# Presentation: 114737

## Parker-Davis Project

- Informal Rate Meeting
- November 14, 2007

## Meeting Agenda

- Fiscal Year 2009 Rate Process
- Overview of Current Rate Methodology
- Cost Apportionment Study Changes
- Carryover Application
- Next Steps and Questions

## Fiscal Year 2009 Rate Process

- Current rate methodology established in November 1997 (Rate Order WAPA-75) and extended in 2002, 2004 and 2006
- Methodology and rates expire September 30, 2008 so formal process needed in 2008
- Federal Register Notice to begin public process expected to be published in February 2008

## Fiscal Year 2009 Rate Process

- Public Information and Comment forums will be scheduled to coincide with other DSW meetings
- Public Information Forum tentatively scheduled for April 2, 2008
- Public Comment Forum tentatively scheduled for April 23, 2008

## Current Rate Methodology

- Service rates for five year cost evaluation period are calculated annually to ensure adequate to recover annual project expenses and capital requirements
- Project costs projected using actual budget submission and 10 year planning data
- Other revenues projected based on historic trends adjusted for known future transactions

## Current Rate Methodology

- Project expenses and other revenues allocated between generation and transmission to establish separate revenue requirements
- Excess revenues from prior periods applied to revenue requirements in cost evaluation period
- Current methodology appropriately and effectively recovering costs and minimizing rate volatility

## Cost Apportionment Study

- Project costs allocated between generation and transmission in the Cost Apportionment Study (CAS)
- Project costs directly assigned to generation and transmission revenue requirements when readily identifiable
- All other project costs assigned to revenue requirements using cost allocation factors

## Cost Apportionment Study

- Current allocation factors include: SCADA Points, Billing Time Study, Investments calculation,  percentage of Western O&M and Capitalized Moveable Equipment (CME) calculation

## Current CAS Factors

| Systemwide Expenses | Time Study/50-50 Split |
| --- | --- |
| Communication/Control Equip | SCADA |
| System Operation/Dispatch | SCADA/Time Study |
| Western General Expenses | % of Western O&M |
| Capitalized Movable Equipment | CME Calc |
| Western Principal & Interest | Investment Calc |

- Costs with Allocated Elements

- Factor

## Proposed CAS Changes

- Streamline the CAS 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 assign costs to generation and transmission

## CAS Factor Comparison

| Systemwide | Time Study/50-50 | Customer Count/50-50 |
| --- | --- | --- |
| 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

## CAS Factor Impact

- Estimated annual impact not significant enough to result in rate change

| Proposed Factor | $41,899,835 | 73.9% |
| --- | --- | --- |
| Current Factor | $41,513,769 | 73.3% |
| Change | $386,066 | 0.6% |

- FY09 Tran Revenue Requirement

- System Revenue Requirement

## Carryover Application

- In current rate methodology, excess revenue from prior periods (carryover) is applied to future revenue requirements in the cost evaluation period
- Carryover currently applied to stabilize both generation and transmission rates
- Several viable options are available to apply carryover in FY09 rate methodology

## Option 1

- Carryover applied to generation and transmission revenue requirements based on proportion of total revenue requirement during cost evaluation period
- Transparent calculation but may cause rate volatility due to unexpected changes in the annual revenue requirements

- _Revenue Requirement Basis_

## Option 2

- Carryover applied to stabilize existing rates.  If excess carryover or expenses, carryover will be applied to cause generation and transmission rates to adjust proportionally
- Less intuitive calculation but will significantly mitigate rate volatility

- _Stabilize Rates + Equal Change_

## Option 3

- Carryover applied to stabilize existing rates.  If excess carryover or expenses, carryover will be applied to cause generation and transmission rates to adjust based on proportion of total revenue requirement
- Transparent calculation and will significantly mitigate rate volatility

- _Stabilize Rates + Rev Requirement Change_

## Comparison of Options

| Current Rate  (without increased expenses) | 6.64 | 1.08 |
| --- | --- | --- |
| Option 1 | 8.34 | 1.04 |
| Option 2 | 6.82 | 1.11 |
| Option 3 | 6.84 | 1.11 |

- Composite Gen Rate
- (mills/kWh)

- Transmission Rate
- ($/kW-month)

- $1 million hypothetical increase in annual Western General Expenses

## Next Steps for P-DP Rates

- 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 February to begin formal process

## Questions/Comments

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