# Presentation: 664928

## Formal Information Forum on Proposed 

**Formal Information Forum on Proposed **
**2008 Rate Adjustments**
**Pick-Sloan Missouri River Basin Program**
**and**
**Loveland Area Projects**
- Jon Horst
- Linda Cady-Hoffman
- Sheila Cook
- 							          June 2007
**	**

## Introduction

- Pick-Sloan Rate Structure and Drought Impacts
- LAP Rate Structure and Drought Impacts
- Rate Proposals
- Eastern Division Rate Design
- Eastern Division Proposed Rate Adjustment
- LAP Proposed Rate Adjustment
- Schedule
- Contact Information
- Questions

## P-SMBP Rate Structure

- P-SMBP has one power repayment study
- Markets 10,730 GWH
- Eastern Division (UGPR-Billings, MT)
- Pick-Sloan--ED  8,742 GWH
- Western Division (RMR-Loveland, CO)
- Pick-Sloan--WD  1,988 GWH

## P-SMBP Rate Impacts

- 8th year of drought
- PRS solved at 24.78 mills/kWh
- Total Deficits for this drought $573 M       	through FY 2007
- 10 year drought debt repayment
- Proposing 3rd rate adjustment for this drought cycle (2004, 2006, and 2008)

## Slide 5

## Slide 6

## Loveland Area ProjectsRate Structure

- Although operationally and contractually integrated, Fry-Ark and     P-SMBP-WD retain separate financial status
- A Separate PRS is prepared annually for each project
- Fry-Ark completed by Rocky Mountain Region
- P-SMBP completed by Upper Great Plains Region with input from the Rocky Mountain Region
- Revenue requirements from both projects are combined to develop the LAP revenue requirement
- Rate is designed to return 50 percent of the revenue from the capacity component and 50 percent from the energy component
- Capacity component is based on a monthly billing of the seasonal contract rate of delivery
- Energy component is based on the annual contracted energy

## LAP Rate Impacts

- 8th year of drought
- Fry-Ark Solved with a Revenue Requirement of $14.3 million (3% increase)
- No deficits
- 2034 pinch-point
- Western Division Allocated Revenue Requirement of $51.8 million (23% increase)
- As with the Eastern Division Revenue Requirement, includes impacts from proposed changes to Eastern Division’s Tiered and Peaking Power rate designs
- Proposing 3rd rate adjustment for this drought cycle (2004, 2006, and 2008)

## Slide 9

## Slide 10

## Rate Proposals

- 1- Base and Drought Adder components rate recovery method
- 2- Metered methodology for Firm capacity charge
- 3- Allocated CROD methodology for Peaking capacity charge
- 4- Eliminate the Tiered Rate for energy over    60% load factor (Eastern Division Only)

## =

**Drought Adder**

**Adjusted only by Public Process**

**Adjusted Annually by Formula          or by Public Process**

**Annual**
**Revenue Requirement**

## Recovers $ Associated with the Drought
Purchase Power Related 
        to Drought
Interest on Drought Debt
Historical Drought Debt

- Purchase Power Related
-         to Drought
- Interest on Drought Debt
- Historical Drought Debt

**Drought Adder**

**Base**

**Drought $**

**O&M $**
**Other $**
**Capital $**
**Interest $**

- Annual O&M
- Normal Purchases
- Transmission Costs
- Investments - Additions and Replacements
- Annual Interest on Investment
- Inflation

- Revenue Requirement Components

## Base Component Methodology

**Base meets costs**

**  ****Base does not meet costs**

**Initiate public process**

**Base Component Methodology**

**No change to the Base**

**Implement new Base**

## Drought Adder Methodology

** ****Drought Costs**

**Higher than projected**
**Drought Costs**

**Increase Adder**

**Drought**** ****Adder Methodology**

**Keep 10 Year Repayment**
**of Drought Debt**

**Reduce Adder**

**Automatic increase**
**up to 2 mills/kWh**

**Increase greater than 2 mills/kWh Initiate Public Process **

**Annually**

**Annually**

## Conduct preliminary review in early summer to estimate adjustment +/-
Letter sent to customers to give advance notice of estimated adjustment
Conduct final review in September to finalize adjustment +/- (up to 2 mills/kWh)
Letter sent to customers in October giving notice of final adjustment
Adder adjusted in January billing period

