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 
tables (lines 4-24) including (a) a comparison of the differences between the 
two tables (either the reasons for any differences in amounts for a line 
description that is the same in both tables, or the reason for any 
differences in the logic of the calculations), and (b) a &crosswalk8 showing 
how each line in each table corresponds to a variable or equation (or both) 
in section f of the GRSPs beginning on p. 15 of Attachment A to this 
testimony.



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


Table Illustrating JCG Method










Table Illustrating BPA Method













Before beginning the comparison of the two tables, it should be pointed out 
that the tables calculate gross augmentation costs.  We left out the step 
that calculates the net augmentation costs.  As a result, the &Total8 line 
dollar amounts ($6M and $6.2M in the JCG table, and $6M and $6M in the BPA 
table) should all be reduced by the amount of augmentation resale revenue.  
However, since this modification will not affect the comparison requested in 
the data request, let us continue as if the &Total8 line dollar amounts are 
already net of the augmentation revenue. See the attachment to the data 
response.



















Another item that may be confusing is the item labeled &Pre-purchase ) 0 day 
rule8.  This is the incremental cost associated with purchases made between 
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 
equation in section f is not possible since section f reflects the BPA 
method, not the JCG method.  Perhaps an overview of BPA,s perspective on the 
difference between the JCG method and the BPA method will be helpful.

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

In contrast to the JCG method, the BPA method distributes the costs using the 
120-day rule proportionally between the Slice and non-Slice products, and 
then assesses all the incremental cost from using the 0-day rule rather than 
the 120-day rule to the non-Slice products.  In contrast to JCG method, this 
assures that all the actual incremental net augmentation costs calculated by 
replacing the &120-day8 rule with the &0-day8 rule are recovered  from 
purchasers of non-Slice power products.  In addition, this also assures that 
purchasers of the Slice product do not bear any nearer term market prices 
fluctuations.

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

&Pre-purchase ) 120 day rule8 is the total cost of augmentation purchases 
made at least 120 days prior to the month of delivery.  This amount is $2M in 
both tables in both columns.  This amount represents the sum of DIURNALACA 
for the six-month period.  This would have represented DIURNALACA(S) in the 
GRSPs proposed by the JCG in their Direct Case.

&Pre-purchase ) 0 day rule8 is the additional cost of pre-purchases made less 
than 120 days prior to the month of delivery.  This amount is $1M in both 
tables in the non-Slice column.  The 0-day rule pre-purchases are not 
applicable to the Slice product, thus the N/A in the Slice column in both 
tables.  If &Pre-purchase ) 120 day rule8 and &Pre-purchase ) 0 day rule8 
were summed the sum would represent DIURNALACA(NS) in the GRSPs proposed by 
the customers.  Note that the Pre-purchase ) 0 day rule appears in a 
different row in the BPA table since BPA has proposed that these incremental 
cost enter the calculations at a different point.

Short position is the cost of the amount of AAMTA that is not pre-purchased.  
This is the amount that is valued at PRICE in the GRSPs.  In the JCG, the 
short position is different between the Slice and non-Slice columns.  This is 
because the example has BPA purchasing some additional augmentation ($1M 
worth) under the 0-day rule, and there is a corresponding reduction in the 
value of BPA,s short position.  The change also reflects that the short 
position is valued using different PRICEs for the 120 day rule and the 0 day 
rule.  In the BPA example, Short position is $3M for both Slice and non-Slice 
products, and the difference (-$0.8M) is found in the row &Short position 0 
day rule8

&Buydown8 is the cost of all buydowns.  It is the same in both tables, for 
both Slice and non-Slice products.  In the examples BPA spent $1M buying down 
load.

&Total8 is the gross cost of augmentation.  As stated above, it should be 
reduced by the augmentation resale revenue.  To continue on, let us assume 
that &Total8 has been reduced by augmentation resale revenue, and represents 
the net augmentation costs.  In the JCG  example, &Total8 is $6M for Slice 
and $6.2M for non-Slice.  These would represent NACA(S) and NACA(NS) in the 
GRSPs proposed by the JCG in their Direct Case..  In the BPA example, Total 
is $6M for both Slice and non-Slice.  This represents NACA in the BPA GRSPs.

&Percent of CRACable revenue8 is the same in both tables.  The example shows 
that the Slice revenue is 30% of the total CRACable revenue, and the 
non-Slice revenue is 70% of the total CRACable revenue.

&LB CRAC Costs8 only appears in the BPA example.  It is the NACA distributed 
between Slice and non-Slice products in proportion to actual revenue.

&Pre-purchase 0 day rule8 and &Short position 0 day rule8 are the changes in 
the valuation of pre-purchases ($1M) and Short position (-$0.8M) between the 
120 day rule and the 0 day rule.  The net difference of $0.2M is equivalent 
to the difference that is seen in &Total8 in the JCG example (the difference 
between $6M and $6.2M).  This difference is also equivalent to NACDIFF in the 
BPA GRSPs.

&Total LB CRAC Cost(s)8 is the cost that the Slice and non-Slice groups true 
up to.  In the JCG example, the Slice product trues up to 30% of $6M, or 
$1.8M while the non-Slice products true up to 70% of $6.2M for a total from 
both groups of $6.14M.  In BPA,s example, the Slice product pays 30% of $6M 
or $1.8M (the same as in the JCG example) while the non-Slice products pay 
70% of $6M plus the net difference between valuation of net augmentation 
costs using the 120 day rule and valuation using the 0 day rule.  The 
non-Slice amount is $4.2M plus $0.2M or $4.4M.



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