Integrated System Power Rates, 60126-60139 [E6-16912]

Agencies

• DEPARTMENT OF ENERGY
• Southwestern Power Administration

[Federal Register Volume 71, Number 197 (Thursday, October 12, 2006)]
[Notices]
[Pages 60126-60139]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-16912]


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DEPARTMENT OF ENERGY

Southwestern Power Administration


Integrated System Power Rates

AGENCY: Southwestern Power Administration, DOE.

ACTION: Notice of Rate Order.

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SUMMARY: Pursuant to Delegation Order Nos. 00-037.00, effective 
December 6, 2001, and 00-001-00B, effective July 28, 2005, the Deputy 
Secretary has approved and placed into effect on an interim basis Rate 
Order No. SWPA-56, which increases the power rates for the Integrated 
System pursuant to the following Integrated System Rate Schedules:

Rate Schedule P-06, Wholesale Rates for Hydro Peaking Power.
Rate Schedule NFTS-06, Wholesale Rates for Non-Federal Transmission/
Interconnection Facilities Service.
Rate Schedule EE-06, Wholesale Rate for Excess Energy.

    The rate schedules supersede the existing rate schedules shown 
below:

Rate Schedule P-05, Wholesale Rates for Hydro Peaking Power 
(superseded by P-06).
Rate Schedule NFTS-05, Wholesale Rates for Non-Federal Transmission/
Interconnection Facilities Service (superseded by NFTS-06).
Rate Schedule EE-05, Wholesale Rate for Excess Energy (superseded by 
EE-06).


[[Page 60127]]


    The effective period for the rate schedules specified in Rate Order 
No. SWPA-56 is October 1 2006, through September 30, 2010.

FOR FURTHER INFORMATION CONTACT: Forrest E. Reeves, Assistant 
Administrator, Office of Corporate Operations, Southwestern Power 
Administration, Department of Energy, Williams Center Tower I, One West 
Third Street, Tulsa, Oklahoma 74103, (918) 595-6696, 
gene.reeves@swpa.gov.

SUPPLEMENTARY INFORMATION: Southwestern Power Administration's 
(Southwestern) Administrator has determined based on the 2006 
Integrated System Current Power Repayment Study, that existing rates 
will not satisfy cost recovery criteria specified in Department of 
Energy Order No. RA 6120.2 and Section 5 of the Flood Control Act of 
1944. The finalized 2006 Integrated System Power Repayment Studies 
(PRSs) indicate that an increase in annual revenue of $37,703,812, or 
27.7 percent, beginning October 1, 2006, will satisfy cost recovery 
criteria for the Integrated System projects. The proposed Integrated 
System rate schedules would increase annual revenues from $136,267,400 
to $173,971,212, primarily to recover increased investments and 
replacements in the hydroelectric generating facilities. Additionally, 
the PRS indicates the need for an annual increase of $8,562,500 in 
revenues received through the Purchased Power Adder to recover 
increased average year purchased energy costs. This proposal also 
includes an increase in size and frequency to the Administrator's 
Discretionary Purchased Power Adder Adjustment (Adjustment) to a level 
sufficient to recover purchased power costs for the recent drought 
conditions experienced in the Southwestern region. The Adjustment 
allows the Administrator to adjust the purchased power adder up to 
twice annually, limited to $0.0067 per kilowatthour as necessary, at 
his/her discretion, under a formula-type rate, with notification to the 
FERC.
    The Administrator has followed Title 10, Part 903 Subpart A, of the 
Code of Federal Regulations, ``Procedures for Public Participation in 
Power and Transmission Rate Adjustments and Extensions'' in connection 
with the proposed rate schedule. On June 16, 2006, Southwestern 
published notice in the Federal Register, (71 FR 34925), of a 60-day 
comment period, together with a combined Public Information and Comment 
Forum, to provide an opportunity for customers and other interested 
members of the public to review and comment on the proposed rate 
increase for the Integrated System. The forum was canceled since no one 
expressed an intention to participate. Written comments were accepted 
through August 15, 2006. Comments from two entities were received and 
are addressed in this rate proposal.
    Information regarding this rate proposal, including studies and 
other supporting material, is available for public review and comment 
in the offices of Southwestern Power Administration, Williams Center 
Tower I, One West Third Street, Suite 1400, Tulsa, Oklahoma 74103.
    Following review of Southwestern's proposal within the Department 
of Energy, I approved, Rate Order No. SWPA-56, on an interim basis, 
which increases the existing Integrated System annual revenue 
requirement to $173,971,212 per year for the period October 1, 2006 
through September 30, 2010.

    Dated: September 28, 2006.
Clay Sell,
Deputy Secretary.

Deputy Secretary of Energy

    In the matter of: Southwestern Power Administration; Integrated 
System Rates; Rate Order No. SWPA-56.

Order Confirming, Approving and Placing Increased Power Rate Schedules 
in Effect 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 Southwestern 
Power Administration (Southwestern) were transferred to and vested in 
the Secretary of Energy. By Delegation Order No. 0204-108, effective 
December 14, 1983, the Secretary of Energy delegated to the 
Administrator of Southwestern the authority to develop power and 
transmission rates, delegated to the Deputy Secretary of the Department 
of Energy the authority to confirm, approve, and place in effect such 
rates on an interim basis and delegated to the Federal Energy 
Regulatory Commission (FERC) the authority to confirm and approve on a 
final basis or to disapprove rates developed by the Administrator under 
the delegation. Delegation Order No. 0204-108, as amended, was 
rescinded and subsequently replaced by Delegation Orders 00-037.00 
(December 6, 2001) and 00-001-00B (July 28, 2005). The Deputy Secretary 
issued this rate order pursuant to said delegations.

Background

    The Deputy Secretary approved and placed into effect on an interim 
basis the following Integrated System (System) rate schedules for the 
period February 1, 2006, through September 30, 2009, and submitted the 
rate schedules to the FERC for final confirmation and approval:

Rate Schedule P-05, Wholesale Rates for Hydro Peaking Power.
Rate Schedule NFTS-05, Wholesale Rates for Non-Federal Transmission/
Interconnection Facilities Service.
Rate Schedule EE-05, Wholesale Rate for Excess Energy.
Southwestern Power Administration's (Southwestern), Current Power.

