Rate Impacts of Various DSM Program Designs

1. Rate Impacts of Various DSMProgram Designs Dave Lamont EEU Budget Negotiations April 10, 2006

2. Model Design • Based on 2004 revenues and sales • Losses attributed to Sales and DSM impacts are adjusted to VELCO • Base load forecast assumes no new DSM after 2008 • Base load growth (no DSM) assumed to be 1.5%

3. Model Design • 2004 Base revenues separated into VY, HQ, and IPP plus “everything else” • Revenues are adjusted going forward for impacts of contract expirations as well as incremental market purchases and sales. “Everything else” escalated at inflation (2.5%) • Model used ICF avoided cost study, including ICAP cost projections

4. Model Design • RR includes DSM budgets for ‘06 – ’08 • Revenue requirements (RR) adjusted for T&D expenditures above base peak load

5. Scenarios • Model used DSM scenarios as presented by EVT at the 12/3/2005 workshop • A second set was developed which assumed 2008 savings levels continued through 2025 with costs escalated at inflation (2.5%) • Savings estimates incorporated EVT decay function • DSM costs expensed in each year

6. Results • Rates increased • Revenue requirements (including DSM costs) decreased

7. Base Case