Summary

This report begins by reviewing the recommendations of the Transition Board regarding 1) application of the Federal Power Act (FPA) to Bonneville and 2) a contingent cost recovery mechanism for recovery of any otherwise unrecoverable power costs through Bonneville’s transmission rates. Both were developed as part of the Transition Board’s implementation of the recommendations of the Comprehensive Review. It then examines the specific issues raised in applying the FPA to Bonneville, while providing for the contingent cost recovery mechanism.

This report concludes by comparing the Administration’s recently released restructuring bill, which included a subtitle on application of the FPA to Bonneville, with the principles of the Transition Board. It highlights several important limitations of the Administration bill in relationship to those principles.

Introduction

This report is intended to record the work done by the Transition Board in implementing the recommendations of the Comprehensive Review pertaining to Bonneville’s transmission. It is meant to support work being undertaken by Congress and other parties to address these issues.

 Over the past two years, the Transition Board, working with representatives of the key stakeholders, developed a set of recommendations intended to effect the transmission-related goals of the Comprehensive Review. The Transition Board subsequently directed staff to work with interests in the region to identify the changes in the Federal Power Act necessary to effect the Board’s recommendations, to examine Bonneville’s organic statutes to determine whether there were obvious conflicts with the FPA and to propose modifications to those organic statutes to avoid later argument over implementation of the FPA’s regulatory regime.

 After communications with the delegation, the Transition Board decided not to proceed with the development of specific legislative language. However, in working on proposed changes to the FPA and necessary modifications to the organic statutes, a number of important issues have arisen. This report provides a short description of each of those issues, the thinking of various parties and, where possible, proposed resolutions. This information is provided to assist those who will be working on a "Northwest Chapter" of federal restructuring legislation. It is important to note that there is NOT consensus among regional parties on these recommendations. While there may be rough agreement about the general goals, there are deep divisions regarding the specifics.

Background

In 1996, the governors of Idaho, Montana, Oregon and Washington initiated a Comprehensive Review of the Northwest Energy System. Its purpose was to address anticipated effects on the region of increasing competition in a restructuring electricity industry. The Review was charged with determining how to benefit from competition while also preserving the benefits of the region’s unique hydroelectric system, which include low-cost energy, fish and wildlife enhancement, energy conservation, renewable energy development and low-income energy assistance. The Comprehensive Review was carried out by a committee of more than 20 persons representing a broad range of interests in the region's electric power system.

 The Comprehensive Review made several recommendations regarding the future of the Bonneville Power Administration. Bonneville supplies about 40 percent of the region's electricity from a system of 29 federal dams and one nuclear plant in the Columbia River Basin and is the largest provider of transmission and transmission services in the region. The key recommendations with respect to Bonneville’s transmission or which implicate Bonneville’s transmission are:

•  The primary goal for transmission is a transmission system whose structure and operation help ensure a fully competitive generation market.
• Bonneville should be legally separated into two entities, a transmission organization and a power marketing organization. The separation of these functions should be structured so that it does not jeopardize or diminish the legal obligation and ability of Bonneville to meet fish and wildlife and other financial obligations.
• Bonneville’s transmission should be subject to regulation by the Federal Energy Regulatory Commission (FERC) equivalent to the regulation of the transmission of the investor owned utilities.
• Bonneville should be given the authority to join a regional transmission organization.
• The benefits and risks of access to existing federal power should be aligned.
• A mechanism should be devised to address unrecoverable costs at Bonneville, should they arise.

 To address the recommendation that Bonneville be separated into transmission and generation organizations, the Transition Board formed a Transmission Work Group made up of representatives of key stakeholders. The Work Group considered a number of approaches to separation, weighing such issues as potential impacts on the security of Bonneville’s third-party debt, Bonneville’s need to meet its Treasury payments and its treaty obligations. The Work Group ultimately decided the best solution lay in emphasizing functional separation, as opposed to legal separation, of Bonneville’s transmission and power marketing activities, as required by FERC for investor-owned utilities under Order 888. This, combined with equivalent FERC regulation of Bonneville’s transmission, could effectively achieve the objectives behind legal separation. In fact, since FERC’s Order 888 in April 1996, Bonneville has voluntarily pursued a course of functional separation of its two business lines.

