WP-02 Data Response

request_number: PG-BPA: 132
firstname: Sarah
lastname: Westenberg
e-mail: sawestenberg@bpa.gov
exhibit_wp-02-e-: BPA-77
page_numbers: 9
request_text: Please provide a short description of each line in the two=
=20
tables (lines 4-24) including (a) a comparison of the differences between t=
he=20
two tables (either the reasons for any differences in amounts for a line=20
description that is the same in both tables, or the reason for any=20
differences in the logic of the calculations), and (b) a =01&crosswalk=018 =
showing=20
how each line in each table corresponds to a variable or equation (or both)=
=20
in section f of the GRSPs beginning on p. 15 of Attachment A to this=20
testimony.

response_text:
The following two tables are excerpted out of WP-02-E-BPA-77, page 9, lines=
=20
4-26.

Table Illustrating JCG Method

Table Illustrating BPA Method

Before beginning the comparison of the two tables, it should be pointed out=
=20
that the tables calculate gross augmentation costs. We left out the step=
=20
that calculates the net augmentation costs. As a result, the =01&Total=018=
line=20
dollar amounts ($6M and $6.2M in the JCG table, and $6M and $6M in the BPA=
=20
table) should all be reduced by the amount of augmentation resale revenue. =
=20
However, since this modification will not affect the comparison requested i=
n=20
the data request, let us continue as if the =01&Total=018 line dollar amoun=
ts are=20
already net of the augmentation revenue. See the attachment to the data=20
response.

Another item that may be confusing is the item labeled =01&Pre-purchase =01=
) 0 day=20
rule=018. This is the incremental cost associated with purchases made betw=
een=20
the 120-day cut-off and the 0-day cut-off.

Also, a crosswalk of each table showing how it corresponds to a variable or=
=20
equation in section f is not possible since section f reflects the BPA=20
method, not the JCG method. Perhaps an overview of BPA=01,s perspective on=
the=20
difference between the JCG method and the BPA method will be helpful.

JCG calculated the augmentation costs using two different cost pools, one=
=20
cost pool for the Slice product (using the 120 day rule), and a second cost=
=20
pool for all other products (using the 0 day rule). The products then=20
collected a portion of the augmentation costs associated with a specific=20
rule. When these two cost pools yield different net augmentation costs=20
(which they usually will unless all of the augmentation is purchased under=
=20
the 120-day rule), the JCG method doesn=01,t collect the actual amount of e=
ither=20
of those pools from Slice or non-Slice. Rather it collects a proportion of=
=20
each of the cost pools.

In contrast to the JCG method, the BPA method distributes the costs using t=
he=20
120-day rule proportionally between the Slice and non-Slice products, and=
=20
then assesses all the incremental cost from using the 0-day rule rather tha=
n=20
the 120-day rule to the non-Slice products. In contrast to JCG method, thi=
s=20
assures that all the actual incremental net augmentation costs calculated b=
y=20
replacing the =01&120-day=018 rule with the =01&0-day=018 rule are recovere=
d from=20
purchasers of non-Slice power products. In addition, this also assures tha=
t=20
purchasers of the Slice product do not bear any nearer term market prices=
=20
fluctuations.

Now for a short description of each line in the two tables, and a compariso=
n=20
of the differences. The example assumes that we don=01,t actually purchase=
all=20
of our augmentation, that some of it is served from BPA=01,s secondary, or =
is=20
bought in the spot market.

=01&Pre-purchase =01) 120 day rule=018 is the total cost of augmentation pu=
rchases=20
made at least 120 days prior to the month of delivery. This amount is $2M =
in=20
both tables in both columns. This amount represents the sum of DIURNALACA=
=20
for the six-month period. This would have represented DIURNALACA(S) in the=
=20
GRSPs proposed by the JCG in their Direct Case.

=01&Pre-purchase =01) 0 day rule=018 is the additional cost of pre-purchase=
s made less=20
than 120 days prior to the month of delivery. This amount is $1M in both=
=20
tables in the non-Slice column. The 0-day rule pre-purchases are not=20
applicable to the Slice product, thus the N/A in the Slice column in both=
=20
tables. If =01&Pre-purchase =01) 120 day rule=018 and =01&Pre-purchase =01=
) 0 day rule=018=20
were summed the sum would represent DIURNALACA(NS) in the GRSPs proposed by=
=20
the customers. Note that the Pre-purchase =01) 0 day rule appears in a=20
different row in the BPA table since BPA has proposed that these incrementa=
l=20
cost enter the calculations at a different point.

Short position is the cost of the amount of AAMTA that is not pre-purchased=
. =20
This is the amount that is valued at PRICE in the GRSPs. In the JCG, the=
=20
short position is different between the Slice and non-Slice columns. This =
is=20
because the example has BPA purchasing some additional augmentation ($1M=20
worth) under the 0-day rule, and there is a corresponding reduction in the=
=20
value of BPA=01,s short position. The change also reflects that the short=
=20
position is valued using different PRICEs for the 120 day rule and the 0 da=
y=20
rule. In the BPA example, Short position is $3M for both Slice and non-Sli=
ce=20
products, and the difference (-$0.8M) is found in the row =01&Short positio=
n 0=20
day rule=018

=01&Buydown=018 is the cost of all buydowns. It is the same in both tables=
, for=20
both Slice and non-Slice products. In the examples BPA spent $1M buying do=
wn=20
load.

=01&Total=018 is the gross cost of augmentation. As stated above, it shoul=
d be=20
reduced by the augmentation resale revenue. To continue on, let us assume=
=20
that =01&Total=018 has been reduced by augmentation resale revenue, and rep=
resents=20
the net augmentation costs. In the JCG example, =01&Total=018 is $6M for =
Slice=20
and $6.2M for non-Slice. These would represent NACA(S) and NACA(NS) in the=
=20
GRSPs proposed by the JCG in their Direct Case.. In the BPA example, Total=
=20
is $6M for both Slice and non-Slice. This represents NACA in the BPA GRSPs=
.

=01&Percent of CRACable revenue=018 is the same in both tables. The exampl=
e shows=20
that the Slice revenue is 30% of the total CRACable revenue, and the=20
non-Slice revenue is 70% of the total CRACable revenue.

=01&LB CRAC Costs=018 only appears in the BPA example. It is the NACA dist=
ributed=20
between Slice and non-Slice products in proportion to actual revenue.

=01&Pre-purchase 0 day rule=018 and =01&Short position 0 day rule=018 are t=
he changes in=20
the valuation of pre-purchases ($1M) and Short position (-$0.8M) between th=
e=20
120 day rule and the 0 day rule. The net difference of $0.2M is equivalent=
=20
to the difference that is seen in =01&Total=018 in the JCG example (the dif=
ference=20
between $6M and $6.2M). This difference is also equivalent to NACDIFF in t=
he=20
BPA GRSPs.

=01&Total LB CRAC Cost(s)=018 is the cost that the Slice and non-Slice grou=
ps true=20
up to. In the JCG example, the Slice product trues up to 30% of $6M, or=20
$1.8M while the non-Slice products true up to 70% of $6.2M for a total from=
=20
both groups of $6.14M. In BPA=01,s example, the Slice product pays 30% of =
$6M=20
or $1.8M (the same as in the JCG example) while the non-Slice products pay=
=20
70% of $6M plus the net difference between valuation of net augmentation=20
costs using the 120 day rule and valuation using the 0 day rule. The=20
non-Slice amount is $4.2M plus $0.2M or $4.4M.

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