**UNITED STATES DEPARTMENT OF ENERGY**

**WESTERN AREA POWER ADMINISTRATION**

**DESERT SOUTHWEST CUSTOMER SERVICE REGION**

**[REGULATION AND FREQUENCY RESPONSE SERVICE]{.underline}**

[Effective]{.underline}:

The first day of the first full billing period beginning on or after
July 1, 2006, through June 30, 2011.

[Available]{.underline}:

In the area served by the Western Area Lower Colorado (WALC) Balancing
Authority and Transmission Operations Area (BATO).

[Applicable]{.underline}:

To all customers with standard loads in the WALC BATO taking this
service under the Open Access Transmission Tariff. Customers with
non-conforming loads will be charged differently as stated below. A
non-conforming load is defined as a single plant or site with a
regulation capacity requirement of 5 megawatts (MW) or greater on a
recurring basis and whose capacity requirement is equal to 10 percent or
greater of its average load.

[Character of Service]{.underline}:

Regulation and Frequency Response Service (Regulation Service) is
necessary to provide for the continuous balancing of resources,
generation, and interchange with load, and for maintaining scheduled
interconnection frequency at sixty cycles per second (60 Hz). Regulation
Service is accomplished by committing on-line generation whose output is
raised or lowered, predominantly through the use of automatic generating
control equipment, as necessary to follow the moment-by-moment changes
in load. The obligation to maintain this balance between resources and
load lies with the transmission provider. The transmission customer must
either purchase this service from the WALC BATO, or make alternative
comparable arrangements satisfactory to Western to meet its Regulation
Service requirements.

[Formula Rate]{.underline}:

The charges for Regulation Service are based on the following formula
rate.

DSWR

Regulation = [Revenue Requirement for the Service]{.underline}

Rate Load Requiring the Service

Where:

Revenue requirement for the service is the product of the generation
capacity for the regulation times the capacity rate of supplying
projects, plus any regulation purchases the transmission provider must
make, multiplied by a use factor; and Load requiring the service is the
sum of the loads in the WALC BATO.

[Rate:]{.underline}

The rate to be in effect July 1, 2006, through September 30, 2006, is:

0.2049 mills/kWh

Regulation Service for non-conforming loads, as determined by Western,
must be delineated in a service agreement and charged an amount which
includes the cost to procure the service and the additional amount
required to monitor and supply this service.

This rate is based on the above formula and on FY 2004 financial and
load data, and will be in effect July 1, 2006, through September 30,
2006. Based on updated financial and load data, a recalculated rate will
go into effect on October 1 of each year during the effective rate
period.

The DSWR charges for Regulation Service may be modified upon written
notice to the customer. Any change to the charges for regulation shall
be as set forth in a revision to this rate schedule promulgated under
applicable Federal laws, regulations, and policies and made part of the
applicable service agreement. The DSWR shall charge the customer in
accordance with the rate then in effect.