 Recommendations for FERC Jurisdiction

 The Transition Board adopted 11 recommendations for implementing FERC jurisdiction:

1.  FERC’s authority over Bonneville’s transmission should be based on Parts II and III of the FPA.
2. Section 201 of the FPA should be amended to make clear that FERC’s authority is limited to Bonneville’s transmission. FERC’s authority over Bonneville’s power should only be expanded to the extent required by a contingent cost recovery mechanism.
3. Bonneville should be excluded from FERC’s authorities under Sections 204, 207, 209, 214 303 and 305 of the FPA. Section 212(i) should be repealed.
4. FERC’s enforcement authority should be based on Sections 307, 314, 315 and 316 of the FPA. These sections may require some modification to ensure the penalties are appropriate for a federal agency.
5. FERC’s newly established authority should clearly supersede any conflicting provisions of Bonneville’s organic statutes.
6. Total recovery of Bonneville’s transmission costs should not be compromised. FERC should apply the "just and reasonable" standard, recognizing that Bonneville has no stockholders to absorb losses, so that FERC cannot disallow Bonneville costs already incurred at the time of any such FERC process.
7. Neither the priority of payments nor the security of Bonneville’s third party debt should be compromised.
8. In rare instances, priority access should be made available to Bonneville’s transmission system to permit federal and non-federal users to meet environmental obligations. To the maximum extent possible, users should obtain this access and pay for it through a normal open access transaction. Should priority access be required, equitable compensation should be determined by an after-the-fact mechanism.
9. FERC’s new authority should become effective on or after October 1, 2001.
10. Bonneville should be permitted to join a FERC-regulated independent system operator.
11. FERC hearings on Bonneville rates should be held in the Pacific Northwest.

 Recommendations for Contingent Cost Recovery

 Regarding contingent-cost recovery, the Transition Board proposed four progressively more aggressive actions triggered by projected reserve levels.

To identify the proposed changes in the FPA and Bonneville’s organic statutes, the staff formed a working group of attorneys and others, representing as wide a range of interests across the region as possible. Bonneville, the Public Power Council, several individual public utility districts, an Indian tribe, the generating publics, Bonneville’s industrial customers, the direct service industries, a power marketer, various IOUs and several industry groups participated. The staff met with individual representatives and groups of representatives to gather proposed changes, first to Bonneville’s organic statutes and then to the FPA. Following this "circuit rider" approach, the staff met with all interested parties to discuss proposed changes to the organic statutes. Staff has also met with members of the working group individually to work through the FPA. It has not held a general meeting with all members of the working group present to discuss proposed changes to the FPA. However, an earlier version of this report was circulated in the region and public comment was taken. Those comments are reflected in this draft to the extent that the Board felt it was appropriate to do so.

 THE FEDERAL POWER ACT

Starting Point

The Transition Board had a choice of two approaches to FERC regulation of Bonneville. One would tailor FERC’s authority over Bonneville’s transmission by amending Bonneville’s organic statutes, including the Bonneville Project Act of 1937, the Flood Control Act of 1944, the Regional Preference Act of 1964, the Transmission System Act of 1974, the Northwest Power Act of 1980 and others, and make conforming changes to the FPA. The other would apply the Federal Power Act, the authority FERC exercises over investor-owned utilities, to Bonneville. Under this approach, the FPA would be appropriately modified to account for Bonneville’s special nature. There would also be conforming amendments to Bonneville’s organic statutes.

  The Transition Board chose the second approach. That is, the Board would apply Parts II and III of the Federal Power Act, with specific modifications, and make conforming amendments to Bonneville’s organic statutes. This approach reflects a basic intention to subject Bonneville transmission to FERC regulation comparable to FERC regulation of IOU systems. The Transition Board concluded that it would be clearer and more appropriate for FERC to interpret its own statute, with the case-specific experience that has developed under it, than to interpret Bonneville’s statutes, which were developed for a specific federal agency.

  At the same time, the Transition Board recognized that Bonneville differs in several important respects from the utilities FERC currently regulates. To account for these differences, the Transition Board recommended a number of exceptions to the FPA that are enumerated on page 3. Parties had a wide range of views on the appropriate way to express those exceptions and on the appropriate extent of such exceptions, a range that was narrowed during the staff’s discussions with the parties. The Board’s recommendations reflect the important ways Bonneville is different from an IOU, but also make clear, with an express proviso, that unless otherwise noted, the FPA is to supersede any conflicting sections of Bonneville’s organic statutes.

