# Presentation: 663882

## MULTI-SYSTEM TRANSMISSION RATE

- Fourth Informal Customer Meeting

- Jack Murray

## Meeting Agenda

- Overview of previous presentations
- MSTR Principles
- Advantages of MSTR
- MSTR Rate Methodologies
- Action Items & Responses
- Current State of Losses Study
- Discussion and Feedback

## MSTR Principles

- Eliminate Pan-caking Service Charges
- Mitigate Cost Shifts to Customers
- End State
- Rate applies to whole contract amount
- Increase Available Transmission Capacity (ATC)

## MSTR Principles (con’t)

- Similar to Industry Standards
- Simple and Transparent
- Each Project is Financially Independent
- Ensure Repayment of Project

## Advantages of a MSTR to DSW Customers

- Additional Contract Capacity
- Eliminate Pancaked Rates
- Increased Economic Access to Tie Points
- Encourage Joint Financial Participation
- Design in accordance with Restructuring where possible

## Overview of Methods for Calculation

- MSTR Only
- MSTR w/ Convergence
- Apply MSTR 5th Year
- Apply MSTR 1st Year
- Customer Choice
- OATT 1st

## MSTR Only

- Total Revenue Requirements divided by Total  Capacity Reservations with Pancaking Eliminated.
- All transmission service customers would pay the same rate each year.
- Rate is recalculated each year.
- Similar to current P-DP rate design methodology.

## Table 1:  MSTR Only

|  | Current Rates vs MSTR Only |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|   | CAP | IP 230/345 | IP 500  | P-DP | MSTR Only |
| FY04 | $0.82 | $1.00 | $1.44 | $1.08 | $1.16 |
| FY05 | $0.82 | $1.00 | $1.44 | $1.08 | $1.14 |
| FY06 | $0.82 | $1.00 | $1.44 | $1.08 | $1.15 |
| FY07 | $0.82 | $1.00 | $1.44 | $1.08 | $1.14 |
| FY08 | $0.82 | $1.00 | $1.44 | $1.08 | $1.12 |

## MSTR w/Convergence 

- Transmission Rate for each power system converges towards a Target MSTR over a five year period.
- The Target MSTR is the lowest rate possible   that will ensure collection of the Total Revenue Requirements over the five year period.
- Convergence is uniform each year for each power system.
- This methodology is similar to having step rates for each power system.

## MSTR w/Convergence - Two Options

- Apply MSTR 5th Year
- Customers pay the converging transmission rate for each power system the first four years.
- All Customers pay the MSTR the fifth year and all pancaking is eliminated.
- Apply MSTR 1st Year
- Customers pay the converging transmission rate for each power system the first four years **or **pay a MSTR with pancaking eliminated.
- All Customers pay the MSTR the fifth year and all pancaking is eliminated.
**                                 **

## Table 2:  MSTR w/ConvergenceApply MSTR 5th Year

|   | CAP | IP 230/345 | IP 500  | P-DP | MSTR |
| --- | --- | --- | --- | --- | --- |
| FY04 |  $0.87  |  $1.01  | $1.37  |  $1.08  |  n/a  |
| FY05 |  $0.92  |  $1.03  | $1.29  |  $1.08  |  n/a  |
| FY06 |  $0.97  |  $1.04  | $1.22  |  $1.07  |  n/a  |
| FY07 |  $1.02  |  $1.06  | $1.14  |  $1.07  |  n/a  |
| FY08 |  $1.07  |  $1.07  | $1.07  |  $1.07  |  $1.07  |

## Table 3:  MSTR w/ConvergenceApply MSTR 1st Year

|   | CAP | IP 230/345 | IP 500  | P-DP | MSTR |
| --- | --- | --- | --- | --- | --- |
| FY04 |  $0.87  |  $1.01  | $1.37  |  $1.08  | $1.60 |
| FY05 |  $0.92  |  $1.03  | $1.29  |  $1.08  | $1.45 |
| FY06 |  $0.97  |  $1.04  | $1.22  |  $1.07  | $1.31 |
| FY07 |  $1.02  |  $1.06  | $1.14  |  $1.07  | $1.18 |
| FY08 |  $1.07  |  $1.07  | $1.07  |  $1.07  |  $1.07  |

## Customer Choice – Circular Argument 

- When determining the MSTR first and SSTR second, economics would encourage customers to select Multi-System Transmission Rate
- When using existing SSTR first and determining the MSTR second, economics would encourage customers to select Single System Transmission Rate

## OATT 1st

- A customer suggested this Rate Design Methodology.
- First Year
- All new OATT customers would take Multi-System Transmission Service and pay the MSTR.
- Existing customers can select Multi-System Transmission Service and pay the MSTR under the terms of their existing contracts or service agreements.
- All Short-Term Firm and Non-Firm Transmission Service would be offered as Multi-System.

## OATT 1ST

- Subsequent Years
- Existing Customers that select Multi-System Transmission Service and pay the MSTR will not be allowed to switch back.
- Customers must take Multi-System Transmission Service and pay the MSTR when their Firm Transmission Service contract or OATT service agreement terminates without renewal rights.
- Requires calculation of transmission service rates for each power system and Multi-System until all customers transition (> 10 Yrs).
- Network Transmission Service will be offered only for Multi-System, not Single System.

## Table 4: OATT 1st  Comparison to Current

|  | Current Rates |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|   | CAP | IP 230/345 | IP 500  | P-DP | MSTR Only |
| FY04 | $0.82 | $1.00 | $1.44 | $1.08 | $1.91 |
| FY05 | $0.82 | $1.00 | $1.44 | $1.08 | $1.68 |
| FY06 | $0.82 | $1.00 | $1.44 | $1.08 | $1.67 |
| FY07 | $0.82 | $1.00 | $1.44 | $1.08 | $1.64 |
| FY08 | $0.82 | $1.00 | $1.44 | $1.08 | $1.48 |

## Disadvantages of OATT 1ST

- Customers may pay much higher rate for same service if contract terminates < 5 years
- Last Contract switches to MSTR in 2039

## Action Items from 3rd Meeting

- Put presentation on Web
- Put calculations to the OATT 1st Method and put on Web
- Discuss How to Change POD for FES to take delivery on Intertie
- Contact DSW Contracts Division
- Availability and feasibility will be determined

## Q & A on OATT 1ST from Third Meeting

- Could Western extend the contracts to end at the same time?
- No. Substantial change requires contractor to take OATT service

## Q & A from 3rd Meeting (Con’t)

- Could Western treat $ from increase in MSTR as prepayment to be credited when MSTR rate drops in later years?
- No because it is not really a prepayment so:
- RR would increased in year MSTR converges
- No language in contract to allow this
- No equitable treatment of Variable reservations over the period
- Treatment of Interest unknown

## Q & A from 3rd Meeting (Con’t)

- How will the MSTR work with the AOF contract?
- AOF contract—not applicable to design/implementation of firm transmission rate
- P-DP AOF contract deals strictly with Generation costs.
- MSTR relates only to firm transmission rates.

## Current State of Losses Study

- Losses issue under study currently
- Ongoing meetings between Operations and Marketing
- Will keep customers updated as to progress

## Discussion & Feed Back

- Are there parts of these methodologies which need more exploration?

## Next Steps

- Status of Repayment
- Redo tables with SOR numbers
- Continue Losses analysis
- Meeting to discuss new numbers