    Repayment Study (PRS) indicates that the existing rates will not 
satisfy present financial criteria regarding repayment of investment 
within a 50-year period due to increased investments and replacements 
in the U.S. Army Corps of Engineers (Corps) hydroelectric generating 
facilities. The revised PRS indicates that an increase in annual 
revenues of $37,703,812 is necessary beginning October 1, 2006, to 
accomplish repayment in the required number of years. Accordingly, 
Southwestern has prepared proposed rate schedules based on the 
additional revenue requirement and the 2006 Rate Design Study.
    An informal meeting was held in April 2006 with customer 
representatives to review the repayment and rate design processes and 
present the basis for the 27.7 percent annual revenue increase. In May 
2006, Southwestern prepared a proposed 2006 PRS for the Integrated 
System based on comments received from our customers during this 
informal meeting.
    Title 10, Part 903, Subpart A of the Code of Federal Regulations, 
``Procedures for Public Participation in Power and Transmission Rate 
Adjustment,'' has been followed in connection with the proposed rate 
adjustments. More specifically, opportunities for public review and 
comment on proposed System power rates during a 60-day period were 
announced by notice published in the Federal Register, June 16, 2006, 
(71 FR 34925). The consultation and comment period was shortened by the 
Administrator in accordance with Sec. 903.14(a) of 10 CFR part 903, 
because of the need to assure new rates are in place by October 1, 
2006, to respond to financial difficulties resulting from the FY 2006 
drought conditions. A Public Information and Comment Forum scheduled 
for July 12, 2006, in Tulsa, Oklahoma, was canceled since no one

[[Page 60128]]

expressed an intention to attend. Written comments were due by August 
15, 2006. Southwestern mailed copies of the proposed May 2006 Power 
Repayment and Rate Design Studies to customers and interested parties 
that requested the data, for review and comment during the formal 
period of public participation.
    Following conclusion of the comment period on August 15, 2006, 
comments presented during the formal public participation process were 
reviewed. Once the comments were evaluated, the 2006 Power Repayment 
and Rate Design Studies were completed. No changes were made to the 
2006 PRS based on comments received. The studies were finalized in 
August 2006. The Administrator made the decision to submit the rate 
proposal for interim approval and implementation. The comments 
resulting from the public participation process and responses, as 
developed by Southwestern's staff, are contained in this Rate Order.

Discussion

General

    The existing rate schedules developed in the 2005 Integrated System 
PRS were the basis for revenue determination in the August 2006 
Integrated System Current PRS. The Current PRS indicates that existing 
rates are insufficient to produce the annual revenues necessary to 
accomplish repayment of the capital investment as required by Section 5 
of the Flood Control Act of 1944 and Department of Energy (DOE) Order 
No. RA 6120.2.
    A Revised PRS was prepared that increases ultimate annual revenues 
by $37,703,812 or 27.7 percent, in three steps over a three-year 
period, which satisfies the cost recovery criteria outlined in DOE 
Order No. RA 6120.2 and Section 5 of the Flood Control Act of 1944. The 
first step (October 1, 2006) is an increase in the purchased power 
adder ($8,562,500 or 6.3 percent) and the discretionary purchased power 
adder adjustment ($10,085,580 or 7.4 percent) components which will be 
set to recover future average purchased power expenses and purchased 
power costs resulting from the recent drought situation in the 
Southwestern region. The second step (October 1, 2007) will incorporate 
1/2 of the full revenue requirement ($9,527,866 or 7 percent) caused by 
the increased investment and replacement costs. The final step (October 
1, 2008 through September 30, 2010) will incorporate the remaining 1/2 
($9,527,866 or 7 percent) to reach the full revenue requirement level. 
Due to only slight increases in annual operating and maintenance 
expenses during the cost evaluation period, these revenue increases 
combined over the three year phase-in will ensure that cost recovery 
will be accomplished as required.
    In Southwestern's 2006 Rate Design proposal, rates were designed to 
recover the additional revenue requirements in three steps over a 
three-year period. In FY 2007, the Purchased Power Adder will increase 
to $0.0067 per kWh to cover the increased expense of future purchased 
power costs. Also in FY 2007, the Discretionary Purchased Power Adder 
Adjustment will increase in size and frequency (twice annually limited 
to $0.0067 per kwh) to a level sufficient to recover the purchased 
power costs for the recent drought conditions experienced in the 
Southwestern region. A preliminary amount currently estimated to be 
$0.0045 per kWh, based on actual data through August 2006, will be 
collected through this adjustment. The final discretionary PPA 
adjustment will be determined prior to implementation of this rate 
proposal using actual data through September 2006 and will become 
effective October 1, 2006. The demand charge for Federal power will 
increase in FY 2008 by $0.15 per kW per month, and again in FY 2009 by 
$0.33 per kW per month to the final rate of $3.51 per kW per month. The 
energy charge for peaking energy has remained unchanged. The energy 
charge for supplemental peaking energy and excess energy will increase 
in FY 2008 by $0.0027 per kWh to $0.0082 per kWh and be equal to the 
peaking energy rate. The transformation charge remains the same at 
$0.30 per kW and is applied to the transmission capacity usage at 69 kV 
and below. In addition, transmission charges for firm service 
deliveries of non-Federal power will increase beginning in FY 2009.
    Consistent with FERC's Order No. 888, Southwestern will continue 
charging separately for five ancillary services under Rate Schedule P-
06 and Rate Schedule NTFS-06, and offering network transmission service 
under Rate Schedule NFTS-06. Southwestern's rate design has separated 
the five ancillary services for all transmission service. Two ancillary 
services, Scheduling, System Control and Dispatch Service together with 
Reactive and Voltage Support Service, are required for every 
transmission transaction. These charges are also a part of the capacity 
rate for Federal power. This is consistent with Southwestern's long-
standing practice of charging for the sale and delivery of Federal 
power in its Federal demand charge. The three remaining ancillary 
services will be made available to any transmission user within 
Southwestern's control area, including Federal power customers. The 
rate schedules for Peaking Power and Non-Federal Transmission Service 
reflect these charges. Network transmission service is provided to 
those who request the service, within Southwestern's control area, but 
only for non-Federal deliveries. The rate for and application of this 
service are identified in the Non-Federal Transmission/Interconnection 
Facilities Service Rate Schedule, NFTS-06.
    With respect to the Purchased Power Adder (Adder), Southwestern is 
proposing, as in all previous proposals beginning with the 1983 
implementation of the purchased power rate component, that the Adder is 
set equal to the current average long-term purchased power revenue 
requirement. As shown in the Rate Design Study, the amount is 
determined by dividing the estimated total average direct purchased 
power costs by Southwestern's total annual contractual 1200-hour 
peaking energy commitments to the customers (exclusive of contract 
support arrangements). In this rate proposal, the resulting Adder is 
$0.0067 per kWh of peaking energy. The total revenue created through 
application of this Adder would enable Southwestern to cover its 
average annual purchased power costs.

