HomeMy WebLinkAbout000784 Original ContractCity of Port Angeles
Record # 000784
CONSULTING SERVICES AGREEMENT
EES CONSULTING, INC.
Billing Address
570 Kirkland Way, Suite 100, Kirkland, Washington 98033
(425)889-2700
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, WA 98362, Attn: Phil Lusk (hereinafter "CLIENT').
I. SCOPE, COMPENSATION AND QUALITY OF CONSULTING SERVICES
EES CONSULTING will provide the services and be compensated for these services as described 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 is signed.
II. TERMS & CONDITIONS OF CONSULTING SERVICES AGREEMENT
1. Timing of Work. EES CONSULTING shall commence work on or about January 1, 2014.
2. Relationship of Parties, No Third -Parry Beneficiaries. EES CONSULTING is an independent contractor under this Agreement. This Agreement gives no rights or
benefits to anyone not named as a party to this Agreement, and there are no third party beneficiaries 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:
i. Worker's Compensation and Employer's Liability Insurance as required by applicable state or federal law.
ii. Comprehensive Vehicle Liability Insurance covering personal injury and property damage claims arising from the use of motor vehicles with combined
single limits of $1,000,000.
iii. Commercial General Liability Insurance covering claims for personal injury and property damage with 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 harmless 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) arising 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 with 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
CLIENT's or CLIENT's agents proportionate negligence, if any.
5. Resolution of Disputes, Attorneys' Fees. The law of the State of Washington shall govern 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 written notice to the other sent to the
addresses listed herein.
In the event CLIENT terminates this agreement. CLIENT specifically agrees to pay EES CONSULTING for all services rendered through the termination date.
EES CONSULTING, INC.
By: Gary Saleba w z
Title: President
Date: November 7. 2013
CITY OYORTANGELES
By:
Title: `✓L�� l�l���m/�Y�.�
Date: _ PIA L41 L-9 t%
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 and transmission 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
2. Public Utilities shall compensate the Attorney for these services at an average
hourly rate not to exceed $180.00. 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: November 7. 2013
Date: CA-AU(4...t" ) /J o o l q
By: � ' � 4 1
Terence L. Mundorf
CITY,OK PORT ANGELES
By: b" K, V_
Manager
Page 2 of 2
c
M m O N V O m O n V M O m N I M O (0 M m
N
0
O
m m O n M M r t0 (0 N M M M M m V M m N
N n O M m r V' r O V m M c- n 0 M N r N
V
N
0
C
O
d ro
O
d Q s
•3
o
b
cx
N
N O O m N d' V (0 M N m m M O V N M V r
V'
O
C
O
N N O m N O O m M V N n N h (0 m n M n O M
m N N M (0 C m O M m 0 (C •- w (M m m U1 N N
(O
O
O
W I N
W
O
1 U O.
N O ro
N V M N N
- U
has
o
N � •3
a
v
3
m
(» (» (» EH (A EA ffl (A EA 69 dl EA EA (f3 Ul dl (» (» (» EA (»
(»
E9
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0
0
0 n m (V m r m N
' IQ
m
0
r Mi M N 6 o o v v 0 0 M M 0 0
o0
E c
U
U o
ro
C
r
d
y � d
o
U ro E
m
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0
0
O
O m M N mOV Vm m CO O O O m m m
NO mO N N N O N m V N r M
N
0
OTI >
U
M M 0 O O N N O O O
m
o
O
m y—
?
