[Federal Register: August 28, 2006 (Volume 71, Number 166)] [Notices] [Page 50902-50917] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr28au06-31] ----------------------------------------------------------------------- DEPARTMENT OF ENERGY Southeastern Power Administration Kerr-Philpott Project, SEPA-46 AGENCY: Southeastern Power Administration, DOE. ACTION: Notice of rate order. ----------------------------------------------------------------------- SUMMARY: The Deputy Secretary, Department of Energy, confirmed and approved, on an interim basis, Rate Schedules VA-1-A, VA-2-A, VA-3-A, VA-4-A, CP&L-1-A, CP&L-2-A, CP&L-3-A, CP&L-4-A, AP-1-A, AP-2-A, AP-3-A, AP-4-A, NC-1-A, Replacement-2, and VANC-1. The rates were approved on an interim basis through September 30, 2011, and are subject to confirmation and approval by the Federal Energy Regulatory Commission on a final basis. DATES: Approval of rates on an interim basis is effective October 1, 2006. FOR FURTHER INFORMATION CONTACT: Leon Jourolmon, Assistant Administrator, Finance & Marketing, Southeastern Power Administration, Department of Energy, 1166 Athens Tech Road, Elberton, Georgia 30635- 4578, (706) 213-3800. SUPPLEMENTARY INFORMATION: The Federal Energy Regulatory Commission, by Order issued March 6, 2002, in Docket No. EF01-3041-000, confirmed and approved Wholesale Power Rate Schedules VA-1, VA-2, VA-3, VA-4, CP&L-1, CP&L-2, CP&L-3, CP&L-4, AP-1, AP-2, AP-3, AP-4, and NC-1 through September 30, 2006. This order replaces these rate schedules. Dated: August 15, 2006. Clay Sell, Deputy Secretary. In the Matter of: Southeastern Power Administration B Kerr-Philpott System Power Rates; Order Confirming and Approving Power Rates on an Interim Basis Pursuant to sections 302(a) and 301(b) of the Department of Energy Organization Act, Public Law 95-91, the functions of the Secretary of the Interior and the Federal Power Commission under section 5 of the Flood Control Act of 1944, 16 U.S.C. 825s, relating to the Southeastern Power Administration (SEPA), were transferred to and vested in the Secretary of Energy. By Delegation Order No. 00-037.00, effective December 6, 2001, the Secretary of Energy delegated: (1) The authority to develop power and transmission rates to Southeastern's Administrator, (2) the authority to confirm, approve, and place such rates into effect on an interim basis to the Deputy Secretary of Energy, and (3) the authority to confirm approve, and place into effect on a final basis, to remand or to disapprove such rates to the Federal Energy Regulatory Commission (Commission). Existing DOE procedures for public participation in power rate adjustments (10 CFR part 903) were published on September 18, 1985. Background Power from the Kerr-Philpott Projects is presently sold under Wholesale [[Page 50903]] Power Rate Schedules VA-1, VA-2, VA-3, VA-4, CP&L-1, CP&L-2, CP&L-3, CP&L-4, AP-1, AP-2, AP-3, AP-4, and NC-1. These rate schedules were approved by the FERC on March 6, 2002, for a period ending September 30, 2006 (98 FERC 62,156). An examination of SEPA's current system power repayment study, prepared in July 2006, for the Kerr-Philpott System shows that revenues are not adequate to meet repayment criteria. A revised repayment study with a revenue increase of $1,423,000 in fiscal year 2007 and all future years over the current repayment study shows that all costs are repaid within their service life. Therefore, Southeastern is proposing to revise the existing rates to generate this additional revenue. The rate adjustment is an increase of about twelve percent (12%). Public Notice and Comment Notice of a proposed rate adjustment for the Kerr-Philpott System, based on a repayment study prepared in February of 2006, was published in the Federal Register March 10, 2006 (71 FR 12354). A Public Information and Comment Forum was held in Raleigh, North Carolina, on April 26, 2006. Transcripts from this forum are included as exhibit A- 4. Written comments were accepted until June 8, 2006. Written comments were received from two sources and are attached to this exhibit. Comments have been condensed into three major categories. The three major categories are as follows: 1. Power Marketing Policy; 2. Inclusion of investments that are not currently used and useful; 3. Establishment of a true-up mechanism; 4. A question on Corps Operation & Maintenance (O&M) Expense; and 5. Questions directed at the Corps of Engineers (Corps). Category 1: Power Marketing Policy Comment 1: We don't question the need for a rate increase, but suggest that it should be phased in as the project is funded and as we see benefits from the increased capacity and hopefully more energy. Response 1: The question pertains to marketing policy, rather than rates. Over the next five years, SEPA anticipates that at least one unit at the John H. Kerr Project will be out of service for rehabilitation. During that time, no additional capacity or energy will be available to allocate to preference customers. After the rehabilitation of the Kerr Project is complete, SEPA will evaluate the marketing arrangements and policies and may allocate the additional capacity. Category 2: Inclusion of Investments that are Not Currently Used and Useful Comment 2: It appears to us that SEPA intends to include amounts in the new rate schedules for plant and investment that have not gone into commercial operation at this time. The inclusion of these amounts appears to violate the general legal principles on cost recovery, as well as DOE Regulations that govern the preparation of repayment studies and development of rate schedules. Response 2: The laws, regulations, methods, and standards for establishing rate schedules for Power Marketing Administrations (PMA) are different from the standards that apply to Investor Owned Utilities. See Generally: Central Electric Power Coop., Inc. v. Southeastern Power Administration (4th Cir. 2003). As the commenter has cited, ] 10(k.) of RA 6120.2 requires PMAs to include ``investment costs for all authorized power system facilities for which Congress has appropriated funds for construction and which will be in service within the cost evaluation period * * *'' ] 10(l.) provides ``Future replacement costs will be included * * *'' SEPA has traditionally included the cost of power investment that is estimated to be in service during the cost evaluation period (normally 5 years). SEPA is setting the rate at the beginning of the cost evaluation period; therefore it must be an estimate of when it will go into service. The budget process of the Corps is to request a new start for a major rehabilitation. The Corps may ask for several years of additional appropriations to complete the rehabilitation. When the first monies are appropriated the cost are included in the repayment study if the in service date is estimated to be within the cost evaluation period. It should be noted that ] 10(l.) does not include a requirement that the replacements included in the Repayment Study to have been appropriated funds by Congress. The paragraph is discussing costs to be included beyond the cost evaluation period. These costs have not been appropriated and are estimated assuming the need to be made in order to keep the projects in good operating order. It should also be noted that RA 6120.2 does not include a requirement that the investment be ``used and useful'' before it can be included in the repayment study. ] 10(k.) requires that investment costs that ``* * * will be in service within the cost evaluation period will be included.'' At this time, the customers point out that it is unclear that the ongoing rehabilitation of the John H. Kerr Project will be complete at the end of the cost evaluation period, which is the end of Fiscal Year 2011. Accordingly, SEPA has removed these projected investment costs from the Repayment Study used to develop the proposed rate schedules, and established a true-up mechanism that is discussed in SEPA's response to comments 9 and 10. The Repayment Study includes projections of future replacement costs for which funds have not been appropriated by Congress, as required by ] 10(l.) of RA 6120.2. Comment 3: The United States