Comments and Responses

    The Southwestern Power Administration (Southwestern) responded to 
questions during the public participation period which are included in 
the supplemental background information. In addition, Southwestern 
received comments from two entities during the public participation 
process. Southwestern's responses are summarized into two general areas 
of concern, and are as follows:

Future Investments

    Comments: The commenter questions why Southwestern bases rates on 
anticipated future capital expenditures which is not in keeping with 
the standard industry practice of including capital investments in 
rates only after the items are placed into service and are ``used and 
useful'' and when Congressional funding is not a guarantee.
    Response: Southwestern follows DOE Order No. RA 6120.2 dated 
September 20, 1979, as amended October 1, 1983, for interpretation of 
the statutory requirements for preparing annual

[[Page 60129]]

power repayment studies. As stated in Order No. RA 6120.2 (paragraph 
10), replacements of investment will be ``included in repayment studies 
by adding the estimated capital cost of (the) replacement to the unpaid 
Federal investment in the year each replacement is estimated to go into 
service.'' Southwestern is required to forecast for replacements and 
must forecast replacements for the entire period of the PRS. The Corps 
provides the best data they have available, together with the service 
lives of the equipment. Southwestern and the Corps review these 
estimates annually and update the replacement data with the goal to 
better reflect what will be on the annual financial statements.
    The laws, regulations, methods, and standards for establishing rate 
schedules for Power Marketing Administrations (PMAs) are different from 
the standards that apply to Investor-Owned Utilities. The ``used and 
useful'' concept is apparently utilized for testing rates of investor-
owned utility companies, but is not accepted in rate making for Federal 
PMAs. The rationale for this difference is that the Federal projects 
must be fully operational to allow Southwestern to market power and 
energy for the entire repayment period to meet the requirements of the 
law to amortize the investment over a reasonable period of years. 
Replacements must be included to assure the projects are fully 
operational for the entire repayment period since most of the projects 
will be well over 50 years old at the end of the repayment period and 
would no longer be able to produce power. Our Power Repayment Study 
system is based on the concept that the older projects will produce 
power and revenues well beyond their original service lives to help 
repay the newer projects, thus keeping rates lower overall. RA 6120.2 
required estimated costs of capital to be included in the repayment 
study, not that investment be ``used and useful'' before it can be 
included. The replacement of hydroelectric power assets is required to 
assure repayment of the Federal investment, as is the funding of those 
replacements. Funding sources may include both direct Congressional 
appropriations and/or other alternative financing methods such as 
customer funding. In any event, adequate funding is assumed to enable 
replacements and, hence, to assure repayment.

Unfunded Civil Service Retirement System Benefits

    Comment: One commenter reiterated its opposition to including the 
``unfunded CSRS'' costs in the PRS.
    Response: Statement of Federal Financial Accounting Standards 
(SFFAS) No. 5, requires all Federal agencies, including Power Marketing 
Administrations (PMAs), to record the full cost of pension and 
postretirement benefits in financial statements beginning in fiscal 
year 1997. SFFAS No. 5 prescribes that the aggregate entry age normal 
(AEAN) actuarial cost method be used to calculate pension expenses and 
accrued actuarial liabilities for pension benefits. Under the AEAN 
method, which is based on dynamic economic assumptions, including 
future salary increases, the actuarial present value of projected 
benefits is allocated on a level basis over the earnings or the service 
of the group between entry age and assumed exit ages and should be 
applied to pensions on the basis of a level percentage of earnings. The 
portion of this actuarial present value allocated to a valuation year 
is called the ``normal cost''. The Office of Personnel Management (OPM) 
applies the AEAN method to estimate the amount by which employer and 
employee contributions toward future Civil Service Retirement System 
(CSRS) pension benefits fall short of the normal cost of those 
benefits.
    Southwestern has included an estimate of the unfunded portion of 
the CSRS costs in its Power Repayment Studies every year since 1998. 
All previous rate filings back to 1998 have been submitted through the 
DOE and ultimately approved by FERC. The FERC confirmed the 
Southwestern rate filings on a final basis and did not accept arguments 
to exclude the CSRS costs.
    Authority to collect revenues for the unfunded CSRS costs comes 
primarily from Section 5 of the Flood Control Act of 1944 which, in 
part, states ``* * * Rate schedules shall be drawn having regard to the 
recovery'' * * * ``of the cost of producing and transmitting such 
electric energy, * * *'' Unfunded CSRS has been determined to be a cost 
of producing and transmitting electricity. The Federal government funds 
the unfunded portion of the CSRS program just as it funds the funded 
portion of the CSRS program. All of the CSRS costs are properly 
included within Southwestern's cost estimates.
Availability of Information
    Information regarding this rate proposal, including studies, 
comments and other supporting material, is available for public review 
and comment in the offices of Southwestern Power Administration, One 
West Third Street, Tulsa, OK 74101.
Administrator's Certification
    The August 2006 Revised Power Repayment Study indicates that the 
increased power rates will repay all costs of the Integrated System 
including amortization of the power investment consistent with the 
provisions of Department of Energy Order No. RA 6120.2. In accordance 
with Delegation Order No. 00-037.00, December 6, 2001, and Section 5 of 
the Flood Control Act of 1944, the Administrator has determined that 
the proposed System rates are consistent with applicable law and the 
lowest possible rates consistent with sound business principles.
Environment
    The environmental impact of the proposed System rates was evaluated 
in consideration of DOE's guidelines for implementing the procedural 
provisions of the National Environmental Policy Act and was determined 
to fall within the class of actions that are categorically excluded 
from the requirements of preparing either an Environmental Impact 
Statement or an Environmental Assessment.

Order

    In view of the foregoing and pursuant to the authority delegated to 
me the Deputy Secretary of Energy, I hereby confirm, approve and place 
in effect on an interim basis, effective October 1, 2006, the following 
Southwestern Integrated System Rate Schedules which shall remain in 
effect on an interim basis through September 30, 2010, or until the 
FERC confirms and approves the rates on a final basis.


    Dated: September 28, 2006.
Clay Sell,
Deputy Secretary.

Department of Energy, Southwestern Power Administration

Rate Schedule P-06 \1\ Wholesale Rates for Hydro Peaking Power

    Effective: During the period October 1, 2006, through September 30, 
2010, in accordance with Rate Order No. SWPA-56 issued by the Deputy 
Secretary of Energy.
---------------------------------------------------------------------------

    \1\ Supersedes Rate Schedule P-05
---------------------------------------------------------------------------

    Available: In the marketing area of Southwestern Power 
Administration (Southwestern), described generally as the States of 
Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas.
    Applicable: To wholesale Customers which have contractual rights 
from Southwestern to purchase Hydro Peaking Power and associated energy

[[Page 60130]]