 Phasing In

 Some parties wanted to authorize FERC to phase in any changes in transmission rates or charges that would result in unreasonable cost shifts among users if these changes were implemented at once. Opponents of this suggestion argued that FERC already has a practice of "phasing in" and that, therefore, this provision is unnecessary. They also argued that given this FERC practice, a special provision for Bonneville would only cause confusion and problems of interpretation. The Transition Board believes that this is a transition problem at most and that it could be handled in the legislative history rather than in statutory language.

 Total Cost Recovery

  This issue elicited considerable controversy, both on the question whether there should be a transmission surcharge to recover otherwise-unrecoverable power costs at all and on the question, if there were to be such a surcharge, whether power customers should be paying cost-based rates up to market price levels before non-power customers had to pay for power costs. Recognizing that ongoing disagreement, the Transition Board’s principles answered "yes" to both of those questions. The surcharge is needed as a backstop to ensure Bonneville’s ability to repay Treasury (within limits) and to repay the third-party debt obligations. The cost-based power cost adjustment capped by market levels more closely aligns risks and benefits of access to Federal power within the region.

 Given the Transition Board’s answers to those questions, three issues arose regarding Bonneville’s obligation to meet all its costs. The first issue relates to Bonneville’s transmission system costs and FERC’s authority to reject certain transmission costs. The second and third issues relate to two categories of potentially unrecoverable power costs, described next. The first category of power costs is the cost of meeting Bonneville’s obligations to the Federal Treasury. The Transition Board developed a draft proposal for a recovery mechanism that would provide for a surcharge on transmission under defined circumstances in which Bonneville’s reserves fell below a predetermined level. The surcharge mechanism would be limited to fixed annual and total amounts, reflecting a judgment that the national government, whose laws are driving so much in that arena, should share in the recovery of expenditures for fish and wildlife recovery. The second category of power costs is the cost of servicing and repaying third party debt, chiefly that of the Washington Public Power Supply System. This latter category of costs needs to be recovered in full from Bonneville’s customers and so the application of the recovery mechanism would not contain any limits. Each category will be discussed separately.

 Transmission Costs.

All parties agreed that Bonneville's transmission rates must continue to be set to meet the current statutory standard, that is, the federal investment in the transmission system must be repaid over a reasonable number of years. Bonneville is different from other utilities regulated by FERC, however, in that it does not have investors to absorb any shortfall if revenues don't cover already-incurred costs. If FERC should determine some Bonneville costs are not "just and reasonable" and therefore ineligible for recovery through rates, Treasury repayment would be put at risk. For that reason, the parties agreed that Bonneville costs incurred as of the date of FERC's review ought to be eligible for recovery in rates.

Some parties pointed out, however, that Bonneville might include in rates, costs that have not actually been incurred; that is, amounts found in its out-year budgets that may actually never be spent. There was disagreement over recovery of these non-yet-incurred costs. Some would have granted the status of "prudent, used and useful, and otherwise eligible for recovery" to all Bonneville's costs, whether already incurred or not. Others objected that such a legislative grant would give Bonneville carte blanche to spend whatever it might choose on its transmission system. Opponents also noted that "prudent, used and useful" are terms of art at FERC that carry precedential weight. Bonneville could argue, in other words, that future costs and expenses must be found "prudent, used and useful" simply because similar costs and expenses met that standard in the past. Thus, granting this special status to all costs could allow recovery of amounts that might ultimately be proven unwarranted.

  Those who opposed this special status argued for a system of FERC pre-approval of Bonneville’s transmission investment. It was noted, however, that FERC’s processes are often long and drawn out and that a pre-approval requirement might make it impossible for Bonneville to provide transmission services without undue delay.

 Bonneville’s transmission expenditures are subject to a congressional approval process that the Transition Board believes offers a sufficient mechanism for oversight of such expenditures. If designating such costs as "prudent, used and useful" would, in fact, bestow undue precedential weight, it should be sufficient to deem them "eligible for recovery." Costs incurred as of the date of a rate filing should, in the Board’s view, be deemed recoverable.

 Power Costs that Cannot Be Recovered to Make Timely Treasury Payments

"Just and reasonable" determinations should take into account any surcharge on rates or charges for transmission imposed by Bonneville to recover power costs that cannot be recovered through power revenues in time to meet its Treasury payment. The Board believes that transmission charges should be a last resort and limited. It stands by its draft proposal that FERC review transmission charges proposed by Bonneville which would recover no more than $100 million in any year, up to a cumulative total of $600 million.

