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HomeMy WebLinkAboutAgenda Packet 11/12/2003 UTILITY ADVISORY COMMITTEE - SPECIAL I~EETING PUBLIC WORKS CONFERENCE ROOM PORT ANGELES, WA g8-"46~- NOVEMBER I ~, ~003 3:00 P.M. AGI~NDA I. CALL TO ORDER II. ROLL CALL III. APPROVAL OF MINUTES FOR OCTOSER 1 O, 2003 APPROVAL OF MINUTES FOR OCTOBER 149 2003 IV. OISCUSSlON ITEMS A. SITING PLAN FOR PORT AN~L~S WATER TReATMeNT PLANT C. STORMWAT~R UTILITY OISCUSSlON ~V~RBAL) O. FLUORIDATION SYSTEM UPDATE (VERBAL) E, 2004 WPAG CONTRACT AND 2003 ADdU~THENT F. BPA SETTLEMENT BRIEFING V, NEXT ~EETINB DATE - OECEMBER ~t ~003 VI, ADJOURNMENT UTILITY ADVISORY COMMITTEE Special Meeting Port Angeles, Washington ~ October 10, 2003 I. Call to Order: Chairman Erickson called the meeting to order at 10:08 a.m. IL Roll Call: Members Present: Chairman Erickson,'Councilman Campbell, Councilman Williams, Dean Reed, Allen Bentley Members Absent: Councilmember Rogers Staff Present: Mike Quinn, Craig Knutson, Glenn Cutler, Yvonne Ziomkowski, Scott McLain, Gary Kenworthy, Scott Johns, Tom McCabe, Cate Rinehart Others Present: Dick Goodman - KONP Emeline Cokelet ~ Peninsula Daily News Richard Talbot - Jefferson County Public Works Brent Gagnon - West Waste And Recycling (Forks) Rick Banta - Murrey's Olympic Disposal Peter Battuello - Parametrix Jim Underwood - Citizen Lawrence Alice - Citizen Lee Embree - Citizen III. Approval of Minutes: Delayed to regular meeting of October 14th. IV. Discussion Items Adjourn to Executive Session - Determined not necessary Port Angeles Landfill Transition Strategy And Interlocal Agreement Glenn Cutler ( Director of Public Works and Utilities), with the assistance of Peter Battuello (Parametrix) reviewed the transfer station functions, land use, and planning issues. Flow control options were summarized and r. ecommendations were provided. An implementation strategy was discussed UTILITY ADVISORY COMMITTEE October 10, 2003 along with the Interlocal Agreement provisions. Additional comments should go to staffby October 17th for a final draft for the County Commission meeting. Information only. No action taken. V.. Next Meeting: The next meeting will be October 14, 2003. FI. Adjournment: The meeting was adjourned at 11:55 a.m. Councilmember Erickson, Chairman Cate Rinehart, Administrative Assistant 2 UTILITY ADVISORY COMMITTEE Port Angeles, Washington October 14, 2003 L Call to Order: Chairman Erickson called the meeting to order at 3:00 p.m. IL Roll Call: Members Present: Chairman Erickson, Councilmember Rogers, Councilman Campbell, Dean Reed (3:10), Allen Bentley Members Absent: None StaffPresent: Mike Quinn (3:15), Craig Knutson, Ken Ridout, Scott McLain, Gary Kenworthy, Tom McCabe, Claudia Stromski, Cate Rinehart Others Present: Paul Lamoureux - Citizen III. Approval of Minutes: Chairman Erickson asked if there were any additions or corrections to the meeting minutes of September 9, 2003. Councilmember Rogers moved to approve the minutes. Councilman Campbell seconded the motion, which carried unanimously. IV. Discussion Items A. Residential Container Conversion Tom McCabc, Solid Waste Superintendent, updated the committee on the completion of the three year project of converting the 300 gallon solid waste containers to 90 gallon containers. Goals to be achieved were the elimination of illegal dumping, an increase in recycle participation, yard waste ban from containers, cleaner alleys, and compliance with the Solid Waste Comp Plan. Claudia Stromski, Solid Waste Lead Worker, was complimented for the fine job she did in administering this undertaking. There was a short discussion. Information only. No action taken. UTILITY ADVISORY COMMITTEE October 14, 2003 B. Stormwater Utility Gary Kenworthy, Deputy Director of Public Works and Utilities/City Engineer, noted in response to previous direction given to staff the ordinance had been revised to eliminate all references to the Stormwater Management Manual, provide an emphasis on a project based program, and have the County include the stormwater billing in the semiannual assessments for property taxes. A discussion followed with a request to tighten the wording in a couple of areas where Director approval was mentioned. Councilman Campbell moved to recommend Council adopt the revised ordinance. Dean Reed seconded the motion, which carried unanimoously. C. Reports Rayonier Leachate - Quarterly Information only. No action taken., V. Late Items None. VI. Next Meeting: The next meeting will be November 12, 2003 (designated as a special meeting due to Veteran's Day falling on the regular meeting date). VII. Adjournment: The meeting adjourned at 3:43 p.m. Councilmember Erickson, Chairman Cate Rinehart, Administrative Assistant 2 pORTANGELES WASHINGTON, U.S.A. UTILITY ADVISORY COMMITTEE MEMO DATE: November 12, 2003 TO: UTILITY ADVISORY COMMITTEE FROM: Glenn A. Cutler, Director Public Works and Utilities SUBJECT: Siting of the Port Angeles Water Treatment Plant Summary: The National Park Service is planning to construct a municipal water treatment plant for the City's water system as part of the water mitigation associated with the Elwha River Ecosystem and Fisheries Restoration Act. Recommendation: Review land use of the south end of the landfill site and provide comments to the staff on the acceptability of the plan. If acceptable, endorse the plan for approval to the City Council. Background/Analysis: As part of the water mitigation measures associated with the Elwha River Ecosystem and Fisheries Restoration Act, the National Park Service is planning to construct a municipal water treatment plant for the City's water system. The City continues to work closely with the National Park Service and has agreed to site the facility at the landfill. In conjunction with our consultant, Parametrix, a site plan has been developed to accommodate a water treatment plant and facilities associated with the waste export system that will replace the landfill function. The attached site plan is the preferred concept alternative. There are still a number of outstanding issues, such as ownership of the triangular parcel adjacent to the southeast comer of the landfill, that need to be resolved. This issue will impact the location of the water treatment plant and the remaining land to accommodate the facilities associated with future operations of the waste export system. Staff will make a presentation on the layout. It is requested that the UAC conditionally endorse the site plan to the City Council. Attachment: Port Angeles Landfill Post Closure Development Site Schematic Rev 5 N:\UACXFinalLPAWTP Siting.wpd i. s WASHINGTON, U.S.A. UTILITY ADVISORY (;OMMITT£I= MfMO DATE: November 12, 2003 TO: UTILITY ADVISORY COMMITTEE FROM: Glenn A. Cutler, Director Public Works and Utilities SUBJECT1 Waste Export Discussions Summary: A presentation will be given by Parametrix concerning the solid waste export financing and operation plan that will be required upon closure of the landfill. Recommendation: Consider information provided on the financing and operation of the waste export system and provide comments to staff on the alternatives presented. Background/Analysis: The City will be transitioning to a waste export system for solid waste in 2006 upon closure of the landfill. At the special UAC meeting on October 10, 2003 a presentation was given on the waste export system. It is necessary to continue the discussion concerning the alternatives for financing and operation of the waste export facilities. Parametrix will present and lead today's discussion. It is not envisioned that final decisions will be made at the meeting but it will help staff formulate a plan of action. Also, information will be provided on the waste export industry forum scheduled for November 21, 2003. The attached is provided for your information. Attachment: Solid Waste Export Alternatives N:\UACWinal\Waste Export.wpd City of Port Angeles COMPARISON OF ALTERNATIVE TRANSFER STATION CONTRACT STRUCTURES (10/02/03) City City design/build Private designfouild/operatc Private design/build/operate operate Cost to City Capital + Operation + + Control by City Financial + 0 +[CSS 1 ] Operational + Risk to City Financial + Operational © O/+ [CSS2] Other Stakeholders County 0 + Industry 0 + Legal/Institutional O + ?