# Presentation: 712198

## Western Area Power Administration

**Transmission System**
**Partnering Opportunities (FAQs)**
- Anthony Montoya
- Assistant Regional Manager
- for Power System Operations
- September 14, 2004

## Introduction

**Notes:**
Western Area Power Administration's Desert Southwest Customer Service Region markets federal hydroelectric power to nearly 70 municipalities, cooperatives, federal and state agencies, and irrigation districts.  Most power sold by the Desert Southwest Region is generated from powerplants operated at Hoover, Parker, and Davis dams.  Power is also marketed from hydroelectric projects in the Bureau's Upper Colorado Region and the federal portion of power generated at Navajo Generating Station near Page, Arizona.

## Desert Southwest Region

- Markets and delivers Federal power
- Nearly 70 municipalities, cooperatives, tribal authorities, federal and state agencies.
- 3,100 miles of transmission lines
- more than 40 substations
- NERC load control area

**Notes:**
Western Area Power Administration's Desert Southwest Customer Service Region markets federal hydroelectric power to nearly 70 municipalities, cooperatives, federal and state agencies, and irrigation districts.  Most power sold by the Desert Southwest Region is generated from powerplants operated at Hoover, Parker, and Davis dams.  Power is also marketed from hydroelectric projects in the Bureau's Upper Colorado Region and the federal portion of power generated at Navajo Generating Station near Page, Arizona.

## We get many questions...

- Transmission construction capabilities
- Transmission O&M capabilities
- Use of ROW

**Notes:**
In order to deliver this Federal power to Project Use and Firm Electric Service customers, the Desert Southwest Region owns, operates and maintains 3,100 miles of transmission lines and more than 40 substations in the Southwestern U.S.

The Parker-Davis Project consists of Davis Dam, Parker Dam and corresponding powerplants, 1,500 miles of high-voltage transmission lines, and 32 substations. Parker Dam and Davis Dam are located on the Colorado River, downstream of Hoover Dam, and supply electrical energy to Arizona and southern California.

The Pacific NW-SW Intertie Project consists of 760 miles of extra high voltage and high voltage transmission lines and nine substations located in Arizona and California.

## DSW Transmission FAQ 1

- How has Western traditionally financed construction for transmission used to meet its Federal Hydropower mission?
- Federal Appropriations
- Repaid with interest
- Excess capacity offered under OATT
- Example:  Liberty – Mead 345-kV

**Notes:**
Western has traditionally requested Federal appropriations to cover the construction of costs for transmission replacement, betterments or additions.  The appropriated construction funds must be repaid, including a charge for interest during construction and interest on unpaid principle balance, within the service life of the new transmission investment.  The interest rate for each transmission investment is the U.S. Treasury rate in effect when the first capital expenditure is made on the project.  The repayment obligation is incorporated into the power repayment study and becomes a component of the Project’s transmission rate.  Transmission capability, in excess of the capability required to meet statutory and contractual obligations is then offered under Western’s Open Access Transmission Tariff (OATT).  The sale of transmission services generates revenues to repay the new transmission investment.  The Liberty to Mead 345-kV transmission line is an example of a traditionally financed transmission addition.

## DSW Transmission FAQ 2

- Can another party participate with Western in a new transmission construction project?
- Yes, Joint Participation Project
- Joint ownership by special legislative authority
- Example:  Mead-Phoenix 500-kV

**Notes:**
Yes, these are generally referred to as Joint Participation Projects.  Western has considerable flexibility in structuring these projects, but does not share ownership without special legislative authority.  Instead, physical ownership is separated from ownership-like rights.  The physical ownership of the project is divided among the project participants in a mutually agreed upon manner in accordance with Western’s limitations.  In some projects, Western might own all the transmission physical rights.  In others, Western might own a segment with other participants owning other segments.  Then ownership-like rights, such as capacity entitlements, are established and allocated.  Construction cost responsibilities are negotiated based on items like pro-rata share of capacity entitlements.  Traditionally, Western would then request appropriations to cover its share of the construction costs in the manner described in FAQ 1.  The Mead to Phoenix 500-kV transmission line is an example of a joint participation project.

## DSW Transmission FAQ 3

- Can a customer work with Western to fund either individual or Joint Participation Project transmission construction?
- Yes, Contributed Funds
- Net Billing
- Example:  Griffith-Peacock 230-kV line

**Notes:**
Western can use contributed funds instead of appropriations to fund either individual or Joint Participation Project transmission construction.  The contributed funds are used as if they were Federally appropriated, and the same ownership restrictions apply as if the funds were appropriated.  After the transmission is constructed, it becomes contributed plant.  If Western determines that the contributed plant is beneficial to Western, Western could also repay the entity that contributed the funds.  Western could repay the contributed funds with interest if appropriate.  The term repayment is based upon many items but rate impact and cash flow are often determining factors.  The repayment obligation would be identified in the power repayment study, and would be used to establish rates as if the project had been built using appropriated funds.