C p M
ro c
w
O
=_
U O
>
Q
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0
0
o N r N
O m n M M (0 m — N M m Oo
N
O
N N �- O O O N N O O
�
n
0
nC
d
Nm
m 0 (0 m V M m m M O N m O O N (o �- O N
O> O O
N
m
(0
0
d
n V 0 N n N N (0 O O N n r
t0 d' O M O N (0 M N �-_ V (0 V O (D v m M O N
to
.-
c
O O O m N m (0 m m m N M m O O W W m V
V m 0 m m M O V N O w O N N n (0 (0 n
N
O
0
V
N
N v u> m v m m N r (n m M m M 'cl' �- O O M m m N
V
n
Z
Q M m n (0 V mm M N W N m n �- O m N m m
M M N
N
m
0
.O m O M (0 N C O �2 N D
N
H3 V3 (fl EA ffl (A fA EA (A (A fA (A (fl dl fA fA Efl (A Hi (A Vl
0o o 0 0 0 0 0 0 0 0 0 0 o 0 0 0 0 0 0 0
0
0
O m m N m (0 m O r m N M � V O N M M N n O M
V
0
N V (0 N m O m O N N m O O O N N O O— O
n
0
�
O
O
d
d
O.
0
Uj
m 0 0( N N m m M O O N O r (0 O O O N n
N
M
T
w
` m O O M m O V n r n 0 m M O m 0 m N V V
X 0 0 (O � N m m N m O m M O M m m co N N �
m
0
m
m
�
d
C (o N o m v m m f� V N N o t� m V U) N m m
O
M
N
m 0 0 (0 V V m M M (0 O m 0 m r M 7 m m O M
O O m V N N N m n m N n N M t0 m O O N
(0
N
O
N
W
N n n(0 N (O N 'V N M to M V r c V m m (O O
m
n
(0 C' n O n m N r (0 m N N V N m t0 (0 n v
(0 (o m N m m (0 N n N N
V
m
M
(O
N
Y
0 o o a o o 0 o 0 o 0 0 0 0 0 0 0 0 o o 0(
0
O (O O O N O O (0 V' m n M m M N r m O O r
(D
O
o
N) I� co N m r t� �- r M N � O O O M N O
�
�
O
d
E
d
Q
O
y
m O n 0 (0 m N N m M r O N M m N O N m N M
N V m m r O m m V N
V
M
m
U
N �- m M .- M m
V (0 N O (0 m a
w
m
0
N m� m m V r M n N N
r m N
C r
C �
o
o
N
c
O >`
c
N
Qa
oE
o
a
w oa
d
>-
Q m m
a
w
_ m E E
c U
o
o c
z Z o p a
U
Z z z z R '- 0 3 a Eo 3
c
p p p p a >. U o -o U -o E
W z) m
o
O p d
EL m d a a a c a o m m m m
a a m c J
.o -.c L
a m�
ao c 3 U E U
w U 9 w 10 U 0 0 ci a m o
j = U c c o y d g c o
To
c E y
o m o m o o w o E Y c c 3> o a Y c
o
m m m ro m m m w y m U a o E m w c `m o
n
o
.� m U U U U' Y�� a U m Q F W U O a f-
`m
m
v
Western Public
encies
•; • •.
2014 Scope of Services and Budget
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. 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, 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" or
"BPA") 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
*XUBHOO
Scope of Services
The 2014 scope of services for WPAG is proposed as follows:
General WPAG Activities and Meetings
During 2014, 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
RP -16 Pre -Rate Case Workshops
BPA will commence a combined transmission and power rate case in November of 2014
that will set rates for the two year FY 2016-2017 rate period ("1313-16"). BPA will hold a
series of pre -rate case workshops through 2014 up to the beginning of the BP -16 rate case.
These workshops will help establish the policy and technical underpinnings of BPA's initial
BP -16 rate proposal for both power and transmission rates. WPAG will participate actively
in the workshop processes leading up to the rate case, and will intervene in the case once it
begins. The workshops will present issues as described below.
