPA has the operational tools to deal with high wind/high water events, and that such operational tools work fairly for all forms of generation. This will be staffed by MMPS &M. Precedent Transmission Service Agreement Process BPA has signed a number of precedent transmission service agreements with wind project developers which commit it to providing transmission service to these projects once they are completed. Many of these developers now seek to either terminate these agreements with BPA, or to delay for an extended period the commencement of service. This raises a number of issues: what conditions (if any) should BPA impose on developers seeking to terminate these agreements in order to hold other transmission customers harmless; how should the transmission capability made available by the termination of these agreements be used; and what changes should BPA institute in order to avoid making such commitments in the future. BPA recently released proposed term sheets with several developers that provide for either terminations of their PTSAs or modifications thereof. WPAG has already submitted comments on these and other topics in this proceeding, and will continue to actively participate in order to ensure that unnecessary costs are not imposed on preference customers. This includes reviewing and commenting on the recently released terms sheets. This will be staffed by MMPS &M. BPA Network Open Season Process The network open season process that BPA has employed has not been a success, and that a revision of this process is needed. However, BPA is reluctant to undertake this process until it deals with the issues presented by the PTSA proceeding. WPAG will continue to participate in the NOS revision process with the intention of improving its operation from the point of view of the preference customers. In particular, the availability of transmission capability for both Tier 2 non federal resources and for preference customer load service will be areas of emphasis. This will be staffed by EES Consulting and MMPS &M. Network Transmission Service Process BPA has initiated an intensive process with NT customers to address concerns and issues regarding access to and availability of transmission capability for resource and load service for NT customers. It has included issues such as how is transmission capability ear marked for NT customers, how is such capability made available to NT customers, and can NT customers get access to transmission without getting in line behind all the wind generators. While BPA has made some preliminary decisions that are favorable to NT customers, much work remains to be done to assure NT customers that BPA will have transmission available when it is needed by NT customers. This will be staffed by MMPS &M. Energy Imbalance Market There are currently three separate processes under way to investigate the hows and whys of energy imbalance markets. These initiatives present both a threat and a potential benefit to preference customers. The threat stems A -5 EXHIBIT A from the creation of a new market that BPA will be tempted to participate in, diverting Federal base system capability from service to preference customer loads. The potential benefit is that wind integration needs will be met from the market, freeing up Federal base system capability currently used for that purpose for use to serve preference customer loads. WPAG will participate in all of these processes to ensure that any energy imbalance market is structured in a way to minimize the detrimental aspects and maximize the benefits to preference customers. Any erosion to preference customer rights will be stoutly resisted. This will be staffed by EES Consulting and MMPS &M. TRM Revisions There are a number of significant issues that were not satisfactorily resolved at the end of the Tier Rate Methodology process that BPA has agreed to revisit, including most importantly the issue of system obligations that BPA treats as off -the -top dedications to the Tier 1 system capability, and the lack of any agreed upon methodology for determining the capability of the Tier 1 system, which impacts how much Tier 1 power is available to WPAG utilities. This will be staffed primarily by MMPS &M. Preference to FBS Capacity BPA has been using increasing amounts of FBS capacity to integrate wind generation on the Federal transmission system. This capacity is deducted from the FBS capability made available to preference customers under Tier 1. For the near term, the primary impact of this activity is to reduce the secondary revenues available to BPA to reduce the PF rate by shifting secondary power sales from heavy load hours to light load hours. However, in the future this reduction in FBS capacity may impinge on service to preference customer loads under both load following and Slice contracts. WPAG has brought to the fore in the BP -14 rate proceeding workshops this misuse of FBS capacity, and has asserted our preference rights to this capacity. Vindication of these preference rights may require litigation. This will be staffed by MMPS &M. 9 Circuit Petition for Review WPAG filed a petition for review in the 9 Circuit to question whether BPA's Environmental Redispatch ROD complied with the statutory provisions regarding the rights of