I hereby declare that I am Robert McCullough, manager of ...

UNITED STATES DEPARTMENT OF THE INTERIOR
OFFICE OF HEARINGS AND APPEALS
INTERIOR BOARD OF INDIAN APPEALS
CONFEDERATED TRIBES OF THE )
WARM SPRINGS RESERVATION OF )
OREGON, and ANITA JACKSON, )
CHARLES JACKSON, DEBORAH ) Docket Nos. IBIA 12-142 and
JACKSON, AND MARK JACKSON, ) IBIA 12-143
)
Appellants, )
)
v. ) DECLARATION OF ROBERT
) F. MCCULLOUGH
NORTHWEST REGIONAL )
DIRECTOR, BUREAU OF INDIAN )
AFFAIRS, ) January 25, 2013
Appellee. )
I hereby declare that I am Robert McCullough, manager of McCullough Research, LLC,
an economic consulting firm located in Portland, Oregon. My firm is the economic consultant to
the Jackson appellants in this case and I, personally, am the expert who has submitted economic
testimony on their behalf for the past four years. My credentials are filed in BIA No. 1A.
Under full awareness of the penalty for perjury, I say as follows:
Executive Summary
1. The answering briefs from the BIA and the Tribe reveal a very poor command of the
literature and calculation of utility economics. The BIA’s understanding of depreciation, for
example, shows a lack of understanding of FERC record keeping and basic accounting theory.
The complex steps to allow comparison of the base load Port Westward plant with the Pelton
Projection also show little understanding of electric operations. Overall, the many errors in the
Cardno analysis have understated the estimated impact by $22.3 million dollars.
1
Exhibit A to Jackson
Appellants' Reply Brief
Page 1 of 27

Introduction
2. On July 27, 2009, PGE, WSPE (the Warm Springs Power Enterprise), and the
Jacksons met at the WSPE conference room to discuss the appropriate remuneration for the use
of the Jackson land under the Reregulation dam and reservoir. The meeting was not successful.
PGE proposed, among other evaluation methods, the use of the “power site [net benefits]
formula.” The Jacksons’ representatives counseled the Tribe and PGE that the large number of
assumptions would prove error prone and contentious. The Jacksons recommended a simpler
approach of valuing the specific contribution their land made to the Project. 1
A variety of materials were presented to BIA staff in the following four years after the
initial meeting. Some of these materials are included in the current record, others, apparently
primarily those provided by the Jacksons, have apparently been lost at Cardno or the BIA. 2
In
2009, Jennifer Frozena discouraged submission of additional materials since “[they] will simply
delay the process further.” 3
Cardno, as demonstrated in its report, chose to pursue the more complex calculations
recommended by PGE and the Tribe, although no effort over the intervening four years was
made to contact the Jacksons for explanations of any issues that were not understood in the
materials it had received.
1 The Jackson land is occupied by half the Reregulation Dam and one third of the storage in the Reregulation Pool.
The Reregulation Dam was built in 1957 to protect the downstream environment from peaking operations at Pelton.
Absent them, Pelton would not be able to increase generation during on-peak hours.
2 The Cardno report references a number of places where it could not understand calculations provided by the
Jacksons. The detailed calculations provided to Cardno in November 2008 were apparently not available to the
writer of the Cardno report, nor included in the BIA record. The Cardno report only referenced the November 2008
presentation and the September 2009 review of the 2009 PGE/Tribal presentation by the Jacksons as attachments.
No reference was made to later documents that are in the record such as BIA No. 18 Rebuttal Testimony of Robert
McCullough, dated November 18, 2009 with Attachments (BIA No. 18A through BIA No. 18D).
3 Email from Jennifer Frozena [BIA counsel] to John Gould [Jackson counsel], October 1, 2009. PBIA No. 7
2
Exhibit A to Jackson
Appellants' Reply Brief
Page 2 of 27

Not surprisingly, the more complex calculations in the Cardno report have proven error
prone and contentious. So much so, it is necessary to provide a careful calculation by calculation
summary to understand where the specific calculations need to be corrected.
The basic structure of the Cardno calculation can be confusing. The basic concept is to
compare costs between Pelton and Port Westward, escalate the difference to the present, and then
calculate the present value. And then, finally, use the Jacksons’ share of project lands to
calculate the condemnation payment.
This can be summarized in the following formulas:
2012
where
and
4
The final step is:
2012
4 “Original cost net of accumulated depreciation” is a standard accounting phrase which means the original cost
minus accumulated depreciation from previous time periods.
3
Exhibit A to Jackson
Appellants' Reply Brief
Page 3 of 27

3. The first step in the power site formula is to set a date for the comparison and to select
a comparison power project. The logic of the power site formula stems from an era before the
development of the wholesale power markets in the marketing of electricity in the late 1980s.
Before the adoption of wholesale market pricing, the only reliable way to estimate value was to
review the costs of the most recent comparable plant built by the utility. In 2009 – when PGE
and the Tribe made their presentation – the most recent plant was Port Westward. PGE and the
Tribe proposed the date of the comparison as December 31, 2007. 5
Port Westward is not terribly
comparable to Pelton Round Butte, but it was the most recent plant in 2009. 6
Among the adjustments required to make the calculation “apples to apples” is to adjust
the capacity factor – the percentage of operations to capacity (more fully explained below) – to
make sure that the number of kilowatt-hours produced do not prejudice the comparison, by
inflating the denominator of the calculation of dollars divided by megawatt-hours. This is just
one of the areas where corrections to the Cardno report have been recommended by both the
Jacksons and the Tribe. 7
Chart I summarizes the tables in the Cardno analysis and its primary material errors.
Under the Jackson Methodology column, we have shown the significantly less-complex
calculations recommended to value the Jackson Project lands.
///
///
5 BIA No. 69, Attachment 5, page 19.
6 As of 2011, the most recent plant is the far more comparable (and more expensive) Biglow project since it is most
recent, renewable, has a low capacity factor, and a similar geographical location.
7 The Tribe has noted that the value chosen by Cardno was in error. However, it has recommended comparing the
base load operation of Port Westward in 2007 with the peaking operations of Pelton, which is also an error.
4
Exhibit A to Jackson
Appellants' Reply Brief
Page 4 of 27

Chart I
Steps Cardno Methodology Line Numbers Errors
Jackson Methodology
Table 4‐1 Calculate Port Westward $/MWh 1 1 Capital cost omitted 7 months of
depreciation
Use market data for energy, capacity, and Renewable Energy
Credits
2 2 Incorrect cost of capital
2 3 Home mortgage calculation
3 4 Ommitted depreciation cost
6 5 Incorrect MWh numerator
Table 4‐2 Calculate Pelton and Round Butte 8,9 1 Incorrect capital amount Not needed
$/MWh
11 2 Incorrect cost of capital
12 3 Omitted depreciation
8,9 4 Double counted capital and operating
costs
23 5 Omitted Renewable Energy Credits
Table 4‐2 Reregulation Project $/MWh 16 1 Incorrect cost of capital Use Tribe's actual interest rate
16 2 Omitted interest
23 3 Omitted Renewable Energy Credits Include Renewable Energy Credits
Table 4‐4 Escalation and Present Valuation 36,37 1 Use of the wrong evaluation date Use 2013 since this would be the year of the condemnation
36,37 2 Use of the wrong Handy Whitman Use the correct Handy Whitman index
Index
39,40 3 Use of the incorrect discount rate Use discount rate set out by law for Department of Interior
hydro projects
39,40 4 Used the wrong dsicount formula Use the standard financial formula for perpetual assets
Table 4‐5 Adjustment for using the wrong
period in the present value
1 Incorrect financial formula Not Needed
Attachment A 8 to this Declaration consists of several tables which discuss the Cardno
calculations on a line by line basis. The calculations on the left were taken from the original
Cardno tables, with their errors displayed in bold and red. The column to the right of the Cardno
values notates the corrected calculations in green italics. The column on the far right notes each
error and describes the correction made. Each row can be identified by the row number on the
left of the table. Excerpts from Attachment A have been included in the text and references to
Attachment A have been footnoted to make following these computations easier.
Calculation of Port Westward’s 2007 Dollars per Megawatt-hour in Table 4-1
4. Cardno’s first determination was to accept the selection of Port Westward as the
comparison resource and to calculate a cost per megawatt-hour. This was summarized in Table
4-1 of their report.
8 By this reference incorporated herein.
5
Exhibit A to Jackson
Appellants' Reply Brief
Page 5 of 27