Issues Identified for Workshops
Segmentation of the Transmission System — During the last rate case a number of
BPA's larger public power customers, the investor owned utilities, power marketers, and
wind generators (collectively "Allied Parties") made a concerted effort to have BPA
redefine its Network transmission segment (the "Network"). The Network is BPA's
largest transmission segment and it basically includes all transmission facilities at 34.5
kV and above that are not part of the Southern or Montana Interties. Nearly all of BPA's
transmission customers take service over the Network. The Allied Parties argued that
BPA should remove lower voltage (i.e., facilities below 116 kV) and radial transmission
facilities from the Network for rate purposes and directly assign the costs thereof to
those customers who take service over them. The Allied Parties contend that their
proposal is more consistent with cost causation, Federal Energy Regulatory Commission
(FERC) precedent, and BPA's responsibilities under its organic statutes. If adopted this
proposal would have significantly increased the transmission rates of many of WPAG's
members. In the last rate case, WPAG successfully argued that the Allied Parties'
proposal was contrary to BPA's core mission to spread the benefits of the Federal
system broadly at the lowest possible rate to all consumers regardless of where they are
located or what specific transmission facilities are used to serve them. In the final
record of decision BPA adopted WPAG's position. However, it also promised to hold
A-2
workshops with the region to further discuss, and potentially amend, its segmentation
policy prior to the BP -16 rate case. These workshops are scheduled to begin in January
of 2014. WPAG will oppose any proposal in the segmentation workshops that would
result in increased transmission costs to any WPAG member through the removal of any
transmission facility or facilities from the Network. On WPAG's recommendation BPA
has agreed that at least some of these workshops will be held not in Portland but
throughout region so that BPA may hear the direct input of local policy makers,
consumers and other stakeholders on any potential segmentation proposals. WPAG will
assist WPAG members in preparing for workshops held in their local areas, including
providing talking points and details as to how segmentations proposals may impact their
individual utility and consumers. This will be staffed by EESC and MMPS&M.
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. WPAG strongly opposed the
proposal to roll in the Montana Intertie in the last rate case. BPA, ultimately, agreed
with WPAG and did not roll in the intertie for the BP -14 rate period. However, BPA did
promise that further discussion on the roll in of the Montana Intertie would be part of
the segmentation workshops held with the region mentioned above. In the workshops
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.
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. In the last rate case BPA and the
rate case parties settled the generation inputs portion of the rate case. As part of that
settlement, BPA agreed to hold a series of workshops on operational and rate case
issues relating to generation inputs and the integration of wind generation. WPAG will
participate in the workshops and will attempt to promote rates and policies by BPA that
provide preference to the Federal base system (FBS) for load service, which reflect the
true costs of providing generation inputs, which give those receiving service the
incentive and means to manage generation integration costs, and which ensure that the
costs of resource acquisitions from third parties made by BPA to provide generation
input services to non -preference customers are borne by such non -preference
customers. This will be staffed by EESC and MMPS&M.
A-3
10Yt.I i TY
Allocation of Costs of Third Party Balancing Reserve Purchases. BPA has reached
the limit of the amount of balancing reserves it can provide from the FBS to balance the
variable output of wind generation in its balancing authority area. Since the balancing
reserve need for the wind fleet is higher than the ability of the FBS to provide such
reserves, BPA will be acquiring non-federal capacity and energy to make up the
difference between the need and FBS capability. While there is some speculation that in
the short run the costs of these non-federal acquisitions could be less than the cost of
the FBS, it is expected that over the long term they will be more expensive. The
question will be whether BPA should allocate the costs of those acquisitions to those
who caused them in the first instance, i.e., wind generators, or whether BPA should
spread the costs broadly across load, thermal generators and wind generators. Section
7(b)(1) of the Northwest Power Act provides that preference customers shall only pay
rates based on the cost of the FBS until the FBS is no longer able to meet all of their
needs. This means that under the statute BPA cannot allocate the cost of these non-
federal acquisitions to preference customers because the FBS can provide more
balancing reserves than is needed to meet the balancing reserve requirement of load.
WPAG brought this issue to the fore in the BP -14 rate proceeding, and asserted our
preference rights to this capacity. We will do so again in the pre -BP -16 rate case
workshops. Vindication of these preference rights may require litigation. This will be
staffed by MMPS&M.