Western has various means for repaying the contributed funds and each Federal hydropower project has unique legislation.  The most straightforward means of repaying the contributed funds would be through a net billing arrangement.  Net billing means that two parties owe each other money.  Rather than each sending their total obligation to the other party, the parties agree to exchange the net difference.  To use net billing on a contributed funds project, the funding party would need to owe Western money, typically in the form of payment for transmission service.  If the transmission is not under an existing contract, or subject to a marketing plan process, it would be provided under Western’s OATT.  In this case, the repayment for transmission service would be at Western’s standard transmission rate.  Western would owe the contributed funding party for the contributed plant.  Generally, Western arranges the terms such that the monthly payment owed by the contributing funds party is greater than or equal to the funds owed by Western.  In this case, Western nets its obligation against the obligation of the contributing funds party and sends the party a bill for the difference.  The Peacock to Griffith 230-kV transmission line addition is an example of contributed funds used to construct transmission with net billing for repayment.

## DSW Transmission FAQ 4

- Does contributed funding give the funding party unique advantages when taking OATT service?
- No

**Notes:**
Contributed funds allow a party to work with Western to get transmission constructed; however it is independent of open access tariff service.  With contributed funding, Western incurs a repayment obligation, but Tariff service remains standard.  An exception would be for the initial term of tariff service.  The term can be extended beyond the traditional 10-year term to ensure that the net billing requirements are met.

## DSW Transmission FAQ 5

- Why would anyone want to contribute funds, rather than getting ownership-like rights through a Joint Participation Project?
- Ownership-like rights over new segment not always sufficient to meet customer’s total needs.
- Customer needs transmission service beyond the limits of the new transmission segment.

**Notes:**
Contributed funding works best when it is necessary to add or upgrade a segment of transmission to Western’s system as part of a larger overall requirement.  The assumption is that ownership-like rights over the segment would not be sufficient to meet the funding parties overall requirements and that the customer needs transmission service well beyond the limits of the new segment.  In this situation, contributed funding is a much preferred alternative to joint participation projects.

## DSW Transmission FAQ 6

- How can a customer work with Western to get transmission constructed?
- Talk to us
- Joint Planning Agreement (JPA)
- Ten Year Planning

**Notes:**
The party should make their needs known to Western.  Western identifies its future plans though the Joint Planning Agreement (JPA) and Ten Year Planning processes.  If both Western and the party have mutually compatible needs that can be met through either contributed funding or Joint Participation Projects, then contracts can be negotiated and transmission constructed.

## DSW Transmission FAQ 7

- How has Western traditionally funded transmission operating and maintenance expenses?
- Federal Appropriations

**Notes:**
Western traditionally requests Federal appropriations for the Parker-Davis Project and the Northwest/Southwest Intertie Transmission projects operating and maintenance expenses.  The appropriations are repaid through the sale of transmission services.

## DSW Transmission FAQ 8

- Can another party work with Western to help fund O&M needs?
- Yes, Advanced Funding
- Example:  Arizona Power Authority

**Notes:**
Yes, if funds were provided to Western in advance of the operations and maintenance expenditure, then the funds could be used in lieu of appropriations.  Western has considerable flexibility in structuring these advanced funding arrangements.

## DSW Transmission FAQ 9

- Will Western share easements or consolidate circuits?
- Yes, essential to optimize scarce land.
- Maintain reliability
- Consistent with underlying land rights.
- Recognize the value of the ROW.
- Example:  TEP, SEV, ED-3

## DSW Transmission FAQ 10

- Are there any other options for working with Western on transmission?
- Yes, transmission exchange
- Mutually compatible needs
- Equitable
- Example:

## DSW Transmission FAQ 11

- Any other transmission questions?

## DSW Transmission FAQ 12

- Who can we contact for more information?
- Ron Moulton
- (602) 352-2668
- moulton@wapa.gov
- Tony Montoya
- (602) 352-2780
- tmontoya@wapa.gov

**Notes:**
Western has considerable flexibility in structuring joint participation, contributed funding of construction or advanced funding of operations and maintenance for transmission service.  To discuss your specific needs and interests please contact Ron Moulton or Tony Montoya.