Cardno made a number of errors in Table 4-1. First, Cardno assumed that the value taken
from the 2007 FERC Form 1 was net of accumulated depreciation. 9
Second, without
documentation or explanation, that the cost of capital for PGE and Tribes was 9%. 10
Third, it
applied PGE’s assumed cost of capital to the original cost as though it were a home mortgage
payment. 11
Fourth, Cardno did not include depreciation as an operating cost. 12 Fifth, it used
seven months of baseload generation as a denominator in calculating their dollars per megawatthour.
13 The methodology which should be used in estimating cost of generation is based on
generally accepted accounting principles. Any number of references are available that describe
how to calculate those costs. A standard industry reference is The Regulation of Public Utilities
by Charles Phillips. The basic formula for cost is given as:
R = 0 + (V - D)r
where R is the total revenue required,
0 is the operating costs,
V is the gross value of the tangible and intangible property,
D is the accrued depreciation of the tangible and reproducible property, and
r is the allowed rate of return. 14
9 Cardno’s value is located in line one of Attachment A.
10 This value, compared to our correction, can be found in line two of Attachment A.
11 The conventional home mortgage sets a constant repayment amount over the life of the mortgage. Repayment of
the debt starts at a very low level and increases over the life of the mortgage. But this is very rare circumstance in
industry practice. In the case of Port Westward, the plant was financed by a portfolio of debt and equity. The
repayment of debt issues is set out in their offering memoranda and would show no resemblance to a fixed-rate
home mortgage.
12 This error, along with its correction, is notated on line 3 of Attachment A.
13 Cardno’s values, along with corrections for Port Westward as on-peak generation are listed in line 6 of
Attachment A.
14 Phillips, Charles F., THE REGULATION OF PUBLIC UTILITIES: Theory and Practice, (Public Utilities
Reports, 1988), p 169.
6
Exhibit A to Jackson
Appellants' Reply Brief
Page 6 of 27

Operating costs includes “all types of operating expenses (wages, salaries, fuel,
maintenance, advertising, research, and charitable contributions) plus annual charges for
depreciation and operating taxes.” 15 (Emphasis added.) Depreciation – wear and tear,
colloquially – is a cost of operations and a standard part of cost determination.
Cardno may have been unaware that the FERC Form 1 does not include depreciation in
its Steam-Electric Generating Plant Statistics (Large Plants) data. Instead, depreciation data is
separately shown in the pages entitled “Depreciation and Amortization of Electric Plant.”
Similarly, the Director’s lack of experience with FERC Form 1’s organization must lead one to
disregard his statement on depreciation, that “[g]iven that all dams' costs were already
depreciated; there was no need to depreciate them further.” 16
In this case, the “2007 Capital
Cost” for Port Westward neither adjusted for accumulated depreciation, nor included
depreciation as an operating cost, both errors.
In fact, the term “depreciation” represents a cost of operation. It reflects a determination
of “wear and tear” of the equipment over time. The family car, for example, “depreciates” over
its expected lifetime from a subject of pride to a broken down jalopy. The term “net of
depreciation” means the capital cost with accumulated depreciation removed. In the case of the
family car, the value of the car is the original cost minus the accumulated wear and tear.
The Director’s Answer continues to note that “Cardno requested additional information
directly from the licensees and used this data at face value as provided.” 17
This implies that
Cardno could not be expected to apply common accounting rules unless it was specifically
15 Id.
16 Director’s Answer, at 20.
17 Id.
7
Exhibit A to Jackson
Appellants' Reply Brief
Page 7 of 27

instructed by its data source. A kinder view, favored by the Jacksons, is that Cardno simply
forgot to add these costs for Pelton and Port Westward, since they were included in Cardno’s
analysis of the Reregulation costs – although in the Reregulation cost analysis Cardno also
forgets to include interest costs. 18
The Tribe’s Answering Brief further muddies the depreciation waters. It says,
“The Tribe understands that the nine percent (9%) cost amortization rate used by
Cardno likely includes a component for a return on capital, i.e., depreciation. The
Tribe is not certain because Cardno provides no explanation of what is included in
its cost amortization rate.” 19
Although the 9% value is undocumented, the Director’s Answer indicates that it was provided by
PGE. 20 This seems reasonable, since the correct value for PGE’s nominal cost of capital, 9.03%,
is calculated in the document cited in Patrick Hager’s September 30, 2009 Declaration. 21
But
the source (PGE’s 2009 Integrated Resource Plan) for the correct value (9.03%) makes it clear
that the nominal cost of capital does not include depreciation:
22
18 Cardno’s reregulation costs and the inclusion of interest rates can be found in line seventeen of Attachment A.
19 Tribe’s Answering Brief at 29, fn 12.
20 Director’s Answer, at 15.
21 BIA No. 16H.
22 2009 Integrated Resource Plan Addendum, PGE, April 9, 2010, page 12.
8
Exhibit A to Jackson
Appellants' Reply Brief
Page 8 of 27

Note that this table was used to derive both the nominal cost of capital and the after-tax real cost
of capital. The nominal value (9.03%) is the actual amount that PGE expects to pay its bond
holders and stock holders for capital. This corresponds to the interest rate one’s bank pays on a
deposit. The after-tax real cost of capital, 5.59%, is the value that reflects the impact of taxes
and inflation. Patrick Hager’s 23 declaration recommends that this be used as PGE’s discount
rate:
“This real rate of return is the same as the Tribe and PGE have used in their
current net benefits analysis. Such a utility rate of return is appropriate here, since
a) it reflects the risks of the majority owner of the Project (i.e. PGE); b) it reflects
future long-term debt costs that PGE will issue, as well as the cost of equity; and
c) it reflects PGE's long-term capital structure goal of 50 percent equity and 50
percent debt. Further the long-term 5.59% weighted after-tax cost of capital is
what is used in PGE's current IRP [Integrated Resource Plan] for long-term
analyses, including net present value calculations.” 24 (Emphasis added.)
Thus, the first correction is to use original cost net accumulated depreciation for the Port
Westward. 25
The second correction to Cardno’s analysis is to use the correct PGE nominal cost
of capital instead of Cardno’s 9%. 26,27
The third correction is to multiply the cost of capital
against original cost net of accumulated depreciation. The fourth correction is to include
depreciation on Port Westward as set out in the standard cost formula quoted above. Port
23 PGE’s regulatory affairs manager at the time.
24 BIA No. 16H.
25 This value can be found in Attachment A at line one, incorporating seven months of depreciation.
26 This allows the analysis to use actual values from original sources – in this case PGE’s Declaration and their
Integrated Resource Plan.
27 The value with this cost of capital is located at line two of Attachment A. This value includes the 9.03% cost of
capital over seven months.
9
Exhibit A to Jackson
Appellants' Reply Brief
Page 9 of 27

