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Northwest Energy Review Transition Board
John Etchart,
Montana
851 S.W. Sixth Avenue, Suite 1100
Portland, Oregon 97204-1348
John Savage,
Oregon
Phone 503-222-5161 or 1-800-452-5161 
FAX 503-820-2370
Tom Karier,
Washington
Todd Maddock,
Idaho

April 21, 1999

 

TO:  Interested Persons
FROM:  Dick Watson
SUBJECT: Staff Draft Status Report on Development of Recommendations to Effect FERC Oversight  of  Bonneville Transmission

The subject report is attached and is available on the Northwest Power Planning Council’s web site at the address noted above. This report will be discussed at the Transition Board’s meeting to be held at 10:30 AM, Tuesday, April 27 at the offices of the Northwest Power Planning Council. Public comment on the draft will be accepted.

 

Transition Board Staff
Status Report on
Development of Recommendations to Effect
FERC Oversight of Bonneville Transmission

April 21, 1999


 




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 who will 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 (FPA) 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.

The initial aim was to develop a package for consideration by the Transition Board. The Transition Board had intended to review the draft proposal, circulate it among policy level representatives across the region, and forward it to the governors of the four Northwest states and to Congress for consideration.

However, after further communications with the delegation, the Transition Board requested this report. To date, the staff has completed a set of recommendations for the organic statutes, but has not finished integrating those changes with the current draft set of changes to the FPA. Neither has the whole package been subjected to policy review by the regional parties. 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. The report concludes with a brief summary of some of the important similarities and differences between the elements discussed by regional parties and recommended by the staff and those found in the Administration's recently released "Comprehensive Electricity Competition Act."

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:

In 1997, the governors created a four-member Transition Board to oversee implementation of the Comprehensive Review’s recommendations. The non-transmission issues related to Bonneville were delegated to a working group composed of Bonneville, customers and other key interests meeting under the auspices of the Pacific Northwest Utilities Coordinating Committee. This group periodically reported to and received comment from the Transition Board. The results of their efforts are incorporated in Bonneville’s subscription record of decision.

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, after FERC’s Order 888 in April 1996, Bonneville had voluntarily begun to pursue a course of functional separation of its two business lines.

To effect the Comprehensive Review’s conclusions, 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 exempt 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.
    5. FERC’s newly established authority should clearly supersede any conflicting provision 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 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.
    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.
The Transition Board’s recommendations for total cost recovery (#6) and third party debt security (#7) necessarily implicate the issue of unrecoverable costs, sometimes discussed under the rubric of a contingent-cost recovery mechanism. That is, in a competitive market system Bonneville rates would be limited by market conditions. It is possible that the market would not allow a Bonneville generation organization to recover enough revenue to pay all its costs or to ensure the security of third-party debt. The staff’s effort to develop legislative changes therefore takes up the contentious issue of how to ensure that Bonneville can meet all its obligations in the face of costs that might not be recoverable in an open market.

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

  1. First, Bonneville would rely on its cash reserves and any credits available under Section 4(h)(10)(c) of the Northwest Power Act.
  2. If these proved insufficient, Bonneville would identify possible cost reductions, take public comment, and implement those that are appropriate.
  3. If there were still a problem, Bonneville would initiate the first stage of a contingent cost recovery mechanism through a power rate adjustment. The rate adjustment would be the lower of a predetermined market cap or an amount that would assure cash reserves were rebuilt to a level sufficient to ensure that Bonneville can make its annual Treasury payment. The rate adjustment would be triggered by projected reserve levels.
  4. If it still appeared likely that the Treasury payment would have to be deferred, then the second stage, involving surcharges to transmission rates, could be implemented following review, possible modification and approval by FERC. The Transition Board recommends that FERC approve a mechanism that would recover no more than $100 million in any year, up to a cumulative total of $600 million.
 Process

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, several 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. However, it has not yet held a general meeting with all members of the working group present to discuss proposed changes to the FPA.

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. 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 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 staff has taken the position 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

Three issues arose regarding Bonneville’s obligation to meet all its costs. (1) The first 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. (2) 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. (3) 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 all Bonneville's costs, whether already-incurred or not, the status of "prudent, used and useful, and otherwise eligible for recovery." 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 staff 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 be deemed recoverable, in the staff’s view.

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 staff’s proposal follows the Board’s draft proposal that FERC review transmission charges proposed by Bonneville to 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 capped 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. The staff’s proposal 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’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.

The rate adjustment mechanism drew considerable comment. Those who opposed it argued that customers put a high priority on rate certainty. In their view, the possibility of a rate adjustment would discourage customers from subscribing to Bonneville power. The staff would recommend including such a provision because it better aligns the risks and benefits of subscription, one of the principles of the Comprehensive Review. Subscribers that receive the benefit of Bonneville power when it is below market price should bear some of the risk if Bonneville power is above market price, in staff’s view.

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 staff’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, 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 staff notes that interested parties will likely have an opportunity to participate in any FERC process set up to establish such rules, and therefore can help shape provisions to guard against this eventuality.

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 has not taken a position on this issue.

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, the staff did not think it was necessary to highlight those sections.

Uniform Rates

The work the staff 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 staff 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 staff 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 whose actions may be complained of. So staff 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 staff 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 staff 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 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:

Notwithstanding any provision of this chapter, rates, terms and conditions for the transmission of electric power over the facilities of the Bonneville transmission system and provision of necessary associated services by the Bonneville Administrator or his successor in interest shall be established and reviewed by the Federal Energy Regulatory Commission under the applicable requirements of the Federal Power Act according to its terms. Energy Policy Act of 1992

Staff 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 staff 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 staff 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 staff 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 staff 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 staff 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 staff would recommend deleting it.

The staff 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 staff would lean toward FERC making that determination, because it has similar experience with its current regulation of IOUs.

Northwest Power Act

The staff 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 staff 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 staff 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 staff 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 staff 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 Administration Bill

Based on a quick reading of the provisions relating to FERC and Bonneville in the Administration’s recently released "Comprehensive Electricity Competition Act," the following observations and comparisons can be made. Generally, the Administration bill follows the principles and recommendations of the Transition Board and is close to the specific legislative provisions that the staff and regional parties have discussed.

Both the Administration bill and the proposal outlined by the staff, 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 details, both the bill and the staff proposal provide for a surcharge to recover otherwise non-recoverable costs. Another similarity between the Administration bill and the staff’s proposal is that Bonneville is authorized to take part in a regional transmission organization. Both the bill and the staff proposal would, as well, give Bonneville standing to challenge actions taken by FERC.

Several differences between the Transition Board’s principles and the Administration’s bill are important. 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 could be a source of confusion and an invitation to extensive litigation in the future.

The second 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 staff thinks are probably redundant to current FERC practice, and thus unnecessary. The staff recommends eliminating the standard for equitable allocation of costs between federal and non-federal transmission users from the organic statutes as unnecessary and a potential source of confusion; the Administration did not. The staff 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 (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 staff proposes an equitable allocation standard; the Administration was silent on a specific standard.