Supreme Court essentially noted that electric utilities should recover investments when actually made and when the plant or investment is used and useful. It appears that those same considerations apply to Power Marketing Administrations as well. Response 3: See Response 2, above. Comment 4: On page 4 of RA 6120.2, subsection b(3), states ``Fixed assets should be carried at the cost of acquisition or construction''. There is no suggestion here that the fixed assets should be carried at the cost of a predicted acquisition or construction. Response 4: See Response 2, above. Comment 5: [] 10(k) of RA 6120.2] explains ``The allocated power investment costs of all authorized power system facilities for which Congress has appropriated funds for construction and which will be in service within the cost evaluation period will be included.'' So not only does Congress need to provide the funds, but the construction needs to be completed before the Department of Energy Regulations allow for the recovery of these amounts in the rates. Response 5: See Response 2, above. Comment 6: [] 10(l.) of RA 6120.2 states] ``Future replacement costs will be included in repayment studies by adding the estimated capital cost of replacement to the unpaid Federal investment in the year each replacement is estimated to go into service.'' The rate regulation tells the PMAs that they can include amounts in the rates that have been appropriated and then put into plant that has or will go into service during the time frame of the repayment schedule. Response 6: See Response 2, above. Comment 7: The SeFPC believes that SEPA must look to common electric utility practice to apply this term of art in the context of the proposed increase. Indeed, when considering the inclusion of investment that is not yet commercially operable, Federal Courts [[Page 50904]] have determined that rates should include investment that is ``used and useful.'' See Oglethorpe Power Corporation v. FERC, 84 F.3d 1447, 1451 (D.C. Cir. 1996) citing Town of Norwood v. FERC, 80 F.3d 526, 531 (D.C. Cir. 1996). Response 7: See Response 2, above. Comment 8: If the Corps and SEPA are wrong about the anticipated funding and expected completion of the rehabilitation work, there is no apparent downside for each of these agencies. SEPA will continue to collect the funds for investment that is not commercially operable, and the Corps will simply fail to meet the rehabilitation schedule. There appears to be no financial accountability for the failure to perform. Response 8: See Response 2, above. 3. Establishment of a True-Up Mechanism Comment 9: The North Carolina EMC's propose that an annual assessment of plant place in service be made, and only then, impose a rate increase that reflect the cost of this placed in-service project. The customers should not be in a position to pay in advance for service that may or may not be completed. Response 9: SEPA has agreed to include a true-up mechanism in the proposed rates. The true-up mechanism will work as follows: the Capacity Charge and the Energy Charge will be subject to annual adjustment on January 1 of each year based on transfers to plant in service for the preceding Fiscal Year that are not included in the proposed repayment study. The adjustment will be for each increase of $1,000,000 to plant in service an increase of $0.01 per kilowatt per month added to the capacity charge and 0.04 mills per kilowatt-hour added to the energy charge. Comment 10: To provide a more accurate reflection of the investment entering commercial operation and ensure that the rates reflect this reality, the Customers encourage SEPA to consider a rate structure that recognizes and accounts for rehabilitation work that goes into commercial operation for the preceding fiscal year. Response 10. See Response 9, above. 4. Question About Corps of Engineers O&M Comment 11: What are the specific components of Corps O&M that have increased to make up the $2.7 million annual increase to be recovered through rates from the hydropower function at the Kerr Project. Response: SEPA provides a breakdown of Corps O&M annually. The projections that are incorporated into the repayment study used to develop the proposed rate schedules were provided to the O&M Committee of the SeFPC on June 8, 2005. SEPA and the Corps provided updates of O&M activities May 16, 2006. The specific components of Corps O&M that make up the $2.7 million annual increase were included in this breakdown. SEPA will continue to provide these reports to the SeFPC and any other party that requests them. 5. Questions Directed at the Corps of Engineers Comment 12: The SeFPC asked several questions that SEPA believes are appropriately addressed by the Corps of Engineers. The questions are listed below. The Corps response follows each question. SeFPC 1. Has the Corps requested funding for this project that has not been provided in the year requested? Corps 1: No. All funding requested in the President's Budget has been provided in the year of the request. SeFPC 2. Does the Corps intend to take more than one unit out of operation at a time to perform rehabilitation? Corps 2: No. The contract allows for a 50-day overlap between unit outages. This overlap is to provide better efficiency of the contract work force. This will reduce the overall contract time between assembly and reassembly of the main hydropower units (Units 2-7). Likewise there is a weight restriction and physical size limitation to one main rotor removal (215 tons) in the powerhouse on the generator floor erection bay. SeFPC 3. Are there any infrastructure repairs that must occur before the rehabilitation of the generators can take place? i.e. overhead bridge crane? Corps 3: The only outstanding work is the refurbishment of the existing draft tube gates. A new set of draft tube gates has been delivered to the project and now being used on Unit 1. This refurbishment should not delay any future contract work. The bridge crane was refurbished and upgraded already prior to the start of the major GE Hydro contract. SeFPC 4. Has the Corps ordered all of the equipment needed to make the needed replacements? If not, when will this take place? Corps 4: All Government furnished equipment required to support the rehabilitation contractor has been ordered. SeFPC 5. What contingencies have been put in place to address any delays from suppliers of equipment or problems with equipment quality, installation, or performance? Corps 5: The last of the Government furnished equipment is to be delivered to the project site within 30 days, well in advance of the needs of the rehabilitation contractor. The rehabilitation contractor is required by contract to provide a contractor quality control system to manage the procurement, installation and testing of the remaining equipment. The performance of the contractor's quality control system and the contract schedule are continuously evaluated by the Government. SeFPC 6. How many Corps Full Time Employees (``FTEs'') were anticipated to be allocated to the hydropower function at the Kerr project in 2000? Corps 6: There have been several reorganizations in Operations since FY 2000. None of the positions identified in Operations or Maintenance of the powerhouses were established or abolished based on the major rehabilitation of the powerhouse. The permanent FTE assigned to John H. Kerr in 2000 was approx. 