Westward has an expected lifetime of 35 years, so straight line depreciation would be 1/35 of the
original cost each year. 28
The fifth error concerns the correct number of megawatt-hours to use as the denominator
of the calculation of 2007 dollars per megawatt-hour for both plants, and takes us to the
baseload/peaking load debate. In order to compare Port Westward, a base load unit, to Pelton, a
peaking resource, it is necessary to consider the difference in operations between the two
resources.
To take a simple example, assume that you wanted to use this approach to figure out the
rental value of a limousine and used the family car as a comparison vehicle. The family car
drives 10,000 miles a year and costs $30,000. A limousine can drive 50,000 miles a year and
costs $100,000. If you did not correct for the radically different number of miles, this approach
would prove that limousines are less expensive than family cars. Dividing $100,000 by 50,000
miles would indicate a cost of $2/mile. The family car “cost” would be $30,000 by 10,000 miles
or $3/mile. Without adjusting for the use the vehicle is to be put, you would have to conclude
that limousine owners should pay their clients for the use of a limousine, rather than vice versa.
To make an apples to apples comparison, you would choose similar mileage for both vehicles in
your analysis. This is the same point that Judge Lande addressed in the 1980 FERC case, 29 as
discussed in our Opening Brief, at 22.
28 This value of depreciation can be found in line three of Attachment A. We have taken the 2007 Capital Costs and
found the depreciation by year over thirty-five years.
29 BIA No. 14R Initial Decision Adjusting Annual Charges for Use of Indian Lands, Allen C. Lande, Presiding
Administrative Law Judge, September 23, 1980, 12 FERC 63.055. at page 16, 6th full paragraph.
10
Exhibit A to Jackson
Appellants' Reply Brief
Page 10 of 27

For reasons still unclear, Cardno assumed that Pelton /Round Butte was a base load
plant. 30 The fact sheet describing the project on PGE’s web site – created by the licensees –
stresses the peaking nature of the plant. 31
The FERC license and the Final Environmental Impact
Study both describe the Pelton Round Butte project as a peaking resource. 32,33
Cardno, in
materials prepared for the Bureau of Indian Affairs, described Pelton as a peaking facility in its
comments to FERC in 2003. 34
Dr. McKusick, the author of the current Cardno report, stated in
his report to the BIA on the Pelton Project that:
30 BIA No. 69 Purchase Price Determination for Certain Indian Land Allotments within the Pelton-Round Butte
Hydroelectric Project Boundary (FERC No. 2030), page 4-2.
31 http://www.portlandgeneral.com/community_environment/initiatives/protecting_fish/deschutes_river/
news_fact_sheets/round_butte_fact_sheet.aspx
32 “The Round Butte and Pelton developments are operated as peaking facilities, typically generating between the
hours of 6 a.m. and 11 p.m. daily. Lake Billy Chinook provides seasonal storage and is currently drawn down as
much as 85 feet, to elevation 1,860 feet msl, in the winter, although typically the lake is only drawn down about 10
feet, to elevation 1,935 feet. The lake is typically refilled during the months of April and May. During the summer,
the reservoir is held at the highest practicable level with a relatively stable pool elevation that usually does not
fluctuate more than 1.0 feet below the normal maximum pool elevation of 1,945 feet msl. The surface elevation of
Lake Simtustus usually fluctuates less than 0.75 feet per day but exceeds 3.5 feet per day about 25 percent of the
time due to flow fluctuations produced by Round Butte.” 111 FERC 61,450, “ORDER APPROVING
SETTLEMENT AND ISSUING NEW LICENSE” (June 21, 2005), p. 5.
33 “Typically, PGE dispatches its thermal generating facilities for base-load operations, subject to unit availability
and energy market conditions. PGE's hydroelectric resources, other than the project, are also typically used for baseload
operation, subject to streamflow and reservoir conditions, unit availability, license constraints and regional
coordination of hydroelectric operations. These other hydroelectric projects are operated as run-of-river projects and
therefore cannot replace the peaking power generated by the Pelton Round Butte Project.
The project is typically operated to provide power during daily load peaks. PGE's other significant load-following
resource, contract power from the mid-Columbia projects, does not have this degree of flexibility because of
environmental and operational constraints. The operational flexibility of the project is used by PGE to maintain the
stability and reliability of the PGE system.” FINAL ENVIRONMENTAL IMPACT STATEMENT FOR
HYDROPOWER RELICENSING PELTON ROUND BUTTE HYDROELECTRIC PROJECT FERC Project No.
2030-036, (June 2004), p. 3.
34 “While the Round Butte and Pelton developments are store-and-release facilities that operate in a load following
or peaking mode, the Reregulating Dam operates to redistribute upstream peaking flows to provide a relatively
steady downstream flow of about the same magnitude as inflow to Lake Billy Chinook.” PELTON-ROUND
BUTTE HYDROELECTRIC PROJECT LOWER DESCHUTES RIVER INSTREAM FLOW REPORT Prepared
for UNITED STATE DEPARTMENT OF INTERIOR BUREAU OF INDIAN AFFAIRS, Entrix, Inc.. December
2003, page 7.
11
Exhibit A to Jackson
Appellants' Reply Brief
Page 11 of 27

“Operation of the Project involves the generation of electricity in a "peaking
mode" through powerhouses at the Round Butte and Pelton developments.” 35
BIA counsel has invented a new utility resource classification in Regional Director’s Answer
that has not otherwise been used in the industry. 36 Further, this new classification contradicts the
Cardno report which states that base-load plants operate during 70 to 80 percent of the hours in a
year, 37 a magnitude that Pelton could not hope to attain in the future nor has ever attained in the
past.
Energy economists and engineers call this concept “capacity factor” – the number of
megawatt-hours generated during a period (usually a year) divided by the maximum number of
megawatt-hours the plant could operate. In its first twelve months of operation, Port Westward
had a capacity factor of 80%. 38
The capacity factor for Pelton, Round Butte, and Reregulation
was 45%. 39 The point is, if an apples to apples analysis is to be conducted between these two
very dissimilar plants in order to compare costs per MWh of generation, it would be necessary to
adjust Port Westward’s megawatt-hours for 2007 to reflect its dispatch in 2007 as a peaking
resource.
35 Substantial Evidence in Support of Section 4(e) Conditions for the Pelton Round Butte Hydroelectric Project
FERC Project No. 2030, Prepared for Bureau of Indian Affairs Portland Area Office, Dr. Robert McKusick et al,
November 11, 2002, page 17.
36 “The Pelton Project has characteristics of both a base-load and peaking facility. Although the Project does have
peaking capabilities and properties, it is a base-load facility in that the three dams of the Project work together as
one unit, and the Project in its entirety is not regularly turned "on" or "off' or used only when more power is needed.
Hydropower facilities are generally considered base-load facilities whether they are run-of-river or shaped due to
their low fuel costs turned "on" or "off' or used only when more power is needed.” Director’s Answer, at 22.
37 BIA No. 69 Purchase Price Determination for Certain Indian Land Allotments within the Pelton-Round Butte
Hydroelectric Project Boundary (FERC No. 2030), p. 4-2.
38 Megawatt-hours are from the Energy Information Administration at
http://www.eia.gov/electricity/data/eia923/index.html. The capacity value was from the 2007 PGE FERC Form 1,
page 403.
39 Megawatt-hours are from the Energy Information Administration at
http://www.eia.gov/electricity/data/eia923/index.html. The capacity value was from the Final EIS.
12
Exhibit A to Jackson
Appellants' Reply Brief
Page 12 of 27