[CSS3] Feasibility O - Incidental condition. The scenario provides no advantage or disadvantage compared to other alternatives. - Adverse condition relative to other alternatives. + Positive condition relative to other alternatives. SUMMARY OF PRELIMINARY ALTERNATIVES ANALYSIS The accompanying matrix provides a relative ranking of three principal design/build/operate options for the City of Port Angeles Transfer Station project: 1. City designs, builds and operates; 2. City designs and builds, Private Contractor operates; 3. Private Contractor designs, builds and operates. The purpose of the matrix is to focus discussion of the options among City staffand members of the City's project team. The rankings provided in the attached matrix are meant as point of departure for discussion. Following is a brief rationale for the comparisons summarized in the matrix. Cost to City Capital Costs Capital costs to thc City appear likely to be higher under both Options I and 2, in which the City is responsible for design and construction. ?? Thc likely private contractors arc major solid was(c handlers who already own and operate similar facilities. These firms will already have thc benefit of workable facility designs and construction methods, standard details and specific design features compatible with their own system of operations. ?? Private waste management companies will also have established relationships as large customers of specialty equipment vendors (e.g., compactors) as well as construction contractors. ?? Private companies will not be bound by various procurement, labor, reporting, funding and financing requirements that typically affect governmental entities. Operation Cost A private operator has a simple, direct incentive to minimize operating costs (i.e., to increase profits) -- this affects both staffing and methods of operation. Further, a private operator may have more latitude in staffing its facilities than a public agency. Control by City Financial Under Option 1, the City retains full control of every aspect of facility construction and operation. Under Option 2, the City's retains control of facility acquisition, but exercises less direct control over operations (control is achieved by means of the City's contract with the private operator). Under this option, the City will be asking the contractor to operate a facility that the contractor did not design and does not own - the contractor's financial interests could at times diverge from those of the City under this scenario. Under Option 3, the relationship between City and contractor is simplified, and with a well-written contract, the City can retain significant control through performance guarantees, operation of gate-house, etc. Operational The City would have direct control over operations only under Option 1. The extent of this advantage is diminished by a well written contract with performance requirements, penalties and incentives. Risk to City Financial Risk The City takes on a significant financial risk in designing, and building a facility without the experience that is likely available to a qualified private contractor. Depending on contract conditions (bonding, performance guarantees, liquidated damages, etc.) the City can effectively manage its financial risk through its contract in Option 3. Operational Risk Option 2 entails relatively greater risk for the City because the City exercises only indirect control over operations and maintenance of the facility that it provides to the contractor. Under Option 1, the City retains full control of (and responsibility for) the operation and maintenance of its own facility. Under Options 3 the City can shift much of the responsibility for effective facility operations and maintenance to the contractor, using contractual performance guarantees (penalties and incentives). 0 2004 STORMWATER UTILITY BUDGET ACTIVITY ORIGINAL PROPOSED / REVISED BUDGET BUDGET/ BUDGET Operations & Maintenance* $85,000 $15,000. $15,000 Administration, Engineering, & Planning $95,000 $50,000 $10,000'* (1.0 FTE) (0.5 FTE) (0.0 FTE) I Utility Tax $23,000 $23,000 $30,000 Capital Improvements $85,000 $200,000 $310,000 Total Stormwater Funded Budl~et $288,00( $288,000 $365,000*** * ESA training for field crews and supervisors. ** Includes estimated Clallam County onetime costs for revenue collection setup ($4,500) and annual 1.5% processing fee ($5,500). No additional City staffare proposed. ***Based on Equivalent Single Family Units (ESUs) determinations per GIS mapping and updates based on building permit data. subsequent to last aerial photography. N:~PROJECTS\01 - 12STRMSkStormwater I 1-4-(~CC.wpd ORDINANCE NO. AN ORDINANCE of the City of Port Angeles, Washington, establishing a stormwater utility, establishing a monthly stormwater utility charge, providing for stormwater regulations and for the management and operation of the stormwater utility, and amending Ordinance 2394 and Chapter 13.63 of the Port Angeles Municipal Code. THE CITY COUNCIL OF THE CITY OF PORT ANGELES DOES HEREBY ORDAIN as follows: Section 1. Ordinance 2394 and Chapter 13.63 of the Port Angeles Municipal Code are hereby amended by amending Chapter 13.63 PAMC to read as follows: Chapter 13.63 STORMWATER - REGULATIONS AND UTILITY Sections: 13.63.010 Purpose ! 3.63.020 Definitions 13.63.0,10,030 Stormwater Discharge Not Permitted 13.63.0,20,040 Unpolluted Discharge Shall Have Approved Outlet 13.63.0,30,050 Stormwater Connection Not Permitted in Sanitary System 13.63.060 Stormwater Utility Established 13.63.070 Jurisdiction 13.63.080 Operation and Management 13.63.090 Transfer of nrot~ertv 13.63.100 Monthly charge 13.63.110 Rate Adjustment 13.63.120 Billing and payment 13.63.130 Remedies 13.63.140 Inspections - Right of entry - Emergency -1- 13.63.010 Purpose. The purpose of this Chapter is to establish a storm and surface water management program in order to accomplish the following goals: A__~. Establish a stormwater capital facilities plan and small project funding program for projects which will: protect property owners adjacent to developing and developed land from increased runoffrates, which could cause erosion of abutting property; 2~. decrease drainage-related damage to public and private property; 3_. maintain safe City streets and rights-of-way; 4_. minimize water quality degradatiofi and control of sedimentation of creeks, streams, ponds, and other water bodies; and 5_. preserve and enhance the aesthetic quality of waters; B.._~. Promote sound development policies and construction procedures, which respect and preserve the Ci _ty's watercourses; and C. provide public education, outreach, participation, and involvement in the protection of water quality. The storm and surface water management program shall consist of stormwater regulations and a stormwater utility, which shall be implemented and operated by the City's Department of Public Works and Utilities in accordance with standards established by the appropriate governmental entities with jurisdiction. 13.63.020 Definitions. The following definitions shall apply to this Chapter: O e n A__.~. "Commercial/multiple pr p rty means all property zoned or used for multifamily, commercial, retail, public, government, non-profit, and all other non-residential uses. B~ "Impervious area" means anypart of any parcel of land that has been modified by the action of persons to reduce the land's natural ability to absorb and hold rainfall. This includes areas which have been cleared, graded, paved or compacted. Excluded, however, are all vegetated areas such as lawns, agricultural areas, and landscaped areas. C_~. "Single -family and duplex property'_' means all property used for single family and duplex residential uses. -2- 13.63.010030 Stormwater Discharge Not Permitted. No person shall discharge or cause to be discharged any stormwater, surface water, ground water, roof runoff, subsurface drainage, uncontaminated cooling water, or unpolluted industrial process waters into any sanitary sewer, unless otherwise approved in writing by the Director based on lack of feasible alternatives or other appropriate factors. (Ord. 2394 Ch. IV §1, 6/2/86) 13.63.020040 Unpolluted Discharge Shall Have Approved Outlet. Stormwater and all other unpolluted drainage shall be discharged to such sewers as are specifically designated as combined sewers or storm sewers, or to a natural outlet approved by the Director. Industrial cooling water or u,,F,~,,,,~,~ process waters that have been tested and are free of pollutants may be discharged on written approval of the Director to a storm sewer or natural outlet. (Ord. 2394 Ch. IV §2, 6/2/86) 13.63.030050 Stormwater Connection Not Permitted in Sanitary System. A. No person shall make connection of roof downspoutspoura, exterior foundation drains, area drains, or other sources of stormwater surface runoff or groundwater to a building sewer or building drain which in mm is connected directly or indirectly to a public sanitary sewer, unless such connection is otherwise approved in writing by the Director based on lack of feasible alternatives or other appronriate factors. B. Storm drainage from hard-surfaced or graded areas, such as parking lots, service station yards, and storage yards, shall enter the public storm sewer system or other outlet approved by the Director and as required by this Chapter and as such facilities are available. Such storm drainage shall not be connected to or enter a sanitary sewer, unless otherwise approved in writing by the Director based on lack of feasible alternatives or other appropriate factors. (Ord. 2394 Ch. 1V §3, 6/2/86) 13.63.060 Stormwater Utility Established. There is hereby created and established a storm and surface water utility (also referred to as the "stormwater utility'). The stormwater utility shall be administered under direction of the Director of Public Works and Utilities. The stormwater utility shall perform the functions, and have the anthori _ty, as set forth in Chapter 35.67 RCW for managing, regulating, and controllin~ the City's stormwater management program. 13.63.070 Jurisdiction. The City shall have jurisdiction over all storm and surface water facilities within the Ci _ty's boundaries. No modifications or additions shall be made to the City's storm and surface water facilities without the prior approval of the City. 13.63.080 Operation and Management. A. The stormwater utility shall be managed and operated in accordance with: (1) the Stormwater Management Plan prepared by Economic and Engineering Services Inc. dated June 1996 and adopted by the City Council on December 17, 1996, and -3- (2) applicable sections of the City's Urban Services Standards and Guidelines. 