21. The projected FTE this year and future years is 22 FTE for the Kerr project. The Hydropower District Function (Wilmington-1 FTE) was absorbed into the regular O&M staff at the powerhouse to make a total of 22 permanent FTE. There will be a projected increase in Philpott FTE by 1 for FY 07 and will remain constant into the future for a staff of 4. One additional J.H. Kerr FTE may be transferred to Philpott (net gain 0) in the next several years based on attrition or upcoming retirements at John H. Kerr. For the Kerr-Philpott system this will remain a total of 26 FTE. These totals are consistent with other hydropower stations of our size within SAD. In the case of the remote operated Philpott Powerhouse the staff is somewhat smaller than other remote powerhouse sites in SAD. The John H. Kerr staff also has the responsibility for the O&M of another station; the Island Creek Pumping Station to support the 22 FTE. The District approved Objective Organization, reviewed quarterly, that accounts for all USACE Wilmington District FTE for FY 06 through FY 10 allocates a combined total staff of 26 permanent FTE for the Hydropower Branch for both powerhouses and the pumping station. There are no plans to increase or decrease this staffing in the next 4 years. SeFPC 7. How many Corps FTEs are anticipated to be allocated to the hydropower function at the Kerr project in 2011? Corps 7: 22 FTE. [[Page 50905]] SeFPC 8. If there is an increase in Corps FTE allocated to the hydropower function between FY 2007 and FY 2011, please explain why the Corps expects FTEs allocated to hydropower to rise as the project is rehabilitated? Corps 8: There is no projected increase or decrease in FTE anticipated due to the rehabilitation of the powerhouse. Replacing the old generators with new still will require normal O&M and biennial inspections on all 7 units. The hydropower staff is allocated certain labor charge numbers to assist with the GE Hydro contract for review of P&S, submittals, meetings, plant security, and Lockout & Tag out of the equipment. Mostly this represents the managers and senior craft staff for about 5-10% of their time. SeFPC 9. Are any of these Corps FTEs allocated to hydropower working on a full time or part-time basis on rehabilitation work? Corps 9: No. Administration of the major rehabilitation contract is the responsibility of the Wilmington District Construction Branch. The Resident Engineer's office of the Wilmington District Construction Branch did increase their staff for the administration of the major rehabilitation contract with 3.5 FTE. Those employees will be reassigned upon completion of the rehabilitation project. Discussion System Repayment An examination of SEPA's revised system power repayment study, prepared in July 2006, for the Kerr-Philpott System shows that with the proposed rates, all system power costs are paid within the 50-year repayment period required by existing law and DOE Procedure RA 6120.2. The Administrator of SEPA has certified that the rates are consistent with applicable law and that they are the lowest possible rates to customers consistent with sound business principles. Environmental Impact SEPA has reviewed the possible environmental impacts of the rate adjustment under consideration and has concluded that, because the adjusted rates would not significantly affect the quality of the human environment within the meaning of the National Environmental Policy Act of 1969, the proposed action is not a major Federal action for which preparation of an Environmental Impact Statement is required. Availability of Information Information regarding these rates, including studies and other supporting materials, is available for public review in the offices of Southeastern Power Administration, 1166 Athens Tech Road, Elberton, Georgia 30635, and in the Power Marketing Liaison Office, James Forrestal Building, 1000 Independence Avenue, SW., Washington, DC 20585. Order In view of the foregoing and pursuant to the authority delegated to me by the Secretary of Energy, I hereby confirm and approve on an interim basis, effective October 1, 2001, attached Wholesale Power Rate Schedules VA-1-A, VA-2-A, VA-3-A, VA-4-A, CP&L-1-A, CP&L-2-A, CP&L-3-A, CP&L-4-A, AP-1-A, AP-2-A, AP-3-A, AP-4-A, NC-1-A, Replacement-2, and VANC-1. The Rate Schedules shall remain in effect on an interim basis through September 30, 2011, unless such period is extended or until the FERC confirms and approves them or substitutes Rate Schedules on a final basis. Dated: August 15, 2006. Clay Sell, Deputy Secretary. Wholesale Power Rate Schedule VA-1-A Availability This rate schedule shall be available to public bodies and cooperatives (any one of whom is hereinafter called the Customer) in Virginia and North Carolina to whom power may be transmitted and scheduled pursuant to contracts between the Government, Virginia Electric and Power Company (hereinafter called the Company) , the Company's Transmission Operator, currently PJM Interconnection LLC (hereinafter called PJM), and the Customer. This rate schedule is applicable to customers receiving power from the Government on an arrangement where the Company schedules the power and provides the Customer a credit on their bill for Government power. Nothing in this rate schedule shall preclude modifications to the aforementioned contracts to allow an eligible customer to elect service under another rate schedule. Applicability This rate schedule shall be applicable to the sale at wholesale of power and accompanying energy generated at the John H. Kerr and Philpott Projects and sold under appropriate contracts between the Government and the Customer. Character of Service The electric capacity and energy supplied hereunder will be delivered at the delivery points of the Customer on the Company's transmission and distribution system. Monthly Rate The monthly rate for capacity, energy, and generation services provided under this rate schedule for the period specified shall be: Capacity Charge: $2.35 Per kilowatt of total contract demand per month. Energy Charge: 9.38 Mills per kilowatt-hour. The Capacity Charge and the Energy Charge will be subject to annual adjustment on January 1 of each year based on transfers to plant in service for the preceding Fiscal Year that are not included in the proposed repayment study. The adjustment will be for each increase of $1,000,000 to plant in service an increase of $0.01 per kilowatt per month added to the capacity charge and 0.04 mills per kilowatt-hour added to the energy charge. Additional rates for Transmission and any ancillary services provided under this rate schedule shall be the rates charged Southeastern Power Administration by the Company or PJM. Future adjustments to these rates will become effective upon acceptance for filing by the Federal Energy Regulatory Commission of the Company's rate. Transmission $2.43 Per kilowatt of total contract demand per month as of February 2006, is presented for illustrative purposes. Ancillary Services 3.63 Mills per kilowatt-hour of energy as of February 2006, is presented for illustrative purposes. The initial charge for transmission and Ancillary Services will be the Customer's ratable share of the charges for transmission, distribution, and ancillary services paid by the Government. The charges for transmission and ancillary services are governed by and subject to refund based upon the determination in proceedings before the Federal Energy Regulatory Commission (FERC) involving the Company's or PJM's Open Access Transmission Tariff (OATT). Proceedings before FERC involving the OATT or the Distribution charge may result in the separation of charges currently included in the transmission rate. In this event, the Government may [[Page 50906]] charge the Customer for any and all separate transmission, ancillary services, and distribution charges paid by the Government in behalf of the Customer. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Tandem Transmission Charge $1.69 Per kilowatt of total contract demand per month, as an estimated cost as of February 2006. The tandem transmission charge will recover the cost of transmitting power from a project to the border of another transmitting system. This rate will be a formulary rate based on the cost to the Government for transmission of power from the Philpott project to the border of the Virginia Electric and Power Company System and the cost to the Government for transmission of power from the John H. Kerr Project to the border of the Carolina Power & Light System. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Transmission and Ancillary Services The charges for Transmission and Ancillary Services shall be governed by and subject to refund based upon the determination in the proceeding involving the Company's or PJM's Open Access Transmission Tariff. Contract Demand The contract demand is the amount of capacity in kilowatts stated in the contract which the Government is obligated to supply and the Customer is entitled to receive. Energy To Be Furnished by the Government The Government will sell to the Customer and the Customer will purchase from the Government energy each billing month equivalent to a percentage specified by contract of the energy made available to the Company (less applicable losses). The Customer's contract demand and accompanying energy will be allocated proportionately to its individual delivery points served from the Company's system. The applicable energy loss factor for transmission is specified in the OATT. These losses shall be effective until modified by the Federal Energy Regulatory Commission, pursuant to application by the Company or PJM under section 205 of the Federal Power Act or Southeastern Power Administration under section 206 of the Federal Power Act or otherwise. Billing Month The billing month for power sold under this schedule shall end at 12 midnight on the last day of each calendar month. Wholesale Power Rate Schedule VA-2-A Availability This rate schedule shall be available to public bodies and cooperatives (any one of whom is hereinafter called the Customer) in Virginia and North Carolina to whom power may be transmitted pursuant to contracts between the Government, Virginia Electric and Power Company (hereinafter called the Company), the Company's Transmission Operator, currently PJM Interconnection LLC (hereinafter called PJM), and the Customer. The Customer has chosen to self-schedule and does not receive Government power under an arrangement where the Company schedules the power and provides a credit on the Customer's bill for Government power. The Customer is responsible for providing a scheduling arrangement with the Government. The Government is responsible for arranging transmission with the Company and PJM. Nothing in this rate schedule shall preclude modifications to the aforementioned contracts to allow an eligible customer to elect service under another rate schedule. Applicability This rate schedule shall be applicable to the sale at wholesale of power and accompanying energy generated at the John H. Kerr and Philpott Projects and sold under appropriate contracts between the Government and the Customer. Character of Service The electric capacity and energy supplied hereunder will be delivered at the delivery points of the Customer on the Company's transmission and distribution system. Monthly Rate The monthly rate for capacity, energy, and generation services provided under this rate schedule for the period specified shall be: Capacity Charge: $2.35 Per kilowatt of total contract demand per month. Energy Charge: 9.38 Mills per kilowatt-hour. The Capacity Charge and the Energy Charge will be subject to annual adjustment on January 1 of each year based on transfers to plant in service for the preceding Fiscal Year that are not included in the proposed repayment study. The adjustment will be for each increase of $1,000,000 to plant in service an increase of $0.01 per kilowatt per month added to the capacity charge and 0.04 mills per kilowatt-hour added to the energy charge. Additional rates for Transmission and any ancillary services provided under this rate schedule shall be the rates charged Southeastern Power Administration by the Company or PJM. Future adjustments to these rates will become effective upon acceptance for filing by the Federal Energy Regulatory Commission of the Company's rate. Transmission $2.43 Per kilowatt of total contract demand per month as of February 2006, is presented for illustrative purposes. Ancillary Services 3.63 Mills per kilowatt-hour of energy as of February 2006, is presented for illustrative purposes. The initial charge for transmission and ancillary services will be the Customer's ratable share of the charges for transmission, distribution, and ancillary services paid by the Government. The charges for transmission and ancillary services are governed by and subject to refund based upon the determination in proceedings before the Federal Energy Regulatory Commission (FERC) involving the Company's or PJM's Open Access Transmission Tariff (OATT). Proceedings before FERC involving the OATT or the Distribution charge may result in the separation of charges currently included in the transmission rate. In this event, the Government may charge the Customer for any and all separate transmission, ancillary services, and distribution charges paid by the Government in behalf of the Customer. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Tandem Transmission Charge $1.69 Per kilowatt of total contract demand per month, as an estimated cost as of February 2006. The tandem transmission charge will recover the cost of transmitting power from a project to the border of another transmitting system. This rate will be a formulary rate based on the cost to the Government for transmission of power from the Philpott project to the border of the Virginia Electric and Power Company System and the cost to the Government for transmission of power from the John H. Kerr Project to the [[Page 50907]] border of the Carolina Power & Light System. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Transmission and Ancillary Services The charges for Transmission and Ancillary Services shall be governed by and subject to refund based upon the determination in the proceeding involving the Company's or PJM's Open Access Transmission Tariff. Contract Demand The contract demand is the amount of capacity in kilowatts stated in the contract which the Government is obligated to supply and the Customer is entitled to receive. Energy To Be Furnished by the Government The Government will sell to the Customer and the Customer will purchase from the Government energy each billing month equivalent to a percentage specified by contract of the energy made available to the Company (less applicable losses). The Customer's contract demand and accompanying energy will be allocated proportionately to its individual delivery points served from the Company's system. The applicable energy loss factor for transmission is specified in the OATT. These losses shall be effective until modified by the Federal Energy Regulatory Commission, pursuant to application by the Company or PJM under section 205 of the Federal Power Act or Southeastern Power Administration under section 206 of the Federal Power Act or otherwise. Billing Month The billing month for power sold under this schedule shall end at 12 midnight on the last day of each calendar month. Wholesale Power Rate Schedule VA-2-A Availability This rate schedule shall be available to public bodies and cooperatives (any one of whom is hereinafter called the Customer) in Virginia and North Carolina to whom power may be transmitted pursuant to contracts between the Government, Virginia Electric and Power Company (hereinafter called the Company), the Company's Transmission Operator, currently PJM Interconnection LLC (hereinafter called PJM), and the Customer. The Customer has chosen to self-schedule and does not receive Government power under an arrangement where the Company schedules the power and provides a credit on the Customer's bill for Government power. The Customer is responsible for providing a scheduling arrangement with the Government. The Government is responsible for arranging transmission with the Company and PJM. Nothing in this rate schedule shall preclude modifications to the aforementioned contracts to allow an eligible customer to elect service under another rate schedule. Applicability This rate schedule shall be applicable to the sale at wholesale of power and accompanying energy generated at the John H. Kerr and Philpott Projects and sold under appropriate contracts between the Government and the Customer. Character of Service The electric capacity and energy supplied hereunder will be delivered at the delivery points of the Customer on the Company's transmission and distribution system. Monthly Rate The monthly rate for capacity, energy, and generation services provided under this rate schedule for the period specified shall be: Capacity Charge: $2.35 Per kilowatt of total contract demand per month. Energy Charge: 9.38 Mills per kilowatt-hour. The Capacity