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# TABLE OF CONTENTS

I. Introduction

MSTR Process

Project Description

II\. Proposed Rates

III\. Rate Adjustment Procedure

IV\. Environmental and Regulatory Requirements

V. Appendices

A. Federal Register Notice

B. Transmission Rate Design Data

C. Summary of Customer Dialogue

D. CAP Supporting Data

E Intertie Supporting Data

F. PDP Supporting Data

G. Transmission System Reservation Data

H. Assumptions

# introduction

The Western Area Power Administration's (Western) Desert Southwest
Customer Service Region (DSW) is proposing rates (Proposed Rates) for
long-term sales of transmission under a Multi-System Transmission Rate
(MSTR) for cost recovery purposes for the Parker-Davis Project (P-DP),
the Pacific Northwest-Pacific Southwest Inter-tie Project (Intertie) and
the Central Arizona Project (CAP), collectively referred to as Projects.
The MSTR will supercede each Project\'s Single System Transmission Rates
(SSTR). Revenue derived from the MSTR will be allocated to the Projects
based on each individual Project's percentage of the total revenue
requirement. The Proposed Rates will be applied under existing contracts
and Western's Open Access Transmission Service Tariff (OATT) and
conforms with the spirit and intent of the Federal Energy Regulatory
Commission (Commission) Orders 888 and 888A. Western is a
non-jurisdictional entity under FERC and as such, is filing under
Secretarial Delegation Order No. 0204-108 only.

A convergent rate will be applied during the first five years to
mitigate the cost shift to those customers who do not have concurrent
service over two or more Projects (termed pancaked service). The
convergent rate will be determined as follows: DSW will calculate a
target rate to be achieved in the fifth year following the effective
date of the MSTR. The rate for each Project in the first four years will
be the prior year rate increased/decreased each year by an amount equal
to twenty percent of the difference between the target rate and the rate
in effect in the year prior to the MSTR effective date. In the fifth
year, all projects will pay the target rate. The total revenue collected
during the five years will be adequate to meet all expenses of each
Project during the five year cost evaluation period.

DSW will offer firm point-to-point transmission service. The Proposed
Rates will be applicable to existing and future transmission service.
Network Integration Transmission Service (NITS) will be offered to
transmission customers under Western's Open Access Transmission Tariff
(OATT). The NITS will be offered over the P-DP, Intertie, and CAP
Projects as stated in Rate Order WAPA-84. DSW's Firm Electric Service
(FES) and Priority Use Power (PUP) customers who take service under
existing marketing plans will continue to receive a bundled product
which includes an appropriate transmission component charge. The FES or
PUP customers that choose to take advantage of the broader MSTR
transmission service will pay the MSTR transmission rate.

Ancillary Services will continue to be offered under Rate Order WAPA-84
and succeeding Rate Orders. NITS for those customers taking service over
Western's CRSP transmission lines will continue to be covered by Rate
Order WAPA-84.

## Project Descriptions

DSW transmission system includes facilities of three Projects: P-DP,
Intertie and CAP. A complete description of each project is available in
the appropriate appendix and a brief description of each Project
follows.

### *Parker-Davis Project*

The P-DP transmission system includes various high-voltage switchyards,
substations, and approximately 1600 miles of high voltage transmission
lines. Davis Dam is located on the Colorado River between Arizona and
Nevada, about 67 miles downstream from Hoover Dam. Parker Dam is located
on the Colorado River between Arizona and California, 155 miles
downstream from Hoover Dam. The P-DP transmission system has served as a
major transmission system for delivery of power over long distances in
Arizona, with facilities extending into the southern parts of California
and Nevada.

### *Pacific Northwest-Pacific Southwest Intertie Project*

DSW administers the Southwest portion of the Intertie. It consists of a
238 mile (383 km) 345 kV transmission line from Mead Substation in
southern Nevada to Liberty Substation in Arizona; and a 19 mile (31 km)
230 kV transmission line from Liberty Substation to Westwing Substation
in Arizona. A 22 mile (35 km) 230 kV transmission line runs from
Westwing Substation to Pinnacle Peak Substation in Arizona and the 260
mile (419 km) 500 kV Mead-Phoenix Project transmission line between
Perkins Switchyard in Arizona and Marketplace Substation in Nevada. The
Project also includes a 202 mile (325 km) 500 kV Mead-Adelanto Project
transmission line between Marketplace Substation and the existing
Adelanto Switching Station in southern California.