13.63.090 Transfer ofproperW. All equipment, properties, and property rights and interests owned or held by the City, however acquired, insofar as they re/ate to or concern s~orm or surface water sewage, are hereby transferred to the stormwater utility. This includes by way 0fexample and not limitation, all properties and property_ fights and interests acquired by adverse possession or by prescription in and to the drainage and storage of storm or surface waters over and under lands, watercourses, streams, ponds and sloughs to the full extent of inundation caused by the largest storm or flood condition. 13.63.100 Monthly Charge. A_~. Effective January 1, 2004, the owners of all real properly in the City containing impervious surfaces shall pay a monthly stormwater utility 'charge at the rate as set forth in this Section. B_~. Single-family and duplex residential fees. The monthly stormwater utility charee for each single-family and duplex residential ~roperty shall be $ 3.00. C_~. The monthly stormwater utility charge for all commercial/multiple property shall be calculated by dividing the total impervious area in square feet by 4000 square feet, times the Single family and duplex residential fee. The minimum monthly fee for a commercial/multiple property shall be not less than the monthly fee for a single-family dwelling, and the maximum monthly fee shall be not more than ten times the monthly fee for a single-family dwelling. D.~. City streets, State highways, private streets with storm and surface facilities in place meeting City standards~ and other public or private owned properties or portions thereof having their own NPDES permitted storm and surface water runoff facilities which do not discharge to City facilities shall be exempt from the monthly charges set forth in this Section. 13.63.110 Rate Adjustment. A_~. A property owner may request a rate adiustment to the monthly charge set forth in PAMC 13.63.100, only if the property contains no impervious surfaces or if the property owner disagrees with the City's calculations of the rate, or the amount of impervious area used by the City in calculating the rate, under PAMC 13.63.100C. A request for an adjustment shall be submitted in writing to the Director of Public Works and Utilities. If the property contains no impervious surfaces, the rate shall be adiusted to zero. If the City's calculations or amount of impervious surfaces under PAMC 13.63.100C is incorrect, the rate shall be adjusted accordingly. Approved adjustments will be applied prospectively except that reimbursement for overcharges paid by the property_ owner will be made by the City for the year during which the adjustment is requested and for the prior year. -4- B.._:. Any person aggrieved by a decision of the Director of Public Works and Utilities relating to a request for a rate adjustment authorized by PAMC 13.63.110 may appeal the Director's decision to the CiW Manager within 30 days of the date of the Director's decision. The City Manager's decision shall be final. 13.63.120 Billing and payment. Stormwater utility fees shall be billed annually by Clallam County on behalf of the City in conjunction with the County's property tax bill. Discounts for low- income senior citizens and disabled citizens will be applied in accordance with Chapter 13.20 PAMC. Stormwater utility fees billed pursuant to this Section shall be due and payable semiannually on the same dates each year that the CountVs property tax bill is due and payable and shall be delinquent if not paid by the due date. All delinquent accounts billed pursuant to this Section will be subject to penalty charges the same as those imposed for delinquent property taxes. 13.63.130 Remedies. A_~. Termination of water service. The Director of Public Works and Utilities or desi~ee is authorized to terminate water service to any property owner, unless said water service is received by a residential tenant, who fails to pay the stormwater utility service fees imposed by this Chapter in the same manner as delinquent water bills. Termination of such water service shall not limit other remedies available to the City. B.~. Lien for delinquent charges - Interest. Pursuant to RCW 35.67.200 et seq. the City shall have a lien for delinquent and unpaid stormwater charges. A stormwater lien shall be effective for a total not to exceed one year's delinquent service charges without the necessity of an'/writing or recording of the lien with the County Auditor. Enforcement and foreclosure of any stormwater lien shall be in the manner provided by state law. Interest on the unpaid balance shall be eight percent per annum or such rate as may hereafter be authorized by law. C.~. Other remedies. The City shall have all other legally available remedies for enforeing and collecting delinquent and unpaid stormwater charges. 13.63.140 Inspections - Right of entry - Emergency. The City is authorized to enter at all reasonable times in or upon any property_, public or private, for the purpose of operating or maintaining the storm and surface water facilities, or to inspect or investigate any condition relating to the stormwater utility; provided, that the City shall first obtain permission to enter from the owner or person responsible for such premises. If entry is refused, the City shall have recourse to every remedy provided by law to secure entry_. Notwithstanding the foregoing, whenever it appears to the City that conditions exist requiting immediate action to protect the public health or safe _ty, the City is authorized to enter at all reasonable times in or upon any property, public or private, for the purpose of inspecting, investigating or correcting such emergency condition. Section 2 - Severability. Ifanyprovisions of this Ordinance, or its application to anyperson or circumstances, is held invalid, the remainder of the Ordinance, or application of the provisions -5- of the Ordinance to other persons or circumstances, shall not be affected. Section 3 - Effective Date. This Ordinance shall take effect five days following the date of its publication by summary. PASSED by the City Council of the City of Port Angeles at a regular meeting of said Council held on the 18th day of November 2003. MAYOR ATTEST: Becky J. UptOn, City Clerk APPROVED AS TO FORM: Craig D. Knutson, City Attorney PUBLISHED: November 23, 2003 By Summary November 6, 2003 -6- pORTANGELES WASHINGTON, U.S.A. UTILITY ADVISORY COMMITTEE MEMO DAT~ November 12, 2003 TO: UTILITY ADVISORY COMMITTEE FROM: Scott McLain, Deputy Director of Power Systems SUEJECT: Western Public Agencies Group (WPAG) agreements for 2004 and Amendment to 2003 Budget Summary: The City has been a member of the Western Public Agencies Group for several years. It is comprised of 21 Washington public utilities with similar interests. Each year the group contracts with two consultants and develops a scope of work for issues expected during the year. The 2004 contract mount is estimated to be $230,000, of which the City's share is expected to be less than $13,000. The BPA settlement negotiations have caused the 2003 budget to exceed the original estimate of $13,000. The total budget for 2003 will be less than $18,000. Recommendation: Forward a favorable recommendation to City Council authorizing the Director of Public Works and Utilities to sign agreements with Marsh Mundorf Pratt and Sullivan, and EES Consulting for WPAG services during the year 2004 for an amount not to exceed $18,000 and amend the not to exceed amount for the 2003 contracts to $18,000. Background / Analysis: The City of Port Angeles, along with 20 other public utilities in Washington, are members of the Western Public Agencies Group. This group was formed in 1980 to share costs in contracting with experts in the regional power field. The law firm of Marsh MundorfPratt and Sullivan, and EES Consulting are the two primary consultants to WPAG. Each year, the members of WPAG establish a budget based on expected regional issues for the year. Allocations of the total budget are divided among the participating utilities based on number of customers, kWh sales, and utility investment. The City's share for 2004 ora total WPAG budget of $230,000 is $12,244 or 5.3%. This expense was included in the City's 2004 budget in the amount of $13,000. The settlement negotiations relating to the lawsuit on the financial benefits given to the investor owned utilities has extended beyond the scope of the original budget proposed for 2003 of $13,000. Along with the recommendation for the 2004 WPAG budget authorization, we are proposing an increase in the 2003 budget by $5,000, for a total of $18,000. While we do not expect to exceed the 2004 budget of $13,000, we propose authorization up to $18,000 if the WPAG group expands the expected scope of work. Attached is the scope of work for the 2004 calendar year with Marsh Mundorf Pratt and Sullivan, and EES Consulting. The agreements are being reviewed by the City Attorney. Attachments: WPAG scope of services and budget N :\UACWin al\wp ag2004.wpd Exhibit A Western Public Agencies Group 2004 Scope of Services and Budget The Western Public Agencies Group (WPAG) comprises 20 publicly owned utilities in the state of Wash/ngton: Benton REA, Clallam County P.U.D. No. 1, Clark Public Utilities, the City of Ellensburg, K/tiltas County P.U.D. No. 1, 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, Peninsula Light Company, the City of Port Angeles, Snohomish County P.U.D. NO. 1, 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 Steilaeoom. Together the WPAG member utilities serve more than one million customers and purchase more than 12 billion kilowatt-hours from the Bonneville Power Administration ("Bonneville") each year. WPAG member utilities also own or receive output from more than 500 megawatts of non- Bonneville generation and purchase more than 400 megawatts of power from sources other than Bonneville. WPAG members are 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 forums in the Pacific Northwest and the United States 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 organiz~'mns, of which WPAG members might also be members, cannot advocate for WPAG members due to conflicts of interest within those organizations. 