 The surcharge could be imposed only if Bonneville had fully utilized the authority available under Section 4(h)(10)(c) of the Northwest Power Act. It could also be implemented only if Bonneville were implementing or had implemented a cost-based rate adjustment mechanism that would bring power rates to the lower of: (1) a level substantially equivalent to the then-current market or (2) a level necessary to restore reserves to a point that will ensure a desired certainty of Treasury repayment. These calculations should take into account the effects of any cost reductions achieved through Bonneville’s cost management efforts. FERC would approve any transmission charges proposed by BPA and could modify the proposal. The Board would also call on FERC to establish an equitable allocation regime. It was suggested that the provision establish a trigger that would only permit implementation of the surcharge when Bonneville projects that financial reserves attributable to the power function were less than $150 million. The Transition Board has not taken a position about the level of projected reserves that would trigger a surcharge. That level should be determined as part of the rate case. The Transition Board’s draft proposal provides that any transmission surcharge be regarded as a loan from the transmission business line to the power business line, along with repayment conditions and interest provisions.

 Power Costs that threaten the Security of Third Party Debt.

Everyone agreed that preserving the security of Bonneville’s third party debt was a high priority. So, the Board’s recommendations include a provision that would permit recovery, through transmission rates and charges, of costs related to Bonneville’s generation or conservation resources financed through third party debt, if such costs could not be recovered through power rates and charges. This provision did not contain the dollar limits found in the surcharge mechanism outlined above, recognizing the fact that these financial obligations are based on bond covenants. Because the third party debt is of highest priority in the priority of payments, i.e., it is paid before Treasury, it is unlikely that this provision would have any practical effect.

 Environmental access

 The Transition Board recognized that environmental obligations, specifically, requirements to generate at both federal and non-federal hydro facilities to avoid spill and nitrogen super-saturation, sometimes require access to Bonneville’s transmission. While the Board urged that such access ordinarily be acquired through open access transactions, there may be rare instances in which access cannot be assured. In those cases, priority access ought to be provided, the Board said, with equitable compensation determined after the fact. The Board therefore included a principle calling on FERC to establish rules to provide for such special access and for compensation for adversely affected users. Some concern was expressed that Bonneville might exploit this provision and define any access it might want for commercial reasons as environmentally driven. The Board notes that interested parties should and likely will have an opportunity to participate in any FERC process set up to establish such rules. Consequently, they can help shape provisions to guard against this possibility.

 Regulation Applicable to all Bonneville Transmission Services

  There were differing opinions of how parallel FERC regulation of Bonneville’s transmission could be to its regulation of the IOUs. IOUs’ power business lines are FERC regulated; Bonneville’s power business line is not. There was a suggestion that the FPA be amended to include a provision specifying that FERC’s regulation would apply to Bonneville’s transmission regardless of whether it was associated with a Bonneville sale of power, to maintain the regulatory parallels to current FERC practice for IOUs. The Transition Board believes such a provision would be consistent with FERC oversight of all IOU transmission service while not regulating the power component of any bundled Bonneville power rate.

 Provisions of the Transmission System Act

  Some argued that when making a "just and reasonable" determination, FERC should take into account Section 11 of the Transmission System Act and other laws, regulations or contracts concerning revenue application, including Section 13(b) of the Transmission System Act. In light of the fact that there are no changes proposed in those sections of the Transmission System Act and because there did not appear to be any significant conflicts with regulation under the Federal Power Act, the Board does not think it is necessary to highlight those sections, particularly given the proviso recommended above.

 Uniform Rates

  The work the Board has done includes a recommendation authorizing Bonneville to propose rates that are uniform, or uniform throughout prescribed transmission areas, in order to extend the benefits of the integrated transmission system and encourage the equitable distribution of electric energy produced by the Federal Columbia River Power System. This was included to make clear that the deletion of similar provisions in the organic statutes (see below) was not intended to undermine this principle. At the same time, the Board intended no limitation on FERC’s ability to prescribe rates or rate forms.

 Eligibility for Service

  Certain current DSI customers support guaranteeing continued eligibility to purchase transmission services from Bonneville. The Board believes this issue goes beyond its mandate to fashion a regulatory regime that is as close as possible to that which FERC exercises over the jurisdictional utilities. Nor does it seem warranted simply on the ground that Bonneville has had an historical relationship with these customers. The DSIs now have 20-year contracts with Bonneville. It is most probable that open access will be the rule before the end of those contracts, in which case this provision would be unnecessary. For these reasons, this provision is not recommended.