### *Central Arizona Project*

The CAP is one of three related water development projects that make up
the Colorado River Basin Project. The others are the Dixie and the Upper
Basin projects. The Central Arizona Project was developed for Arizona
and western New Mexico; the Dixie Project for southeastern Utah; and the
Upper Basin Project for Colorado and New Mexico. The part of the CAP
transmission system for which Western is responsible for O&M and
marketing, includes approximately 38 circuit miles of transmission
lines, (98% of which are in Arizona and the remainder in California) and
six substations with a transformer capacity of 228,000 kVA.

## Rates History

This is the first year the MSTR will be offered; there is no history for
that rate as such. A rate history for each project is detailed in the
supporting data appendices.

# PROPOSED RATES FOR THE multi-system transmission service

DSW will offer point-to-point and network integration transmission
service (NITS). These services include the transmission of energy to
points of delivery on the Projects transmission system which includes
transmission lines, substations, communication equipment, and related
facilities. DSW's FES and PUP customers will continue to receive a
bundled product, which contains an appropriate transmission component
charge, as part of their total electric service charge.

The convergent rates described in the introduction and Appendix B will
be applied during the first five year cost evaluation period in order to
mitigate the cost shifts to the customers that do not have pancaked
service. Table 1 shows the convergent rates for the period sorted by
Project SSTR and the target MSTR.

Table 1: Power System and Multi-System Transmission Rates

  ------ --------------- ------------- -------------- ------------ ------------------
         **20% Annual                  **\$1.15                    
         Convergence**                 /kW-Mo Target               
                                       Rate**                      

                                                                   

         **P-DP**        **CAP**       **IP           **IP         **Multi-System**
                                       230/345-kV**   500-kV**     

  **FY   \$1.08 /kW-Mo   \$0.82 /kW-Mo \$1.00 /kW-Mo  \$1.44       n/a
  04**                                                /kW-Mo       

  **FY   \$1.09 /kW-Mo   \$0.89 /kW-Mo \$1.03 /kW-Mo  \$1.38       n/a
  05**                                                /kW-Mo       

  **FY   \$1.11 /kW-Mo   \$0.95 /kW-Mo \$1.06 /kW-Mo  \$1.32       n/a
  06**                                                /kW-Mo       

  **FY   \$1.12 /kW-Mo   \$1.02 /kW-Mo \$1.09 /kW-Mo  \$1.27       n/a
  07**                                                /kW-Mo       

  **FY   \$1.14 /kW-Mo   \$1.08 /kW-Mo \$1.12 /kW-Mo  \$1.21       n/a
  08**                                                /kW-Mo       

  **FY   \$1.15 /kW-Mo   \$1.15 /kW-Mo \$1.15 /kW-Mo  \$1.15       \$1.15 /kW-Mo
  09**                                                /kW-Mo       
  ------ --------------- ------------- -------------- ------------ ------------------

### Firm Point-to-Point Transmission Rate

The Firm Point-to-Point transmission rate will be based on the sum of
the transmission revenue requirements for each of the Projects divided
by the sum of the unpancaked point-to-point reservations of each Project
and the estimated average monthly coincidental peak load of those
customers who take NITS. Currently no customers take deliveries under
the NITS. Calculations for the five year cost evaluation period assume
no customers will take this service.

### Network Integration Transmission Charge

The monthly charge for network integration transmission service is the
product of the transmission customer's load-ratio share times
one-twelfth of the annual transmission revenue requirement. The
customer's load-ratio share is the ratio of their network load to the
DSW Transmission System Total Load, which will be calculated on a
rolling 12-month basis (12 coincident peak average or 12-cp). The
customer's load-ratio share will be calculated as follows:

-   Identify the transmission system peak hour for each month

-   Calculate the total delivery to each individual network transmission
    customer for the 12 monthly peak hours.

-   Sum the 12 monthly peaks and divide by 12 months to derive the 12-cp
    for each network Transmission Customer.

### Firm Electric Service and Priority Use Project Power

Customers who receive P-DP federal capacity and energy allocations on
the P-DP will continue to receive a bundled product which includes both
their allocation and an appropriate transmission component charge. Those
P-DP FES and PUP customers who continue to take deliveries on the P-DP
will receive a single system use credit, to be credited in an amount
equal to the difference between the amount they would pay for the
transmission component at a P-DP single system rate and the amount they
are billed for their transmission component at the MSTR. The FES or PUP
customers that choose to take advantage of the broader MSTR service will
pay the MSTR transmission rate.