(Peaking Energy and Supplemental Peaking Energy).
    Character and Conditions of Service: Three-phase, alternating 
current, delivered at approximately 60 Hertz, at the nominal 
voltage(s), at the points of delivery, and in such quantities as are 
specified by contract.
    Definitions of Terms: ``Customer'' is the entity which is utilizing 
and/or purchasing hydroelectric power and associated energy and 
services from Southwestern pursuant to this rate schedule.
    The ``Demand Period'' used to determine maximum integrated rates of 
delivery for the purpose of power accounting is the 60-minute period 
which begins with the change of hour. The term ``peak demand'' means 
the highest rate of delivery, in kilowatts, for any Demand Period 
during a particular month, at any particular point of delivery.
    For the purposes of this Rate Schedule, the term ``point of 
delivery'' is used to mean either a single physical point at which 
electric power and energy are delivered from the System of Southwestern 
(defined below), or a specified set of delivery points which together 
form a single, electrically integrated load. ``Peak demand'' for such 
set of delivery points is computed as the coincidental highest rate of 
delivery among the specified points rather than as the sum of peak 
demands for each individual physical point of delivery.
    The term ``Peaking Contract Demand'' means the maximum rate in 
kilowatts at which Southwestern is, by contract, obligated to deliver 
Peaking Energy during any Demand Period. Unless otherwise provided by 
contract, the ``Peaking Billing Demand'' for any month shall be equal 
to the ``Peaking Contract Demand.''
    The term ``Uncontrollable Force,'' as used herein, shall mean any 
force which is not within the control of the party affected, including, 
but not limited to failure of water supply, failure of facilities, 
flood, earthquake, storm, lightning, fire, epidemic, war, riot, civil 
disturbance, labor disturbance, sabotage, or restraint by court of 
general jurisdiction, which by exercise of due diligence and foresight 
such party could not reasonably have been expected to avoid.
    The term ``System of Southwestern'' means the high-voltage 
transmission lines and related facilities Southwestern owns and 
operates, and/or has contractual rights to such transmission facilities 
owned by others.
    ``Ancillary Services'' are those services necessary to support the 
transmission of capacity and energy from resources to loads while 
maintaining reliable operation of the System of Southwestern in 
accordance with good utility practice. Definitions of the Ancillary 
Services are as follows:
    ``Scheduling, System Control, and Dispatch Service'' is provided by 
Southwestern as Control Area operator and is in regard to interchange 
and load-match scheduling and related system control and dispatch 
functions.
    ``Reactive Supply and Voltage Control from Generation Sources 
Service'' is provided at transmission facilities in the System of 
Southwestern to produce or absorb reactive power and to maintain 
transmission voltages within specific limits.
    ``Regulation and Frequency Response Service'' is the continuous 
balancing of generation and interchange resources accomplished by 
raising or lowering the output of on-line generation as necessary to 
follow the moment-by-moment changes in load and to maintain frequency 
within a Control Area.
    ``Spinning Operating Reserve Service'' maintains generating units 
on-line, but loaded at less than maximum output, which may be used to 
service load immediately when disturbance conditions are experienced 
due to a sudden loss of generation or load.
    ``Supplemental Operating Reserve Service'' provides an additional 
amount of operating reserve sufficient to reduce Area Control Error to 
zero within 10 minutes following loss of generating capacity which 
would result from the most severe single contingency.
    ``Energy Imbalance Service'' corrects for differences over a period 
of time between schedules and actual hourly deliveries of energy to a 
load. Energy delivered or received within the authorized bandwidth 
(defined below) for this service is accounted for as an inadvertent 
flow and is returned to the providing party by the receiving party in 
accordance with standard utility practice.
Energy Associated With Hydro Peaking Power
    Peaking Energy: 1,200 kilowatthours of Peaking Energy per kilowatt 
of Peaking Contract Demand will be furnished during each contract year.
    Supplemental Peaking Energy: Supplemental Peaking Energy (in 
addition to Peaking Energy) will be furnished if and when determined by 
Southwestern to be available, and at rates of delivery which do not 
exceed the Customer's Peaking Contract Demand.
Monthly Rates for Peaking Contract Demand
    Capacity Charge for Hydro Peaking Power:

------------------------------------------------------------------------
     10/1/2006-9/30/2007       10/1/2007-9/30/2008   10/1/2008-9/30/2010
------------------------------------------------------------------------
$3.03 per kilowatt of         $3.18 per kilowatt    $3.51 per kilowatt
 Peaking Billing Demand.       of Peaking Billing    of Peaking Billing
                               Demand                Demand.
------------------------------------------------------------------------

Services Associated With Capacity Charge for Hydro Peaking Power

    The capacity charge for Hydro Peaking Power includes such 
transmission services as are necessary to integrate Southwestern's 
resources in order to reliably deliver Hydro Peaking Power and 
associated energy to Customers. This capacity charge also includes two 
ancillary services charges, Scheduling, System Control and Dispatch 
Service and Reactive Supply and Voltage Control from Generation Sources 
Service.

Secondary Transmission Service Under Capacity Associated With Hydro 
Peaking Power

    Customers may utilize the capacity associated with Peaking Contract 
Demand for the transmission of non-Federal energy, on a non-firm, as-
available basis, at no additional charge for such transmission service 
or associated Ancillary Services, under the following terms and 
conditions:
    (1) The sum of the capacity, for any hour, which is used for 
Peaking Energy, Supplemental Peaking Energy, and Secondary Transmission 
Service, may not exceed the Peaking Contract Demand;
    (2) The non-Federal energy transmitted under such secondary service 
is delivered to the Customer's point of delivery for Hydro Peaking 
Power;
    (3) The Customer pays for or commits to provide Real Power Losses 
associated with such deliveries of non-Federal energy; and
    (4) Southwestern determines that sufficient transfer capability 
exists between the point of receipt into the

[[Page 60131]]

System of Southwestern of such non-Federal energy and the Customer's 
point of delivery for Hydro Peaking Power for the time period that such 
secondary transmission service is requested.

Rates for Energy Associated With Hydro Peaking Power

    (a) Peaking Energy Charge:

------------------------------------------------------------------------
     10/1/2006-9/30/2007       10/1/2007-9/30/2008   10/1/2008-9/30/2010
------------------------------------------------------------------------
$0.0082 per kilowatthour of   $0.0082 per           $0.0082 per
 Peaking Energy delivered;     kilowatthour of       kilowatthour of
 plus (c).                     Peaking Energy        Peaking Energy
                               delivered; plus (c).  delivered; plus
                                                     (c).
------------------------------------------------------------------------

    (b) Supplemental Energy Charge:

------------------------------------------------------------------------
     10/1/2006-9/30/2007       10/1/2007-9/30/2008   10/1/2008-9/30/2010
------------------------------------------------------------------------
$0.0055 per kilowatthour of   $0.0082 per           $0.0082 per
 Peaking Energy.               kilowatthour of       kilowatthour of
                               Peaking Energy.       Peaking Energy.
------------------------------------------------------------------------

    (c) A purchased power adder of $0.0067 per kilowatthour of Peaking 
Energy delivered, as adjusted by the Administrator, Southwestern, in 
accordance with the procedure within this rate schedule. This adder 
does not apply to: Supplemental Peaking Energy, or Sales to any 
Customer which, by contract, has assumed the obligation to supply 
energy to fulfill the minimum of 1,200 kilowatthours of Peaking Energy 
per kilowatt of Peaking Contract Demand during a contract year 
(Contract Support Arrangements).