Cardno uses average generation for the hydroelectric facilities in its analysis, but relies on
only seven months of Port Westward generation in Table 4-1. The use of these seven monthly
values is highly misleading because they reflect base load operation of the resource.
The Western Energy Coordinating Council defines peak hours as those after the first six
hours of the day and before the last two hours of the day from Monday through Saturday. New
Year’s Day, President’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas are defined as off-peak days. Since Port Westward’s hourly generation is available
from the Environmental Protection Agency, it is easy to calculate the number of megawatt-hours
Port Westward generated on-peak in 2007. 40 In 2007, Port Westward only produced 1,013,787
megawatt-hours on peak. This constituted 58% of total generation in 2007. Pelton (comprising
all three dams) produced 72.0% megawatt hours on peak. 41
There is no uncomplicated way to adjust the values in Cardno. The correct approach
would be to use market prices – the revenue approach – which Cardno rejected. In this case, we
have used the average generation from June 2007 through September 2012 (six years of data) to
maintain comparability with their similar calculation for the Pelton Project. This adjustment is
made on line 6 of Attachment A. 42
The Tribe’s Answering Brief cites two studies to prove that Port Westward is a peaking
facility 43
– one describing plants using different technology than used at Port Westward, and a
second, purely theoretical, article deriving the mathematics for a hypothetical plant that could
dispatch its component generators independently of each other. These are unavailing to remake
40 http://ampd.epa.gov/ampd/
41 Generation By Development for Pelton Project 2007, 2007 Licensee’s Report to FERC
42 The value in line 6 is the average monthly generation for June 2007 through September 2012 multiplied by seven.
43 Tribe’s Answering Brief, at p. 30, fn. 14.
13
Exhibit A to Jackson
Appellants' Reply Brief
Page 13 of 27

the facts. The record is clear: The Oregon Energy Facility Siting Council’s Site Certificate
references Port Westward as a “base load gas plant” throughout its pages and must be treated
accordingly. 44
The following excerpt from Attachment A illustrates the corrections discussed above:
Chart II
Table 4‐1 Benefits per MWh
Line Alternative Project ‐ Port Westward Data Cardno Corrected Values Corrections
1 2007 Capital Costs $267,015,214 $ 262,564,960.43
2 Calculate capital costs at 9.03% $24,358,962 $ 13,830,609.29
3 Straight Line Depreciation (35 Year Life) $ 4,450,253.57
4 2007 Operating & Maintenance Costs $96,634,896 $ 96,634,896.00
5 2007 Total annual project cost (B + C) $120,993,858 $ 114,915,758.86
6 2007 Power Generation (MWh) $1,721,921 $ 1,367,158.41
7 Cost per MWh (D / E) $70 $ 84.05
Error: The original cost should reflect seven months of depreciation.
Cardno neglected the first seven months of accumulated depreciation in
calculating original cost less accumulated depreciation. We removed
7/12ths of one year's depreciation from the original capital less
accumulated depreciation.
Error: Nominal amortization overstates cost of capital. We multiplied
capital cost times the assumed cost of capital for seven months. Cardno
has proposed using a home mortgage to represent the interest and
amortization for the Port Westward plant PGE finances on a portfolio
basis using 50% debt and equity. The home mortgage approach slightly
overstates the capital costs. The correct capital costs should be
calculated at 9.03% for PGE. The capital cost for 2007 — for seven
months ‐‐ is 9.03% times $262,564,960" or $13,830,609.
Error: A major area of cost was omitted from Port Westward. We
calculated straight line depreciation over 35 years. Depreciation is an
operating cost that Cardno neglected to include for three of the four
plants under analysis here (Cardno did include depreciation as an
operating cost for the Reregulation Dam). Since Port Westward has a
lifetime of 35 years, straight line depreciation would be 1/35th of the
original cost per year for seven months.
Error: Assumption of base load operation for 7 months. We calculated
Port Westward's on‐peak generation in 2007. Cardno assumed output
at Port Westward based on their erroneous comparative assumption
that Pelton Round Butte, too, is a base load generator. Pelton, however,
is a peak load generator. With this information taken into account, Port
Westward on‐peak generation plus the comparable share of off‐peak
generation to Pelton's is used as the denominator.
The errors in the Port Westward calculation of 2007 cost per megawatt-hour are injurious to the
Jacksons since the numerator was diminished by the omission of depreciation and the
denominator assumed base load operation.
Calculation of Pelton Cost in 2007 Dollars per Megawatt-hour in Table 4-2
5. Cardno Table 4-2 (Pelton costs) is loosely based on the methodology in Cardno Table
4-1 (Port Westward costs). The errors include using total cost instead of cost-net-of-
44 SITE CERTIFICATE FOR THE PORT WESTWARD GENERATING PROJECT
ISSUED BY OREGON ENERGY FACILITY SITING COUNCIL (NOVEMBER 8, 2002), pp. 26, 27, and 30,
http://www.oregon.gov/energy/Siting/Pages/PWG.aspx
14
Exhibit A to Jackson
Appellants' Reply Brief
Page 14 of 27

depreciation, omitting depreciation costs, double counting capital and operating costs, using the
wrong cost of capital, and using a home fixed-rate mortgage calculation instead of multiplying
the cost-net-of-depreciation times the cost-of-capital.
As guidance to third parties for the calculation of cost-net-of-depreciation at jointlyowned
plants such as Pelton, PGE provides a specific table to describe the original cost and
accumulated depreciation. In 2007, this table was found on page 123.29, Note 10, of the PGE
FERC Form 1:
Cost-net-of-depreciation should subtract accumulated depreciation. As mentioned above, this
calculation should only have been made once for each plant. In Cardno’s table the capital costs
had been mistakenly multiplied by 1 2 /3. Cardno had misread PGE’s 2007 FERC Form 1 and
included 1 2 /3 the correct costs for Pelton’s capital 45 (before the adjustment required for
accumulated net depreciation). PGE reports two columns in their Form 1 for Pelton and Round
Butte – one at 100% and one at 66.67%. This is explained clearly in the footnotes to the
columns in the Form 1, and in our Opening Brief, at 20.
Referring again to the standard regulatory cost formula from Phillips, the cost of capital
should only have been multiplied against cost-net-of–accumulated-depreciation -- (V-D)r.
45 Both Pelton and Round Butte values are located in Attachment A at lines nineteen and twenty, respectively.
15
Exhibit A to Jackson
Appellants' Reply Brief
Page 15 of 27

Cardno’s approach – a home mortgage paying off the original cost – was error, the harm of
which is to over-estimate the cost of Pelton, to the detriment of the Jacksons.
Cardno Table 4-2 includes several additional errors: omitting depreciation, overstating
operating costs by a factor of 1 2 /3 due to their misreading for the Form 1, and miscalculating the
cost of capital by 1.21%.
As discussed above, it seems likely that Cardno’s undocumented cost of capital was taken
from PGE’s cost of capital calculation in its Integrated Resource Plan. This is a standard
approach for the calculation of capital costs. As PGE explained in Note 10, above, “Each joint
owner has provided its own financing.” 46
PGE finances on a corporate basis, blending low risk
investments like Pelton and Round Butte with high risk investments in other areas. The Tribe’s
financing is on a project basis. In 2003, the Tribe issued $50 million in taxable auction rate
securities. 47
At the time of issue, the assumed interest rate was approximately 5.40%. 48 The
correct melded cost of capital is, therefore, 9.03% for the 2 /3 PGE share, and 5.40% for the 1 /3
Warm Springs share, or 7.82%. 49
Credits for Renewable Operations
6. Cardno also neglected to consider the renewable nature of the Pelton/ Round Butte
Project and its redounding benefit to the Jacksons. In 2007, after the Oregon legislature passed
the Renewable Energy Act of 2007 (Senate Bill 838), the state of Oregon established a
renewable portfolio standard (RPS) for electric utilities and retail electricity suppliers. Different
46 2007 PGE FERC Form 1, page 123.29.
47 FINAL LIMITED OFFERING MEMORANDUM $50,000,000 The Confederated Tribes of the Warm Springs
Reservation of Oregon Hydroelectric Revenue Bonds, Series 2003 (Pelton-Round Butte Project) (Taxable Auction
Rate Securities), (October 7, 2003)
48 Id., page 20.
49 The correction to the cost of capital is on line eleven of Attachment A.
16
Exhibit A to Jackson
Appellants' Reply Brief
Page 16 of 27