## Transmission System Reservations

The DSW transmission system reservations consists of the sum of the firm
transmission Contract Rates of Delivery (CROD) for each Project. Table 2
contains an estimate of the CROD for each Project based on current
contracts and the assumptions of future reservations detailed in
Appendix H.

Table 2: Capacity Reservations

  --------------- ----------- ----------- --------- -------------- ---------- ------------------
  **Capacity                                                                  
  Reservations                                                                
  with                                                                        
  Pancaking**                                                                 

                  **Total**   **P-DP**    **CAP**   **IP           **IP       
                                                    230/345-kV**   500-kV**   

  FY05            4,554,840   2,278,164   275,000   1,239,676 kW   762,000 kW 
                  kW          kW          kW                                  

  FY06            4,823,618   2,373,858   275,000   1,312,760 kW   862,000 kW 
                  kW          kW          kW                                  

  FY07            4,951,405   2,383,191   275,000   1,331,214 kW   962,000 kW 
                  kW          kW          kW                                  

  FY08            4,951,405   2,383,191   275,000   1,331,214 kW   962,000 kW 
                  kW          kW          kW                                  

  ***Section 2B:                                                              
  Capacity                                                                    
  Reservations                                                                
  with Pancaking                                                              
  Eliminated***                                                               

                  **Total**   **P-DP**    **CAP**   **IP           **IP       **Multi-System**
                                                    230/345-kV**   500-kV**   

  FY09            4,369,912   1,126,086   275,000   690,840 kW     962,000 kW 1,315,986 kW
                  kW          kW          kW                                  

  **5 Year**                                                                  

  **Average**     4,730,236   2,108,898   275,000   1,181,141 kW   902,000 kW 263,197 kW
                  kW          kW          kW                                  
  --------------- ----------- ----------- --------- -------------- ---------- ------------------

## Annual Transmission Revenue Requirement

The annual transmission revenue requirements for each project will be
determined by its applicable laws, regulations, and procedures. Detailed
information on calculation of the total revenue requirement for each
Project is contained in the appendices. The revenue requirement which
must be collected from firm transmission sales is the total revenue
requirement minus Other Revenue. Historically, Other Revenue has
included sources such as non-firm and short term transmission sales,
facility use charges, penalties and transfers from other projects. Table
3 shows the net revenue requirements to be recovered from firm
transmission sales for each Project.

Table 3: Revenue Requirements

  -------------- -------------- -------------- ------------- --------------
                 **Total**      **P-DP**       **CAP**       **Intertie**

  FY 2005        \$60,687,906   \$29,525,005   \$3,735,900   \$27,427,001

  FY 2006        \$63,703,902   \$30,765,200   \$3,561,902   \$29,376,800

  FY 2007        \$65,422,542   \$30,886,155   \$3,727,532   \$30,808,855

  FY 2008        \$65,501,455   \$30,886,155   \$3,817,093   \$30,798,197

  FY 2009        \$66,236,885   \$30,367,755   \$3,680,806   \$32,188,324

  **5 Year**                                                 

  **Average**    \$64,310,536   \$30,486,054   \$3,704,647   \$30,119,835
  -------------- -------------- -------------- ------------- --------------

## Allocation of Revenue to Single Projects

Historically, firm transmission revenues (the sum of CROD times the
applicable firm transmission rate) were applied to each Project. Under
the MSTR, revenue from all transmission sales will be applied to each
project based on the percent its revenue requirement is to the
multi-system revenue requirement. At the end of the year, a true-up will
be performed to verify each project has collected the correct amount to
satisfy its revenue requirement. Table 4 shows the allocation percentage
for each Project for the Cost Evaluation Period

Table 4: Transmission Revenue Allocation

  -------------- -------------- -------------- -------------- --------------
                 **P-DP**       **CAP**        **IP**         **Total**

  FY 2005        48.65%         6.16%          45.19%         100.00%

  FY 2006        48.30%         5.59%          46.11%         100.00%

  FY 2007        47.21%         5.70%          47.09%         100.00%

  FY 2008        47.15%         5.83%          47.02%         100.00%

  FY 2009        45.84%         5.56%          48.60%         100.00%
  -------------- -------------- -------------- -------------- --------------

# RATE ADJUSTMENT PROCEDURE

## Announcement of Proposed Rates and Consultation and Comment Period

A public information forum and a public comment forum will be held
during the consultation and comment period. At these forums, Western
will discuss information contained in this document and receive comments
from interested parties. After the consultation and comment period and a
review of oral and written comments, Western's Administrator may develop
a provisional firm power rate, firm and non-firm point-to-point and
network transmission rates, and ancillary service rates. With the
concurrence of the Deputy Secretary of the Department of Energy (DOE),
the provisional rates may be confirmed, approved, and placed into effect
on an interim basis. The provisional rates will be announced to the
public along with an explanation of the principal factors leading to the
decision. The provisional rates will then be submitted to FERC for final
approval.