Monthly Rates for Transformation Service

    Capacity Charges for Transformation Service: A charge of $0.30 per 
kilowatt will be assessed for capacity used to deliver energy at any 
point of delivery at which Southwestern provides transformation service 
for deliveries at voltages of 69 kilovolts or less from higher voltage 
facilities.

Application of Capacity Charges for Transformation Service

    For any particular month, charges for transformation service will 
be assessed on the greater of (1) that month's actual peak demand, or 
(2) the highest peak demand recorded during the previous 11 months, at 
any point of delivery. For the purpose of this Rate Schedule, the peak 
demand will be based on all deliveries, of both Federal and non-Federal 
energy, from the System of Southwestern, at such point during such 
month.

Rates for Ancillary Services

    Capacity Charges For Ancillary Services:
    (a) Regulation and Frequency Response Service:

------------------------------------------------------------------------
                               10/1/2006-9/30/2008   10/1/2008-9/30/2010
------------------------------------------------------------------------
Monthly rate................  $0.08 per kilowatt    $0.09 per kilowatt
                               of Peaking Billing    of Peaking Billing
                               Demand.               Demand.
------------------------------------------------------------------------

    (b) Spinning Operating Reserve Service:

------------------------------------------------------------------------
                               10/1/2006-9/30/2008   10/1/2008-9/30/2010
------------------------------------------------------------------------
Monthly rate................  $0.0079 per kilowatt  $0.0092 per kilowatt
                               of Peaking Billing    of Peaking Billing
                               Demand.               Demand.
Daily rate..................  $0.00036 per          $0.00042 per
                               kilowatt for non-     kilowatt for non-
                               Federal generation    Federal generation
                               inside                inside
                               Southwestern's        Southwestern's
                               control area.         control area.
------------------------------------------------------------------------

    (c) Supplemental Operating Reserve Service:

------------------------------------------------------------------------
                               10/1/2006-9/30/2008   10/1/2008-9/30/2010
------------------------------------------------------------------------
Monthly rate................  $0.0079 per kilowatt  $0.0092 per kilowatt
                               of Peaking Billing    of Peaking Billing
                               Demand.               Demand.
Daily rate..................  $0.00036 per          $0.00042 per
                               kilowatt for non-     kilowatt for non-
                               Federal generation    Federal generation
                               inside                inside
                               Southwestern's        Southwestern's
                               control area.         control area.
------------------------------------------------------------------------

    (d) Energy Imbalance Service:
    $0.0 per kilowatt for all reservation periods.

Availability of Ancillary Services

    Ancillary Services (a) and (d) listed above are available only for 
deliveries of power and energy to load centers within Southwestern's 
Control Area. Ancillary Services (b) and (c) listed above are available 
only for deliveries of non-Federal power and energy generated by 
resources located within Southwestern's Control Area and for deliveries 
of all Hydro Peaking Power and associated energy from and within 
Southwestern's Control Area. Where available, such Ancillary Services 
must be taken from Southwestern; unless, subject to Southwestern's 
approval, they are provided by others.

[[Page 60132]]

Application of Ancillary Services Charges

    For any month, the charges for Ancillary Services (a), (b), (c) and 
(d) listed above for deliveries of Hydro Peaking Power shall be based 
on the Peaking Billing Demand.
    The daily charge for Ancillary Services (b) and (c) for non-Federal 
generation inside Southwestern's Control Area shall be applied to the 
greater of Southwestern's previous day's estimate of the peak, or the 
actual peak, in kilowatts, of the internal non-Federal generation.

Provision of Ancillary Services by Others

    Customers for which Ancillary Services (a), (b), (c) and (d) are 
made available as specified above, must inform Southwestern by written 
notice of the Ancillary Services which they do not intend to take and 
purchase from Southwestern, and of their election to provide all or 
part of such Ancillary Services from their own resources or from a 
third party.
    Subject to Southwestern's approval of the ability of such resources 
or third parties to meet Southwestern's technical requirements for 
provision of such Ancillary Services, the Customer may change the 
Ancillary Services which it takes from Southwestern and/or from other 
sources at the beginning of any month upon the greater of 60 days 
notice or upon completion of any necessary equipment modifications 
necessary to accommodate such change.

Limitations on Energy Imbalance Service

    Energy Imbalance Service primarily applies to deliveries of power 
and energy which are required to satisfy a Customer's load. As Hydro 
Peaking Power and associated energy are limited by contract, the Energy 
Imbalance Service bandwidth specified in Southwestern's Open Access 
Transmission Service tariff does not apply to deliveries of Hydro 
Peaking Power, and therefore Energy Imbalance Service is not charged on 
such deliveries. Customers who consume a capacity of Hydro Peaking 
Power greater than their Peaking Contract Demand may be subject to a 
Capacity Overrun Penalty.

Application of Capacity Overrun Penalty

    Customers which have loads within Southwestern's Control Area are 
obligated by contract to provide resources, over and above the Hydro 
Peaking Power and associated energy purchased from Southwestern, 
sufficient to meet their loads. A Capacity Overrun Penalty shall be 
applied only when the formulas provided in Customers' contracts 
indicate an overrun on Hydro Peaking Power, and investigation 
determines that all resources, both firm and non-firm, which were 
available at the time of the apparent overrun were insufficient to meet 
the Customer's load.

Capacity Overrun Penalty

    For each hour during which Hydro Peaking Power was provided at a 
rate greater than that to which the Customer is entitled, the Customer 
will be charged a capacity overrun penalty at the following rates:

------------------------------------------------------------------------
                                                             Rate per
              Months associated with charge                  kilowatt
------------------------------------------------------------------------
March, April, May, October, November, December..........           $0.15
January, February, June, July, August, September........            0.30
------------------------------------------------------------------------

    Application of Energy Overrun Penalty: By contract, the Customer is 
subject to limitations on the maximum amounts of Peaking Energy which 
may be scheduled during any month or during any four consecutive 
months. When the Customer schedules an amount in excess of such maximum 
amounts for any month, or schedules more than 1,200 hours of Peaking 
Energy per kilowatt of Peaking Contract Demand in any contract year, 
such Customer is subject to the Energy Overrun Penalty.
    Energy Overrun Penalty: For each kilowatthour of overrun: $0.0902 
per kilowatthour.