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. 2-1 Exhibit A Scope of Services The 2004 scope of services for WPAG is proposed as follows: · General WPAG Activities and Meetings During 2004, EES Consulting and MMPS&M will monitor and comment on regional and federal activities of general interest to include BPA-related legislation, progress regional transmission and wholesale market design issues, and any other new topic of mutual interest and relevance. Monthly meetings will be held to briefWPAG members on these activities. · BPA Power Business Line Rates BPA continues to have periodic adjustments of the Load-Based, Financial-Based and Safety- Net CRACs which will be followed closely. /n the event that there is a Settlement, monitoring the implementation of the Settlement elements will be necessary. · BPA Financial Review BPA will be facing continuing challenges regarding their financial condition and need to raise rates. There will be a continuing need to pressure BPA in all arenas to cut costs as an alternative to raising rates. To this end, BPA is expected to continue conducting periodic "spending reviews," which we wall momtur on behalf of WPAG. ·RTO West With recent possible stalling of FERC's standard market design (SMD) proposal, and . subsequent variants, the RTO West is expected to become a greater focus. A significant aspect of the activities taking place in 2004 will include further development of alternatives to the Phase II filing, the cataloguing of transmission contract fights and the inclusion of transmission facilities in the RTO West system. Both of these issues could have significant implications for members of WPAG. We will actively participate in these efforts on behalf of WPAG. · Standard Market Design/Wholesale Mark~'t Platform Although losing support fi.om the current Presidential Administration, FERC continues to advocate to Congress the need for new regulations that will change market design in the region and across the nation. Future variations of these proposed regulatory schemes could have significant implications on the region, BPA and the future of power supply to WPAG utilities. EES Consulting and MMPS&M will monitor these activities, and intervene wher~ appropriate, on behalf of WPAG's specific interests. 2-2 Exhibit A · Energy Policy Act of 2003/2004 With renewed interest in energy issues resulting from the "Blackout of 2003/' there appears a greater possibility of the passage of the most significant energy legislation since the Energy Policy Act of 1992. These new laws could have significant implications on the region, BPA and the future of power supply to WPAG utilities. EES Consulting and MIVIPS&M will monitor these activities and report on developments of special interest to WPAG utilities. · Regional Benefits/BPA Future Role Settlement discussions regarding the allocation of BPA's resources are likely culminate this year, if not sooner, and may result in new power sale~ contracts being negotiated.in late 2004. Having principal negotiators involved in this process, continued WPAG participation will be important to ensure a successful conclusion to these efforts. There is a strong likelihood that there will be an effort to institute tiered rates as part of the 2006 rate proceeding, with the preparatory work being done in the next two years. This will be a major money issue for all WPAG utilities. · Olympia Legislative Session The 2004 legislative session is not expected to deal with WPAG-related activities in any major fashion such as industry restructuring or deregulation, but may touch on other utility issues such as taxation, financial/rate information sharing, telecommunication issues, etc. EES Consulting and MMPS&M will monitor these activities on behalf o£ WPAG's specific interests. · Litigation . Although this appears less likely, there is still the possibility that a challenge to thc Subscription ROD may commence if thc above noted Settlement does not come to fruition. If pursued, additional funding above and beyond this proposed budget may be needed. Budget The budget for the scope of services described above is calculated at the following billing rotes for EES Consulting and M/VIPS&M: EE$ Consulting President .................................................................................. $130 per hour Vice PresidentYlVlanaging Director ............................................ 120 per hour Project Manager ........................................................................ 110 per hour Analyst or Engineer ................................................................... 100 per hour Clerical ................................................................................ 60 - 80 per hour 2-3 Exhibit A MMPS&M Principal .................................................................................. $135 per hour Associate ........................ , .......................................................... 110 per hour These billing rates will remain in effect through December 31, 2004. On the basis of the above billing rates, the 2004 laber budgets of EES Consulting and MMPS&M combined are estimated to be $200,000. This labor budget will be split equally between .EES Consulting and MMPS&M. 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 $30,000 in total out-of-pocket expenses will be incurred for all work elements in total. Out-of-pocket costs will be billed by whichever organization actually incurs the expense. The total estimated WPAG budget for 2004 is estimated at $230,000. As always, the allocation of the budget among WPAG members is open to negotiation by the participants. We have attached an inter-utility allocation predicated on the most recent available utility dat~ assuming a 15 percent maximum allocation to any one utility. After a final count of WPAG participants, a final budget by utility will be prepared. An example of the budget's allocation is attached at the end of this narrative. Project Staffing The staffing for this project will be similar to that for past WPAG activities. Gary Saleba and Terry Mundorf will be the principal representatives for EES Consulting and MMPS&M, respectively. Additional MMPS&M and EES Consulting staff will assist as needed. 2-4 CONSULTING SERVICES AGREEMENT EES CONSULTING, INC. Bi#lng Addre~ 570 Kirk~and Way, Suite 200, Kirkiand, Washington 9~033 This Consurdng Sewlces Agreement (herein Agreement) is made ~ EF.S Consulting, Irc., (heminal~' 'EES CONSULTING') and Ih~ C~/ 1150, Po~ Angelse, WA g8362, At~: Mr. Scoft Mc[.ain (he~tualter "CU~'43~'). I. SCOPE, COMPENSATION AND QuALrTY OF CONSULTING SERVICE~ EES CONSULTING will provide the services and be cernpansatad fa-these se~vk~es as dasc~bed in E~init A, attaci~ed hereto. EES CONSULTING shall render its sewlces in accordance with generally accepted pmfessin~al p~acflces. EES CONSULTING Mmll, to ~e b~t of Ils knowieg~e and belief, comply with apa~abie inws, o~:linances, codas, rules, regulafloas, permits and (tlher pu~ ~ in ~ ~ ~ ~ ~ ~ b ~. II. TERMS & CONDrI1ONS OF CONSULTING ~ERVlCE$ AGREEMEi~rF 1. Timing of Wot, lc EES CONSULTING shall commer~ce wod[ on or about Jmluery 1, 2(X~4, 2. Relationship of Par~m, No Thlrd..Pa~ly Benel~clada~. EES CONS ULTING is an indepandant conb'ecto~' under tills Agreemeof. a. Irmurance of EES CONSULTING, EES CONSULTING will maintain tl'~ougttout the pedommnce of this Agre6a~nt ifm f~af~ng ~ and amounts of insurance: i. Workeds Compensafio~ and Employe~s Uability I~unance as required by applicabie state o~ fedalal inw, ii. Compre~easive V6hicle Liability insurance co~edng pemo~al injury and pmp~ty damage bielms arising f~om 1he use of mok3r ~ wi~ c~'nbined single limits of $1,000,000. iv. Pmtassional Liability (Erm~ and Om~sions, o~ a ~ dasis) Insurance with limifs of $1,000,000. b. Interpretation. No(w#hstanding any olher provisioa($) ki this AGreement. nolfling shall da constmnd 0¢' entomed ~o ~s to ~3k:l, ilegato ~' advemely alfect any othem~e app#ca~e insurance held by any per[y to tt~s Agrseme~ 4. Mutual Indamnlflcatton. EES CONSULTING agrees to indemnify and hold harmless CEENT and tls employees flora and against ally and all ~, ~ da~, ~- expense of any kind and nature (including, without limitation, court costs, expenses, and reasonable attorneys' fees) arising out of injury to damon~ p~ (indudklg, without limitafi(xl, property of CLIENT, EES CONSULTING, and their respective employee~, agents, Ik:ansees, and rep~seofatlve~) in any manne~ caused by the negligent acta o¢ omissions of EES CONSULTING in the pedormance Of tls wo~'k purs~mnt to o~' in connecfl(m with iflt~ Agreement to the extent Of EES CONSULTING's ploportlonata 13egligel~ce, if any. CUENT agrses to indamnJfy and hold harmless EES CONSULTING