## Public Process

Procedures adopted by DOE give interested parties an opportunity to
participate in the development of power and transmission rates. The
published procedures for rate adjustments are available upon request
from the Desert Southwest Customer Service Region.

A FRN announcing the proposed rates and the consultation and comment
period was published on June 22, 2004. The FRN signed by the
Administrator is enclosed in the appendices of this brochure.

The formal public consultation and comment period will begin with the
publication of the FRN and will end 90 days after the publication of the
FRN. During this time, interested parties may consult with and obtain
information from Western representatives about the rate proposals.

## Public Information & Comment Forums

The Public Information Forum will be held:

July 14, 2004 at 10 a.m. MST

Desert Southwest Customer Service Region Office

Western Area Power Administration

615 South 43^rd^ Avenue

Phoenix, AZ 85009-5313

Telephone: (602)352-2525

During the Public Information Forum, Western representatives will
explain the need for the proposed rate adjustment and answer questions.
Questions not answered at the Public Information Forum will be answered
in writing at least 15 days before the end of the consultation and
comment period. The Public Information Forum will be recorded and
transcribed. Copies of the transcript will be available for purchase
from the company providing the transcription service.

### The Public Comment Forum will be held:

August 11, 2004 at 10 a.m. MST

Desert Southwest Customer Service Region Office

Western Area Power Administration

615 South 43^rd^ Avenue

Phoenix, AZ 85009-5313

Telephone: (602)352-2525

Interested persons may submit written or oral comments at the public
comment forum. As with the public information forum, the public comment
forum will be recorded and transcribed. Copies of the transcript will be
available for purchase from the company providing the transcription
service.

### Written Comments

All interested parties may submit written comments to Western any time
during the consultation and comment period. All comments must be
received by Western by the end of the comment period to ensure their
consideration. Comments should be sent to Tyler Carlson at the address
above or by e-mail to <carlson@wapa.gov>.

## Revision of Proposed Rate(s)

During and after the consultation and comment period and the review of
oral and written comments, Western may revise the proposed rate(s). If
Western's Administrator decides that further public comment on the
revised proposed rate(s) should be invited, a second consultation and
comment period may be initiated. In that event, one or more additional
public meeting(s) may be convened.

## Decision on Proposed Rates

Following the end of the consultation and comment period(s), Western's
Administrator will develop proposed rates. The Deputy Secretary may
confirm, approve, and place this rate in effect on an interim basis. The
decision and an explanation of the principal factors leading to the
decision will be announced in a Federal Register notice. Western
proposes to place the rates in effect on January 1, 2005.

## Final Decision on the Rate Adjustment

The Deputy Secretary will submit all information concerning the
provisional rates to the Commission and request approval of the MSTR and
NITS for the period January 1, 2005, through December 30, 2009. The
Commission may then confirm and approve the rate permanently, remand it
to Western, or disapprove it.

## Rate Adjustment Schedule

Table 5 displays DSW's anticipated schedule for processing the proposed
MSTR rate adjustments and proposals.

**TABLE 5: DSW's Anticipated Rate Adjustment Schedule**

  ----------------------------------- -----------------------------------
  **Action**                          **Date**

  Federal Register Notice of Proposed 6/22/04
  Rates                               

  Public Information Forum            7/14/04

  Public Comment Forum                8/11/04

  End of Comment Period               9/20/04

  Publication of Interim Rate         12/20/04

  Rate Effective                      1/1/05
  ----------------------------------- -----------------------------------

## ENVIRONMENTAL EVALUATION

In compliance with the National Environmental Policy Act of 1969 (NEPA)
(42 U.S.C. 4321, et seq.); Council on Environmental Quality Regulations
(40 CFR parts 1500-1508), and DOE NEPA Regulations (10 CFR part 1021),
Western has determined that this action is categorically excluded from
the preparation of an environmental assessment or an environmental
impact statement.

## REGULATORY FLEXIBILITY ACT OF 1980

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.) requires
Federal agencies to perform a regulatory flexibility analysis if a final
rule is likely to have a significant economic impact on a substantial
number of small entities and there is a legal requirement to issue a
general notice of proposed rulemaking. This action does not require a
regulatory flexibility analysis since it is a rulemaking of particular
applicability involving rates or services applicable to public property.