Rate Case Workshops — BPA will likely hold many other rate case workshops on a
variety of transmission and power related issues prior to the commencement of the BP -
16 rate case. WPAG will participate in these workshops and will advance new proposals
and protect current positions as appropriate. This will be staffed by EES Consulting and
MMPS&M.
Oversupply Cost Allocation — BPA's OS -14 rate case is still pending and may be
continued into the first part of next year before the final record of decision is issued.
BPA is proposing to allocate to power customers more than 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 continue to 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.
501131M 127WIDAI .:/ ��
BPA has already commenced a number of proceedings, and will commence some additional
ones during 2014, that will have long-term impacts on preference customers. WPAG will
participate in the following BPA processes.
A-4
Integrated Program Review (IPR) — The IPR provides BPA's customers with an
opportunity to review and comment on BPA's expense and capital spending levels prior
to their inclusion in the upcoming BP -16 rate case. With BPA's implementation of the
Tiered Rate Methodology and the Residential Exchange Program Settlement, many of
the issues that were historically subject to heavy litigation in BPA's rate cases are largely
resolved for the duration of the Contract High Water Mark (CHWM) contracts. This is
particularly so on the power side, where for the last two rate cases that has not been
significant movement by BPA from the proposals made in its initial proposals and those
decisions adopted by the Administrator in the final record of decision. Nonetheless,
BPA's recent power rates have increased from between 7.8% to 9% from rate period to
rate period. Prior to the upcoming BP -16 rate case, we propose that WPAG commit
additional effort and resources into the IPR process to attempt to reduce the costs that
are to be included in the initial BP -16 rate case proposal in the first instance. The
strategy is to reduce those costs in the IPR, and any associated rate increase, before
they are effectively "baked" into BPA's initial BP -16 rate proposal. This will be staffed by
EES Consulting and MMPS&M.
Capital Investment Review — This process provides BPA customers an
opportunity to review and comment on BPA's long term asset strategies including asset
performance objectives, prioritizing risks, developing capital project strategies and
forecasting costs and uncertainties. WPAG will also urge BPA to give priority to capital
projects that provide service to preference customers and maintain the reliability of the
current FBS and transmission system. This will be staffed by EES Consulting and
MMPS&M.
Debt Management Strategy — 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. To fill the gap between BPA's borrowing authority and the cost of
BPA's projected capital needs, BPA is considering a number of initiatives and funding
alternatives. These include, but are not limited to, increased lease financing of
transmission builds, a second round of the power pre -payment program, and the use of
revenue financing to fund capital projects. In a situation where going to DC for
additional borrowing authority is ill-advised, and likely to be unsuccessful in today's
current environment, 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 and that keep BPA's capital costs as low as
reasonably possible. 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 EES Consulting and
MMPS&M.
A-5
Calculation of Peak Energy Amounts Under CHWM Contracts — The Contract High
Water Mark (CHWM) Contracts, including both the Slice/Block and Load Following
Contracts, include a provision where BPA can invoke a process for purposes of adopting
a methodology for calculating the amount of "peaking energy" available from the FBS to
serve a preference customer's load under their respective CHWM contract, as well as
the peak capability of non-federal resources used to serve requirements load. By
increasing the peak capability of non-federal declared resources and decreasing the
amount of FBS peak capability, BPA could materially impact the peak capacity available
to serve preference customer loads. For Slice/Block customers to the extent the amount
of peaking energy available to them from the FBS is insufficient to meet their peaking
energy needs, they will have to acquire additional resources to make up the difference.
For Load Following customers BPA will acquire non-federal resources on their behalf
and roll the costs thereof into their power rates. BPA has recently given some indication
that it intends to invoke the process for determining a methodology for calculating
available peaking energy. This matter invokes issues involving preference, BPA's 7(b)(1)
statutory rate directive to base preference customer rates on the costs of the FBS until
the FBS can no longer meet all preference customer needs, and contractual rights.