and tls employses from and again~ any and all k3ss, cost, damage, or expanse of any kind and nature (including wtlhout limitation, court c~, expenses and reas~abie attorney' fees) arising out of injury to pemon($) ~ damage to pmpmty (including, without limite6on, properly of CUENT, EES CONSULTING, and their respective em~, agents, licensees and repmsentefives) in any rnarmer caused by ifm negligeat acta or omissions Of CMENT or other(s) wilfl whom CMENT ccmbacts ("CLIENT's agenta') to pedorm w~3~k Ixusuant to or in connec§on wlth thin Agmemeof, to the exterd Of ClJENT'S ~ CMENTs agents pmporlJ(~ate negligence, if any. 5. Resolu~on of Disputes, Attorrmy~' From. The law of the State of Washington shall govern Ihe Inteq3retaflon of and the resolu~xl of dispuMs undel' Agreement. if any claim, at law or othem~'m, is made by eifher party to this Agreement, ti3e pcevailing party shatl da eat~ed to tls costa and ~ aif~3meYs' taes, 6. Termination of Agreement. Either EES CONSULTING ~ CLIENT may terminate this Agreement upo~ thirty (30) days wfit~m rx:~3e to ~ ~ seat to the addresses listed herein. In the eveat CLIENT terminates this agreement, CUENT specifically agrees to pay EES CONSULTING for all services rendered throu~t the telmina~ date. EES CONSULTING, iNC. CITY OF PORT ANGELES Title: President ~ Title: Date: October 29, 2003 Date: LEGAL SERVICES AGREEMENT ' THIS AGREEMENT is made between BENTON RURAL ELECTRIC ASSOCIATION, WASI-IINGTON; CITY OF PORT ANGELP. S, WASHINGTON; CITY OF ELLENSBUP..G, WASHINGTON; CITY OF MILTON, WASHINGTON; TOWN OF EATONVII.I.R, WASHINGTON; TOWN OF STEILACOOM, WASHINGTON; ALDER MLrrUAL 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; PENINSULA LIGHT. COMPANY, WASHINGTON; PUBLIC LrrIL1TY DISTRICT NO. 1 OF CLALLAM COUNTY, WASHINGTON; PUBLIC UTILITY DISTRICT NO. 1 OF CLARK COUNTY, WASHINGTON; PUBLIC UTILrrY DISTRICT OF KITT1TAS 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 SNOHOMISH COUNTY, WASHINGTON; (Public Utilities); and MARSH MUNDORF PRATT SUI. J. IV~ & McKENZIE (Attorney) for the provision of legal services and the payment of compensation as specified here'm. 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 ? of the Pacific Northwest Electric Power p!ann{n$ and Conservation Act (Act); WHEREAS, BPA is considering adoption of various policies, rate forms and long-t~Lm contracts which would have a major impact on the wholesale rates of the Public Utilities, and WHEREAS, BPA is preparing to conduct heatings 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 hem'iugs 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 2. Public Utilities shall compensate the Attorney for these services at an average hourly rate not to exceed $135.00. 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 Attomey 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 Att0mey relating directly to the foregoing legal se~ices 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 thc Attorney may terminate this Agreement at any time upon written notice. MARSH MUNDORP PRATT SULLIVAN & McK, LrNZIE Date: October 29, 2003 y Terence L..Mundorf Date: October 29. 2003 By: Manager Page 2 of 2 V~/ A $ Ft I N G T O N, [J. $. A. IJTll. ITY ADVISORY COMMITTEE MEMO DATE: November 12, 2003 TO: UTILITY ADVISORY COMMITTEE FROM: Scott McLain, Deputy Director for Power Systems SUBJECT: BPA Lawsuit Settlement Briefing Summary: A settlement agreement has been reached between various public utilities, investor owned utilities(IOU's), and BPA over lawsuits filed in 2001 concerning the level of the IOU benefits in the 2001 BPA rate case. If the City chooses to support this settlement, City Council will need to approve signing of several documents no later than January 21, 2004. Recommendation: Information onl~ at this time. Background/Analysis: During the BPA rate case that established wholesale rates in 2001, several public utilities, including the City as a member of the WPAG group, filed suit against BPA challenging the validity of several issues. The main contention was the level of benefits that BPA gave to the IOU's. In this rate case the IOU's received about $450 million in benefits as compared to about $150 million in previous years. Increases in the IOU benefits causes the pt~blic power customers rates to increase. BPA also included in the contracts to the IOU's a poison pill that gave the IOU's $200 million if their agreement was invalidated though a lawsuit in the 9th circuit. Throughout the last year, the parties have been working on a settlement agreement to avoid litigating the issues in Federal court. On October 21st, the parties completed a settlement document that all parties must sign by January 2Pt, 2004. Every party that is a litigant must sign for the settlement to be valid. A single litigant failing to sign the various document would void the settlement. I am not recommending any action be taken at this time, but I did want to get the members of the UAC information about the suit and the settlement early in the process to help understand the various issues. Attached is a summary produced by BPA that gives a fairly good explanation of what is taking place (although is does have a slight BPA slant), and also a more detailed explanation from our WPAG attorney. The summary at the end of the WPAG brief gives a good description of the benefits of the settlement and what we are giving up with this settlement. Attachments: BPA Journal, WPAG Brief OURNAL MONTHLY P U B LIC ATION OF THE BONNEVILLE POWER ADMINISTRA T'IO N Special Edition, October 23, 2003 Web site: www. bpa.gov/corporatdkclhome/journal egion's utilities offered referendum on The parts of the agreement tigation settlement The agreement has three pans: hursday Oct. 23 was day one in a crucial 120-day · A Stipulation and Agreement for Settlement · .hod during which public power utilities and other (Stipulation), mies that have filed litigation against the Bonneville )wer Administration will decide whether to end their · Amendments to the existing IOU contracts wsuits and make possible a wholesale power rate (IOU Amendment) and :duction for many public power utilities, direct-service · Slice Settlement Agreements. tdustries such as aluminum companies and the :gional investor-owned utility (IOU) that buys power The StipUlation states the terms and conditions that om BPA. BPA, Vera Water and Power, Avista Corpora- each party agrees to in the settlement. The. Stipulation on and Puget Sound Energy each signed the legal has three attachments. vcuments that define the terms and conditions of the · Covenant Not to Sue: A contractual promise in :ttlement, establish its effective date and make it a which parties to the settlement agree not to file hal action by BPA under the Northwest Power Act. future suits challenging the Stipulation or aspects he suits, filed earlier by various utilities in the region, of BPAg rates. aal]enge the nature and level of investor-owned utility · Motions to Dismiss: A Set of motions that ask the enefits and other contractual arrangements entered Ninth Circuit Court of Appeals to dismiss the pend- ~to by BPA in 2001. BPA is required by the Northwest lng contract and policy-related litigation. ower Act to provide benefits to IOU residential and ~alt farm customers. The challenge is over the level of · Motion to l~mtt Issues on Cert~!~ Rate claims: ~e benefits, not over provision of the benefits. Which asks the Ninth Circuit Court to limit the issues that parties can raise on their existing chal- ! the settlement succeeds, BPA would eliminate a lenges regarding BPAIs 2002 ~'holeSale power rates. .2 percent rate increase that took effect Oct. i and :duce rates 7.4 percent below 2003 average rates. The In addition to the Stipulation, BPA signed the IOU et effect, compared to current rates, would be a nearly Contract Amendments and the Slice Agreements. 0 percent reduction in wholesale power rates for The IOU Contract Amendments commit the IOUs to sca] year 2004. eliminate the $200 million risk contingency payment tow it would work and to defer the $269 million in benefits from this rate period into FY 2007-2011. Each of the six regional IOUs n basic terms, the lOUs would give up a $200 million has been offered an amendment but it is not necessary isk contingency payment and defer $269 million tn for all of the IOUs to sign for the settlement to be ,enefits into the FY 2007-2011 period. The affected binding. If an IOU chooses not to sign its amendment, ~ublic utilities would get rate relief for the remainder the other parties to the settlement can choose to con- ,f this rate period in exchange for some increased costs tinue with the agreement, or not, based on their assess- n the FY 2007-2011 period. Both the publics and the ment of the associated risks. OUs would receive certainty about the range of benefits hat the residential and small farm customers of the The Slice Agreements ensure that purchasers of the Slice OUs will receive in the latter period, power product will benefit in the FY 2004-2006 period from the deferral of IOU benefits into the next rate )ne of the major benefits of the settlement would be period. It also ensures that the Slice purchasers will pay :limination of several lawsuits. That should provide a for their share of the deferred monetary benefits in the nuch improved business climate for all utilities and tllow the region to focus on the future. ext rate period. All Slice purchasers have been offered ~e Slice Agreements, but it is not essential for all Slice Schedule urchasers to sign in order for the settlement agreement ~ be binding. Again, if a Slice purchaser does not sign · Oct. 23 - BPA and at least one public litigant ~e agreement, BPA has the opportunity to decide and one IOU sign the Stipulation establishing 'hether to continue, the effective date. BPA releases the Record of Decision on the Stipulation. 