Western Area Power Administration

Transmission Customer Meeting

August 20, 2007

Agenda

CVP Transmission System – Mariam Mirzadeh

Compliance with NERC Standards – Arun Sethi

Western’s OATT – Darren Buck Western’s Transmission Rate –

Melinda Grow

CVP Transmission Network

Long Transmission Lines – High Reactive Losses

Integrating CVP Base Resource, Third Party Generation or Import to Load Hubs or Designated Loads at Elverta and Tracy and Other Delivery Points

Simultaneous Import Limitations – Nomogram

Internal (local) Generation vs. Import

COI Impact vs. the Parallel 230 kV

CVP Customer Loads

50% Direct Connect 50% Off-System Project Use Loads 50% Direct Connect 50% Off-System

Network Reliability Projects Sacramento Valley

31 Miles of DCKT 230kV O’Banion to Elverta Folsom Loop

Loop SMUD’s Orangevale/Lake into Folsom Substation

Two New 230kV Bays at Folsom

Long Import Lines to Load Center & Delivery Points

Questions/Discussion

Western’s Compliance with NERC Reliability

Standards

Reliability Standards Eighty-three mandatory standards,

and 700 requirements became effective on June 18, 2007.

All bulk power system owners, operators, and users must comply with these standards. 

All entities are required to register with NERC through the appropriate regional entities.

NERC Registration Western-SNR Operations has registered

with NERC as: Transmission Owner (TO) Transmission Operator (TOP) Transmission Service Provider (TSP) Transmission Planner (TP) Planning Authority (PA)

Western Standards Review

& Compliance Western has self-reported 14

Compliance Violations and Mitigation Plans to WECC.

Six Mitigation Plans have been completed.

All but one of the remaining Mitigation Plans will be completed in 2007.

Western Compliance Audits As a TO and TOP, Western is

required to perform a Self-Certification by December 2007.

Western is scheduled to have a WECC On-Site Compliance Audit in December 2008.

Questions/Discussion

Western’s OATT

Transmission Reservation Process Transmission Upgrades

Western OATT Requests/Planning

Service or Interconnection Request Submitted

Feasibility Analysis Performed System Impact Study (SIS)

Study of TX and impacts Must be coordinated with neighboring TX

owners and potentially WECC

Western OATT Requests/Planning (cont.) Facility Impact Study (FIS)

Substation Impacts Lands, Environmental Design Cost Estimates Determined Mitigation On Neighboring Transmission

Anticipated Rate Impacts Determined from FIS Estimates Includes existing TX service and additional service as

a result of the new line (if SIS indicates new TX results)

Transmission Service Constraints Transmission Reliability Impacts All Customers Firm Off-System Sales are Considered Direct

Connect Load and are subject to Schedule Cut like On-System

Cuts due to Transmission Outages are shared Pro-rata for all customers

All Network Upgrades benefit All Customers

Network VS. Direct Assignment Upgrades Network Upgrades: Modifications or additions to

transmission-related facilities that are integrated with and support the TP’s overall Transmission System for the general benefit of all users of such Transmission System.

Direct Assignment Facilities: Facilities or portions of facilities that are constructed by the Transmission Provider for the sole use/benefit of a particular Transmission Customer requesting service under the Tariff. Direct Assignment Facilities shall be specified in the Service Agreement that governs service to the Transmission Customer

FERC Bright Line Test For Facility Designation

(1) whether the new facility additions would improve service to existing system load (other than the load that requested it);

(2) whether the additional facilities, that have been demonstrated to be the most cost-efficient alternative, are needed to maintain the reliability of the existing transmission system;

(3) whether the new facilities are mandatory requirements for a load interconnection to satisfy a utility’s planning criteria, or whether they far exceed what those criteria require;

(4) whether customers other than the customer that requested the facilities would experience a degradation in service if installation of the new facilities at issue were not undertaken; and

(5) whether the facilities are integrated with the rest of the transmission system, and provide integrated benefits to the overall transmission grid.

Questions/Discussion

Transmission Revenue Requirement (TRR)

Recovered by: Firm and Non-Firm Point to Point (PTP)

Service Network Integrated Service (NITS)

Must be fully recovered Current recovery is estimated at:

26 % - PTP 74 % - NITS

Estimated Impact on TRR

Assumptions: 50 year capitalization beginning in 2012 Revenue impact represented as an annual

average increase % change reflected based on April 2007 TRR Interest on loan (from third party) is expensed

based on the amortization of loan payment Capitalization of project for repayment will

probably be different than represented but the approach used provides a standardized basis

Estimated Impact on TRR “Partial Funding” ($22M) Option Scenario

Project Capitalization of $92 million Loan Interest Paid off in 3 years

Year(s) % Inc to TRR2012-2014 26.5%2015-2061 15.0%

Total Repayment

$ 206 million

Estimated Impact on TRR

“Full Funding” Third Party Option Scenario Project Capitalization of $97 million Loan Interest Paid off in 18 yearsYear(s) % Inc to TRR

2012 42.6 %2013-2029 32.1%2030-2061 13.1%

Total Repayment

$ 264 million

Questions/Discussion