# Presentation: 711173

## Intertie Project

- Informal Rate Meeting
- June 15, 2006

## Meeting Agenda

- Overview of Transmission Service Rates
- Discuss Transmission Rate Drivers
- Review Average Annual Expenses and Other Revenue
- Sales Projections
- APA Transmission Sales Proposal
- Next Steps
- Questions and Comments

## 230/345-kV Firm Transmission Service

- Rate Schedule INT-FT3 became effective January 1, 1999 for a 5-year period ending December 31, 2003
- INT-FT3 was extended through December 31, 2006
- The existing rate for Long-Term and Short-Term Firm Point-to-Point Transmission Service is $12.00 kW-Yr
- Rate Schedule INT-FT4 becomes effective January 1, 2007 for a 5-year period ending December 31, 2011
- The proposed rate for Long-Term and Short-Term Firm Point-to-Point Transmission Service is $15.36 kW-Yr

## 500-kV Firm Transmission Service

- Rate Schedule INT-FT2 became effective February 1, 1996 for a 53-month period ending September 30, 2000
- INT-FT2 was extended through December 31, 2003 and extended again through December 31, 2006
- The existing rate for Long-Term and Short-Term Firm Point-to-Point Transmission Service is $17.23 kW-Yr
- Rate Schedule INT-FT5 becomes effective January 1, 2007 for a 5-year period ending December 31, 2011
- The proposed rate for Long-Term and Short-Term Firm Point-to-Point Transmission Service is $21.96 kW-Yr

## 230/345/500-kV Nonfirm Transmission Service

- Rate Schedule INT-NFT2 became effective February 1, 1996 for a 53-month period ending September 30, 2000
- INT-NFT2 was extended through December 31, 2003 and extended again through December 31, 2006
- The existing rate for Nonfirm Point-to-Point Transmission Service is 2.00 mills/kWh
- Rate Schedule INT-NFT3 becomes effective January 1, 2007 for a 5-year period ending December 31, 2011
- The proposed rate for Nonfirm Point-to-Point Transmission Service is 2.50 mills/kWh

## Comparison of Transmission Rates

|  | 
Current  Rates | 
Proposed Rates |
| --- | --- | --- |
| Firm Point-to-Point
230/345-kV
500-kV | 
$12.00 kW-Yr
$17.23 kW-Yr  | 
$15.36 kW-Yr
$21.96 kW-Yr  |
| Nonfirm Point-to-Point
230/345/500-kV | 
2.00 mills/kWh | 
2.50 mills/kWh |

## Transmission Rate Drivers FY 2007-2011 [FY99 Ratesetting PRS]

## Transmission Rate Drivers FY 2007-2011[FY06 Preliminary PRS]

## Average Annual Expenses

|  | FY 2007-2011
[FY99 Ratesetting PRS] | FY 2007-2011 
[FY06 Preliminary PRS] | Difference |
| --- | --- | --- | --- |
| O&M | $4.4M | $7.0M | $2.6M |
| Interest | $18.4M | $18.6M | $0.2M |
| Other | $0.4M | $0.8M | $0.4M   |
| Investment Repayment | $4.6M | $13.8M | $9.2M |
| Total | $27.8M | $40.2M | $12.4M |

## Annual  Expense Projections

- FY 2007 & 2008 O&M expenses derived from budget  estimates submitted to DOE and OMB.
- FY 2009-2012 O&M expenses indexed off FY 2008 budget estimates @ 3.65%, consistent with budget submission
- Investment Repayment applied towards an estimated $51.8M unpaid capitalized deficit balance at the end of FY 2006

## Average Annual Other Revenue

|  | FY 2007-2011
[3-Year Historical Average] |
| --- | --- |
| Facilities Use Charges | $1.55M |
| Transmission Losses | $0.90M |
| Nonfirm Sales | $0.71M |
| Multi-Project  | $0.22M |
| Miscellaneous | $0.06M |
| Total | $3.44M |

## Multi-Project Costs

- The Multi-Project Cost written procedures intended that future additions and replacements be included
- The original implementation resulted in the SCADA MPC ending in FY 2006 with no consideration for projected upgrades, replacements, etc.
- Starting in FY 2006, the MPC calculations will include these additions and replacements to meet the intent of the written procedures
- The estimated SCADA MPC for Intertie is $11,470 for FY 2007

## Charges for Common Facilities 

- Intertie may be subject to charges for the use of common facilities at Pinnacle Peak Substation.
-  The proposed rates do not include these charges.

## 230/345-kV Sales Projections

|  | FY 2007-2011 |  |
| --- | --- | --- |
|  | Actual Average Annual CROD | Projected Average Annual CROD |
| FTS Existing | 537,762 kW | 609,450 kW |
| OATT  | 458,000 kW | 458,000 kW |
| SLCA/IP | 1,000 kW | 1,000 kW |
| Total | 996,762 kW | 1,068,450 kW |
| 
These projections are used for Transmission Rate calculation purposes only and does not imply that  contractors will elect to continue Firm Transmission Service when contracts terminate.  |  |  |

## 500-kV Sales Projections

|  | FY 2007-2011 |  |
| --- | --- | --- |
|  | Actual Average Annual CROD | Projected Average Annual CROD |
| FTS Existing | 0 kW | 0 kW |
| OATT  | 452,500 kW | 942,500 kW |
| Total | 452,500 kW | 942,500 kW |
| 
These projections are used for Transmission Rate calculation purposes only and does not imply that  contractors will elect to continue Firm Transmission Service when contracts terminate.  |  |  |

## APA Transmission Sales Proposal

- Western will sell APA transmission service on the Intertie
- APA will prepay for the transmission service from revenue bonds issued by APA
- Western will apply the prepayment to retire capitalized deficits and highest-interest bearing unpaid investments
- APA will assign the transmission service back to Western for Western to market
- Transmission assignment payments equal to the APA bond debt service and related costs are treated similar to “O&M Expense” in PRS

## Rate Impacts of APA Proposal

- The overall impact is a rate reduction and a leveling of the revenue requirement.
- Average Annual Expenses for FY 2007-2011 decrease to $31.6M from $40.2M, a difference of $8.6M
- Projected Transmission Rates
- $11.64 kW-Yr for the 230/345-kV transmission system
- $16.71 kW-Yr for the 500-kV transmission system

## FY07 Transmission Rates

|  | Current  Rates | Proposed Rates |  |
| --- | --- | --- | --- |
|  | 
 | Without APA Transaction | With APA Transaction |
| Firm Point-to-Point
230/345-kV
500-kV | 
$12.00 kW-Yr
$17.23 kW-Yr  | 
$15.36 kW-Yr
$21.96 kW-Yr  | 
$11.64 kW-Yr
$16.71 kW-Yr |
| Nonfirm Point-to-Point
230/345/500-kV | 
2.00 mills/kWh | 
2.50 mills/kWh | 
1.91 mills/kWh |

## Next Steps

- Publish Federal Register Notice to begin the formal process for the proposed rates
- Prepare a rate brochure that provides detailed information
- Information about the rate process will be available on Western’s website at: **http://www.wapa.gov/dsw/pwrmkt/Intertie/RateAdjust.htm**
- Public Information Forum tentatively scheduled for  August 16, 2006 at 10 a.m. MST
- Public Comment Forum tentatively scheduled for     August 16, 2006 at 1:30 p.m. MST

## Questions/Comments