'he process · 90 days later - Deadline for'all public litigants a order to implement the setdement, all public utilities to sign the settlement. Failure of any one ~at are parties to the litigation must sign the Stipulation public litigant to sign results in automatic nd the Covenant Not to Sue and the applicable termination of the settlement. This is also lotions to Dismiss and Motion to Limit Issues on the deadline to file legal challenges to'the iertain Rate Claims within 90 days of the effective date Stipulation. f the Stipulation. Public customers may opt to merely · BetWeen days 91 and 105 - IOUs assess risk .gn the Covenant Not to Sue and necessary motions. . is essential for the public litigants to sign the exposure and may opt out under,certain tipulation (or Covenant not to Sue and appropriat$ c~rcumstances defined in the Stipulation. Failure of IOUs to opt out binds them to the lotions) within 90 days for the agreements to be final agreement. · . nd binding. · Between days 106 and 120 - BPA and publics ollowing that 90-day period, if all public litigants have .gned either the Stipulation or applicable motions, the assess value of settlement and may opt out under certain cireurustances defined inthe DUs will have 15 days to opt out of the settlement Stipulation. If BPA or public litigants opt out, greement if certain events have occurred. For example, the agreement terminates, lf~teither BPA nor ntities might file claims that challenge either the the public litigants opts out, the settlement arious documents that are part of this settlement becomes binding on all parties and the rate ackage or aspects of BPA~ 2002 wholesale power rates. ! such an action were successful, it could undermine decrease goes into effect. ae framework of the settlement. Therefore, the IOUs · March - New settlement rates go into effect zould have the opportunity to decide whether to and refunds appear on bills mailed in Mamh. ontinue with the settlement in light of the challenges. a the event any IOU elects to back out, the settlement ~ not automatically terminated. After the IOUs have the pportunity to assess the landscape, the public utility tigants and BPA will also have 15 days to review the urrent status of the challenges to the settlement and ny IOU response and decide one last time whether to tick with the settlement. [ the settlement fails, the IOUs continue to take ervice under their existing contracts. The current ..2 percent rate increase established for FY 2004 hat went into effect on Oct. 1, 2003, will remain in ffect, as will all the lawsuits that the agreement would ~therwise dismiss. :or More Information :or more information,'a comprehensive list of questions md answers about the settlement is available on the nternet at www. bpa.gov/power/LP/settlement/. )OE/BP-3552 )ctober 23, 2003 WESTERN PUBLIC AGENCIES GROUP BRIEFING MATERIALS FOR GENERAL MEMBERSHIP MEETING October 23, 2003 Presented by: Terence L. Mundorf, Marsh Mundorf Pratt Sullivan & McKenzle Agenda · Litigation Settlement Discussions Update · Litigation Settlement DocumentsWP-02 Litigation Settlement Discussions Update · Litigation drafting efforts ended on Monday. · BPA intended to send out signed copies of settlement documents on Tuesday. · BPA anticipated that one public and one IOU would sign the Settlement documents on Wednesday. · The signing of the documents by BPA, one public and one IOU will commence the running of the 90-day statute of limitations period for challenges to the Settlement. · Each of you has this 90-day period to determ'me whether you will support or oppose the Settlement. · A legal challenge to the Settlement is not necessary to void the Settlement. · A decision by one public that is a party to the litigation (such as any WPAG member) will void the settlement according to its terms. · As a consequence, any of you that wish to oppose the Settlement need not take any legal action to do so. · Declining to sign the Settlement documents will be sufficient void the Settlement. · For those that wish to support the Settlement, there are two alternative courses of action. · You can sign the Stipulation, Covenant Not to Sue and the Motion to Dismiss; or · You can sign just the Covenant Not to Sue and the Motion to Dismiss 2 Litigation Settlement Documents Overview of Settlement · The Settlement is intended to dispense with pending litigation. · Litigation that would be dismissed includes: · Challenges to IOU Subscription contracts · Challenges to Slice Agreement · Challenges to WP-02 rates that deal with rate test, forward flat block forecast, and IOU benefits generally · The Settlement would not require the dismissal of challenges to SN' CRAC trigger determination. · The Settlement is composed of six documents which include: · Stipulation · Covenant and Waiver Not to Sue · Motions to Dismiss · IOU Amendment to Amended Settlement Agreement (IOU Amendment) · Slice Settlement Agreement · Record of Decision · Copies of each of these are attached, and we will review the highlights and lowlights of each 3 Stipulation · The Stipulation is the compendium of all the rights and obligations under the Settlement, and points to the various documents that make up the substance of the Settlement. · While the Stipulation primarily points to other documents, it also contains some substantive provisions that are worthy of consideration. · Section 1 - Effectiveness · Starts the 90 day statute of limitations clock running when BPA, one public and one IOU sign up · Significance is that this is also the period within which each of you must determine whether to support or oppose the Settlement. · Sections 2 and 3 - New Amendments and Agreements · These sections obligate BPA to offer the IOUs the IOU Amendments and to Slice customers the Slice Settlement Agreement. · Both will be discussed later. · Section 4 - BPA Stipulation Regarding Monetary Benefits · BPA contractually agrees that it will not assert that the monetary benefits to be paid the IOUs are subject to 7Co)(2) rate test. · BPA contractually agrees that the Slice Settlement Agreement is not a modification to the Slice Agreement or rate methodology. · Agrees to vigorously enforce the Waiver and Covenant Not to Sue. · Section 6 - Rate Adjustment · Obliges BPA to implement the rate decrease if the Settlement is not voided by the 121st day after the Effective Date. · Section 7 - Poison Pill · Contractual commitment not to include a poison pill in future contracts. 4 Stipulation (cont'd) · Section 8 - Principles · Statement of"commitments" by BPA negotiated with Wright by Leone, Reiten and Saven. · Not contractual obligations, but statements of intention that may have political value if Wright does not live up to them. · Basically state that he will try to avoid an FY05 SN CRAC by pursuing cost reductions and revenue increases, and will conduct a collaborative process with customers to identify both. · Also agrees to do a forward look when making the FY05 and 06 SN CRAC determinations to see if there is good financial news that would avoid an increase. · Expressly states that failure of BPA to achieve these gnals has no legal consequence. · Section 9 and 10 - Motions and Waiver. · These sections require publics that are litigants (and that means all of you) that wish to support the Settlement to sign a Waiver and Covenant Not to Sue, and Motions to Dismiss, within the 90 day period. · These will be discussed in detail later. · Section 11 -Voiding the Settlement · Two ways for the Settlement to be voided. · First is automatically upon the occurrence of certain events, and second is at the election of any party to the Stipulation upon the occurrence of certain events. · Events that automatically void the Settlement include: · Failure of Public Litigant to Execute and Deliver. Failure of any Public Litigant to execute and deliver to BPA in trust, on or before the 90th day after the Effective Date each of the following, Stipulation (cont'd) (A) a Waiver and Covenant Not tO Sue; 03) a Motion to Dismiss Causes and Claims {unless such Public Litigant has as of the 90th day after the Effective Date dismissed with prejudice any and all of its petitions for review in any and all the Referenced Causes (other than with respect to Reserved Claims in Cause No. 00-70948), withdrawn as an intervenor in any and all of the Referenced ' Causes (other than with respect to Reserved Claims in Cause No. 00-70948), and delivered with the Waiver and Covenant Not to Sue a copy of an order (or other indicia of dismissal with prejudice and withdrawal) f~om the Ninth Circuit dismissing all such petitions for review and granting all such withdrawals}; and (C) a Motion to Limit Issues on Certain Rate Claims {if such Public Litigant has as of the 90th day after the Effective Date filed a petition for review or motion to intervene in the Ninth Circuit that includes or may include any claim that a Party would be precluded fi:om filing or maintaining by its Waiver and Covenant Not to Sue regarding BPA's WP-02 rates (or any CRAC during the WP-02 rate period)}. · Withdrawal from Stipulation. Withdrawal, pursuant to an Event of Default, fi:om this Stipulation by any Public Litigant or BPA. · Court Action Prior to 121st Day. Withdrawal by any Public Litigant, BPA, or Investor Owned Utility pursuant to an Event of Default described in item (iii), (iv), or (viii) of section 11(b) below. · Failure of United States Department of Justice to Authorize. Failure of the Department of Justice to notify BPA in writing on or before the 90th day after the Effective Date of its intent to authorize the appropriate departmental officials or attorneys to sign and file on behalf of Respondent the Motion to Dismiss Causes and Clainas and the Motion to Limit Issues on Certain Rate Claims and to the extent necessary or advisable to provide its approval of the Stipulation. 