RPS targets apply depending on a utility's size. Electricity service suppliers must meet the
requirements applicable to the electric utilities that serve the territories in which the electricity
service supplier sells electricity to retail consumers. Large utilities, like PGE-- those with 3% or
more of the state's load -- must ensure that a percentage of the electricity sold to retail customers
in-state be derived from newer eligible renewable energy resources according to the following
schedule:
5% by 2011
15% by 2015
20% by 2020
25% by 2025
Renewable Energy Credits are provided by a variety of resources, including hydro projects built
before 1995. At Pelton/Round Butte, the credits are limited to 50 megawatts. At $3.00 per
megawatt-hour, the revenue impact is 50 times 8,760 hours times $3.00 or $1,314,000. 50
This is
a credit against costs at Pelton /Round Butte and has, accordingly, been netted against (a
reduction in) costs on line 23 on Attachment A.
Calculation of Reregulation Cost in 2007 Dollars per Megawatt-hour in Table 4-2
7. Cardno made fewer errors in the analysis of the Reregulation Dam and Reservoir than
it had in the analysis of Pelton and Round Butte but added one significant new error. For the
Reregulation Dam, it correctly added depreciation to the costs, but then omitted interest costs.
This was apparently due to the omission of interest costs from the Tribe’s response to Cardno’s
50 2007 PGE renewable tariff at http://edocs.puc.state.or.us/efdocs/UAA/3134uaa12351.pdf
17
Exhibit A to Jackson
Appellants' Reply Brief
Page 17 of 27

equest for capital costs. 51
Cardno had asked for a full set of costs, but seemingly did not notice
any omissions in the Tribe’s response. 52
The Tribe listed the original value of the reregulation dam and powerhouse as
$31,796,575 in their 1990 FERC Form 1. 53 Assuming 25 years of straight line depreciation from
1982 through 2007, the original cost net of depreciation would be 25/50ths of the original cost,
or $15,898,287. The financing cost for the 2003 bonds was 5.40%, so the cost of capital is
$858,508. 54 This is corrected on line 16 of Attachment A.
The following excerpt from Attachment A summarizes the corrections to Table 4-2.
///
///
///
///
///
///
///
51 BIA No. 69 Re: Confidential Information: Costs and Alternative Power Costs of Reregulating Dam
and Powerhouse, November 29, 2011.
52 “1. Itemized actual annual costs of the Reregulating portion of the Project, including all operating & maintenance
costs and all capital costs (including capital additions and capital carrying costs, broken out as appropriate), for the
most recent 10 years available;” BIA No. 47.
53 1990 Warm Springs Power Enterprises FERC Form 1, page 406, line 19.
54 FINAL LIMITED OFFERING MEMORANDUM $50,000,000 The Confederated Tribes of the Warm Springs
Reservation of Oregon Hydroelectric Revenue Bonds, Series 2003 (Pelton-Round Butte Project) (Taxable Auction
Rate Securities) ( October 7, 2003), p. 20.
18
Exhibit A to Jackson
Appellants' Reply Brief
Page 18 of 27

Chart III
Table 4‐2 Net Benefits per MWh
Line Pelton Round Butte Project Costs Cardno Corrected Values Corrections
Error: Capital costs have been double counted. In PGE's 2007 FERC Form
8 2007 Pelton Capital Costs $57,160,309
1, there are two columns dedicated to capital costs. One of these
$20,991,211
represents the total value, while the other presents two thirds of total
value to represent PGE's ownership of the dam. Cardno incorrectly
summed these values, and then failed to net accumulated depreciation.
9 2007 Round Butte Capital Costs $121,310,087 $44,549,193 We used the correct 2007 values from PGE FERC Form 1.
10 2007 Total Pelton Round Butte Capital Costs (A + B) $178,470,396 $65,540,404
11 Correct Cost of Capital
Error: Capital Costs are overstated. PGE financed 66.67% of the project
at its cost of capital of 9.03% while the Tribe financed at a rate of 5.4%.
Taking the weighted average these two values yields an average cost of
7.82% capital of 7.82%.
12
Original Cost Net Accumulated Depreciation Times Cost
of Capital $16,281,295 $5,125,260
Error: Nominal amortization overstates the cost of capital. Cardno
applied a formula for a home mortgage instead of multiplying the
original cost net accumulated depreciation times the melded cost of
capital.
13 2007 Pelton Straight Line Depreciation (50 Year Life) $685,910 Error: (lines 13 and 14): Missing depreciation for Pelton Round Butte.
14 2007 Round Butte Straight Line Depreciation (50 Year Life) $1,455,692 Straight line depreciation assuming a fifty year life
15 Depreciation from Warm Springs data $627,868 Depreciation from Warm Springs data.
16 Tribe's Cost of Capital at 5.4% $858,508
ERROR: Depreciation only ‐ no cost of capital. This value is the product
of the Tribal cost of capital, 5.40%, and the undepreciated balance of
the Reregulation Dam taken from 1990 WSPE FERC Form 1.
17 2007 Annual Re‐Reg Capital Costs $627,868 $1,486,376
18 Total Annual Project Capital Costs (D + E) $16,909,163 $8,753,237
19 2007 Pelton Operating & Maintenance Costs $2,596,538 $1,811,108 Error (lines 19 and 20): Pelton Operating and Maintenance costs were
20 2007 Round Butte Operating & Maintenance Costs $6,999,414 $3,919,303 double counted. Correct 2007 values from PGE FERC Form 1.
21 2007 Re‐Reg Operating & Maintenance Costs $1,137,183 $1,137,183
22 2007 Project Operating & Maintenance Costs (G + H + I) $10,733,135 $6,867,594
23 Credit for Renewable Energy Certificates
Error: Missing Value of REC credits. The product of these = 50
megawatts, 8760 hours in a year, and $3 per megawatt‐hour from
$1,314,000 PGE's contemporaneous tariff.
24 2007 Total annual project cost (F + J) $27,642,298 $14,306,831
25 2007 Power Generation (MWh) $1,464,949 $1,464,949
26 Cost per MWh (2007 $/MWh) (K / L) $18.87 $9.77
27 Net Benefit per MWh (Table 4‐1 F – Table 4‐2 M) $51.40 $74.29
The calculation of Pelton Project costs disadvantaged the Jacksons since depreciation was
omitted on both the Pelton Dam and the Round Butte dam. Depreciation was included for the
Reregulation dam, but in this case Cardno neglected to include interest. The calculation also
neglected to use the tribal cost of capital for Tribal assets. The sum of these and other errors was
to overstate significantly the average cost per megawatt-hour in 2007.
///
///
///
19
Exhibit A to Jackson
Appellants' Reply Brief
Page 19 of 27

