# Presentation: 114744

## Parker-Davis Project

- Informal Rate Meeting
- March 12, 2008

## Meeting Agenda

- Review Previous Informal Rate Meeting
- Cost Allocation Factor Changes
- Application of Carryover
- Firm Transmission Service Prepayment
- Minor Rate Adjustment Process
- FY09-13 Rate Information (No change in current rates)
- Next Steps and Questions

## Review of Previous Meeting

- Previous informal rate meeting November 14, 2007
- Public process needed since current methodology and rates expire September 30, 2008
- Presented and discussed changes to cost allocation factors and options for application of carryover

## Cost Allocation Factor Changes

- Changes will streamline the cost allocation factors and make rate calculations more transparent
- Eliminate Billing Time Study, Investments and CME calculation cost allocation factors
- Create Customer Count factor and use other existing allocation factors to apportion costs to generation and transmission

## Cost Allocation Factor Changes

| Systemwide | Time Study | Customer Count |
| --- | --- | --- |
| Ops/Dispatch | SCADA/Time Study | SCADA |
| CME | CME Calc | % of Western O&M |
| Western P&I | Investment Calc | None (Tran only) |

- Impacted Costs

- Proposed Factor

- Current Factor

## Cost Allocation Factor Changes

- Produces nominal change to future revenue requirements
- Provided impact analysis of the last seven fiscal years that determined:
- Average annual revenue requirement change of $388k or 0.96%
- Would not have resulted in rate change
- Propose to implement cost allocation factor changes in FY09 rate. Based on current data, will not result in rate change for FY09-13

## Application of Carryover

- Several viable options are available to apply carryover in FY09 rate methodology
- Options presented at last meeting included:
- _Option 1_: Apply based on revenue requirements
- _Option 2_: Use to stabilize rates and if needed adjust rates proportionally
- _Option 3_: Use to stabilize rates and if needed adjust rates based on revenue requirements

## Application of Carryover

- Option 3 minimizes rate volatility while still adjusting rates based on revenue requirements
- Examples showing hypothetical cost increases under current application method and Option 3 are available on rate adjustment website
- Propose using Option 3 for the FY09 rate methodology.  Based on current data, will not result in rate change for FY09-13.

## Firm Transmission Prepayment

- Firm Electric Service customers currently required to prepay for service.  FES customers have requested all system users be treated equally
- Rate calculations assume full and timely collection of revenues.  Prepayment mitigates credit risk exposure from non-payments.
- Prepayment currently required for Intertie firm transmission service customers

## Firm Transmission Prepayment

- Propose one month prepayment requirement for P-DP firm transmission customers effective with FY09 rate
- Customers will be notified in advance of initial prepayment due date and provided with information to illustrate the timing of initial prepayments

## Minor Rate Adjustment Process

- At last meeting discussed that we could not extend existing rate methodology and needed to initiate the public process
- 10 CFR 903, “Procedures for Public Participation in Power and Transmission Rate Adjustments and Extensions”, allows for a minor rate adjustment
- Minor rate adjustment defined as producing less than 1% change in project revenues

## Minor Rate Adjustment Process

- Based on most recent data, no changes are needed to generation or transmission rates so minor rate adjustment process will be used
- Public information and comment forums not necessary
- Federal Register Notice announcing 30 day comment period to be published in April
- PRS/CAS will be posted on website immediately.  Rate brochure detailing additional ratemaking data will also be posted when FRN is published.

## FY09-13 Rate Information

- Based on most recent data, no changes are needed to generation or transmission rates

|  | Current (FY08) | Proposed (FY09-13) | Change |
| --- | --- | --- | --- |
| Firm Transmission (kW-Month) | $1.08 | $1.08 | - |
| Energy (mills/kWh) | 3.32 | 3.32 | - |
| Capacity (kW-Month) | $1.45 | $1.45 | - |
| Firm Power Composite w/o Transmission (mills/kWh) | 6.64 | 6.64 | - |

## Standard Rate Assumptions

- Actual budget data used for Western O&M expenses in 2009.  Budgets increased at 3% for remaining years of rate calculation.
- Last approved 10 Year Plan data from Western and Reclamation used to project capital requirements
- Revenue Carryover used to stabilize project rates but must be calculated to fully deplete during 5-year evaluation period (by FY 2013)

## Rate DeterminantsComparison of Average Transmission Expenses (in millions)

|  | FY08–12 | FY09–13 | Change |
| --- | --- | --- | --- |
| Western O&M | $17.5 | $18.1 | $0.6 |
| Western General | $  4.5 | $  5.5 | $1.0 |
| CME & Multi-Project | $  1.5 | $  1.4 | ($0.1) |
| P&I | $19.1 | $20.0 | $0.9 |
| Total | $42.6 | $45.0 | $2.4 |

## Rate DeterminantsAverage Transmission Expenses During 5-Year Evaluation Period (in millions)

**Total:  $45.0**

## Rate DeterminantsComparison of Average Generation Expenses (in millions)

|  | FY08–12 | FY09–13 | Change |
| --- | --- | --- | --- |
| Western O&M | $1.7 | $1.6 | ($0.1) |
| BOR O&M | $7.1 | $6.9 | ($0.2) |
| Purchase Power | $0.1 | $4.2 | $4.1 |
| CME & Western General | $0.5 | $0.6 | $0.1 |
| BOR Replacements | $1.1 | $0.7 | ($0.4) |
| P&I | $0.3 | $0.1 | ($0.2) |
| Total | $10.8 | $14.1 | $3.3 |

## Rate DeterminantsAverage Generation Expenses During 5-Year Evaluation Period (in millions)

**Total:  $14.1**

## Next Steps

- Information regarding the P-DP rates to be posted on Western’s website:
- 	http://www.wapa.gov/dsw/pwrmkt/RateAdjust/Main.htm
- Publish Federal Register Notice in April to begin 30 day comment period
- New methodology and rate effective October 1, 2008

## Questions/Comments

- Western Contacts:
- 				Jack Murray
- 				602-605-2442
- 				jmurray@wapa.gov
- 				Scott Lund
- 				602-605-2441
- 				slund@wapa.gov