Charge and the Energy Charge will be subject to annual adjustment on January 1 of each year based on transfers to plant in service for the preceding Fiscal Year that are not included in the proposed repayment study. The adjustment will be for each increase of $1,000,000 to plant in service an increase of $0.01 per kilowatt per month added to the capacity charge and 0.04 mills per kilowatt-hour added to the energy charge. Additional rates for Transmission and any ancillary services provided under this rate schedule shall be the rates charged Southeastern Power Administration by the Company or PJM. Future adjustments to these rates will become effective upon acceptance for filing by the Federal Energy Regulatory Commission of the Company's rate. Transmission $2.43 Per kilowatt of total contract demand per month as of February 2006, is presented for illustrative purposes. Ancillary Services 3.63 Mills per kilowatt-hour of energy as of February 2006, is presented for illustrative purposes. The initial charge for transmission and ancillary services will be the Customer's ratable share of the charges for transmission, distribution, and ancillary services paid by the Government. The charges for transmission and ancillary services are governed by and subject to refund based upon the determination in proceedings before the Federal Energy Regulatory Commission (FERC) involving the Company's or PJM's Open Access Transmission Tariff (OATT). Proceedings before FERC involving the OATT or the Distribution charge may result in the separation of charges currently included in the transmission rate. In this event, the Government may charge the Customer for any and all separate transmission, ancillary services, and distribution charges paid by the Government in behalf of the Customer. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Tandem Transmission Charge $1.69 Per kilowatt of total contract demand per month, as an estimated cost as of February 2006. The tandem transmission charge will recover the cost of transmitting power from a project to the border of another transmitting system. This rate will be a formulary rate based on the cost to the Government for transmission of power from the Philpott project to the border of the Virginia Electric and Power Company System and the cost to the Government for transmission of power from the John H. Kerr Project to the border of the Carolina Power & Light System. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Transmission and Ancillary Services The charges for Transmission and Ancillary Services shall be governed by and subject to refund based upon the determination in the proceeding involving the Company's or PJM's Open Access Transmission Tariff. Contract Demand The contract demand is the amount of capacity in kilowatts stated in the contract which the Government is obligated to supply and the Customer is entitled to receive. [[Page 50908]] Energy To Be Furnished by the Government The Government will sell to the Customer and the Customer will purchase from the Government energy each billing month equivalent to a percentage specified by contract of the energy made available to the Company (less applicable losses). The Customer's contract demand and accompanying energy will be allocated proportionately to its individual delivery points served from the Company's system. The applicable energy loss factor for transmission is specified in the OATT. These losses shall be effective until modified by the Federal Energy Regulatory Commission, pursuant to application by the Company or PJM under Section 205 of the Federal Power Act or Southeastern Power Administration under Section 206 of the Federal Power Act or otherwise. Billing Month The billing month for power sold under this schedule shall end at 12:00 midnight on the last day of each calendar month. Wholesale Power Rate Schedule VA-4-A Availability This rate schedule shall be available to public bodies and cooperatives (any one of whom is hereinafter called the Customer) in Virginia and North Carolina served through the transmission facilities of Virginia Electric and Power Company (hereinafter called the Company) and PJM Interconnection LLC (hereinafter called PJM). The Customer has chosen to self-schedule and does not receive Government power under an arrangement where the Company schedules the power and provides a credit on the Customer's bill for Government power. The Customer is responsible for providing a scheduling arrangement with the Government and for providing a transmission arrangement. Nothing in this rate schedule shall preclude modifications to the aforementioned contracts to allow an eligible customer to elect service under another rate schedule. Applicability This rate schedule shall be applicable to the sale at wholesale of power and accompanying energy generated at the John H. Kerr and Philpott Projects (hereinafter called the Projects) and sold under appropriate contracts between the Government and the Customer. Character of Service The electric capacity and energy supplied hereunder will be delivered at the Projects. Monthly Rate The monthly rate for capacity, energy, and generation services provided under this rate schedule for the period specified shall be: Capacity Charge: $2.35 Per kilowatt of total contract demand per month. Energy Charge: 9.38 Mills per kilowatt-hour. The Capacity Charge and the Energy Charge will be subject to annual adjustment on January 1 of each year based on transfers to plant in service for the preceding Fiscal Year that are not included in the proposed repayment study. The adjustment will be for each increase of $1,000,000 to plant in service an increase of $0.01 per kilowatt per month added to the capacity charge and 0.04 mills per kilowatt-hour added to the energy charge. Additional rates for Transmission and Ancillary Services provided under this rate schedule shall be the rates charged Southeastern Power Administration by the Company or PJM. Future adjustments to these rates will become effective upon acceptance for filing by the Federal Energy Regulatory Commission of the Company's rate. Ancillary Services 3.63 Mills per kilowatt-hour of energy as of February 2006, is presented for illustrative purposes. The initial charge for transmission and ancillary services will be the Customer's ratable share of the charges for transmission, distribution, and ancillary services paid by the Government. The charges for transmission and ancillary services are governed by and subject to refund based upon the determination in proceedings before the Federal Energy Regulatory Commission (FERC) involving the Company's or PJM's Open Access Transmission Tariff (OATT). Proceedings before FERC involving the OATT or the Distribution charge may result in the separation of charges currently included in the transmission rate. In this event, the Government may charge the Customer for any and all separate transmission, ancillary services, and distribution charges paid by the Government in behalf of the Customer. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Tandem Transmission Charge $1.69 Per kilowatt of total contract demand per month, as an estimated cost as of February 2006. The tandem transmission charge will recover the cost of transmitting power from a project to the border of another transmitting system. This rate will be a formulary rate based on the cost to the Government for transmission of power from the Philpott project to the border of the Virginia Electric and Power Company System and the cost to the Government for transmission of power from the John H. Kerr Project to the border of the Carolina Power & Light System. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Transmission and Ancillary Services The charges for Transmission and Ancillary Services shall be governed by and subject to refund based upon the determination in the proceeding involving the Company's or PJM's Open Access Transmission Tariff. Contract Demand The contract demand is the amount of capacity in kilowatts stated in the contract which the Government is obligated to supply and the Customer is entitled to receive. Energy To Be Furnished by the Government The Government will sell to the Customer and the Customer will purchase from the Government energy each billing month equivalent to a percentage specified by contract of the energy made available to the Company (less applicable losses). The Customer's contract demand and accompanying energy will be allocated proportionately to its individual delivery points served from the Company's system. The applicable energy loss factor for transmission is specified in the OATT. These losses shall be effective until modified by the Federal Energy Regulatory Commission, pursuant to application by the Company or PJM under Section 205 of the Federal Power Act or Southeastern Power Administration under Section 206 of the Federal Power Act or otherwise. Billing Month The billing month for power sold under this schedule shall end at 12 midnight on the last day of each calendar month. [[Page 50909]] Wholesale Power Rate Schedule CP&L-1-A Availability This rate schedule shall be available to public bodies and cooperatives (any one of whom is hereinafter called the Customer) in North Carolina and South Carolina to whom power may be transmitted and scheduled pursuant to contracts between the Government and Carolina Power & Light Company (hereinafter called the Company) and the Customer. This rate schedule is applicable to customers receiving power from the Government on an arrangement where the Company schedules the power and provides the Customer a credit on their bill for Government power. Nothing in this rate schedule shall preclude modifications to the aforementioned contracts to allow an eligible customer to elect service under another rate schedule. Applicability This rate schedule shall be applicable to the sale at wholesale of power and accompanying energy generated at the John H. Kerr and Philpott Projects and sold under appropriate contracts between the Government and the Customer. Character of Service The electric capacity and energy supplied hereunder will be delivered at the delivery points of the Customer on the Company's transmission and distribution system. Monthly Rate The monthly rate for capacity, energy, and generation services provided under this rate schedule for the period specified shall be: Capacity Charge: $2.35 Per kilowatt of total contract demand per month. Energy Charge: 9.38 Mills per kilowatt-hour. The Capacity Charge and the Energy Charge will be subject to annual adjustment on January 1 of each year based on transfers to plant in service for the preceding Fiscal Year that are not included in the proposed repayment study. The adjustment will be for each increase of $1,000,000 to plant in service an increase of $0.01 per kilowatt per month added to the capacity charge and 0.04 mills per kilowatt-hour added to the energy charge. Additional rates for Transmission and Ancillary Services provided under this rate schedule shall be the rates charged Southeastern Power Administration by the Company. Future adjustments to these rates will become effective upon acceptance for filing by the Federal Energy Regulatory Commission of the Company's rate. Transmission $1.0475 Per kilowatt of total contract demand per month as of February 2006, is presented for illustrative purposes. The initial transmission charge will be the Customer's ratable share of the transmission and distribution charges paid by the Government. The rate is subject to periodic adjustment and will be computed in accordance with the terms of the Government-Company contract. Proceedings before FERC involving the OATT or the Distribution charge may result in the separation of charges currently included in the transmission rate. In this event, the Government may charge the Customer for any and all separate transmission and distribution charges paid by the Government on behalf of the Customer. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Tandem Transmission Charge $1.69 Per kilowatt of total contract demand per month, as an estimated cost as of February 2006. The tandem transmission charge will recover the cost of transmitting power from a project to the border of another transmitting system. This rate will be a formulary rate based on the cost to the Government for transmission of power from the Philpott project to the border of the Virginia Electric and Power Company System and the cost to the Government for transmission of power from the John H. Kerr Project to the border of the Carolina Power & Light System. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Transmission and Ancillary Services The charges for Transmission and Ancillary Services shall be governed by and subject to refund based upon the terms of the Government-Company contract. Contract Demand The contract demand is the amount of capacity in kilowatts stated in the contract which the Government is obligated to supply and the Customer is entitled to receive. Energy To Be Furnished by the Government The Government will sell to the Customer and the Customer will purchase from the Government energy each billing month equivalent to a percentage specified by contract of the energy made available to the Company (less applicable losses). The Customer's contract demand and accompanying energy will be allocated proportionately to its individual delivery points served from the Company's system. The applicable energy loss factor for transmission, in accordance with the Government-Company contract, is six (6) per cent. This loss factor will be governed by the terms of the Government-Company contract. Billing Month: The billing month for power sold under this schedule shall end at 12:00 midnight on the last day of each calendar month. Wholesale Power Rate Schedule CP&L-2-A Availability This rate schedule shall be available to public bodies and cooperatives (any one of whom is hereinafter called the Customer) in North Carolina and South Carolina to whom power may be transmitted pursuant to contracts between the Government and Carolina Power & Light Company (hereinafter called the Company) and the Customer. The Customer has chosen to self-schedule and does not receive Government power under an arrangement where the Company schedules the power and provides a credit on the Customer's bill for Government power. The Customer is responsible for providing a scheduling arrangement with the Government. The Government is responsible for arranging transmission with the Company. Nothing in this rate schedule shall preclude modifications to the aforementioned contracts to allow an eligible customer to elect service under another rate schedule. Applicability This rate schedule shall be applicable to the sale at wholesale of power and accompanying energy generated at the John H. Kerr and Philpott Projects and sold under appropriate contracts between the Government and the Customer. Character of Service The electric capacity and energy supplied hereunder will be delivered at the delivery points of the Customer on the Company's transmission and distribution system. Monthly Rate The monthly rate for capacity, energy, and generation services provided under [[Page 50910]] this rate schedule for the period specified shall be: Capacity Charge: $2.35 Per kilowatt of total contract demand per month. Energy Charge: 9.38 Mills per kilowatt-hour. The Capacity Charge and the Energy Charge will be subject to annual adjustment on January 1 of each year based on transfers to plant in service for the preceding Fiscal Year that are not included in the proposed repayment study. The adjustment will be for each increase of $1,000,000 to plant in service an increase of $0.01 per kilowatt per month added to the capacity charge and 0.04 mills per kilowatt-hour added to the energy charge. Additional rates for Transmission and Ancillary Services provided under this rate schedule shall be the rates charged Southeastern Power Administration by the Company. Future adjustments to these rates will become effective upon acceptance for filing by the Federal Energy Regulatory Commission of the Company's rate. Transmission $1.0475 Per kilowatt of total contract demand per month as of February 2006, is presented for illustrative purposes. The initial transmission charge will be the Customer's ratable share of the transmission and distribution charges paid by the Government. The rate is subject to periodic adjustment and will be computed in accordance with the terms of the Government-Company contract. Proceedings before FERC involving the OATT or the Distribution charge may result in the separation of charges currently included in the transmission rate. In this event, the Government may charge the Customer for any and all separate transmission and distribution charges paid by the Government in behalf of the Customer. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Tandem Transmission Charge $1.69 Per kilowatt of total contract demand per month, as an estimated cost as of February 2006. The tandem transmission charge will recover the cost of transmitting power from a project to the border of another transmitting system. This rate will be a formulary rate based on the cost to the Government for transmission of power from the Philpott project to the border of the Virginia Electric and Power Company System and the cost to the Government for transmission of power from the John H. Kerr Project to the border of the Carolina Power & Light System. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Transmission and Ancillary Services The charges for Transmission and Ancillary Services shall be governed by and subject to refund based upon the terms of the Government-Company contract. Contract Demand The contract demand is the amount of capacity in kilowatts stated in the contract which the Government is obligated to supply and the Customer is entitled to receive. Energy To Be Furnished by the Government The Government will sell to the Customer and the Customer will purchase from the Government energy each billing month equivalent to a percentage specified by contract of the energy made available to the Company (less applicable losses). The Customer's contract demand and accompanying energy will be allocated proportionately to its individual delivery points served from the Company's system. The applicable energy loss factor for transmission, in accordance with the Government-Company contract, is six (6) per cent. This loss factor will be governed by the terms of the Government-Company contract. Billing Month The billing month for power sold under this schedule shall end at 12 midnight on the last day of each calendar month. Wholesale Power Rate Schedule CP&L-3-A Availability This rate schedule shall be available to public bodies and cooperatives (any one of whom is hereinafter called the Customer) in North Carolina and South Carolina to whom power may be scheduled pursuant to contracts between the Government and Carolina Power & Light Company (hereinafter called the Company) and the Customer. The Government is responsible for providing the scheduling. The Customer is responsible for providing a transmission arrangement. Nothing in this rate schedule shall preclude modifications to the aforementioned contracts to allow an eligible customer to elect service under another rate schedule. Applicability This rate schedule shall be applicable to the sale at wholesale of power and accompanying energy generated at the John H. Kerr and Philpott Projects (hereinafter called the Projects) and sold under appropriate contracts between the Government and the Customer. Character of Service The electric capacity and energy supplied hereunder will be delivered at the Projects. Monthly Rate The monthly rate for capacity, energy, and generation services provided under this rate schedule for the period specified shall be: Capacity Charge: $2.35 Per kilowatt of total contract demand per month. Energy Charge: 9.38 Mills per kilowatt-hour. The Capacity Charge and the Energy Charge will be subject to annual adjustment on January 1 of each year based on transfers to plant in service for the preceding Fiscal Year that are not included in the proposed repayment study. The adjustment will be for each increase of $1,000,000 to plant in service an increase of $0.01 per kilowatt per month added to the capacity charge and 0.04 mills per kilowatt-hour added to the energy charge. Additional rates for Transmission and Ancillary Services provided under this rate schedule shall be the rates charged Southeastern Power Administration by the Company. Future adjustments to these rates will become effective upon acceptance for filing by the Federal Energy Regulatory Commission of the Company's rate. Proceedings before FERC involving the OATT or the Distribution charge may result in the separation of charges currently included in the transmission rate. In this event, the Government may charge the Customer for any and all separate transmission and distribution charges paid by the Government in behalf of the Customer. Tandem Transmission Charge $1.69 Per kilowatt of total contract demand per month, as an estimated cost as of February 2006. The tandem transmission charge will recover the cost of transmitting power from a project to the border of another transmitting system. This rate will be a formulary rate based on the cost to the Government for transmission of power from the Philpott project to the border of the Virginia Electric and Power Company System and the cost to the Government for transmission of power [[Page 50911]] from the John H. Kerr Project to the border of the Carolina Power & Light System. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Transmission and Ancillary Services The charges for Transmission and Ancillary Services shall be governed by and subject to refund based upon the terms of the Government-Company contract. Contract Demand The contract demand is the amount of capacity in kilowatts stated in the contract which the Government is obligated to supply and the Customer is entitled to receive. Energy To Be Furnished by the Government The Government will sell to the Customer and the Customer will purchase from the Government energy each billing month equivalent to a percentage specified by contract of the energy made available to the Company (less applicable losses). The Customer's contract demand and accompanying energy will be allocated proportionately to its individual delivery points served from the Company's system. The applicable energy loss factor for transmission, in accordance with the Government-Company contract, is six (6) per cent. This loss factor will be governed by the terms of the Government-Company contract. Billing Month The billing month for power sold under this schedule shall end at 12 midnight on the last day of each calendar month. Wholesale Power Rate Schedule CP&L-4-A Availability This rate schedule shall be available to public bodies and cooperatives (any one of whom is hereinafter called the Customer) in North Carolina and South Carolina served through the transmission facilities of Carolina Power & Light Company (hereinafter called the Company). The Customer has chosen to self-schedule and does not receive Government power under an arrangement where the Company schedules the power and provides a credit on the Customer's bill for Government power. The Customer is responsible for providing a scheduling arrangement with the Government and for providing a transmission arrangement. Nothing in this rate schedule shall preclude modifications to the aforementioned contracts to allow an eligible customer to elect service under another rate schedule. Applicability This rate schedule shall be applicable to the sale at wholesale of power and accompanying energy generated at the John H. Kerr and Philpott Projects (hereinafter called the Projects) and sold under appropriate contracts between the Government and the Customer. Character of Service The electric capacity and energy supplied hereunder will be delivered at the Projects. Monthly Rate The monthly rate for capacity, energy, and generation services provided under this rate schedule for the period specified shall be: Capacity Charge: $2.35 Per kilowatt of total contract demand per month. Energy Charge: 9.38 Mills per kilowatt-hour. The Capacity Charge and the Energy Charge will be subject to annual adjustment on January 1 of each year based on transfers to plant in service for the preceding Fiscal Year that are not included in the proposed repayment study. The adjustment will be for each increase of $1,000,000 to plant in service an increase of $0.01 per kilowatt per month added to the capacity charge and 0.04 mills per kilowatt-hour added to the energy charge. Additional rates for Transmission and Ancillary Services provided under this rate schedule shall be the rates charged Southeastern Power Administration by the Company. Future adjustments to these rates will become effective upon acceptance for filing by the Federal Energy Regulatory Commission of the Company's rate. Tandem Transmission Charge $1.69 Per kilowatt of total contract demand per month, as an estimated cost as of February 2006. The tandem transmission charge will recover the cost of transmitting power from a project to the border of another transmitting system. This rate will be a formulary rate based on the cost to the Government for transmission of power from the Philpott project to the border of the Virginia Electric and Power Company System and the cost to the Government for transmission of power from the John H. Kerr Project to the border of the Carolina Power & Light System. