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Intertie Project

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.

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Intertie Project

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  1. Intertie Project Public Information Forum August 17, 2006

  2. 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

  3. 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

  4. 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

  5. 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

  6. Comparison of Transmission Rates

  7. 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

  8. Transmission Rate DriversFY 2007-2011 [FY99 Ratebase PRS]

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

  10. Average Annual Expenses

  11. 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

  12. 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.

  13. 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

  14. 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

  15. Sales Projections • 230/345-kV Transmission Service • 500-kV Transmission Service • Other Revenues

  16. 230/345-kV Sales Projections

  17. 500-kV Sales Projections

  18. Average Annual Other Revenue

  19. 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

  20. 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

  21. 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

  22. Overview of Transmission Rates

  23. 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.

  24. 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 or Jack Murray, jmurray@wapa.gov • All written comments must be received by the end of the comment period

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