WPAG will participate in the process, if and when it is commenced, with the objective of
working towards an outcome that is fair to all preference customers regardless of
whether they take service under the Load Following or Slice/Block contracts. This will
be staffed by MMPS&M.
Environmental Redispatch/Oversupply Management — Wind generation interests
filed a petition with the FERC alleging, inter alfa, that the application of BPA's
Environmental Redispatch ROD did not provide comparable service, and also filed
petitions for review in the 9th Circuit seeking legal review of BPA's Environmental
Redispatch ROD. WPAG filed comments with the FERC defending BPA's Environmental
Redispatch ROD. The FERC ruled in favor of the petitioning wind interests, finding that
BPA's Environmental Redispatch ROD did not provide comparable service. BPA
responded with the Over -supply Management Protocol (OMP) under which it pays wind
generators for PTCs, RECs and delivery penalties when they are displaced. WPAG filed a
petition in the 9th Circuit challenging BPA's OMP on the basis that BPA does not have the
statutory authority to pay such costs. This petition is currently stayed until December of
2013. 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.
BPA Network Open Season Process — The network open season process that BPA
has employed has not been a success, and a revision of this process has been underway
for the last year or so. 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 two separate processes under
way regarding energy imbalance markets (EIM). The first is PacifiCorp's proposal to join
the California Independent System Operator (Cal -ISO) EIM. To access the Cal -ISO EIM,
PacifiCorp will need to use BPA's transmission system. This initiative could have
significant impacts on the transmission rights of preference customers and BPA's
operation of the transmission system. The second is the Northwest Power Pool's EIM
initiative. This initiative presents both a threat and a potential benefit to preference
customers. The threat stems 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 both 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.
Columbia River Treaty Review — The first phase of the Columbia River Treaty
review is nearing conclusion with the U.S. Entity scheduled to make a recommendation
to the U.S. Department of State by the end of 2013 on what elements the Pacific
Northwest would like the Department of State to pursue in its negotiations with Canada.
There will likely be additional opportunities to provide participate and provide
comments in the process thereafter. WPAG will monitor developments in the process
and provides comments and feedback where appropriate that protect preference
customer interests. This will be staffed by MMPS&M.
A-7
9Th Circuit Petition for Review
WPAG filed a petition for review in the 9th Circuit to question whether BPA has the statutory
authority to pay wind generators for their lost RECs, PTCs, and contract damages under
BPA's Oversupply Management Protocol (OMP). This action has been placed on stay
through December of 2013 at which time a new briefing schedule will be set by court order.
This will be staffed by MMPS&M.
Federal Energy Regulatory Commission
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.
NERC
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 2014. 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.
Olympia Legislative Session
EES Consulting and MMPS&M will monitor the activities of the 2014 legislature on behalf of
WPAG's specific interests.
Other Matters
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.
Budget
The budget for the scope of services described above is calculated at the following billing rates
for EES Consulting and MMPS&M:
EES Consulting
President................................................................................ $165 per hour
Managing Director................................................................... 160 per hour
Manager................................................................................... 155 per hour
Senior Project Manager........................................................... 150 per hour
Project Manager...................................................................... 145 per hour
Senior Analyst or Engineer....................................................... 140 per hour
Analyst...................................................................................... 135 per hour
Clerical...................................................................................... 120 per hour
uu, u
Principal................................................................................. $180 per hour
Associate................................................................................ $180 per hour
These billing rates will remain in effect through December 31, 2014.
On the basis of the above billing rates, the 2014 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 $50,000 in supplemental funding has been provided to staff the upcoming BP -16
Power and Transmission rate cases workshops and related BPA processes, including the IPR,
segmentation and generation input workshops each of which are expected to be intensive.
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. Out-of-pocket costs will be billed by whichever organization actually incurs the
expense. The total estimated annual WPAG budget for 2014 is estimated at $240,000, and a
supplemental budget of $50,000 for IPR and rate case workshop activities.
A-9
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.
Project Staffing
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-10