Rates for Real Power Losses

    The Customer shall purchase real power losses unless it elects to 
self-provide such losses under the provision detailed below in Annual 
Election to Self Provide Real Power Losses.
    Real Power Losses are computed as four (4) percent of the total 
amount of non-Federal energy transmitted under a particular Customer's 
Peaking Contract Demand. The monthly charge for such Real Power Losses 
will be computed on a per kilowatthour basis as follows:

MC = .04 x NFE x R

With the factors defined as follows:

MC = The monthly charge ($) by Southwestern for Real Power Losses of 
non-Federal energy transmitted under the capacity associated with 
Hydro Peaking Power;
NFE = The amount of non-Federal energy (kWh) transmitted under a 
Customer's Peaking Contract Demand during a particular month; and
R = The rate for Real Power Losses ($ per kWh), is equal to the 
average of Southwestern's actual costs for the purchase of energy to 
replace Real Power Losses during the previous fiscal year (October 
through September), as reflected in Southwestern's financial 
records.

The rate for Real Power Losses will be posted on Southwestern's OASIS 
by November 1 of each year. This rate will be effective for one year 
beginning January 1 of each calendar year.
    Annual Election to Self Provide Real Power Losses: The Customer may 
elect, on an annual basis, to self-provide all loss energy for which it 
is responsible subject to the following conditions:
    (1) Such election for self-provision shall be for a full calendar 
year (January through December) for that Customer and shall be 
exercised by execution of a service agreement, or equivalent, before 
December 1 of the prior calendar year;
    (2) Unless otherwise specified in the service agreement, the 
Customer shall schedule the delivery of real power losses into the 
System of Southwestern at the rate of one megawatt of real power losses 
for every 25 megawatts of non-Federal power and energy delivered to 
Customers' loads served from the points of delivery set forth in the 
Southwestern/Customer contract;
    (3) For any new customer taking transmission service from 
Southwestern, election to self-provide real power losses shall be made 
at the time the contract is negotiated. Such service shall be 
implemented as provided for in the contract and the election to self-
provide shall apply through the end of that calendar year for all 
transmission services.
    Requirements Related to Power Factor: Any Customer served from 
facilities owned by or available by contract to Southwestern will be 
required to maintain a power factor of not less than 95 percent and 
will be subject to the following provisions.

[[Page 60133]]

    Determination of Power Factor: The power factor will be determined 
for all Demand Periods and shall be calculated under the formula:
[GRAPHIC] [TIFF OMITTED] TN12OC06.014


With the factors defined as follows:

PF = The power factor for any Demand Period of the month.
kWh = The total quantity of energy which is delivered during such 
Demand Period to the point of delivery or interconnection.
rkVAh = The total quantity of reactive kilovolt-ampere-hours (kvars) 
delivered during such Demand Period to the point of delivery or 
interconnection.

    Power Factor Penalty and Assessment: The Customer shall be assessed 
a penalty for all Demand Periods of a month where the power factor is 
less than 95 percent lagging. For any Demand Period during a particular 
month such penalty shall be in accordance with the following formula:
C = D x (.95 - LPF) x $0.10.

With the factors defined as follows:

C = The charge in dollars to be assessed for any particular Demand 
Period of such month that the Determination of Power Factor ``PF'' 
is calculated to be less than 95 percent lagging.
D = The Customer's demand in kilowatts at the point of delivery for 
such Demand Period in which a low power factor was calculated.
LPF = The lagging power factor, if any, determined by the formula 
``PF'' for such Demand Period.

    If C is negative, then C = zero (0).
    Application of Power Factor Penalty: The Power Factor Penalty is 
applicable to radial interconnections with the System of Southwestern. 
The total Power Factor Penalty for any month shall be the sum of all 
charges ``C'' for all Demand Periods of such month. No penalty is 
assessed for leading power factor. Southwestern, in its sole judgment 
and at its sole option, may determine whether power factor calculations 
should be applied to a single physical point of delivery or to multiple 
physical points of delivery where a Customer has a single, electrically 
integrated load served through multiple points or interconnections. The 
general criteria for such decision shall be that, given the 
configuration of the Customer's and Southwestern's systems, 
Southwestern will determine, in its sole judgment and at its sole 
option, whether the power factor calculation more accurately assesses 
the detrimental impact on Southwestern's system when the above formula 
is calculated for a single physical point of delivery or for a 
combination of physical points or for an interconnection as specified 
by an Interconnection Agreement.
    Southwestern, at its sole option, may reduce or waive power factor 
penalties when, in Southwestern's sole judgment, low power factor 
conditions were not detrimental to the System of Southwestern due to 
particular loading and voltage conditions at the time the power factor 
dropped below 95 percent lagging.
    Adjustment for Reduction in Service: If, during any month, the 
quantity of Peaking Contract Demand of Southwestern's 1200 hour peaking 
power sales customers that is scheduled by the customer for delivery is 
reduced by Southwestern for a period or periods of not less than two 
consecutive hours by reason of an outage caused by either an 
Uncontrollable Force or by the installation, maintenance, replacement 
or malfunction of generation, transmission and/or related facilities on 
the System of Southwestern, or insufficient pool levels, the Customer's 
capacity charges for such month will be reduced for each such reduction 
in service by an amount computed under the formula:

R = (C x K x H) / S

with the factors defined as follows:
R = The dollar amount of reduction in the monthly total capacity 
charges for a particular reduction of not less than two consecutive 
hours during any month, except that the total amount of any such 
reduction shall not exceed the product of the Customer's capacity 
charges associated with Hydro Peaking Power times the Peaking 
Billing Demand.
C = The Customer's capacity charges associated with Hydro Peaking 
Power for the Peaking Billing Demand for such month.
K = The reduction in kilowatts in Peaking Billing Demand for a 
particular event.
H = The number of hours duration of such particular reduction.
S = The number of hours that Peaking Energy is scheduled during such 
month, but not less than 60 hours times the Peaking Contract Demand.

    Such reduction in charges shall fulfill Southwestern's obligation 
to deliver Peaking Power and Peaking Energy.

Procedure for Determining Southwestern's Net Purchased Power Adder 
Adjustment

    Not more than twice annually, the Purchased Power Adder of $.0067 
(6.7 mills) per kilowatthour of Peaking Energy, as noted in this Rate 
Schedule, may be adjusted by the Administrator, Southwestern, by an 
amount up to a total of ($.0067 (6.7 mills) per 
kilowatthour per year, as calculated by the following formula:

ADJ = (PURCH -EST + DIF) / SALES

with the factors defined as follows:
ADJ = The dollar amount of the total adjustment, plus or minus, to 
be applied to the Net Purchased Power Adder, rounded to the nearest 
$.0001 per kilowatthour, provided that the total ADJ to be applied 
in any year shall not vary from the then-effective ADJ by more than 
$.0067 per kilowatthour;
PURCH = The actual total dollar cost of Southwestern's System Direct 
Purchases as accounted for in the financial records of the 
Southwestern Federal Power System for the period;
EST = The estimated total dollar cost ($15,064,500 per year) of 
Southwestern's System Direct Purchases used as the basis for the 
Purchased Power Adder of $.0067 per kilowatthour of Peaking Energy;
DIF = The accumulated remainder of the difference in the actual and 
estimated total dollar cost of Southwestern's System Direct 
Purchases since the effective date of the currently approved 
Purchased Power Adder set forth in this rate schedule, which 
remainder is not projected for recovery through the ADJ in any 
previous periods;
SALES = The annual Total Peaking Energy sales projected to be 
delivered (2,241,300,000 KWh per year) from the System of 
Southwestern, which total was used as the basis for the $.0067 per 
kilowatthour Purchased Power Adder.