6 Stipulation (cont'd) Any of the foregoing happens, the Settlement ends automatically. Second category is events that could, but do not automatically, void the Settlement unless a party withdraws as a result of such an event. · These are called Events of Default, and include: O) Failure of Other Litigant to Execute and Deliver. Failure by any Other Litigant that is not a Party to execute and deliver to BPA in trust each of the following: (A) a Waiver and Covenant Not to Sue; CB) a Motion to Dismiss Causes and Claims {unless such Other Litigant has as of the 90t~ day after the Effective Date dismissed with prejudice any and all of its petitions for review in any and all the Referenced Causes (other than with respect to Reserved Claims in Cause No. 00-70948), withdrawn as an intervenor in any and all of the Referenced Causes (other than with respect to Reserved Claims in' Cause No. 00-70948), and delivered with the Waiver and Covenant Not to Sue a copy of an order (or other indicia of dismissal with prejudice and withdrawal) from the Ninth Circuit dismissing ail such Petitions for review and granting ail such withdrawals}; and (C) a Motion to Limit Issues on Certain Rate Claims {if such Other Litigant has as of the 90th day after the Effective Date filed a petition for review or motion to intervene in the Ninth Circuit that includes or may include any claim that a Party would be precluded from filing or maintaining by its Waiver and Covenant Not to Sue regarding BPA's WP-02 rates (or any CRAC during the WP-02 rate period)}; (ii) Failure of the Investor Owned Utilities to Execute and Deliver. Failure of any Investor Owned Utility to execute and deliver this Stipulation, any Amendment to Existing Settlement Agreement required pursuant to section 2, any Motion to Dismiss required pursuant to section 10, or a Waiver and Covenant Not to Sue required pursuant to section 9; Stipulation (cont'd) (iii) Challenges to Settlement. Filing or maintaining by any person or entity of any claim in the Ninth Circuit (or any other court) that a Party would be precluded from filing or maintaining by its Waiver and Covenant Not to Sue, including a challenge to any of the following actions: offering or enterihg into this Stipulation, offering or entering into any Amendment to Exist'rog Settlement Agreement, offering or entering into any Slice Settlement Agreement, issuance of the final Record of Decision as described in section 5, filing or join'rog tho Motions to Dismiss, or any action proposed or taken by the Adm'mistrator required or contemplated by this Stipulation or other Settlement Documents; (iv) Failure to Dismiss Rate Claims. Failure by any person or entity that is not a Party that has filed a petition for review or intervened in any proceeding regarding BPA's WP-02 rates (or any CRAC during the WP-02 rate period) to execute and deliver to BPA in l~ust a Waiver and Covenant Not to Sue and, a Motion to Limit Issues on Certain Rate Claims, if such person or entity has as of the 90th day after the Effective Certain Rate Claims, if such person or entity th has as of the 90 day after the Effective Date filed a petition for review in the Ninth Circuit; (v) Withdrawal of Investor Owned Utility(s) from Stipulation. Withdrawal, pursuant to an Event of Default, from this Stipulation by any Investor Owned Utility; (vi) Agreed-to Annual Deferral Amounts of Less Than $75 Million. The Investor Owned Utilities fail to enter into Amendments to Existing Settlement Agreements pursuant to section 2 specifying Annual Defenal Amounts in the appropriate exhibits to their respective Amended Settlement Agreements in an aggregate amount of $75 million per year for FY 2004, 2005 and 2006 (this amount does not include the $55 million of deferrals previously agreed to for FY 2003); (vii) Failure of Slice Customer to Execute Slice Settlement Agreement. Any Slice Settlement Agreement Party fails to execute and deliver a Slice Settlement Agreement pursuant to section 3; or (viii) Court Action Prior to 121st Day. This Stipulation, any other Settlement Document, or the Record of Decision as described in section 5 is, prior to the 121st day after the Effective Date, enjoined, stayed, or determined to be void, unenforceable, or unlawful. · If any of these events occur, the IOUs have from the 90~ to the 105~ day to withdraw, and the publics have from the 106th to the 120t~ day to withdraw. Stipulation (cont'd) · Withdrawals are irrevocable, and result in the Settlement being voided. * Effect of either automatic voiding or event of default voiding is that everyone returns to same spot - current contracts remain in place, litigation remains in place, all as if this Settlement exercise had never occurred. · This includes BPA withdrawing its ROD, which it has never done before. · Section 12 - Survival · A section that the lawyers will love. * States that if any of the separate Settlement Documents (Stipulation, Slice Settlement Agreement, IOU Amendment) is individually held to be invalid after the 120 day period has expked, the other documents remain in effect. · Based on IOU concern about the legality of BPA's section 7 commitment in the Stipulation. · Section 19(a) - No Precedent ·The section makes the actions (and inactions) of the parties non-precedential for the period after 2011. · This covers the ROD issued by BPA as well, which is a first. 9 Waiver and Covenant Not to Sue · This is the document that contains the provisions that will limit rate and contract litigation with BPA for the period ending 2011. · The prohibited legal actions include: (i) challenges (except as provided in section 11 of the Amended Settlement Agreement and exhibits thereto) all or any part of the Forward Flat- Block Price Forecast as defined and applied in the Amended Settlement Agreements for all or any portion of the period beginning October 1, 2001 and continuing through September 30, 2011; (ii) challenges all or any part of BPA's Forward Flat-Block Price Forecast in the WP-02 proceeding; , (iii) asserts that the Ri, Rate, Lowest PF Rate, RL, or Lowest PF, as such terms are defined and used to calculate monetary payment under the Amended Settlement Agreements, is a rate or a sale of power, as those terms are used in the Northwest Power Act, for all or any portion of the period begi~nlng · October 1, 2001 and continuing through September 30, 2011; (iv) challenges all or any part of the RL-02 Residential Load Finn Power Rate or the PFXS-02 PF Exchange Subscription Rate established in the WP-02 procead'mg; (v) asserts that section 7C0)(2) or section 7(I))(3) of the Northwest Power Act applies to the RL Rate, Lowest PF Rate, RL, or Lowest PF, as such terms are defined and used in the Amended Settlement Agreements (or applies to any CRAC or other adjustment clauses with respect to such RL Rate, Lowest PF Rate, RL, or Lowest PF), as defined and used under the Amended Settlement Agreements, for all or any portion of the period beginning October 1, 2001 and continuing through September 30, 2011; (vi) challenges all or any part of the application (or lack of application) of section 7(b)(2) or 7(b)(3) of the Northwest Power Act in the WP-02 proceeding (or in any CRAC during the WP-02 rate period); (vii) challenges all or any part of the establishment in WP-02 of the Slice Rate or Slice Rate Methodology in the WP-02 proceeding; (ix) challenges all or any part of any final action proposed or adopted by BPA offering or entering into the Stipulation; 10 Waiver and Covenant Not to Sue (cont'd) (x) challenges all or any part of any Existing Settlement A~eement, Amendment to Existing Settlement Agreement, Amended Settlement Agreement or any final action proposed or adopted by BPA offering or entering into any such agreement or amendment; (xi) challenges all or any part of any Slice Agreement, Slice Settlement Agreement, or any final action proposed or adopted by BPA offering or entering into any such agreement; (xii) challenges all or any part of any final action proposed or adopted by BPA filing or joining the Motions to Limit Issues on Certain Rate Claims and Motions to Dismiss Causes and Claims as described in section 10 oft. he Stipulation; (xiii) challenges all or any part of any final action proposed or adopted by BPA issuing the finai Record of Decision as described in section 5 of the Stipulation; (xiv) challenges all or any part of any other final action, proposed or adopted by BPA, that is required or provided for by the Stipulation; or (xv) asserts, in Ninth Circuit Cause No; 00-70948, any claLm that is not a Reserved Claim. · Put in one sentence, challenges based on the rate test, the forward flat block forecast, the Slice rate or rate methodology, or any of the elements of the Settlement (the Stipulation, the IOU Amendment, the Slice Settlement Agreement or the ROD) are out of bounds. · Basic idea is that you ought not to sign the Settlement to get the rate decrease, then attack any of the elements of the Settlement package. · Waiver also includes no precedent language that is designed to limit these prohibitions to the period ending 2011, and prohibit anyone from using them as precedent in the future. 