WESTERN AREA POWER ADMINISTRATION Sierra Nevada Region 2012 Proposed Rates Adjustment For the Central Valley Project California-Oregon Transmission Project and Pacific Alternating Current Intertie January 11, 2011 DOCUMENTS AVAILABLE UPON REQUEST ............................................................ 6 SECTION I ........................................................................................................................... 7 SUMMARY ....................................................................................................................... 7 Table I – 1 Summary Table of Rates Comparison FY 2011 to Estimated FY 2012 ..... 11 SECTION II ........................................................................................................................ 12 RATE ADJUSTMENT PROCEDURES ...................................................................... 12 A) PUBLIC PROCESS ................................................................................................................................ 12 Table II - 1 Informal and Formal Rate Process Calendar Schedule of Major Steps Central Valley and California-Oregon Transmission Projects And Pacific Alternating Current Intertie ....................................................................... 12 B) PUBLIC FORUMS ................................................................................................................................. 16 C) WRITTEN COMMENTS ......................................................................................................................... 16 D) REVISIONS OF PROPOSED RATES ........................................................................................................ 17 E) DECISION ON PROPOSED OR REVISED PROPOSED RATES .................................................................... 17 F) FINAL DECISION ON THE RATE ADJUSTMENT ..................................................................................... 17 G) ADDITIONAL INFORMATION ............................................................................................................... 17 SECTION III ...................................................................................................................... 18 BACKGROUND ............................................................................................................. 18 A) HISTORY AND DESCRIPTION OF THE CENTRAL VALLEY PROJECT ...................................................... 18 B) HISTORY AND DESCRIPTION OF THE WASHOE PROJECT ..................................................................... 19 C) WESTERN’S CONTRACT WITH THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT AND THE CITY OF FALLON .............................................................................................................................................. 20 D) THE 2004 POWER MARKETING PLAN ................................................................................................. 20 E) HISTORY AND DESCRIPTION OF PATH 15 ............................................................................................ 22 SECTION IV ...................................................................................................................... 24 SNR WAPA–156 Rates Brochure Page 1 RATE HISTORY ............................................................................................................ 24 Table IV – 1 Chronology of CVP Rates Commercial Firm Power ................................ 26 Table IV – 2 PRR Rate History....................................................................................... 27 Table IV – 3 CVP Transmission Rate History ................................................................ 28 SECTION V ........................................................................................................................ 29 POWER REPAYMENT STUDY .................................................................................. 29 A) HISTORY ............................................................................................................................................. 29 B) COST ALLOCATION ............................................................................................................................ 30 C) CVP OPERATIONS AND MAINTENANCE COST SUB-ALLOCATION ...................................................... 31 D) REPAYMENT REQUIREMENTS ............................................................................................................. 32 E) ANNUAL REVENUES ........................................................................................................................... 32 Table V – 1 Projected Annual Revenues ....................................................................... 33 Table V – 2 PRS Transmission FY 2012 Estimate ........................................................ 34 F) ANNUAL EXPENSES ............................................................................................................................ 35 Table V – 3 Projected Annual Expenses ....................................................................... 35 Table V – 4 Operation & Maintenance Expense ........................................................... 35 Table V – 5 Purchase Power Expense – Estimate for FY 2012 .................................... 36 G) INTEREST ............................................................................................................................................ 37 Table V – 6 Summary of Projected Unpaid Investment and Interest Rates as of FY 2012 ........................................................................................................... 37 H) NET REVENUES FOR PROJECT REPAYMENT ........................................................................................ 37 Table V – 7 Projected Net Revenues ............................................................................. 38 I) CUMULATIVE INVESTMENT ................................................................................................................ 38 Table V – 8 Projected Cumulative Federal Investment through FY 2016 .................... 38 J) CURRENT REPAYMENT ....................................................................................................................... 39 Table V – 9 Status of Repayment as of 9/30/09 ............................................................. 40 SECTION VI ...................................................................................................................... 41 PROPOSED RATE FORMULAS FOR CVP BASE RESOURCE & FIRST PREFERENCE POWER DELIVERIES ...................................................................... 41 A) POWER REVENUE REQUIREMENT (PRR) ............................................................................................ 41 B) FIRST PREFERENCE REVENUE REQUIREMENT/FORMULA RATE .......................................................... 42 Table VI – 1 First Preference Percentage Calculation Estimated FY 2012 .................. 42 Table VI – 2 First Preference Revenue Requirement Estimated FY 2012 ..................... 43 C) BASE RESOURCE REVENUE REQUIREMENT/FORMULA RATE.............................................................. 43 Table VI – 3 FP and BR Revenue Requirement Estimated FY 2012 .............................. 45 Table VI – 4 Hourly Exchange Sample Calculation....................................................... 46 SECTION VII ..................................................................................................................... 47 PROPOSED FORMULA RATE FOR CUSTOM PRODUCT POWER AND EFFECTIVE RATE FOR VARIABLE RESOURCE SCHEDULES ........................ 47 A) ADVANCE FUNDING: .......................................................................................................................... 48 Table VII – 1 CPP Funding Example with Escrow Account ........................................... 48 Table VII – 2 CPP Funding Example without Escrow Account ...................................... 50 B) USE OF RECEIPTS, FEDERAL REIMBURSABLE OR APPROPRIATIONS FUNDING .................................... 50 Table VII – 3 CPP Funding Example with Appropriations ............................................. 51 Table VII – 4 VRC Effective Rates FY 2012 through FY 2016 ........................................ 52 SNR WAPA–156 Rates Brochure Page 2 SECTION VIII ................................................................................................................... 54 PROPOSED RATE FORMULA FOR CVP TRANSMISSION PROPOSED RATE SCHEDULE CV-T3 (SUPERSEDES CV-T2) CENTRAL VALLEY PROJECT; SCHEDULE OF RATE FOR FIRM AND NON-FIRM POINT-TO-POINT TRANSMISSION SERVICE ......................................................................................... 54 Table VIII – 1 CVP Cost of Service Study (FY 2012 Estimate) ........................................ 58 Table VIII – 2 Transmission System Usage ...................................................................... 59 Table VIII – 3 TRR Allocation (FY 2012 Estimate) .......................................................... 60 Table VIII – 4 Comparison of Transmission Revenue Requirement Current (FY 2011) vs. Estimated (FY 2012) .................................................................................. 61 Table VIII – 5 Comparison of Transmission System Usage Current (FY 2011) vs. Estimated (FY 2012) .................................................................................. 61 A) PROPOSED RATE FORMULA FOR CVP NITS