- Letter sent to customers to give advance notice of estimated adjustment
- Conduct final review in September to finalize adjustment +/- (up to 2 mills/kWh)
- Letter sent to customers in October giving notice of final adjustment
- Adder adjusted in January billing period

- Drought Adder Annual Process

## Capacity Rates for Firm and Peaking

- Historically Firm and Peaking have had the same rate
- Treat different products with different rates
- Peaking = CROD billing
- Firm = Load pattern billing

**$/Metered kW-Mo/Year**

**$/CROD  kW-Mo/Year**

**Firm Metered**** **

**Peaking CROD**

**Firm Capacity Charge**

**Peaking Capacity Charge**

**Proposed Capacity ****Rates**

## Eliminate the Tiered Rate

- Tiered Rate Discourages Load Management
- Consistent with WD of Pick-Sloan

## Eastern Division Rate Design

- Firm capacity based on metered capacity billing units of 17,876 MW-mo/year
- 8,742 GWH Firm Energy
- 356 MW of Peaking capacity recovered in the 50/50 capacity and energy split
- Peaking capacity based on CROD billing units of 4,272 MW-mo/year

## 50/50 Design

- Eastern Division rate is 50/50 design where 50% of the revenue requirement is recovered from the capacity rate and 50% is recovered from the energy rate:
- Firm Power Rev. Req.                  $ 214.1 Million
- Peaking Rev. Req.			 $21.8 Million
- 5% Discount Req. 			     _9.1 Million_
- Gross Revenue Req. 		          $ 245 Million

## Eastern Division Revenue

**Firm Capacity**

**Peaking Capacity**

**Firm Energy**

**50/50 Capacity/Energy Split**

**1⁄2  of total Rev. Req. ED  Energy GWH**

**Firm portion of 1⁄2 total Rev. Req. Capacity based on total firm load pattern units kW-mo/yr**

**50%**

**50%**

**Peaking portion of Capacity Rev. Req. based on total CROD units kW-mo/yr**

## Separate Capacity Rates 

-       _**Peaking**_**	****	****	****	****	**** **_**Firm**_

**Firm Capacity**

**Peaking Capacity **

**=   $/kW**

**              ****$21.8 M**

**=   $5.10/kW**

**4,272,000 kW-mo/yr**

**   **

** ****$122.7 M**

**=   $5.10/kW**

**24,108,888 kW-mo/yr**

**19,836,888 kW-mo/yr Firm **
**  ****4,272,000 kW-mo/yr Peaking**
**24,108,888 kW-mo/yr**

**17,876,078 kW-mo/yr**

**             ****$**

**Note:  Nickel rule for capacity rounding**

## Proposed ED Rate Design

**Firm Capacity**

**Peaking Capacity**

**Firm Energy**

**50/50 Capacity/Energy Split**

**8,742 GWH**

**=   13.99 mills/kWh**

**$245 Million**

**$100.9 M**

**17,876,078 kW-mo/yr**

**=   $5.65/kW**

**=   $5.10/kW**

**     ****$21.8 M**

**4,272,000 kW-mo/yr**

**$122.3 M**

- Note:  Nickel rule for capacity rounding

## Eastern Division

-  $ 245 million Revenue Requirement
- Firm Metered & Peaking CROD

**ED Composite Rate 24.49 mills/kWh**

**$88 million**

**$157 million**

**Drought Adder**

**Base**

**Capacity  - $2.00/kW  Energy     - 5.06 mills/kWh**

**Capacity  - $3.65/kW  Energy     - 8.93 mills/kWh**

**Firm Capacity  - $5.65/kW****   ****Peaking $5.10**
**Firm Energy    - 13.99 mills/kWh**

**Peaking $22 million**

**Peaking   - $1.85 /kW**

** ****Peaking    - $3.25/kW**

**50/50 split**

**50/50 split**

**Proposed Rates**

**$157 million**

## Pick-Sloan Proposed2008 Rate Adjustment

|  | Composite Rate
(mills/kWh) | Percent Increase | Pick-Sloan Firm Power Rev. Req. (millions) | Western Division Firm 
Rev Req.
(millions) | Eastern
Division 
Firm 
Rev Req.
(millions) | Eastern
Division 
Firm Plus Peaking.
Rev. Req.
(millions)
 |
| --- | --- | --- | --- | --- | --- | --- |
| Current Rates
(2nd Step) January 2007 | 19.83 |  12% | $212.7 | $41.9 | $170.8 | $189.9 |
| Proposed Rates
January 2008
 | 24.78 | 25% | $265.9 | $51.8 | $214.1 | $235.9 |