Department of Energy, Southwestern Power Administration

Rate Schedule NFTS-06\1\ Wholesale Rates For Non-Federal Transmission/
Interconnection Facilities Service
---------------------------------------------------------------------------

    \1\ Supersedes Rate Schedule NFTS-05.
---------------------------------------------------------------------------

    Effective: During the period October 1, 2006, through September 30, 
2010, in accordance with Rate Order No. SWPA-56 issued by the Deputy 
Secretary of Energy.
    Available: In the region where Southwestern Power Administration 
(Southwestern) owns and operates high-voltage transmission lines and 
related facilities, and/or has contractual rights to such transmission 
facilities owned by others (System of Southwestern).
    Applicable: To Customers which have executed Service Agreements 
with Southwestern for the transmission of non-Federal power and energy 
over the System of Southwestern or for its use for interconnections. 
Southwestern will provide services over those portions of the System of 
Southwestern in which the Administrator, Southwestern, in his or her 
sole judgment, has determined that uncommitted transmission and 
transformation capacities in the System of Southwestern are and will be

[[Page 60134]]

available in excess of the capacities required to market Federal power 
and energy pursuant to Section 5 of the Flood Control Act of 1944 (58 
Stat. 887,890; 16 U.S.C. 825s).
    Character and Conditions of Service: Service will be provided as 3-
phase, alternating current, at approximately 60 Hertz, and at the 
voltage level of the point(s) specified by Service Agreement or 
Transmission Service Transaction.
    Definitions of Terms: A Customer is the entity which is utilizing 
and/or purchasing services from Southwestern pursuant to this rate 
schedule.
    A ``Service Agreement'' is a contract executed between a Customer 
and Southwestern for the transmission of non-Federal power and energy 
over the System of Southwestern or for interconnections. Service 
Agreements include:
    ``Firm Transmission Service Agreements'' that provide for reserved 
transmission capacity on a firm basis, for a particular point-to-point 
delivery path.
    ``Non-Firm Transmission Service Agreements'' that provide for the 
Customer to request transmission service on a non-firm basis.
    ``Network Transmission Service Agreements'' that provide for the 
Customer to request firm transmission service for the delivery of 
capacity and energy from the Customer's network resources to the 
Customer's network load, for a period of one year or more.
    ``Interconnection Agreements'' that provide for the use of the 
System of Southwestern and recognize the exchange of mutual benefits 
for such use or provide for application of a charge for Interconnection 
Facilities Service.
    A ``Service Request'' is made under a Transmission Service 
Agreement through Southwestern's Open Access Same-Time Information 
System (OASIS) for reservation of transmission capacity over a 
particular point-to-point delivery path for a particular period. When a 
Service Request is approved by Southwestern, it becomes a 
``Transmission Service Transaction.'' The Customer must submit hourly 
schedules for actual service in addition to the Service Request.
    ``Firm Point-to-Point Transmission Service'' is transmission 
service reserved on a firm basis between specific points of receipt and 
delivery pursuant to either a Firm Transmission Agreement or to a 
Transmission Service Transaction. ``Non-Firm Point-to-Point 
Transmission Service'' is transmission service reserved on a non-firm 
basis for specific points of receipt and delivery pursuant to a 
Transmission Service Transaction. ``Network Integration Transmission 
Service'' is transmission service provided under Part III of 
Southwestern's Open Access Transmission Service Tariff which provides 
the Customer with firm transmission service for the delivery of 
capacity and energy from the Customer's resources to the Customer's 
load.
    ``Secondary Transmission Service'' is associated with Firm Point-
to-Point Transmission Service and Network Integration Transmission 
Service. For Firm Point-to-Point Transmission Service, it consists of 
transmission service provided on an as-available, non-firm basis, 
scheduled within the limits of a particular capacity reservation for 
transmission service, and scheduled from points of receipt, or to 
points of delivery, other than those designated in a Long-Term Firm 
Transmission Agreement or a Transmission Service Transaction for Firm 
Point-to-Point Transmission Service. For Network Integration 
Transmission Service, Secondary Transmission Service consists of 
transmission service provided on an as-available, non-firm basis, from 
resources other than the Network Resources designated in a Network 
Transmission Service Agreement, to meet the Customer's Network Load. 
The charges for Secondary Transmission Service, other than Real Power 
Losses and Ancillary Services, are included in the applicable capacity 
charges for Firm Point-to-Point Transmission Service and Network 
Integration Transmission Service.
    The ``Demand Period'' used to determine a maximum integrated rate 
of delivery for the purposes of power accounting is the 60-minute 
period which begins with the change of hour. The term ``Peak Demand'' 
means the highest rate of delivery, in kilowatts, for any Demand Period 
during a particular month, at any particular point of delivery or 
interconnection.
    For the purposes of this rate schedule, the term ``Point of 
Delivery'' is used to mean either a single physical point to which 
electric power and energy are delivered from the System of 
Southwestern, or a specified set of delivery points which together form 
a single, electrically integrated load. Peak Demand for such set of 
points is computed as the coincidental highest rate of delivery among 
the specified points rather than as the sum of peak demands for each 
individual physical point.
    ``Ancillary Services'' are those services necessary to support the 
transmission of capacity and energy from resources to loads while 
maintaining reliable operation of the System of Southwestern in 
accordance with good utility practice. Ancillary Services include:
    ``Scheduling, System Control, and Dispatch Service'' is provided by 
Southwestern as Control Area operator and is in regard to interchange 
and load-match scheduling and related system control and dispatch 
functions.
    ``Reactive Supply and Voltage Control from Generation Sources 
Service'' is provided at transmission facilities in the System of 
Southwestern to produce or absorb reactive power and to maintain 
transmission voltages within specific limits.
    ``Regulation and Frequency Response Service'' is the continuous 
balancing of generation and interchange resources accomplished by 
raising or lowering the output of on-line generation as necessary to 
follow the moment-by-moment changes in load and to maintain frequency 
within a Control Area.
    ``Spinning Operating Reserve Service'' maintains generating units 
on-line, but loaded at less than maximum output, which may be used to 
service load immediately when disturbance conditions are experienced 
due to a sudden loss of generation or load.
    ``Supplemental Operating Reserve Service'' provides an additional 
amount of operating reserve sufficient to reduce Area Control Error to 
zero within 10 minutes following loss of generating capacity which 
would result from the most severe single contingency.
    ``Energy Imbalance Service'' corrects for differences over a period 
of time between schedules and actual hourly deliveries of energy to a 
load.
    ``Interconnection Facilities Service'' provides for the use of the 
System of Southwestern to deliver energy and/or provide system support 
at an interconnection.