preference customers to federal transmission. This action has been placed on stay. Subsequent to the FERC order essentially invalidating the Environmental Redispatch ROD, BPA issued the Over Supply Management Protocol in response. The wind generators filed petitions challenging this action, as did WPAG. FERC has not ruled on the motions for rehearing on the original Environmental Redispatch order, and has not passed judgment on the Over Supply Management Protocol. The wind interests have not wanted to litigate these petitions, but WPAG has informed the court that we are unwilling to stay the Over Supply Management petition, since it is unclear when if ever the FERC will act. The purpose is to take the initiative away from the wind interests, become pro- active rather than reactive, and create leverage in case settlement discussions become serious. This will be staffed by MMPS &M. A -6 Federal Energy Regulatory Commission NERC Olympia Legislative Session Other Matters Budget EXHIBIT A Given the apparent sympathy the FERC has for wind generation, it is clear that much of the transmission issues relating to wind will find their way back to the FERC. This will require more active participation by WPAG in FERC processes in order to vindicate our interests as preference customers. This may require litigation, as it is clear from recent FERC actions that it does not take very seriously the obligations that BPA has with regard to preference customers. —WPAG will work closely with other preference customers to defend the financial and operational interest of BPA, and ensure that the statutory rights of preference customers are not subordinated to the interests of non preference customers. At times, this may require WPAG to take positions that differ from those of BPA and other preference customers. -EES Consulting and MMPS &M will continue to assist PPC in its efforts, and will monitor this process to see if WPAG direct participation is needed. In June 2007, under the direction of FERC, the North American Electricity Council (NERC) began enforcing electric reliability standards. As of that time utilities with greater than 25,000 customers are required to register with NERC and their regional reliability organization or the Western Electricity Coordinating Council (WECC) on the west coast of North America. EES Consulting has been monitoring and advising WPAG members on compliance issues since April of 2007. EES Consulting will continue to monitor compliance issues on behalf of WPAG members in 2013. EES Consulting will alert WPAG members of issues as they arise. To the extent that detailed analysis and /or representation is required by an individual WPAG member with respect to compliance issues, tasks will be completed and billed on an individual utility basis. EES Consulting and MMPS &M will monitor the activities of the 2013 legislature on behalf of WPAG's specific interests. During the course of each year, matters arise that require WPAG attention to protect the interests of our customers. These matters are undertaken at the direction of the WPAG utilities. The budget for the scope of services described above is calculated at the following billing rates for EES Consulting and MMPS &M: A -7 EES Consulting President $170 per hour Managing Director 165 per hour Manager 160 per hour Senior Project Manager 155 per hour Project Manager 150 per hour Senior Analyst or Engineer 145 per hour Analyst 140 per hour Clerical 120 per hour MMPS&M Principal $175 per hour Associate $170 per hour These billing rates will remain in effect through December 31, 2013. Project Staffing EXHIBIT A On the basis of the above billing rates, the 2013 labor budgets of EES Consulting and MMPS &M combined are estimated to remain at $200,000, which holds the line on budget increases. This labor budget will be split equally between EES Consulting and MMPS &M. In addition, an amount of $75,000 in supplemental funding has been provided to staff the BP -14 Power and Transmission rate cases workshops and related BPA processes. This is a $75,000 reduction compared to the 2011 WPAG budget. In addition to labor costs, out -of- pocket expenses will be billed to WPAG members at their cost to EES Consulting and MMPS &M. It is estimated that $40,000 in total out -of- pocket expenses will be incurred for all work non -rate case elements in total. Out -of- pocket costs will be billed by whichever organization actually incurs the expense. The total estimated annual WPAG budget for 2013 is estimated at $240,000, and a supplemental budget of $75,000 for rate case activities. As always, the allocation of the budget among WPAG members is open to negotiation by the participants. We have attached an inter utility allocation predicated on the most recent available utility data. After a discussion of the foregoing issue, a final budget by utility will be prepared. An example of the budget's allocation is attached at the end of this narrative. The staffing for these projects will be similar to that for past WPAG activities. Gary Saleba and Terry Mundorf will be the principal representatives for EES Consulting and MMPS &M, respectively, with Ryan Neale providing support for the activities of Terry Mundorf Additional MMPS &M and EES Consulting staff will assist as needed. A -8