## ED Proposed Rates

| 
Firm Power Service | Current Rates Effective January 1, 2007 | Proposed Rates Effective January 1, 2008 | %
Increase |
| --- | --- | --- | --- |
| ED Firm plus Firm Peaking Rev. Req. |   $189.9 million | $235.9 million | 24.2 |
| ED Composite Rate | 19.54 mills/kWh | 24.49 mills/kWh | 25.3 |
| Total Firm Capacity | $4.45kW-month | $5.65 kW-month | 27.0 |
| Total Firm Energy | 11.29 mills/kWh | 13.99 mills/kWh | 23.9 |
| Tiered Rate | 5.21mills/kWh | N/A | N/A |
| Total Firm Peaking Capacity | $4.45 kW-month | $5.10 kW-month | 14.6 |
| Total Firm Peaking Energy | 11.29 mills/kWh | 13.99 mills/kWh | 23.9 |

## Eastern Division Sample Billing Format

## LAP Proposed2008 Rate Adjustment

|  | Composite Rate
(mills/kWh) | Percent Increase | Effective
Date | Fry-Ark
Rev Req.
(millions) | Western Division
Rev Req.
(millions) | LAP
Firm Power Rev. Req. (millions) |
| --- | --- | --- | --- | --- | --- | --- |
| Current Rates
(2nd Step) | 27.36 |   15% | January 2007 | $13.9 | $41.9 | $55.8 |
| Proposed Rates | 32.42 | 19% | January 2008 | $14.3 | $51.8 | $66.1 |

## LAP Rate Design

**$66.1 million Revenue Requirement**

**$17.5 million**

**$48.6 million**

**Drought Adder**

**Base**

**Capacity  - $1.12/kW  Energy    -   4.29 mills/kWh**

**Capacity - $3.13/kW  Energy    - 11.92 mills/kWh**

**Firm Capacity - $4.25/kW**
**Firm Energy    - 16.21 mills/kWh**
**Composite      - 32.42 mills/kWh**

**50/50 split**

**50/50 split**

**Total Charges**

- Fry-Ark $14.3 million
- Pick-Sloan WD $34.3 million

- Fry-Ark $.058 million
- Pick-Sloan WD $17.4 million

## LAP Sample Billing Format

## Schedule for Rate Processes

- Federal Register Announcement
- May 31st
- Public Process (90 Days)
- Information Forums
- June 18th     Denver, CO
- June  19th    Sioux Falls, SD (Pick-Sloan only)
- Comment Forums
- July 23rd      Denver, CO
- July 24th      Sioux Falls, SD (Pick-Sloan only)
- Close of Comment Period
- August 29th
- Implementation of New Rates
- January 1, 2008

## Eastern Division Rate ProcessOther Information

- Materials will be posted on Website:
- _http://www.wapa.gov/ugp/rates/2008firmrateadjust_
- Contact:
- Jon R. Horst
- Phone - 406-247-7444
- Email  - horst@wapa.gov
- Mailing Address:
- Western Area Power Administration
- Upper Great Plains Region
- PO Box 35800
- Billings, MT 59107-5800

## LAP Rate Process Other Information

- Materials will be posted on Website:
- _http://www.wapa.gov/rm/ratesRM/2008RatesAdjustment--FirmPower.htm_
- Contact:
- 	Sheila D. Cook:
- Phone - 970-461-7211
- E-mail - scook@wapa.gov
- Mailing Address:
- Western Area Power Administration
- Rocky Mountain Region
- PO Box 3700
- Loveland, CO  80539

## Questions