Use of the Handy Whitman Index in Table 4-4
8. Cardno does not explain the use of the wrong Handy Whitman index for the wrong
plant type at the wrong location for the wrong year. The Director offers that
“In order to limit the number of unspecified variables and to improve
transparency, Cardno used data and information provided by the licensees and
publicly available information to assess each of the calculations provided.
Unfortunately, neither the Jacksons nor the licensees provided a complete or
excerpted Handy-Whitman Index for Cardno's use during this effort even though
both were asked to provide all information necessary to derive a fair market value.
Contrary to the Jacksons' assertions, the Handy-Whitman Index is not readily or
publicly available. A prospective user must purchase the right to use the Index,
and the cost is quite significant.” 57
It must be noted that neither the BIA nor Cardno contacted the Jacksons on this issue – or, in
fact, on any factual issue after September, 2009. The correct Handy Whitman index is available
next door to the BIA offices at the Bonneville Power Administration library. The access number
is 1092-955x. There is no charge for its use. The purchase cost of the Handy Whitman index is
$175 and can be purchased like any other reference material – over the phone or the internet.
Since Port Westward is a gas fueled turbogenerator in Oregon, Pelton/Round Butte are
hydroelectric dams in Oregon, it is inappropriate to use the Handy Whitman index for a steam
unit in New England.
The Director continues:
“The BIA maintains that escalation to 2011 was appropriate. Cardno's analysis
was completed in late 2011, and the Regional Director's decision was issued
approximately seven months later. It was not necessary to re-index the purchase
price to account for the time period between December 2011 and July 2012.” 58
55 We have corrected this error by multiplying the cost of depreciation in line ten by the cost of capital in line eleven.
56 Each of these values takes the Pelton capital costs in line eight and the Round Butte capital costs in line nine and
multiplies them by two percent.
57 Director’s Answer, at 23.
58 Id., at 25.
20
Exhibit A to Jackson
Appellants' Reply Brief
Page 20 of 27

The Cardno report was delivered to the BIA on April 17, 2012 and Mr. Dach summarized the
report in a memo on May 30, 2012. 59,60
Under no circumstance would it have been reasonable
to assume the condemnation could have taken place in the year preceding the completion of the
report since the condemnation could only take place after the valuation was complete. The
Handy Whitman corrections are on lines 36 through 40 of Attachment A.
Calculation of Present Value in Table 4-4
9. The selection of a discount rate is an important – perhaps the most important – part of
an economic analysis, especially so in the reduction of a column of income to its present value.
In the case of the Director’s Decision, every mention of the discount rate to be used in the
Cardno study indicates that the correct real rate is 3.00%. 61,62,63
There is no support in the record
for the use of 9.00%. Nine percent is even more inexplicable when the record contains a
declaration by PGE rejecting this value in favor of the use of PGE’s real discount rate, 5.59%. 64
Even the Tribe mentions correcting this error, but goes on to argue that unspecified risks should
then be used to increase the value. 65
This argument is new to the Tribe and specifically
contradicts its previously held position in this record. In September, 2009, it wrote to BIA,
59 BIA No. 69 Memorandum from Bob Dach to Greg Argel, dated May 30, 2012, RE: Transmittal of Purchase Price
Determination for Certain Indian Land Allotments within the Pelton-Round Butte Hydroelectric Project Boundary
(FERC No. 2030) prepared by Cardno ENTRIX, dated April 2012 (Attachment)
60 BIA No. 69 Purchase Price Recommendation for Certain Indian Land Allotments within the Pelton
- Round Butte Hydroelectric Project Boundary.
61 BIA No. 70 Re: Tribal request to purchase interests in Allotments 528, 532, and 292, page 6.
62 BIA No. 69 Purchase Price Recommendation for Certain Indian Land Allotments within the Pelton
- Round Butte Hydroelectric Project Boundary, May 30, 2012, pages 3 and 6.
63 BIA No. 21 RE Response to Request for Information dated March 9, 2010.
64 BIA No. 16H Declaration of Patrick Hager, September 30, 2009.
65 Tribe’s Answering Brief, at 22.
21
Exhibit A to Jackson
Appellants' Reply Brief
Page 21 of 27

“The Tribe and PGE have revised the capitalization factor used in the GSA
income approach to convert the annual revenues to a purchase price. The new
capitalization factor is 17.89, reflecting a real weighted after-tax cost of capital (or
rate of return) of 5.59 percent (1 divided by .0559). This real rate of return is the
same as the Tribe and PGE have used in their current net benefits analysis. ***
Such a utility rate of return is what FERC used in determining annual charges in
the PGE case, see 12 FERC 63055, WL at 14, and is appropriate here since it
reflects: a) the risks of the majority owner of the Project (i.e., PGE); and b) future
long-term debt costs that PGE will issue, as well as the cost of equity; and c)
reflects PGE's long-term capital structure goal of 50 percent equity and 50 percent
debt.” 66 (Emphasis added.)
At the heart of the problem is a fundamental misunderstanding of the use of a discount rate. The
Bureau of Indian Affairs’ role in this proceeding was to set a price for the taking of a specific
property owned by the Jacksons. To do this, the Director found a rental rate in dollars per
megawatt-hour and then applied it to the share of Pelton Round Butte owned by the Jacksons.
To reimburse the Jacksons for the loss of this stream of income, the Jacksons need to
receive a lump sum payment, prudently invested, that would provide a comparable income
stream. The Cardno report has not done this: First, Cardno has ignored the Jacksons (and their
appropriate discount rate) as the recipient of the lump sum sought to be calculated. Second,
having selected PGE, not the Jacksons, as the apparently appropriate focus, Cardno has
disregarded PGE’s proffered testimony on the subject, as shown above. Third, even assuming
utility focus is warranted (which it is not), Cardno has ignored the tabulated results of a
contemporaneous survey on the very subject of the inquiry, conducted by the Northwest
Regional Power Council, and included in the record:
66 BIA No. 16, Letter from Ellen Grover to Stanley Speaks, dated September 30. 2009 RE ILCA Proceeding in
Purchase of Allotments 292, 528 and 532 with Attachments, p. 13.
22
Exhibit A to Jackson
Appellants' Reply Brief
Page 22 of 27

67
In short, the Cardno report has used a real discount rate higher than discount rate used by any
utility in the Pacific Northwest – or any other alternative -- as if the Jacksons could expect this
rate of return in today’s markets. A real discount rate of 9% would certainly does not reflect a
prudent investment open to the Jacksons in 2013.
The Bureau of Indian Affairs filed a declaration in this case in October demonstrating
that interest rates – nominal, before the adjustment for inflation – were 3.64% for individual
Indians with money deposited (in IMMs) with the Federal Trustee. 68
Adjusted for inflation, this
would indicate a real discount rate below 2.00% -- lower than the discount rate adopted in the
Decision. 69
Tribal counsel has repeatedly averred, without evidence, that a 3.00% real discount rate is
“risk-free.” 70 This assertion is factually incorrect. It is generally accepted that the risk-free rate
is best approximated by securities of the United States federal government. Use of these rates
for economic analysis is set out in Circular A-94 Appendix C, updated annually by the Office of
67 BIA No.1G, Sixth Northwest Conservation and Electric Power Plan, Northwest Power and Conservation Council,
February 2010, page N-8.
68 Declaration of Catherine Rugen re bond amount, October 10, 2012, page 1.
69 At page 6.
70 Tribe’s Answering Brief, at 22, for example.
23
Exhibit A to Jackson
Appellants' Reply Brief
Page 23 of 27

