# Presentation: 693458

## Intertie Project

- Public Information Forum
- August 17, 2006

## Agenda

- Overview of Transmission Service Rates
- Discuss Transmission Rate Drivers
- Review Expenses
- Review Sales Projections
- Discuss 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 |

## History of Transmission Rates

- Current 230/345-kV rates developed taking into account the phasing-in of 500-kV transmission system sales over 10 years beginning in FY 1999
- Sales of 500-kV transmission service were generally on schedule through FY 2004 and fell behind during FY 2005 partially due to the expiration of a 52MW OATT service agreement.
- Currently have 612MW of 500-kV transmission service under contract and 762MW is the FY 2006 sales target
- FY 2004 rates extension done to complete the Multi-System Transmission Rate (MSTR) process

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

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

## Average Annual Expenses

|  | FY 2007-2011
[FY99 Ratebase PRS] | FY 2007-2011 
[FY06 Ratebase PRS] | Difference |
| --- | --- | --- | --- |
| O&M | $4.4M | $7.0M | $2.6M |
| Interest | $18.4M | $18.7M | $0.3M |
| Other | $0.4M | $0.8M | $0.4M   |
| Investment Repayment | $4.6M | $13.7M | $9.1M |
| 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 FY 2006 unpaid capitalized deficit balance of $53.8M, of which $40.5M are required payments

## Annual Expense Summary 

- Largest contributors to proposed rates are increased  O&M expenses and investment repayment
- Western’s goal to accurately charge O&M costs to power systems results in practical budget estimates
- Slower than projected sales of 500-kV transmission service results in capitalized deficits with short-term repayment periods.

## 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 

- For FY 2006 and thereafter, Intertie will pay annually to CRSP a share of the capital improvements for Pinnacle Peak Substation (PPK) common facilities
- From FY 1995 through FY 2005, CRSP has absorbed the maintenance and some of the replacement costs at PPK that should have been charged to Intertie.
- To settle charges, Intertie will pay CRSP approximately $448K for historical costs at PPK
-  The proposed rates do not include these costs

## Sales Projections

- 230/345-kV Transmission Service
- 500-kV Transmission Service
- Other Revenues

## 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  | 512,000 kW | 942,500 kW |
| Total | 512,000 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.  |  |  |

## 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 |

## APA Transmission Sales Proposal

- Western sells Intertie transmission service to APA
- APA issues bonds to prepay transmission service
- Western applies the prepayment to retire capitalized deficits and highest-interest bearing unpaid investments
- APA assigns the transmission service back to Western
- Western directs certain customers to send payments to a Trustee to cover transmission assignment payments.
- Western includes transmission assignment payments when determining revenue requirements
- Intertie customers will only send payments to cover Intertie transmission assignment payments

## Rate Impacts of APA Proposal

- Final rate impacts not known until transaction complete
- The expected overall impact is a rate decrease and a leveling of the future revenue requirements.
- Projected Transmission Rates
- $11.64 kW-Yr for the 230/345-kV transmission system
- $16.71 kW-Yr for the 500-kV transmission system

## Status of APA Proposal

- Bond pricing/final structure anticipated next week
- Anticipated closing date is August 30, 2006
- State of Arizona Certification Board meeting this Friday to complete its consideration of the transaction
- Western’s General Counsel office working with DOE General Counsel to finalize the setoff waiver

## Overview of 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 |

## Schedule 

- Federal Register Notice published July 12, 2006 began the formal process for the proposed rates
- Preliminary rate brochure available on Western’s website at: http://www.wapa.gov/dsw/pwrmkt/Intertie/RateAdjust
- Public Comment Forum scheduled for August 24, 2006 at 10:00 a.m. MST
- Consultation and comment period ends October 10, 2006
- Questions not answered today will be answered in writing no later than 15 days prior to the end of the comment period.

## Comments & Questions 

- Send written comments to J. Tyler Carlson, Regional Manager
- Comments may also be faxed to 602-605-2490, Attn: Jack Murray, Rates Team Lead
- E-mail to Tyler Carlson, _[carlson@wapa.gov](mailto:carlson@wapa.gov)__ or               Jack Murray, __[jmurray@wapa.gov](mailto:jmurray@wapa.gov)_
- All written comments must be received by the end of the comment period