 Bonneville Standing in FERC Proceedings

  The FPA permits states, municipalities, and state utility commissions to complain to FERC about actions taken by licensees or public utilities contrary to the provisions of the FPA. The Board believes that if Bonneville is to be subject to FERC regulation, it should have the same standing in FERC proceedings. By the same token, it makes sense to include Bonneville among those about whose actions parties may complain. The Board would recommend adding "actions taken by Bonneville" to the "actions taken by licensees or public utilities" in this section.

 Hearings in the Northwest and Other Procedural Provisions

  Several parties expressed considerable concern that subjecting Bonneville to FERC regulation would deprive interested parties of the opportunity to participate in decision-making of great importance to the region. For this reason, the Board would recommend that any FERC hearings before an administrative law judge, that is any hearings that are not "paper" hearings, be held in the Pacific Northwest.

 Authorization to Participate in a Regional Transmission Organization

  All agreed that if Congress gives FERC authority to order the power marketing agencies to participate in regional transmission organizations, Bonneville would be subject to such a FERC order. However, in the past, there has been disagreement about whether, absent such an order, Bonneville might voluntarily participate. The Board believes a "Northwest Chapter" should make clear that, even if not ordered by FERC, Bonneville has the authority to participate in a regional transmission organization and to submit disputes to alternative dispute resolution processes, which are typically employed by current and proposed regional transmission organizations.

 THE ORGANIC STATUTES

The Transition Board staff worked with interested parties to identify and make recommendations regarding provisions in Bonneville’s organic statutes that would need revision. These recommendations follow.

 Generic Proviso

  All parties agreed that if Bonneville’s transmission is to be subjected to FERC regulation, the legislative changes should make clear, as the Transition Board recommended in its principles, that the FPA and not the organic statutes would primarily govern such regulation, and in the event of conflicting provisions, the FPA would prevail. So, at some appropriate place in each of the organic statutes there would be inserted a provision along the following lines:

  The Board would recommend deleting all of Section 824k(i), which sets up a special regulatory relationship between FERC and Bonneville that would conflict with the one proposed by the Transition Board.

 Flood Control Act

  Section 825s refers to "rate schedules." The Board would recommend revising this section by appropriately limiting or deleting any references to transmission, to allow for FERC jurisdiction over Bonneville’s transmission under the FPA.

 Bonneville Project Act of 1937

  Section 832a(e) requires that Bonneville gain approval of the President before disposing of real property or transmission lines. This section would conflict with the approval process for disposition of property found in the FPA and so the Board would recommend deleting this provision.

 Northwest Preference Act

  Section 837e provides for preferential access to Bonneville transmission for "federal energy." Such special treatment for Bonneville’s power business was widely agreed to be contrary to the basic thrust of FERC regulation of IOU transmission and therefore the Board would recommend amending this section by deleting that provision.

 Transmission System Act

  Section 838d, governing transmission of non-federal power, is another instance in which Bonneville is currently afforded priority access to the transmission system, widely agreed to be inappropriate under current circumstances. The Board would recommend deleting this section or modifying it to grant non-federal power equivalent access.

  Section 838g treats rate-setting for both power and transmission. The Board would recommend amending this section to conform to the FPA regime under which FERC would regulate Bonneville transmission. In addition to deleting references to transmission in this section, it may also be helpful to add limiting language to make clear that the section is intended to refer to power revenues alone.

  Section 838h provides for equitable allocation between federal and non-federal users in recovering the costs of the transmission system. This provision, if maintained, would add a different, and unnecessary, standard to FERC’s review of Bonneville transmission rates, which is not applied to those of IOUs. Therefore, the Board would recommend deleting it.

  The Board would recommend revising Section 838k(a) to clarify who would determine Bonneville’s transmission and non-transmission costs. Revised provisions would make clear that for non-transmission costs the Secretary of Energy would make the determination, using applicable criteria. Transmission costs would be determined by FERC, according to the applicable requirements of the FPA. Some entity needs to ensure that no costs are left out or inappropriately transferred from one category to the other; the Board would lean toward FERC making that determination, because it has similar experience with its current regulation of IOUs.