11 Motions to Dismiss · These come in two varieties for publics that arc litigants. · First is motion to dismiss the pending litigation over the Subscription contracts. · These motions would dismiss permanently the Subscription litigation, and would preclude challenges to these contracts through 2011. · The motions would only be filed if the Settlement is not voided pursuant to section 11 within the 120 day period after the Effective Date. · This motion will not guarantee that all Subscription litigation will be resolved by the Settlement. · The DSIs have on file two Subscription petitions, and have not indicated that they will join the Settlement or dismiss these cases. · As a consequence, the motions expressly retain for the parties the status as intervenors should the DSIs elect to proceed with their litigation. · By doing so, parties to the Settlement can continue to participate in this litigation to protect their interests consistent with their commitments in the Waiver and Covenant Not to Sue. · The second motion deals with challenges filed as a result of the WP-02 rates receiving final FERC approval. · This motion would cover the petition recently filed by the WPAG. · It basically says that ifa party elects to continue their W'P-02 litigation should the Settlement become final, they will limit the issues litigated to those permitted by the Waiver and Covenant Not to Sue. · These motions will only be filed by BPA should the Settlement survive the 120-day waiting period. · If the Settlement is voided pursuant to section 11 of the Stipulation within the 120- day period, these motions will not be filed and will be returned to each party. 12 IOU Amendment · The IOU Amendment revises the IOU Amended Settlement Agreement to incorporate the changes to be implemented by the Settlement. · In summary, these changes include: * Eliminating the ability of BPA to deliver actual power to the IOUs for the 2006-2011 period. · Limiting the IOU benefits during that period to money only. · Obligating the IOUs to defer receipt of $75 million per year in financial benefits for the next three years of this rate period. · Obligafmg BPA to repay the deferrals during the 2006-2011 period plus interest at 3%. · Obligating the IOUs to pay their proportionate share of the deferral repayment obligation during the 2006-2011 period. · Eliminating the right of the IOUs to use the $55 million in financial benefits deferred out of this fiscal year as an Offset to'any SN CRAC rate increase during the remainder of this rate period (except for PGE). · Establishing the method for determining the forward flat block price for the next year base on independent third party mark-to-market methodology. * Establishing a floor for financial benefits orS100 million and a ceiling of $300 million for the 2006-2011 period. ·Permanently elim'mat'mg the BPA obligation to pay the $200 million poison pill. · Giving the IOUs increased time period during which to flow the financial benefits through to their small farm and industrial customers. · Provisions regarding severability deserve special attention. · If the Settlement is voided within the 120-day period pursuant to section 11 of the Stipulation, the IOU Amendment disappears. 13 lOLl Amendment (cont'd · If there is a court find'rog of invalidity after the 120 days, then the following applies: · If the deferrals are held unlawful after the 120 days but prior to 24-months of the effective date of the Stipulation, then / For PGE, their deferrals will be repaid over a 12-month period. ,~ For all other IOUs, their deferrals will---at each Investor-owned Utility's election---be returned over a period equal to the deferral period or the five- year period FY '07 through FY' 11. · If the deferrals are held unlawful after 24-months from the effective date of the Stipulation then: , For PGE, their deferrals funds will be repaid over a 12-month period. · ~For all other IOUs, the deferrals will be repaid over the five-year period FY '07 through FY '11. ~' The mark-to-market methodology and the provisions regarding financial benefit would remain in place. · The theory was that after two years, we have gotten $200 million in deferrals and the elimination of the $200 million poison pill, so leaving the new IOU benefit calculation in place made sense. · More to the point, this keeps BPA out of the market for augmentation for the IOUs, which was a primary objective of this exercise. 14 Slice Settlement Agreement · The Slice Agreement has a completely different basis.than other purchases. · Most BPA products are based on a fixed (???) rate that does not change but for specific circumstances or events. · The Slice rate pays a monthly mount based on a forecast of actual costs (with certain exclusions), and then a true-up to reflect actual costs. · The result is that Slicers are currently paying the IOU monetary benefits in their rate. · For Slicers to receive any benefit in the foim of reduced costs from IOU deferrals, such deferrals must receive FASB 71 treatment. , · In contrast, other customers see the benefit of such deferrals in the form of a lower SN CRAC even if there is no FASB 71 treatment. · Hence, the non-Slice customers got a benefit from the IOU deferral of $55 million last fiscal year, while the Slice customers did not. · At this point, BPA is uncertain whether their outside auditor will give them FASB 71 treatment of the IOU deferrals that will occur if the Settlement takes effect. · Absent an agreement between BPA and Slicers, it is likely that they would neither receive any reduction in costs nor participate in the repayment of the IOU deferrals. · The Slice Settlement Agreement deals with this situation by setting up a series of payments to the Slicers by BPA and subsequent repayments by the Slicers to BPA. · These payment schemes result in the Slicers getting costs reductions that mirror those that will be seen by non-Slicers, and impose repayment obligations that also mimic the repayment obligations of non-Slicers. · The Slice Settlement Agreement does this regardless of the presence or absence of FASB 71 treatment of the deferrals. 15 Record of Decision · Section 5 of the Stipulation requires BPA to issue a Record of Decision that states: · the monetary payments, and calculations thereof, under sections 4(c) and 5 of the Amended Settlement Agreements constitute neither a rate nor a sale of power as those terms are used in the Northwest Power Act; and · the offering and execution of the Slice Settlement Agreement does not constitute a change or modification to the Slice Rate, the Slice Rate Methodology or the Slice Agreement. · BPA has issued tl'ds Record of Decision, and it is available at the BPA website. · The purpose of the ROD is two-fold: · First, to provide rationale and justification for the actions taken. · Second, to trigger the statute of limitations clock and cut off challenges filed after the 90 period has expired. · The ROD is a support document only, 16 Summary · The proposed Settlement does a number of things that are potentially beneficial. · These include: · Prohibit power sales to IOUs, which gets BPA out of the market £or augmentation power, · Places a limit on IOU benefits that is lower than current payments. · Aligns IOU and public interests in BPA cost control by reducing IOU benefits when BPA costs increase. · Permanently eliminating the poison pill, and obligating BPA not to do it again. · Obtaining a BPA "commitment" to work with customers on cost reduction and revenue enhancement to avoid FY05 and 06 SN CRAC rate increases. · Implementation ora rate reduction. · These benefits come at a price which is not insignificant. · The price to be paid for this includes: · Permanent dismissal of challenges to the IOU Subscription contracts, and the opportunity to force BPA back to the RPSA at least until 2011. · Foregoing the opportunity to assert rate test arguments at the 9th Circuit, and potentially achieve lower rates, until at least 2011. · Acceptance of the status quo, including the IOU buy down and buy back contracts that were negotiated during the energy crisis. ·Foregoing the opportunity to bring to the attention of the 9th Circuit the behavior of BPA regarding the poison pill. · Loss of opportunity to use pending litigation to force a longer term settlement that will resolve more of the fundamental issues we have with BPA. 17 Summary (cont'd) · The Settlement really presents two paths; · One is to make a short-term fix that helps in the rate area that is more certain; but comes at the price of sacrificing leverage for making longer-term fixes at BPA. · The second is to forego this Settlement, and retain the pending litigation as a leverage point to negotiate either a different short-term deal, or a longer-term deal that addresses the more fundamental BPA problems. · The second path could involve negotiation, or litigation, or both, and as a consequence the outcome is less certain. · Although economics enters into this decision, it appears to be one primarily of policy. · This is a close call, and them are reasonable basis for electing either option. 18