Management and Budget and published on the White House web site. The most recent risk-free
rates are:
71
BIA counsel has opined “The reasonableness of this number [of 9% for PGE’s discount rate] is
reinforced by FERC itself - in its economic analyses FERC typically assumes a discount rate of
10% during relicensing. See, e.g., Robert Black, Bruce McKenney and Robert Unsworth, U.S.
Fish and Wildlife Service, Economic Analysis for Hydropower Project Relicensing: Guidance
and Alternative Methods.” 72
This fifteen year old document, circa 1998, is incorrect. FERC
does not use 10% for all reviews, nor did it do so in its review of the Pelton Round Butte project
for relicensing in 2004. 73
The Director confides that, “Cardno was not aware of any case that used a rate as low as
5.59 percent, and indeed, a 5.59 percent rate was not used by the licensees in their net benefits
calculations ***,” 74 but this is wrong. Robert McKusick, the author of the Cardno report, was
also one of the authors of a recent environmental analysis, dated August 11, 2010, that used
71 http://www.whitehouse.gov/omb/circulars_a094/a94_appx-c
72 Regional Director’s Answer, December 21, 2012, page 16.
73 FINAL ENVIRONMENTAL IMPACT STATEMENT FOR HYDROPOWER RELICENSING PELTON
ROUND BUTTE HYDROELECTRIC PROJECT FERC Project No. 2030-036, (June 2004), p. 271.
74 Director’s Answer, at 16.
24
Exhibit A to Jackson
Appellants' Reply Brief
Page 24 of 27

3.00%, 75 and PGE and the Tribe did use the 5.59%, as they said explicitly in a September 2009
letter to the Director:
“The Tribe and PGE have revised the capitalization factor used in the GSA
income approach to convert the annual revenues to the purchase price. The new
capitalization factor is 17.89, reflecting a real weighted after-tax cost of capital (or
rate of return) of 5.59 percent (1 divided by .0559). This real rate of return is the
same as the Tribe and PGE have used in their current net benefits analysis. ***
Further, the long-term 5.59 percent weighted after-tax cost of capital is what is
used in PGE's current Integrated Resources Plan for long-term analyses, including
net present value calculations. 76 (Emphasis added.)
Finally, the Director avers, without justification, that the Jacksons support use of PGE’s discount
rate in the present value of rent to be paid to the Jacksons. 77
This is simply incorrect. The
Jacksons’ position is the same as the Director’s, “that a 3 percent discount rate is most
appropriate.” 78
The following excerpt is from Attachment A.
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///
///
75 Final Regulatory Impact Statement (RIR) /4(b)(2), Preparatory Assessment/FRFA for the Critical Habitat
Designation of Cook Inlet Beluga Whale, Michael Nagy, Robert McKusick, Krieg Brown, and Rabia Ahmed,
August 11, 2010, pp. 7-12, 9-4, and 9-5.
http://www.fakr.noaa.gov/protectedresources/whales/beluga/chabitat/cib_economicanalysis0810.pdf
76 BIA No. 16, Letter from Ellen Grover to Stanley Speaks, dated September 30, 2009, RE ILCA Proceeding in
Purchase of Allotments 292, 528 and 532 with Attachments, p. 13.
77 Director’s Answer, at 14.
78 Id., at 41.
25
Exhibit A to Jackson
Appellants' Reply Brief
Page 25 of 27

Chart IV
Table 4‐4
Line Calculation of Net Benefits Cardno Corrected Values Corrections
28 Net Benefit per MWh (2007 $/MWh) (Table 4‐2, N) $51.00 $
74.29
29 Average annual power generation (MWh) (Table 4‐3) 1,447,986 1,447,986
30 Port Westward Value $ 121,709,678.44 Cost per MWh taken from Table 4‐1 (Corrected)
31 Pelton Round Butte Value $ 14,141,168.74 Cost per MWh taken from Table 4‐2 (Corrected)
32 Total Annual Net Benefits (2007 $) (A * B) $74,423,119.00 $ 107,568,509.71
33 Port Westward Value (Present Value at 3%) $ 4,056,989,281.43
34 Pelton Round Butte Value (Present Value at 3%) $ 471,372,291.23
35
Total Project Net Benefits (Present value C over 50 years
with 9% rate) $815,802,633.00 $
Cardno used the wrong formula (present value at 50 years) and the
3,585,616,990.19
wrong discount rate (9%)
36 Handy‐Whitman Index (Pacific Turbo Generator to 2012)
Error: Wrong Handy Whitman index used in line 38. We used the
appropriate Handy‐Whitman index for a turbogenerator on the Pacific
1.49 coast calculated from 2007 to 2012.
37 Handy‐Whitman Index (Pacific Hydro Generator to 2012)
Error: Wrong Handy Whitman index used in line 38. We used the
appropriate Handy‐Whitman index for a hydroelectric plant on the
1.13 Pacific coast calculated from 2007 through 2012.
38 Handy‐Whitman Index (convert 2007 dollars to 2011 dollar 1.15
Error: Wrong Handy Whitman Index for the wrong plant at the wrong
location for the wrong plant type and the wrong year.
39
Port Westward Value (Present Value at 3%) Indexed to
2012 (million $) $ 6,034.48 Indexed to 2012
40
Pelton Round Butte Value (Present Value at 3%) Indexed
to 2012 (million $) $ 530.29 Indexed to 2012
2012 Total Project Net Benefits (Difference between Port
41 Westward and Pelton Round Butte) (million $) $ 936.54 $ 5,504.18 Calculated Difference.
The choice of the 9% undocumented and erroneous discount rate is deeply disadvantageous to
the Jacksons. The Jacksons are assumed to be able to invest their dollars at a rate much higher
than the evidence filed by the BIA for an individual Indian’s investments. Adding to the bias
against the Jacksons is the use of the wrong handy Whitman index for the wrong location, the
wrong technology, and the wrong time period.
Calculated using rate from Regional Director Speaks decision by using
the rate of 3% and applying the standard financial calculation for
investment streams without a maturation date
Calculation of Condemnation Value in Table 4-5
10. The calculation of the amount owed to the Jacksons is found in line 52 of Attachment A.
This value is .052% of project land times the net present value of $5,504.18 million from line
47. The cumulative effect of the corrections described above is to increase the appropriate
payment to the Jacksons for Project plans from $6.3 million to $28.6 million.
11. This completes my declaration.
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///
26
Exhibit A to Jackson
Appellants' Reply Brief
Page 26 of 27

Done this 25 th day of January, 2013.
___________________________________
Robert McCullough
27
Exhibit A to Jackson
Appellants' Reply Brief
Page 27 of 27