 Northwest Power Act

  The Board would recommend amending Section 839e(a)(1) of the Northwest Power Act to make clear that the Administrator sets and revises rates for power, but proposes rates for transmission. The Board would also recommend expanding this requirement to cover the transmission of all power by deleting the current reference to non-federal power.

  The Board would recommend amending Sections 839e(a)(2) and 839e(a)(2)(A) to make them consistent with the principle that rates set under the Northwest Power Act are power rates, not transmission rates. The Board would also recommend amending Section 839e(a)(2)(B) to make clear that power rates and transmission rates, taken together, are to be based on Bonneville’s total system costs. Maintaining recovery of total system costs is key to ensuring security of the third party debt, one of the Transition Board’s principles. The Board would also recommend deleting the equitable allocation provision of Section 839e(a)(2)(C), as discussed above in the section on the Transmission Act, to avoid unnecessary problems.

  Section 839e(i) refers to rates. The Board would recommend deleting or limiting any references to transmission and would make such other editorial changes as necessary to make clear that this section applies to power alone, thereby allowing for FERC jurisdiction over Bonneville’s transmission.

  Sections 839f(d) and Section 839f(i)(3) refer to conditions for access. The Board would recommend limiting or deleting any references to transmission and make any other editorial changes that will clarify that this section applies to power alone.

Comparison to Provisions of the Administration Bill

Generally, the Administration bill follows the principles and recommendations of the Transition Board and contains a number of specific legislative provisions that the staff and regional parties have discussed. However, there are a number of important differences that will be highlighted below.

 Both the Administration bill and the proposal outlined by the Board, above, follow the same basic structure, that is, they subject Bonneville’s transmission system to regulation by FERC under the FPA, with certain exceptions. Although differing in some important details, both the bill and the Board proposal provide for a surcharge to recover otherwise non-recoverable costs. Another similarity between the Administration bill and the Board’s proposal is that Bonneville is authorized to take part in a regional transmission organization. Both the bill and the Board’s proposal would, as well, give Bonneville standing to challenge actions taken by FERC.

 However, there are several differences between the Transition Board’s principles and the Administration’s bill. The first is that the Transition Board’s principles called for a clear statement that FERC’s new authority supersedes any conflicting provisions of Bonneville’s organic statutes. The Administration’s legislation provides no such clear statement (see the suggestion for one under "Generic Proviso" in this document) and, in fact, provides that FERC’s authority is subject to "complying with requirements of other laws applicable to the Bonneville Administrator." While the legislation amends some of the organic statutes, this general qualification would likely, at best, be a source of confusion and an invitation to extensive litigation in the future, and at worst serve to undermine FERC’s ability to apply the Federal Power Act to Bonneville.

 The second important difference is that the Administration bill does not call for a cost-based power rate adjustment capped by market levels before the imposition of any transmission surcharge for contingent cost recovery. This provision was an important part of the Transition Board’s contingent cost recovery mechanism, aimed at aligning the risks and benefits of access to federal power, albeit within limits set by the market. Alignment of these risks and benefits was a central element of the Comprehensive Review’s recommendations. This has become increasingly important as over-subscription to Bonneville’s power becomes likely.

 The third important difference is that the Transition Board’s contingent cost recovery principles gave unqualified authority to FERC to review and approve or order changes in any Bonneville proposal to recover power costs in transmission rates. The Administration bill strongly qualifies that authority and gives Bonneville itself significant authority over the features and application of such a transmission surcharge.

 The fourth important difference is that the Transition Board’s principles called for FERC hearings on Bonneville’s transmission rates to be held in the Northwest, while the Administration’s legislation proposed no changes in hearing locations.

 There are several other differences between the Administration’s legislation and Transition Board’s principles or the specific recommendations being discussed by the staff and regional parties. The principles recommended applying to Bonneville several of the Federal Power Act’s enforcement mechanisms that the Administration’s legislation does not apply. The Administration proposed two phase-in and cost-shift mitigation requirements that the Board thinks are probably redundant to current FERC practice, and thus unnecessary. The Board recommends modifying the organic statutes in several places to allow FERC to impose a different methodology for calculating costs for rate setting if it wished to be more consistent with its current approach. This would be subject to the same current overall cost recovery standard. The Administration does not address this issue. Regarding the application of transmission surcharges to individual customers, the Board proposes an equitable allocation standard; the Administration was silent on a specific standard.