Rates for Firm Point-to-Point Transmission Service

    Capacity Charges for Firm Transmission Service:

[[Page 60135]]



------------------------------------------------------------------------
                               10/1/2006-9/30/2008   10/1/2008-9/30/2010
------------------------------------------------------------------------
Monthly.....................  $0.90 per kilowatt    $0.95 per kilowatt
                               of transmission       of transmission
                               capacity reserved     capacity reserved
                               in increments of      in increments of
                               one month of          one month of
                               service or invoiced   service or invoiced
                               in accordance with    in accordance with
                               a longer term         a longer term
                               agreement.            agreement.
Weekly......................  $0.225 per kilowatt   $0.238 per kilowatt
                               of transmission       of transmission
                               capacity reserved     capacity reserved
                               in increments of      in increments of
                               one week of service.  one week of
                                                     service.
Daily.......................  $0.0409 per kilowatt  $0.0432 per kilowatt
                               of transmission       of transmission
                               capacity reserved     capacity reserved
                               in increments of      in increments of
                               one day of service.   one day of service.
------------------------------------------------------------------------

Service Associated with Capacity Charges for Firm Point-to-Point 
Transmission Service

    The capacity charge for firm transmission service includes 
Secondary Transmission Service, but does not include charges for 
Ancillary Services or for Real Power Losses associated with actual 
schedules.

Application of Capacity Charges for Firm Point-to-Point Transmission 
Service

    Capacity charges for firm transmission service are applied to 
quantities reserved by contract under a Firm Transmission Agreement or 
in accordance with a Transmission Service Transaction.
    Customers, unless otherwise specified by contract, will be charged 
on the greatest of (1) the Peak Demand at any particular point of 
delivery during a particular month, rounded up to the nearest whole 
megawatt, or (2) the highest Peak Demand recorded at such point of 
delivery during any of the previous 11 months, rounded up to the 
nearest whole megawatt, or (3) the capacity reserved by contract; which 
amount shall be considered such Customer's reserved capacity. Secondary 
Transmission Service for such Customers shall be limited during any 
month to the most recent Peak Demand on which a particular Customer is 
billed or to the capacity reserved by contract, whichever is greater.

Rates for Non-Firm Point-to-Point Transmission Service

Capacity Charges for Non-Firm Transmission Service

    Monthly: 80 percent of the firm monthly charge of transmission 
capacity reserved in increments of one month of service.
    Weekly: 80 percent of the firm monthly charge divided by 4 of 
transmission capacity reserved in increments of one week of service.
    Daily: 80 percent of the firm monthly charge divided by 22 of 
transmission capacity reserved in increments of one day of service.
    Hourly: 80 percent of the firm monthly charge divided by 352 of 
transmission capacity reserved in increments of one hour of service.

Application of Charges for Non-Firm Point-to-Point Transmission Service

    Capacity charges for Non-Firm Transmission Service are applied to 
quantities reserved under a Transmission Service Transaction, and do 
not include charges for Ancillary Services or Real Power Losses.

Rates for Network Integration Transmission Service

    Annual Revenue Requirement for Network Integration Service:

------------------------------------------------------------------------
        10/1/2006-9/30/2008                  10/1/2008-9/30/2010
------------------------------------------------------------------------
               $9,155,900                           $9,431,500
------------------------------------------------------------------------

    Monthly Revenue Requirement for Network Integration Service:

------------------------------------------------------------------------
        10/1/2006-9/30/2008                  10/1/2008-9/30/2010
------------------------------------------------------------------------
                 $762,992                             $785,958
------------------------------------------------------------------------

    Net Capacity Available for Network Integration Service:

------------------------------------------------------------------------
            10/1/2006-9/30/2008                  10/1/2008-9/30/2010
------------------------------------------------------------------------
845,000 kilowatts.........................  828,000 kilowatts.
------------------------------------------------------------------------

    Capacity Charge for Network Integration Transmission Service:

------------------------------------------------------------------------
            10/1/2006-9/30/2008                  10/1/2008-9/30/2010
------------------------------------------------------------------------
$0.90 per kilowatt of Network Load          $0.95 per kilowatt of
 ($762,992/845,000 kilowatts.                Network Load ($785,958/
                                             828,000 kilowatts.
------------------------------------------------------------------------

Application of Charge for Network Integration Transmission Service

    Network Integration Transmission Service is available only for 
deliveries of non-Federal power and energy, and is applied to the 
Customer utilizing such service exclusive of any deliveries of Federal 
power and energy. The capacity on which charges for any particular 
Customer utilizing this service is determined on the greatest of (1) 
the Peak Demand at any particular point of delivery during a particular 
month, rounded up to the nearest whole megawatt, or (2) the highest 
Peak Demand recorded at such point of delivery during any of the 
previous 11 months, rounded up to the nearest whole megawatt.
    For those Customers taking Network Integration Transmission Service 
who are also taking delivery of Federal Power and Energy, the Peak 
Demand shall be determined by subtracting the energy scheduled for 
delivery of Federal Power and Energy for any hour from the metered 
demand for such hour.
    Secondary transmission Service for such Customers shall be limited 
during any month to the most recent Peak Demand on which a particular 
Customer is billed. Charges for Ancillary Services and for Real Power 
Losses shall also be assessed.

Rates for Real Power Losses

    The Customer shall purchase real power losses unless it elects to 
self-provide such losses under the provisions detailed below in Annual 
Election to Self-Provide Real Power Losses.
    Real Power Losses are computed as four (4) percent of the total 
amount of non-Federal energy transmitted on behalf of a Customer. The 
monthly charge for such Real Power Losses will be computed on a per 
kilowatthour basis as follows:

MC = .04 x NFE x R

with the factors defined as follows:
MC = The monthly charge ($) by Southwestern for Real Power Losses of 
non-Federal energy transmitted on behalf of a Customer;
NFE = The amount of non-Federal energy (kWh) transmitted on behalf 
of a Customer during a particular month; and
R = The rate for Real Power Losses ($ per kWh), is an average of 
Southwestern's actual costs for the purchase of energy to replace 
Real Power Losses during the previous fiscal year (October through 
September), as reflected in Southwestern's financial records.


[[Page 60136]]


    The rate for Real Power Losses will be posted on Southwestern's 
OASIS by November 1 of each year. This rate will become effective for 
one year beginning January 1 of each calendar year. Annual Election to 
Self-Provide Real Power Losses: The Customer may elect, on an annual 
basis, to self-provide all loss energy for w