ATTACHMENT A TO MCCULLOUGH DECLARATION
Original Tables from Cardno
Corrected Cardno Tables
Line Table 4-1 Benefits per MWh Errors (Shown in red) Solutions (Shown in Green) Table 4-1 Benefits per MWh Line
Alternative Project - Port Westward Data
Alternative Project - Port Westward Data
1 2007 Capital Costs $267,015,214 The original cost should reflect seven months of depreciation 2007 Capital Costs $ 262,564,960.43
1
2 Amortized 2007 Capital Costs (amortize A over 50 years at 9%) $24,358,962 Nominal amortization overstates cost of capital Multiply capital cost times assumed cost of capital for seven months Calculate capital costs at 9.03% $ 13,830,609.29
2
3 A major area of cost was omitted from Port Westward Straight line depreciation over 35 years Straight Line Depreciation (35 Year Life) $ 4,450,253.57
3
4 2007 Operating & Maintenance Costs $96,634,896 2007 Operating & Maintenance Costs $ 96,634,896.00
4
5 2007 Total annual project cost (B + C) $120,993,858 2007 Total annual project cost (B + C) $ 114,915,758.86
5
6 2007 Power Generation (MWh) 1,721,921 Assumption of base load operation for 7 months Port Westward on-peak generation in 2007 2007 Power Generation (MWh) 1,367,158 6
7 Cost per MWh (D / E) $ 70.27
Cost per MWh (D / E) $ 84.05
7
Table 4-2 Net Benefits per MWh
Table 4-2 Net Benefits per MWh
Pelton Round Butte Project Costs
Pelton Round Butte Project Costs
8 2007 Pelton Capital Costs $57,160,309 Capital costs have been double counted Use correct 2007 values from PGE FERC Form 1 2007 Pelton Capital Costs $20,991,211 8
9 2007 Round Butte Capital Costs $121,310,087 Capital costs have been double counted Use correct 2007 values from PGE FERC Form 1 2007 Round Butte Capital Costs $44,549,193 9
10 2007 Total Pelton Round Butte Capital Costs (A + B) $178,470,396 2007 Total Pelton Round Butte Capital Costs (A + B) $65,540,404 10
11 Capital costs are overstated PGE's share at 9.03% and Tribe's share at 5.4% Correct Cost of Capital 7.82% 11
12 Amortized 2007 Pelton Round Butte Capital Costs (amortize C over 50 years at 9%) $16,281,295 Nominal amortization overstates cost of capital Multiply capital cost times assumed cost of capital Original Cost Net Accumulated Depreciation Times Cost of Capital $5,125,259.56 12
13 Missing depreciation for Pelton and Round Butte Calculate straight line depreciation at 2% 2007 Pelton Straight Line Depreciation (50 Year Life) $685,910 13
14 Missing depreciation for Pelton and Round Butte Calculate straight line depreciation at 2% 2007 Round Butte Straight Line Depreciation (50 Year Life) $1,455,692 14
15 Depreciation from Warm Springs data Depreciation from Warm Springs data $627,868 15
16 Cost of capital (5.4%) times undepreciated balance from 1990 WSPE FERC Form 1 Tribe's Cost of Capital at 5.4% $858,508 16
17 2007 Annual Re-Reg Capital Costs $627,868 Depreciation only - no cost of capital Add in cost of capital at 9% 2007 Annual Re-Reg Capital Costs $1,486,376 17
18 Total Annual Project Capital Costs (D + E) $16,909,163 Total Annual Project Capital Costs (D + E) $8,753,237 18
19 2007 Pelton Operating & Maintenance Costs $2,596,538 O&M Costs have been double counted Use correct 2007 values from PGE FERC Form 1 2007 Pelton Operating & Maintenance Costs $1,811,108 19
20 2007 Round Butte Operating & Maintenance Costs $6,999,414 O&M Costs have been double counted Use correct 2007 values from PGE FERC Form 1 2007 Round Butte Operating & Maintenance Costs $3,919,303 20
21 2007 Re-Reg Operating & Maintenance Costs $1,137,183 2007 Re-Reg Operating & Maintenance Costs $1,137,183 21
22 2007 Project Operating & Maintenance Costs (G + H + I) $10,733,135 2007 Project Operating & Maintenance Costs (G + H + I) $6,867,594 22
23 Credit for Renewable Energy Certificates Credit for Renewable Energy Certificates $1,314,000 23
24 2007 Total annual project cost (F + J) $27,642,298 2007 Total annual project cost (F + J) $14,306,831 24
25 2007 Power Generation (MWh) 1,464,949 2007 Power Generation (MWh) 1,464,949 25
26 Cost per MWh (2007 $/MWh) (K / L) $ 18.87
Cost per MWh (2007 $/MWh) (K / L) $ 9.77 26
27 Net Benefit per MWh (Table 4-1 F – Table 4-2 M) $ 51.40
Net Benefit per MWh (Table 4-1 F – Table 4-2 M) $ 74.29 27
Table 4-4 Calculation of Net Benefits
Table 4-4 Calculation of Net Benefits
28 Net Benefit per MWh (2007 $/MWh) (Table 4-2, N) $51 Net Benefit per MWh (2007 $/MWh) (Table 4-2, N) $ 74.29
28
29 Average annual power generation (MWh) (Table 4-3) 1,447,986 Average annual power generation (MWh) (Table 4-3) 1,447,986 29
30 Cost per MWh taken from Table 4-1 (Corrected) Port Westward Value $121,709,678 30
31 Cost per MWh taken from Table 4-2 (Corrected) Pelton Round Butte Value $14,141,169 31
32 Total Annual Net Benefits (2007 $) (A * B) $74,423,119 Total Annual Net Benefits (2007 $) (A * B) $107,568,510 32
33 Use rate from Regional Director Speaks decision Port Westward Value (Present Value at 3%) $4,056,989,281 33
34 Use rate from Regional Director Speaks decision Pelton Round Butte Value (Present Value at 3%) $471,372,291 34
35 Total Project Net Benefits (Present value C over 50 years with 9% rate) $815,802,633 Discounted at incorrect rate Calculate Difference Total Project Net Benefits (Present value C over 50 years with 9% rate) $3,585,616,990 35
36 Use Handy Whitman Index for Pacific Turbogenerator Handy-Whitman Index (Pacific Turbo Generator to 2012) 1.487 36
37 Wrong Handy Whitman index used Use handy Whitman Index for Pacific Hydro Handy-Whitman Index (Pacific Hydro Generator to 2012) 1.125 37
38 Handy-Whitman Index (convert 2007 dollars to 2011 dollars) 1.148 Wrong date for evaluation 38
39 Index to 2012 Port Westward Value (Present Value at 3%) Indexed to 2012 (million $) $6,034 39
40 Index to 2012 Pelton Round Butte Value (Present Value at 3%) Indexed to 2012 (million $) $530.29 40
41 Total Project Net Benefits (Million 2011 $) (D * E) $936.54 Calculate Difference 2012 Total Project Net Benefits (Difference between Port Westward and Pelton Round Butte) (million $) $5,504 41
Table 4-5 Results for Sharing of Net Benefits Method Alternatives
Sharing of Net Benefits Analysis
Table 4-5 Results for Sharing of Net Benefits Method Alternatives
Sharing of Net Benefits Analysis
50/50 split (million
$)
Up to 100% to
land (million $)
50/50 split (million $)
Up to 100% to land
(million $)
42 Analysis Assumptions Analysis Assumptions 42
43 Allotments 528 and 532 acres within Project area 86.9 86.9 Allotments 528 and 532 acres within Project area 86.9 86.9 43
44 Allotment 292 acres within Project area 10.8 10.8 Allotment 292 acres within Project area 10.8 10.8 44
45 Total acres within Project area for three allotments 97.7 97.7 Total acres within Project area for three allotments 97.7 97.7 45
46 Total project area acres (approximate) 5,878.50 5,878.50 Total project area acres (approximate) 5,878.50 5,878.50 46
47 Net Benefits (million $) $936.54 $936.54 Net Benefits (million $) $5,504.18 $5,504.18 47
48 Allotment Interest Share of Total Project Net Benefits 0.80% 1.70% Allotment Interest Share of Total Project Net Benefits 0.80% 1.70% 48
49 Jackson Interest Share of Total Project Net Benefits 0.26% 0.52% Jackson Interest Share of Total Project Net Benefits 0.26% 0.52% 49
50 Results Results 50
51 50/50 split (million $) $468.27 N/A Cost per MWh taken from Table 4-4 (Corrected) 50/50 split (million $) $2,752.09 N/A 51
52 Share to Jacksons (million $) $2.45 $4.90 Cost per MWh taken from Table 4-4 (Corrected) Share to Jacksons (million $) $14.31 $28.62 52
53 Remainder to licensees (million $) $934.09 $931.64 Cost per MWh taken from Table 4-4 (Corrected) Remainder to licensees (million $) $5,489.87 $5,475.56 53