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Transmission and Ancillary Services The charges for Transmission and Ancillary Services shall be governed by and subject to refund based upon the terms of the Government-Company contract. Contract Demand The contract demand is the amount of capacity in kilowatts stated in the contract which the Government is obligated to supply and the Customer is entitled to receive. Energy To Be Furnished by the Government The Government will sell to the Customer and the Customer will purchase from the Government energy each billing month equivalent to a percentage specified by contract of the energy made available to the Company (less applicable losses). The Customer's contract demand and accompanying energy will be allocated proportionately to its individual delivery points served from the Company's system. The applicable energy loss factor for transmission, in accordance with the Government-Company contract, is six (6) per cent. This loss factor will be governed by the terms of the Government-Company contract. Billing Month The billing month for power sold under this schedule shall end at 12 midnight on the last day of each calendar month. Wholesale Power Rate Schedule AP-1-A Availability This rate schedule shall be available to public bodies and cooperatives (any one of whom is hereinafter called the Customer) in Virginia to whom power may be transmitted and scheduled pursuant to contracts between the Government, American Electric Power Service Corporation (hereinafter called the Company), the Company's Transmission Operator, currently PJM Interconnection LLC (hereinafter called PJM), and the Customer. This rate schedule is applicable to customers receiving power from the Government on an arrangement where the Company schedules the power and provides the Customer a credit on their bill for Government power. Nothing in this rate schedule shall preclude modifications to the aforementioned contracts to allow an eligible customer to elect service under another rate schedule. [[Page 50912]] Applicability This rate schedule shall be applicable to the sale at wholesale of power and accompanying energy generated at the John H. Kerr and Philpott Projects and sold under appropriate contracts between the Government and the Customer. Character of Service The electric capacity and energy supplied hereunder will be delivered at the delivery points of the Customer on the Company's transmission and distribution system. Monthly Rate The monthly rate for capacity, energy, and generation services provided under this rate schedule for the period specified shall be: Capacity Charge: $2.35 Per kilowatt of total contract demand per month. Energy Charge: 9.38 Mills per kilowatt-hour. The Capacity Charge and the Energy Charge will be subject to annual adjustment on January 1 of each year based on transfers to plant in service for the preceding Fiscal Year that are not included in the proposed repayment study. The adjustment will be for each increase of $1,000,000 to plant in service an increase of $0.01 per kilowatt per month added to the capacity charge and 0.04 mills per kilowatt-hour added to the energy charge. Additional rates for Transmission and Ancillary Services provided under this rate schedule shall be the rates charged Southeastern Power Administration by the Company. Future adjustments to these rates will become effective upon acceptance for filing by the Federal Energy Regulatory Commission of the Company's rate. Transmission $2.43 Per kilowatt of total contract demand per month as of February 2006, is presented for illustrative purposes. Ancillary Services 3.63 Mills per kilowatt-hour of energy as of February 2006, is presented for illustrative purposes. The initial charge for transmission and ancillary services will be the Customer's ratable share of the charges for transmission, distribution, and ancillary services paid by the Government. The charges for transmission and ancillary services are governed by and subject to refund based upon the determination in proceedings before the Federal Energy Regulatory Commission (FERC) involving the Company's or PJM's Open Access Transmission Tariff (OATT). Proceedings before FERC involving the OATT or the Distribution charge may result in the separation of charges currently included in the transmission rate. In this event, the Government may charge the Customer for any and all separate transmission, ancillary services, and distribution charges paid by the Government in behalf of the Customer. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Tandem Transmission Charge $1.69 Per kilowatt of total contract demand per month, as an estimated cost as of February 2006. The tandem transmission charge will recover the cost of transmitting power from a project to the border of another transmitting system. This rate will be a formulary rate based on the cost to the Government for transmission of power from the Philpott project to the border of the Virginia Electric and Power Company System and the cost to the Government for transmission of power from the John H. Kerr Project to the border of the Carolina Power & Light System. These charges could be recovered through a capacity charge or an energy charge, as determined by the Government. Transmission and Ancillary Services The charges for Transmission and Ancillary Services shall be governed by and subject to refund based upon the determination in the proceeding involving the Company's or PJM's Open Access Transmission Tariff. Contract Demand The contract demand is the amount of capacity in kilowatts stated in the contract which the Government is obligated to supply and the Customer is entitled to receive. Energy To Be Furnished by the Government The Government will sell to the Customer and the Customer will purchase from the Government energy each billing month equivalent to a percentage specified by contract of the energy made available to the Company (less applicable losses). The Customer's contract demand and accompanying energy will be allocated proportionately to its individual delivery points served from the Company's system. The applicable energy loss factor for transmission is specified in the OATT. These losses shall be effective until modified by the Federal Energy Regulatory Commission, pursuant to application by the Company or PJM under section 205 of the Federal Power Act or Southeastern Power Administration under section 206 of the Federal Power Act or otherwise. Billing Month The billing month for power sold under this schedule shall end at 12:00 midnight on the last day of each calendar month. Wholesale Power Rate Schedule AP-2-A Availability This rate schedule shall be available to public bodies and cooperatives (any one of whom is hereinafter called the Customer) in Virginia to whom power may be transmitted pursuant to contracts between the Government, American Electric Power Service Corporation (hereinafter called the Company), the Company's Transmission Operator, currently PJM Interconnection LLC (hereinafter called PJM), and the Customer. The